BIFR told to change Montari promoters

The AAFIR ordered that the BIFR should set a deadline for the promoters to bring in their “own funds” to subscribe fully to their share in the January 1995 rights issue along with interest of 20 per cent compounded annually upto the date of payment.

“If the promoters fail to fulfil this obligation, there should be a change in the management of MIL,” an AAFIR bench comprising acting chairman M S Dayal and member J K Bagchi observed in a recent order.

These directions were given to BIFR "in order to preventthe fraud on public, shareholders, creditors by MIL promoters by trying to wriggle out of their obligations to subscribe fully to their share in the rights issue.”

Vivek Sibal, legal counsel for Ispat group company Mudra Ispat Ltd, had complained to AAFIR that MIL had defaulted in its payments even though the Agro-Chemicals Company had raised Rs 17.50 crore from its rights issue with the stated objective of reducing high cost borrowings.

In its order, AAFIR laid down that the sale proceeds from disposal of investments of MIL’s subsidiaries shall be utilised for repayment of the loans to MIL and not by way of contribution to the equity of MIL. After full repayment of the loans, if the subsidiaries have any surpluses for contribution to the equity of MIL, these shall not be treated as promoters’ contribution because MIL’s subsidiaries cannot be treated as promoters’ associates.

The recent AAFIR order is likely to seriously undermine the company’s efforts for a complete turnaround by the year 2003. It hadclaimed that it would completely wipe out its Rs 69 crore accumulated losses through reliefs and concessions from banks and FIs to the extent of Rs 28 crore promoters’ contribution of Rs 10 crore and the rest Rs 31 crore through future operating profits.