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BIFR issues show-cause for winding up Sumex Chemicals

Richa Mishra

NEW DELHI, Oct. 29

THE Board for Industrial and Financial Reconstruction (BIFR) has directed issuance of a show-cause notice (SCN) in terms of Section 20(1) of SICA, asking the interested parties to submit their objections/suggestions or alternate proposals in respect of t he proposed winding up of Sumex Chemicals Ltd (SCL).

At the recent hearing, the bench observed that the existing promoters were unable to work out any scheme acceptable to all concerned and the operating agency's (OA) efforts to change of management has also not succeeded. Further, the one-time settlement (OTS) scheme could also not be worked out to the satisfaction of the secured creditors.

``In view of the circumstances, no possibility was seen for any acceptable revival scheme for the company getting worked out enabling it to convert its net worth positive within a reasonable time-frame while discharging all its due financial obligations, '' the bench said.

As such, the bench arrived at the prima facie opinion that it will be just and in public interest if the sick company is wound up.

However, in case any fully tied-up proposal having consent of all concerned still came up from any of the parties including the Workers' Industrial Cooperative Society (WICS), the bench will be open to consider it. If any such proposal is received by the OA, it shall analyse it and submit to the BIFR before the next hearing, the bench said.

The bench directed Sumex Chemicals to pay the costs incurred by the OA, Canara Bank, in pursuing a change of management. Failing this, Canara Bank will be free to invoke the personal guarantees of the promoters and this amount along with expenditure incu rred on arranging the insurance and security of the assets, will have first charge on the liquidation proceeds, the board said.

Sumex was directed to issue debenture certificates to the concerned debenture holders by October 20 and arrange for creation of security in their favour by November 20. The company is to report compliance of these directions to the BIFR within November 3 0, failing which it will be liable for prosecution under Section 33 of SICA.

Directions to Sumex Chemicals for not disposing of or encumbering in any other form, any of its fixed or current assets was also reiterated by the bench.

Further, all banks, institutions, the Employees Provident Fund (EPF) and Employees State Insurance Corporation (ESIC) authorities as well as State and Union Government departments concerned were granted permission by the BIFR to file or pursue their reco very suits against the company. However, the decrees obtained, if any, can be executed only after obtaining the bench's prior approval, the board said.