Deccan Chronicle :Police start probe in disrupted DCHL property auction

BS Reporter  |  Hyderabad  

December 27, 2013 Last Updated at 00:50 IST

Case registered against Indiabulls' official for an alleged false promise of lower price to a bidder

The city police on Thursday said they had begun a probe into the alleged disruption of a Deccan Chronicle Holdings Limited (DCHL) property auction at the office of Indiabulls Housing Finance here on Tuesday.  They would also look into a complaint filed by a prospective bidder in a related matter against two officials of Indiabulls.

The  police registered a case against Somajiguda municipal councillor A Mahesh Yadav and eight others for disrupting the auction of the residential property of P K Iyer, a promoter of DCHL, based on a complaint by Indiabulls’ legal manager K V Subbayya.

They also registered a case against Subbayya and his colleague based on a complaint by Chalapathi, who, according to police, alleged the duo had cheated him after taking money to help get the property at a cheaper price.

West Zone DCP V Satyanarayana said they had initiated the investigation and added they needed to question Indiabulls’ top officials to get a clear picture.

“We readily provided adequate police security to the Indiabulls’ team when they went to take possession of the said property in July this year. I do not understand why they did not seek similar protection this time,” he told Business Standard on Thursday.

The police are not only looking into the motive behind the alleged action of Mahesh Yadav but also trying to find if there was any link between him and Chalapathi, who had approached the police against Indiabulls’ officers soon after the company representatives filed a complaint against the corporator .

According to Satyanarayana, the complainant alleged Subbayya and his colleague received Rs 5 lakh as an advance to help him get the property at a cheaper price but later betrayed him by enhancing the reserve price to Rs 14 crore from the earlier figure of Rs 6 crore. Subbayya refused to comment on the issue.

Indiabulls took possession of two residential properties, including this one, of DCHL promoters after invoking the Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) when they failed to repay the Rs 100 crore it lent.  

An attempt to seek relief under the sick companies Act by the DCHL promoters has failed, as the Board for Industrial and Financial Reconstruction (BIFR) declined to register the company as sick one.

“Although the company is in the business of newspaper, it had filed the reference showing its business to be that of printing which was completely misleading and factually incorrect,” an order issued by the BIFR registrar said.

Referring to a host of civil and criminal proceedings being pursued against the company promoters, the registrar, in his orders, also questioned the claim of the DCHL that Sarfaesi action has been taken only to the tune of 9.78 per cent of its securities.

“A large number of secured creditors, including Indiabulls, Canara Bank, Kotak Mahindra, JM Financial, IDFC, SBI among others have initiated a similar action much more than what has been stated by the company,” it said.

India should cut debt in 5-6 years: Montek T

Press Trust of India  |  Chennai  

December 26, 2013 Last Updated at 20:09 IS

Planning Commission Deputy Chairman says 

that for this to happen, revenues must go up 

and there should be decrease in subsidies

India should reduce its debt within 5-6 years by putting fiscal policy on the right path, but "draconian changes" are not the answer, Planning Commission Deputy Chairman Montek Singh Ahluwalia today said.

 

"In the next five or six years, the objective should be to bring the gross debt to GDP ratio down that means fiscal deficit also must go down," he said, adding for this revenues must go up and there should be decrease in subsidies.

 

"Draconian changes are not at all the answer. A very large number of balls have to be balanced in an effort to put fiscal policy in right path", he said, delivering the first Dr Raja J Chelliah lecture organised by Madras School of Economics and Southern India Chamber of Commerce and Industry.

 

 Noting that a fiscal policy must be directed towards higher level of economic efficiency, he said: "Fiscal policy must be designed to promote growth. (It is) particularly important for a low income countries like us. In our case, trying to design fiscal policy, we need to look what is the implication of fiscal policy and the growth of an economy."

 

Stating that fiscal policy was about making sure that different groups get a fare share of opportunities, he said: "India being a Federal structure, distribution is not just an individual's context, but it is also a distribution of revenues between the Centre and States, States to lower level bodies and others".

 

One of the objectives of fiscal policy was to stabilise the economy on how to react to "shocks" (whenever a slowdown occurs) both external and internal, he said.

 

Later talking to reporters, Ahluwalia said inflation was a problem but added 2014 would be a better year.

 

"Inflation is a problem. We will see a softening of inflation. If you look at the data, it suggests that there will be softening of inflation. I cannot judge how quickly it will often, but it will soften," he said.

 

On Tamil Nadu Chief Minister J Jayalalithaa's charge that the Centre was not allocating more funds to Tamil Nadu, he said, "I would not comment on state issues. She has not written to me on this matter."

 

On the Goods and Services Tax, he said "Most of the parties, I think, are coming closer. So, obviously it requires a Constitutional amendment. It will require going to the next Government (for passage)".

 

"I can assure you that if you are able to say that GST is now a reality, it will be the best signal globally that India is open for business and serious about it," he said.  

CDR references drop sharply in December

Abhijit Lele  |  Mumbai  

December 27, 2013 Last Updated at 00:50 IST

Bankers, however, say it will be premature to celebrate

Did Santa Claus bring good news to bankers who have been burning mid-night oil to restructure debt of stressed companies?

The closing month of calendar year 2013 (December) saw dip activity at the Corporate Debt Restructuring (CDR) cell, with just four cases involving aggregate debt of about Rs 4,500 crore being referred for recast. In the month of November, the CDR forum received just three cases with aggregate debt of Rs 4,000 crore.

Top bankers including those at the CDR cell while showing “signs of relief” are prompt to caution that it is premature to open champagne bottles. There is enough stress in the system due to long-drawn slowdown and burden of interest costs on companies.

"Normally, there is a last minute rush to refer cases at the end of each quarter. But this time around there was no such pressure on us," said a relaxed IDBI Bank executive.

Banks and corporates sent loans of more than Rs 28,700 crore involving 14 cases to the forum in October-December 2013, according to provisional data from CDR.

The large cases like ABG Shipyards and Gujarat NRE Coke referred in October swelled the tally. The infrastructure, textiles and iron and steel sector still lead the pack of stressed companies that are under debt recast.

A senior public sector official said many large groups, especially those in roads, power and other infrastructure segments are trying to sell assets and restructure operations. Perhaps this would relieve them from the need to come to banks for recast.

Dun and Bradstreet in its outlook for 2014 said maximum distress in debt was witnessed in the iron & steel sector and infrastructure sector. They have high share in stressed asset book (NPAs plus restructured loans) of public sector banks.

With continued deceleration in the industrial growth, pick-up in activity in infrastructure and iron & steel sector is expected to be delayed. Since concentration of distressed assets is higher in these sectors asset quality deterioration in Indian banks is set to worsen, it said.

Rating agency Icra has painted a similar picture about the stress levels of banks. In light of large debt recast under CDR, standard restructured advances are slated to grow from 5.3 per cent at end of March 2013 to 6-6.2 per cent by March 2014, it said.

Abizer Diwanji, National Leader - financial services at Ernst & Young India said life will be tough in 2014. Loans given in boom time have showing stress now when the economy is growing at slow pace.

The Reserve Bank of India has proposed more steps tighten rules for restructuring and non performing assets. They will have definite impact on the restructuring activity, he said.

Over a debt repayment Standard Bank consultant leaves Mongolia after detention

Bloomberg  

December 24, 2013 Last Updated at 00:32 IST

A Standard Bank Group consultant 

Chris Bradley who was detained inMongolia amid a dispute with a local company over a debt repayment said he left the country and arrived in his native New Zealand.

Chris Bradley departed Mongolia on December 19, he said on Monday by phone from Auckland. Bradley was part of a five-person team from Africa's biggest lender that visited Ulaanbaatar last month to seek talks with the government on $131 million in loans to Just Group LLC, a holding company, two people familiar with the matter said earlier this month. The people asked not to be named because they weren't authorised to speak publicly.

Standard Bank is cooperating with the Mongolian authorities and "believes it is inappropriate to comment any further," Kate Johns, a spokeswoman for the bank, said on Monday by e-mail.

Ross Linstrom, a spokesman for the bank, confirmed on December 4 Bradley hadn't been allowed to leave Mongolia and said Standard Bank was cooperating with the Mongolian authorities.

Standard Bank alleges the loans are in default and filed a lawsuit in July in a London court seeking repayment.

Standard's loans were made between 2007 and 2010 to Just Group to fund raw materials supplies and debt repayments at state-controlled Erdenet Mining Corp and Ulaanbaatar Railways, according to a document obtained by Bloomberg News.

Bradley said by phone on Dec. 2 that he had been due to depart Mongolia on Nov. 29, but was "restricted by the authorities from leaving." Bradley said he was advised of his situation by local police and that he was a suspect in an investigation. Tugsbayar Nasankhuu, a captain in the National Police Agency's Press and Information Division, declined to comment on Dec. 4.

Bradley, a native of Hokitika, New Zealand, said this month he worked as an employee of Standard Bank from 1999 to 2001, and has consulted on a contract basis for the bank over the last nine years, including five visits to Mongolia since May.

3i Infotech plans to sell assets to pay back 20-30% of its debt

Shivani Shinde Nadhe  |  Mumbai  

December 27, 2013 Last Updated at 00:47 IST

Till 2009, the company had acquired about 40 firms, mainly financed through debt

The new management of 3i Infotech, a midcap software services firm, has its task cut out: To bring the company back on a growth track.

The management plans to repay at least 20-30 per cent of itsdebt by selling some assets.

The new management headed by Chief Executive Madhivanan Balakrishnan and Chief Financial Officer Charanjit Attra are now focused on sales growth. The company’s performance was hit as it defaulted on some of its foreign currency bond payments.

3i has restructured debt of Rs 1,300 crore, at 14.75 per cent rate of interest. The company had converted the rupee loan into a dollar loan of $215 million at an interest rate of 6.5 per cent plus three-month London interbank offer rate. “This reduces our cash outflow for interest payment to Rs 80-100 crore per year from the earlier Rs 250 crore,” said Attar.

Funds through these bonds were raised by the company for acquisition. “I do think the current situation of the company was partly due to the debt raised for acquiring companies. And, then integrating these businesses. There were certain acquisitions that were not a correct fit for us. In 2008-09, the company did plan to take these debts and convert into long-term bonds. But the slowdown dried our financing plans and we were hit badly,” said Attra.

Till 2009, the company had acquired about 40 firms.

Attra added the management plans to sell some of the non-core businesses, amounting to 20-30 per cent of the loan amount, to repay the debt in the next 18-24 months. One of the acquisition the company has identified to sell is Locuz, which it acquired in 2008.

Business Standard had first reported 3i Infotech for divesting majority stake in Locuz

The inability of the company to convert its foreign currency convertible bonds into equity or make a repayment to bond holders also impacted business. Attra agrees this hurt their sale cycles that were extended to five-six months from three earlier. “But it’s good to share that we now see our sale cycles back within three months,” he added.

Additionally, the company has a FCCB repayment worth $93 million that matures in 2017. The interest rate for this is over five per cent. “We started at around $125 million around 18 months ago and we have got this down to $93 million as bond holders have turned part of their bonds into equity,” said Attra.

With the board giving a mandate to the management to bring the company back to black, Attra and the management team are focused on growing its top line at a compounded annual growth rate of 10-15 per cent for the next five years and get its earnings before interest, taxes, depreciation and amortisation in the 20 per cent range. He claims that the company has relaunched a few of its products in both the Indian and European markets. “We recently won a large deal in the BFSI space,” he added.

Deccan Chronicle running out of options after BIFR rejects application

Deccan Chronicle Holdings can contest BIFR’s decision. Photo: Mint

Live Mint ;26 Dec 2013

DCHL may have to consider selling parts of the business after BIFR refused to declared it a sick company

Hyderabad: Debt-laden publisher Deccan Chronicle Holdings Ltd (DCHL) received a setback after the Board for Industrial and Financial Reconstruction (BIFR) rejected its application to be declared a sick company, saying it withheld crucial information and misrepresented itself as an industrial entity, leading once again to uncertainty about its future.

BIFR declined DCHL’s application under the Sick Industrial Companies (Special Provisions) Act, 1985, as the company is primarily engaged in publishing newspapers, which is not considered a manufacturing activity under the Industries (Development and Regulation) Act.

“Although the company is primarily in the business of newspaper, it had filed the reference showing its business to be that of printing, which was completely misleading and factually incorrect,” V.P. Bhardwaj, secretary, BIFR, said in an order dated 21 November. Financial news website Moneylife reported the development on Saturday.

The decision means DCHL is running out of options to keep its lenders at bay and may have to consider selling parts of the business. Being declared a sick company would have given it protection from the creditors while it tried to revive itself. Several creditors have asked for DCHL to be wound up so they can recover their dues.

DCHL can contest BIFR’s decision, but it wasn’t immediately clear if it plans to do so. Aides at the offices of chairman Venkattram Reddy and vice-chairman P.K. Iyer said they were out of town. An email sent to Iyer on Tuesday did not elicit a response till the time of going to press.

BIFR also said DCHL in its application concealed an ongoing probe by the Central Bureau of Investigation (CBI) against its chairman, and did not disclose an inquiry by the ministry of corporate affairs for alleged violations of the Companies Act.

It also pulled up DCHL for misrepresenting the quantum of its securities seized under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act.

BIFR said it found that a “large number” of secured creditors and asset reconstruction companies—India Bulls Financial Services Ltd, Canara Bank, Kotak Mahindra Bank Ltd, State Bank of India, JM Financial Asset Reconstruction Co. Pvt. Ltd, Pegasus Assets Reconstruction Pvt. Ltd andIDFC Ltd—had initiated steps to recover their dues under the Sarfaesi Act, contrary to DCHL’s claim that action had been taken only on 9.78% of its securities.

A company cannot refer itself to BIFR once its financial assets have been acquired by a securitization or a reconstruction company under the Sarfaesi Act.

“By going to BIFR you are getting shelter from all creditors. That’s the principal benefit…For the board to make a decision, to make up its mind, it has to have all the relevant information,” said Sujjain Talwar, partner at legal firm Economic Laws Practice.

Analysts say the rejection of DCHL’s application bodes well for its secured lenders.

“Now the pressure from the lenders would resume and might even increase,” said Satish Kantheti, head of equity research at Hyderabad-based broker Zen Securities Ltd. “Secured lenders are relatively better placed than unsecured lenders. Those who have security will be able to act and get some possession. The others have a problem.”

An official with a private bank with exposure to DCHL said the publisher’s loans were taken out of the lender’s books two quarters ago. “Some of it has been given for asset restructuring. A significant amount was also recovered,” this official said.

Hyderabad-based Andhra Bank, which lent Rs.200 crore, refused to comment on the implications of BIFR’s ruling. An official of the bank, on condition of anonymity, said the bank has started taking possession of properties pledged to it as collateral under the Sarfaesi Act.

Talwar said DCHL can appeal against the BIFR order with an appellate body, or contest the order by filing a writ petition in a high court and then a special leave petition in the Supreme Court.

DCHL, which has Rs.3,777 crore of debt on its books, had already suffered setbacks in debt recovery tribunals and other legal forums. An earlier option to explore corporate debt restructuring also failed.

Kotak Mahindra Bank recently secured permission from the Andhra Pradesh high court to sell DCHL’s Kondapur press if the management fails to settle dues to it by 28 February. Last week, the Supreme Court refused to entertain a plea by DCHL against the high court order, PTI reported.

“They need to reach some sort of compromise with lenders. Whether the lenders will agree for a compromise is another big question,” said Kantheti of Zen Securities.

The promoters of DCHL re-mortgaged the same assets with different banks to avail loans, leading to legal contests between some lenders. IDBI Bank Ltd and Axis Bank Ltd, for instance, are sparring over who has ownership to DCHL’s titles—Deccan Chronicle, Financial Chronicle, Asian Age andAndhra Bhoomi.

HT Media Ltd, publisher of Mint and Hindustan Times, competes with DCHL in some markets.

HC holds father-son duo guilty of contempt of court, sends them to jail for six months

RAGHAV OHRI : I E : Chandigarh, Tue Dec 24 2013, 04:15 hrs

PEEVED with the "consistent contemptuous conduct" of two residents of Panchkula, a father-son duo, the Punjab and Haryana High Court has imprisoned them for six months, holding them guilty of contempt of court.

The two after having "defaulted" on a loan not only "misbehaved" with a lawyer, an officer of the court, but also "manhandled" officers appointed by a lower court to prepare an inventory of the stock lying in the factory owned by the two contemnors.

The court has also taken strong note of the "misconduct" of the duo with the presiding officer of the Debts Recovery Tribunal (DRT) and concealing material facts from the High Court.

A division bench headed by Justice Hemant Gupta has come down heavily on Rajinder Kumar Chauhan and Ravi Chauhan for their "cumulative misconduct". The "unconditional" apology tendered by the duo did not cut ice with the bench which dubbed it "technical apology with a view to evade consequences of thee proceedings".

Interestingly, the father-son duo had also thrown challenge to the jurisdiction of the High Court wherein they had argued that the DRT "is not a court subordinate" to the High Court. Proprietors of M/s Raj Transmission Engineering Limited, the two had raised a loan of over Rs 26 crore from Allahabad Bank in 2009.

Since they "defaulted" on loan, a notice was served by the bank in July 2011 for securitisation and reconstruction of financial assets. Aggrieved, the duo moved the DRT challenging the notice wherein the bank moved an application for appointment of a local commissioner and other officers for making an inventory of machinery, stocks and other goods in the factory. A lawyer and other officers were appointed for the task by the DRT.

The Local Commissioner (a lawyer), in his report given to the DRT, submitted that the day he and other officers visited the factory, the duo misbehaved with him and manhandled other officers. The commissioner submitted that the two also made adverse remarks against the presiding officer of the tribunal and compelled the officers to delete the pictures from their cameras taken by them as evidence. It was also submitted that they were roughed up by the employees of the duo.

Following this, the contemnors moved an application before the presiding officer stating that they "were not getting natural justice" and that they were "not satisfied with the intention of the Tribunal". Recording the "disrespect" shown to him, the presiding officer recused from the case. The two then moved the High Court without disclosing the fact that their application against the prosecution was dismissed by the tribunal.

Dismissing their original petition, a division bench had taken note of the misconduct and initiated criminal contempt of court proceedings. Awarding six-month imprisonment, the court has also slapped a penalty of Rs 2,000 on the two.