Defaulter challenges NPA Ordinance

Just a couple of weeks after being re-promulgated, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Int...

Just a couple of weeks after being re-promulgated, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 has been challenged in the Delhi High Court by one of the companies whom the FIs had given notice under the ordinance.

Leading financial institutions and banks including IDBI, ICICI, IFCI, UTI, GIC, LIC and Bank of Baroda had sanctioned loan to the tune of Rs 800 crore to Mardia Chemicals Limited (MCL). Subsequent to the default by the company, the FIs had issued notice to MCL under the new NPA Ordinance. The company has moved a petition in the Delhi High Court challenging the notice of the FIs and banks.

MCL, a Ahmedabad- based company, is promoted by Rasiklal Mardia and his brothers Rakesh Mardia and Rajeev Mardia for manufacturing dyes and dye intermediates at Surendranagar in Gujarat. To fund this project, the company has taken loans from the FIs and banks. According to FI sources, the company has been defaulting to all the lenders since the late nineties and has been taking recourse to legal action to thwart any move by the FIs and banks to recover their dues.

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During the initial years of default the FIs and the company began discussion on how to salvage the loan but no amicable solution was reached.

The company then applied for protection under BIFR. And when the BIFR rejected the company’s plea they moved AAIFR.

AAIFR in its order in June 2002 had come to the conclusion that since BIFR has not given clear explicit and adequate reasons for its conclusions, the appeal is accepted and the BIFR rejection order has been set-aside and the case has been remanded back to BIFR for re-decision.

AAIFR, however, granted permission to certain lenders to resume recovery proceeding against the company and guarantors. Even as the lenders commenced their legal action, the company filed a writ petition in the Delhi High Court against this particular unfavourable portion of the AAIFR order.

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