Wednesday, June 26, 2013

Fresh loan recoveries from Kingfisher set to start

The lenders collected `550-600 crore in the first phase by selling pledged shares of associate companies of Kingfisher Airlines’s parent UB Group. Photo: Mint
The lenders collected Rs.550-600 crore in the first phase by selling pledged shares of associate companies of Kingfisher Airlines’s parent UB Group. Photo: Mint

P R sanjai Anup Rai : Live Mint :Tue, Jun 25 2013. 11 31 PM IST
A group of 14 lenders led by SBI expects to recover at least Rs.1,000 cr from the grounded airline


Mumbai: The second phase of recovering loans from Kingfisher Airlines Ltd will begin early next month, according to two bankers familiar with the plan.
A group of 14 lenders led by State Bank of India (SBI) expects to recover at least Rs.1,000 crore as it starts taking possession of buildings, helicopters and other fixed assets of the grounded airline, the bankers said, both declining to be identified.
The lenders collected Rs.550-600 crore in the first phase by selling pledged shares of associate companies of Kingfisher Airlines’s parent UB Group.
Kingfisher’s operating licence was suspended in October by the Directorate General of Civil Aviation following a strike by the airline’s employees.
The permit has since expired, although it can be renewed within two years.
“We have already filed a claim on 3 May under the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act to recover dues,” said an SBI executive, one of the two bankers mentioned above. “Under the claim, we have to give 60 days notice to airline and it will expire on 1 July.”
The banks will start taking possession of properties and other assets in the first week of July in consultation with the Debt Recovery Tribunal (DRT), he said.
This marks the last round of a bitter battle in one of corporate India’s most high-profile loan default cases. The lenders will be selling the airline’s properties in Mumbai and Goa, two helicopters, other fixed assets and shares of UB Group companies.
SBI has the maximum exposure to Kingfisher at Rs.1,600 crore, followed by Punjab National Bank (Rs.800 crore), IDBI Bank (Rs.800 crore), Bank of India (Rs.650 crore), Bank of Baroda (Rs.550 crore), United Bank of India (Rs.430 crore), Central Bank of India (Rs.410 crore), UCO Bank (Rs.320 crore), Corporation Bank (Rs.310 crore), State Bank of Mysore, an SBI associate bank (Rs.150 crore), Indian Overseas Bank (Rs.140 crore),Federal Bank Ltd (Rs.90 crore), Punjab and Sind Bank (Rs.60 crore) and Axis Bank Ltd (Rs.50 crore). Overall, their exposure is Rs.6,360 crore, which increases to about Rs.7,000 crore adding unapplied interest.
The lenders have also asked Srei Infrastructure Finance Ltd not to go through legal processes but to sell Kingfisher Airlines shares pledged with them in the open market, the SBI banker quoted above said. “They have agreed to do so,” he said.
There are three lenders outside the consortium—Srei Infrastructure Finance, Jammu and Kashmir Bank Ltd and Oriental Bank of Commerce.
Srei bought the loan from ICICI Bank Ltd and, as per the arrangement, if the value of the shares that it took as collateral exceeds its exposure, the consortium will get the money.
A Kingfisher Airlines spokesperson declined comments.
Under the Sarfaesi Act, only assets that are mortgaged with banks can be recovered, while DRT allows taking possession of any asset held by a defaulting borrower, irrespective of whether these are pledged with banks or not. The DRT process, however, is a long one.
While recovering through court cases, without taking help of Sarfaesi or DRT, if a borrower has to contest a claim by a banker, the borrower has to deposit 75% of the contested amount upfront with the court. However, courts frequently waive this requirement.
However, the court may decide not to waive this in the case of Kingfisher as court rulings have gone in favour of banks so far.
In that case the court will likely insist that KFA submits 75% of the contested amount with it, said a retired banker who specialized in DRT cases at a large public sector bank. But since Kingfisher Airlines is not in a position to submit such a huge sum, it will prefer the DRT process, said this person.
“In DRT, there is a number of ways recovery can be delayed. There are layers of delaying tactics and it’s going to be a long-drawn process. For instance, the borrower’s lawyer may demand 60 days interval between every notice served and there are notice after notice,” the banker said.
Besides, even if the DRT rules in favour of the banks, its decision can be challenged in an appellate tribunal. Finally, the case can go to the Supreme Court.
In short, if the DRT route is taken, it will be many years before the banks can recover their dues, the second banker said.



SBI to get tough on loan defaulters



K Ram Kumar : BL ;Mumbai :June26,2013

Faced with a Rs 51,000-crore bad loans pile, State Bank of India has decided to tighten the screw on defaulting borrowers.
How? 
It is taking recovery action, such as filing winding-up petitions against defaulting companies and their guarantors.
SBI wants its field staff dealing with recoveries to go after loan defaulters and wring out as much of the outstanding loan as possible.
A secured creditor files a winding-up petition in a High Court when the borrower fails to repay debt.
Winding up of a company is a process whereby its normal activities are brought to a standstill. The company’s property is administered by a court-appointed liquidator for the benefit of its members and creditors.

ON RECORD

To keep tabs on the pledged security, bank staff have been asked to take photographs of the properties during inspectionand keep them in the records, said a senior bank official.
SBI will take physical possession of the assets charged to it by the defaulters to preserve their value and realise the maximum amount from their auction.
Earlier, the bank used to just take symbolic possession of a pledged asset by pasting a notice that the property belongs to it. Defaulting borrowers sometimes take advantage of symbolic possession to sell off plant and machinery and other pledged assets.
The official said, the bank may consider acquiring some properties at the reserve price for its own use when their auction fails.
In the case of loan accounts classified as doubtful, up-to-date valuation of such accounts will have to be done so that they can be showcased to asset reconstruction companies (ARCs).
A loan account is classified as doubtful if it has remained non-performing for more than 12 months. ARCs are in the business of resolving non-performing loans bought from banks and financial institutions.
Due to economic slowdown, which has affected its borrowers’ ability to repay loans, SBI’s bad loans increased by Rs 11,513 crore in FY13 to Rs 51,189 crore as at March-end 2013.
In FY13, the bank saw a gross reduction of Rs 20,480 crore in bad loans. Fresh slippages amounted to Rs 31,993 crore.

BREAK-UP

A break-up of SBI’s bad loans portfolio shows that as on March-end 2013, mid-corporate segment accounted for 36 per cent of the total bad loans; small and medium enterprises (28.4 per cent); agriculture (19.8 per cent); retail (8.3 per cent); international (5.5 per cent); and large corporate (2 per cent).
ramkumar.k@thehindu.co.in
(This article was published on June 25, 2013)
Keywords: State Bank of India, loan defaulters, NPAs, asset reconstruction companies, bad loans, 

Canara Bank focussing on bringing down NPA




PTI : BL : June 25,2013

Canara Bank is taking various measures, including loan restructuring, to bring down its mounting non-performing assets (NPA), a top bank official said today.

As against the overall 2.5 per cent NPA, education loan sector had an NPA of nine per cent, followed by agriculture six to seven per cent and MSME sector five per cent pan India, bank Chairman and Managing Director, R K Dubey said here.

Stating that education sector’s NPA stood at about Rs 4,200 crore, he said the bank had two months ago launched a campaign in which the officials would meet the students and their parents, enquire about their problems and suggest restructuring of their loans.

Accordingly, the customers would be given more time from seven year to nine years to repay the loan.

The campaign has evoked tremendous response and the bank was able to recover Rs 53 crore during the period, Dubey said.

Dubey, here to review the performance of branches in Coimbatore circle, said the bank would take its total branches to 5,000 from the present 3,721, in another two years by setting up new ones in the North East, Jammu and Kashmir and Jharkhand among other states, with focus on rural and semi-urban areas.

He said the bank would extend its e-Lobby product, which has been a success in Bengaluru and Delhi, to important cities, including Coimbatore.

The e-Lobby has facilities like ATM, cash and cheque deposits, passbook printing and also internet banking under one roof, Dubey said.

Earlier Dubey donated a bus to Sankara Eye Foundation on behalf of the bank and also disbursed loans worth Rs 127 crore to 4,300 beneficiaries including weavers, farmers, SHGs SMEs and Transgenders.

(This article was published on June 25, 2013)

Tuesday, June 25, 2013

Gopinath in talks with real estate developers to stave off debt



Raghuvir Badrinath  |  Bangalore  June 25, 2013 

Captain Gopinath, the low-cost aviation pioneer in India who has been facing intense heat from State Bank of India (SBI) to repay loans, is in the process of forming a joint development pact with promoters of Bangalore-based RMZ Corp to unlock value at one of his up-market residential properties in Bangalore.

Gopinath has firmed up plans for the pact with Raj Menda and Manoj Menda, managing directors as well as owners of RMZ Corp, one of the city’s leading privately held realtors, said sources.  

SBI, the country’s largest lender, had recently issued public auction notices to sell Gopinath’s pledged properties, owned by his family members as well as Deccan Cargo, to recover as much as Rs 259 crore. Gopinath, however, is understood to have got a stay on the auction.

SBI officials said they could not comment on the auction process as it was sub judice. While Gopinath was not reachable for his view, the promoters of RMZ Corp said they could not comment as it was a private transaction between families. RMZ Corp, over the past years, has acquired and developed over 13 million square feet and today manages a property portfolio in excess of $3 billion (Rs 17,940 crore) in real estate value across India.

The property which is being spun off into a joint development is spread across 16,200 sq ft and is situated just off Vittal Mallya Road, one of the premium localities in Bangalore, where the prices are around Rs 21,000 per square feet. SBI had put a value of close to Rs 33 crore for this property, which is technically owned by Gopinath’s wife Bhargavi Gopinath.

This property is in close to where UB Group chairman Vijay Mallya is building towering uber-luxurious residential apartments — Kingfisher Towers— in a joint venture with Prestige Developers, after razing down his ancestral bungalow.

Even as this development is picking up pace, realtors are indicating a price as close to Rs 30,000 per square feet when the building is completed.

The move to go in for a joint development comes after protracted attempts by Gopinath to restructure thedebt failed to yield any result.

Gopinath is understood to have raised close to Rs 500 crore debt for his second major venture – Deccan Cargo and Logistics– after selling out Deccan Aviation to Kingfisher Airlines. 


Deccan Cargo had also raised close to Rs 135 crore from Reliance Industries through the equity route. 

“While the concept of connecting industrial towns to cities through the air cargo route had immense potential, the execution did not fall into place, as a result of which the venture went into a tail-spin and had to be suspended,” senior industry analysts explained.

Consumer forum can use forensic examination to settle disputes



Jehangir Gai  June 23, 2013 Last Updated at 21:16 IST

consumer forum has to follow a summary procedure for the adjudication of complaints. But at times, the authenticity and credibility of the evidence is challenged as fabricated. In such a situation, sometimes, a consumer forum refuses to weigh a complaint on the grounds that it involves adjudication of complicated facts. It, instead, asks the parties to approach the regular civil court. This is incorrect.

In such a case, a consumer forum isn't helpless; it can obtain evidence by referring the documents for examination by experts.


 This significant ruling was given by a National Commission bench of judges K S Chaudhari and Suresh Chandra in revision petition number 2008 of 2012 on February 11, 2012 (The New India Assurance Co Ltd v/s Sree Sree Madan Mohan Rice Mill).

The rice mill claimed a fire had broken out at its office-cum-manufacturing unit. An insurance claim was lodged for the loss. The insurance company didn't settle the claim. Aggrieved, the mill filed a complaint before the West Bengal State Commission, claiming a compensation of Rs 99 lakh.

To support and substantiate its claim, the mill relied on photographs of the fire and the loss it had caused. The insurance company questioned the authenticity of photographs, alleging these had been manipulated and fabricated. 


It claimed the investigator appointed had approached the Central Forensic Laboratory to examine the photographs, but the laboratory had declined to examine those, unless the police or judicial authorities requested such a move. 

Therefore, the insurer urged the State Commission to refer the photographs to the laboratory for forensic examination.

The mill opposed this application, claiming the surveyor hadn't raised any doubt about the photographs; neither had the insurance company made such an allegation in its reply filed before the State Commission. 


The mill contended the application was aimed merely at delaying proceedings. Upholding the mill's contention, the State Commission rejected the insurance company's application.

Subsequently, the insurance company filed a revision petition before the National Commission, challenging the State Commission's refusal to refer the photographs for examination.

The National Commission said the insurance company had alleged the photographs had been tampered and manufactured by super-imposing one photograph over another so that a claim could be made. 


These photographs were taken by the mill owner, not by an independent person. Even if the surveyor didn't question the genuineness of the photographs, the insurance company's primary defence was its challenge to the photographs' credibility.

 Under such circumstances, the National Commission said the application filed by the insurance company shouldn't have been rejected.

Further, it said the Consumer Protection Act empowered redressal tribunals to seek the report of an analyst from an appropriate laboratory. If the photographs were referred to the laboratory for forensic examination, it would help in arriving at a correct conclusion, it added.

With this, the National Commission set aside the State Commission's order and directed it to send the disputed photographs to the Central Forensic Science Laboratory for examination. Since the insurance company had disputed the validity of the photographs, the commission directed it to bear the cost of the examination.

This judgment is significant: Even in cases in which documentary evidence is disputed, a consumer forum has the power to adjudicate the complaint by seeking a report from a competent laboratory. 


The cost of such an examination wouldn't be a burden on the consumer, as it would have to be borne by the party that challenges the document's validity. If the document is found to be false or fabricated, the consumer would definitely be penalised.

Orchid Chemicals begins corporate debt recast process

A file photo of Orchid Chemicals promoter Raghavendra Rao. Photo: Hemant Mishra/Mint
A file photo of Orchid Chemicals promoter Raghavendra Rao. Photo: Hemant Mishra/Mint

S Bridget Leena : Live Mint :Tue, Jun 25 2013. 12 00 PM IST

The Chennai-based company told BSE that the process has been initiated through State Bank of India


Orchid Chemicals and Pharmaceuticals Ltd has been referred to the corporate debt restructuring (CDR) cell of the Reserve Bank of India after liquidity constraints affected operations.
The Chennai-based company told BSE that the process has been initiated through State Bank of India. Promoter Raghavendra Raoholds a 32.28% stake in the company, of which about 87% has been pledged.
The company did not have sufficient cash flow even to meet working capital requirements, said Subrata Sarkar, an analyst at Dalmia Securities Pvt. Ltd.
“We have close to Rs.2,700 crore of debt,” said Rao, managing director.
“In a way it is good, at least the company gets to restructure its debt and get time on its interest payments,” said Sarabjit Kaur, an analyst with Angel Broking Ltd.
“The deal money from Hospira Inc. will enable us to reduce some debt,” said Rao without providing details.
In August 2012, Orchid said it had agreed to sell its active pharmaceutical ingredients business and research and development facility to US-based Hospira for $200 million as it was severely constrained by debt and working capital issues.
However, IDBI Bank Ltd approached the Madras high court seeking an order that Orchid settle its dues before the deal went through, which delayed the sale. With that issue being sorted out, the transaction is expected to be completed shortly, said Rao.
This is not the first time that Orchid has had debt troubles. The company sold its generic injectable formulation business to Hospira for Rs.1,800 crore after its debt more than doubled to Rs.2,985 crore in 2009-10 from Rs.1,029 crore in 2005-06.
Orchid repaid close to Rs.1,000 crore of debt and increased reserves by Rs.300 crore from the proceeds.
The company reported a loss of Rs.275 crore for the fiscal ended 31 March 2013, compared with a profit ofRs.103 crore the previous year.
“This is a temporary relief not a solution and Orchid had sold its lucrative business to Hospira earlier and this time there is no way out,” said Sarkar.
Orchid fell 0.89% to Rs.50.10 on Monday while the benchmark Sensex fell 1.24 % to 18,540.89 points
TNN | Jun 25, 2013, 05.55AM IST
 Orchid Chemicals is seeking recourse with its lenders and consequently has made a reference to the corporate debt restricting (CDR) cell, a body constituted by RBI to ensure restructuring debt of an organization.

The company made a regulatory filing with the stock exchanges on Monday whereby it said, "due to continuing liquidity constraints and pressure on operations, Orchid has initiated the process of restructuring its debt and accordingly the company has made reference to the CDR Cell throughSBI." Orchid, it is learnt, has a total debt of nearly $500 million or around Rs 2,800 crore. Of this nearly $200 million would be paid to lenders when it receives funds for sale of some businesses to Hospira over the next few days. It received all no-objection certificates, including clearance from IDBI Bank for the agreed sale of various assets to Hospira Inc 

The delay in concluding the August 2012 deal, under which Orchid was supposed to sell various assets, including active pharmaceutical ingredients business and a R&D facility to Hospira for $200 million, had resulted in a severe cash crunch. 
The deal was supposed to have been completed by March 2013, which now has a June 30 deadline. 

Orchid which has nearly 20 lenders, through this CDR is seeking bank's support to restructure the $300 million residual debt.
Debt strapped and cash starved Orchid Chemicals incurred a massive net loss of Rs 132.27 crore for the quarter ended March 2013. The company had earned a net profit of Rs 20.55 crore in the corresponding quarter last year. Revenues during the quarter dropped 45.36% at Rs 268.15 crore from Rs 490.78 crore.

Books :A tough road to justice

My Beloved World: Sonia Sotomayor


Prabha Sridevan : The hindu ;25 June 2013



An extraordinary life, an extraordinary person, and a wonderful read. My Beloved World is by Justice Sonia Sotomayor, whose appointment to the U.S. Supreme Court created a record of sorts.

The book starts dramatically and poignantly with the writer, barely eight years, listening to her parents arguing about how to give her the insulin shot. She is a juvenile diabetic. The parents fought, her father was an alcoholic and she writes, “My mother’s pain would never heal, the ice between them would never thaw because they would never find a way to acknowledge it. Without acknowledgement and communication, forgiveness was beyond reach.”

As she writes, her tone and voice seem to change, she slowly growing from the eight-year-old with whom we walk the journey and see her beloved world. It is a fascinating device, which does not seem to be the result of effort, but almost as if Sonia the child starts sharing her life with us and grows through the pages.

When she was diagnosed as a diabetic, the family receives it as “a catastrophe of tragic dimensions.” But she wouldn’t waste time. “I’d better get to work right now. That urgency always stayed with me.”

Because of the circumstances of her childhood, she had missed the joys of reading the world’s classics which her friend and room-mate had read, while she had been reading Reader’s Digest. “I’d have to remain a student for life.” These scenes are shared without self-pity, with candour and sometimes with a wry humour. Witness how the scene where the disinterested saleswoman looking at the two Puerto Rican women, the mother and daughter, suddenly transforms when the mother says her daughter is going to Princeton. “I saw the saleswoman’s head turn round as in a cartoon double-take.”

She talks of the incongruity of being at Princeton. “There were vultures circling, ready to dive when we stumbled.” She lives the difficulties of “minority students” for us. At the same time she warns against overkill of protests that may become an end in itself and lose potency if used routinely. “Quiet pragmatism of course lacks the romance of vocal militancy. But I felt more a mediator than a crusader.” She wins the Moses Taylor Pyne Honor Prize and disarmingly tells us that she realised it was “the highest award that a graduating senior can receive”, and that she would have to give a speech. “With the exception of our small cluster of ‘Third World’ friends and family, the faces were uniformly white. It was a fitting reminder of what I was doing there.” The speech is simple and hits home the message that Princeton (and indeed the world) would “be further enriched by being broadened to accommodate and harmonize with the beat of those of us who march to different drummers.” And to those who march differently, the message is “As you discover what strength you can draw from your community in this world from which it stands apart, look outward as well as inward. Build bridges instead of walls.” Do not let your identities isolate you; rather integrate with your identities intact. This theme runs through the whole book, there is no apology, no excuses for the difference and its impact, there is rather a pride and a determination.

Marriage
Then came the marriage and her law practice. “If the long hours were straining our marriage, I was too preoccupied to notice.” You cannot miss a word or a line. Note this. She writes about her friendship with a defense lawyer, “We’d talk shop: the ins and outs of our cases, the temperaments and tempers of the judges we dealt with, the routine sexism that was an occupational hazard,” and about the practice of law … “there is a place for idealism in the practice of the law. It is what makes many of us enter the profession in the first place, it is certainly what drives some of us lawyers to become judges.” The marriage breaks. He says “even doing the best I can, I’m not going to catch up with you.” She is touched by his generosity, she writes. This is something that marks her out, this spirit of super-fairness. “You didn’t need me” he says and she writes he wasn’t wrong.

Can women “have it all” is always a burning debate. “…it is a myth we would do well to abandon, together with the pernicious notion that a woman who chooses the one or the other is somehow deficient.”

She gives her best to every case and her closing speech in a child pornography case: “When you sell a stick of marijuana, the buyer and the seller can make free choices. The children could not.”

There is a constant attempt for self- improvement. Her mother and she share an uneasy relationship, “But there is no better indicator of progress, or cause for pride, than the thaw in relations with my mother.”

About her first day as District Judge Sotomayor, she writes that her knees were knocking but once she posed the first question to the litigants, the knees stopped knocking. And in her words “I think this fish has found her pond.” Indeed it had. My Beloved World stops here. It is not a strategic decision alone but an aesthetic decision too. The narrative would have changed track thereafter.

Is this a review?

 Not quite. It is an introduction to a remarkable person: a juvenile diabetic with troubled parents, an affirmative action student belonging to an ethnic minority, a woman who rose to the very top excelling all the way through Princeton and Yale.

 It is also an introduction to a person with remarkable simplicity, fairness, and blazing integrity. Virtues sorely lacking today.

(Prabha Sridevan is a retired judge of the Madras High Court)
Keywords: My Beloved World, Justice Sonia Sotomayor