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Dunlop moves HC for status quo on asset transfer

Debjoy Sengupta

Dunlop India Ltd has moved the Kolkata high court seeking status quo on transfer of assets. The case will be heard before justice Ashok Kumar Ganguli on April 8.

According to the company spokesperson, Dunlop India has moved the court for exoneration in terms of leased assets and rented properties.

The company's plea is that since the Appellate Authority for Industrial Finance & Reconstruction acknowledges the fact that the company can be revived, and since the package was already under consideration, there was no rationale in disrupting the current arrangements. Hence the case for exemption.

Company officials argued that the alternative cost to the company, in case the current arrangements are discontinued, will be too high and Dunlop can ill afford to pay fresh deposits, renovation costs etc for the new premises upon resumption of operations.

In fact, without the exemption, the revival of the company will become improbable. This is the substance of the prayer that the Dunlop management has made before the court. Earlier, a similar prayer was rejected by the Board for Industrial and Financial Reconstruction and the AAIFR.

Earlier, the Manu Chhabria-owned tyre manufacturer had approached the AAIFR seeking immunity against leased assets at the company being sold off or transferred to the lessee.

A portion of assets, including buildings and part of certain manufacturing units, were either leased out by the company or are under hypothecation to various banks.

The lease period for majority of these assets have expired and different entities including banks are keen on either getting possession of these assets or getting their money back.

Before moving AAIFR, the company had sought immunity against transfer of assets before the BIFR, which the latter did not grant.

Scarcity of funds had forced Dunlop India to mortgage properties at Bangalore, Chennai and Kolkata or lease them out to different parties. A large portion of the machinery and equipment was hypothecated to banks.

In its draft revival scheme, the Dunlop management sought to repay its dues to banks and lessees only after completion of implementation of the draft revival scheme.

Banks, along with other entities owing money to the company, did not agree to this. Consequently, the revival schemes were dismissed.

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