The Hindu Business Line : Kabra Drugs fails to seek cover under SICA

REPEATED attempts to seek protection under the Sick Industrial Companies Act (SICA) by the Madhya Pradesh-based bulk drugs manufacturer Kabra Drugs Ltd (KDL) have failed.

The Board for Industrial and Financial Reconstruction (BIFR) while dismissing the present reference of the company as `non-maintainable' observed that "KDL and its promoters have been systematically manipulating and falsifying the company's accounts. They have approached the Board with unclean hands and SICA is not meant for giving protection to such a company."

Going through the facts of the case, BIFR Bbench observed that based on the audited balance sheet as on March 31, 2001, KDL had filed a reference vide Form `A' dated August 16, 2001, which was received by the Board on August 31, 2001. The company's board of directors at a meeting held on July 2, 2001 had formed an opinion regarding the sickness of the company and decided to file the reference. Further, the audited accounts for financial year 2000-01 were adopted at the AGM held on August 8, 2001, the Bench noted.

It also observed that Bank of Baroda (BoB) has filed its objections to the company's sickness. Two earlier references made by the company in 1999 and 2000 based on its audited accounts for the financial year 1998-99 and 1999-2000 were dismissed by BIFR as `non-maintainable' in February and December 2000, respectively. The references were dismissed on grounds that the company had approached the Board with unclean hand, as the previous balance sheets were "seriously manipulated and totally unreliable". Besides, the company had hidden its losses and misled its bankers.

After considering the submissions made at the recent hearing, the Bench observed that the company had, in fact, been incurring losses since 1992 while showing profits in its audited balance sheet. It also observed that figures have been manipulated over the years. Referring to the Appellate Authority of Industrial and Financial Reconstruction (AAIFR) order on an appeal filed by the company, the BIFR Bench stated "AAIFR had effectively closed the doors for the company as it had ruled out reconstruction of the accounts after removing the taints of all manipulations."

AAIFR, in its order, had observed, "In the facts and circumstances of the case, it is not possible to gauge and determine the extent of manipulations and diversion of funds indulged in by the appellant in this case. As such the true affairs of the company cannot be reconstituted or reinstated retrospectively."

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Kabra Drugs fails to seek cover under SICA