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BIFR withholds `sick' tag for Usha Ispat — Co asked to answer creditors' charge

Richa Mishra

The secured creditors also stated that the progress of the project was not abandoned because of recalling of the funds by the financial institutions in 2001.

NEW DELHI, Aug. 28

SECURED creditors including financial institutions (FIs) have raised objections to Usha Ispat Ltd's (UIL) move to knock the doors of the Board for Industrial and Financial Reconstruction (BIFR).

The institutions have, in their submission to BIFR, said that the company had filed the reference only to thwart the efforts made by them to recover their dues.

Considering the submissions, the board, has not declared the company "sick''.

The BIFR Bench has directed all the secured creditors, who had filed written submissions on UIL's reference, to endorse and submit copies of their submissions along with enclosures and a copy of Ernst & Young report to UIL within a stipulated time-frame.

BIFR, vide its recent order, has also asked UIL to file its rejoinder in the matter including its response on the applications filed by secured creditors under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.

The Bench further said that the secured creditors could submit their rejoinders on the same within a given time-frame (not later than August 31).

Section 22(1) provides for suspension of legal proceedings against the company.

Mulling over the facts of the case, the Bench noted that the secured creditors had objected to the reference filed by UIL on the ground of writing off of pre-operative expenses (Rs 72.57 crore), pre-operative interest (Rs 576.35 crore) and diminution in the value of capital assets (Rs 144.50 crore) in respect of ongoing projects of the company, which was not a standard accounting practice.

The secured creditors also stated that the progress of the project was not abandoned because of recalling of the funds by the financial institutions in 2001.

"There was no progress of the project since 1999 because of promoters' inability to bring in their contribution,'' they submitted.

The BIFR Bench also observed that nothing significant had happened between June 28, 2000, when the last balance sheet was signed and September 14, 2001, when the present balance sheet was signed, which should have prompted the company to abandon the project.At the hearing, the Bench also enquired as to how the balance sheet of the company could be relied upon when the premises of the auditors of UIL were raided by the tax authorities and CBI officials, suspecting their involvement.

UIL said at the hearing that it would be submitting a detailed rejoinder to the objections raised and observations made by the Bench.

As per Form A submitted by the company, its paid-up capital was Rs 179.35 crore and accumulated losses were Rs 848.54 crore as on June 30, 2001.

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