NEW DELHI, NOV 5: The Board for Industrial and Financial Reconstruction has asked term-lending institution Industrial Development Bank of India to conduct an enquiry into the reasons for ``sickness'' of Mirchandani group company, Onida Savak Ltd to help the board reach a decision on declaring the company "sick".Hearing an application filed by Onida Savak to be declared "sick", a two-member bench of BIFR appointed IDBI to conduct the enquiry saying the company could not be declared sick without further enquiry. The IDBI has been asked to submit its report latest by November 20, 1999.The group's flagship Onida is making colour TVs and music systems though in the last few years it has failed to take on the competition and lost market share.Group company, Onida Savak had made a reference to BIFR under Sick Industrial Companies (special provisions) Act to be declared sick saying its networth of Rs 33.11 crore was wiped out by accumulated losses of Rs 34.81 crore as on March 31, 1999.Onida said the sickness of the company was mainly on account of the time overrun in project implementation due to delay in transfer of technology by LG Electronics, lower margins and a fire in its factory. Onida Savak started as a colour television manufacturer but later switched to the manufacturing of electronic tuners and washing machines.Secured creditors of Onida Savak including IDBI have raised objections to the company being declared sick and requested the board for a special investigative audit of its accounts.Raising objection to Onida Savak being declared sick, State Bank of India said the company purchased new plant and machinery worth Rs 7.52 crore during 1998-99 despite huge losses, which was quite strange.Onida Savak's representative in his submission before the BIFR bench said an investment of Rs 25-26 crore was stuck up in unproductive assets due to the failure of their technical collaboration agreement with LG which could not materialise on account of latter's own manufacturing operations in India.He said the company had filed a petition in this regard to the International Court of Arbitration, whose decision was expected any day. The company, he claimed, also had to incur heavy expenses on selling, distribution and publicity due to efforts at rebuilding the confidence of the customers which was adversely affected on account of supply of defective machines worth Rs 10 crore by the collaborator.The BIFR bench, however, observed that while many points raised by secured creditors had been clarified by the company, there still remained issues about which banks and institutions were not satisfied. The bench suggested to the company to maintain close interaction with the banks and institutions and hold detailed negotiations with them to retain their confidence, while ordering the enquiry.
