BIFR outlines JK Cotton revival

Company may rope in a strategic partner owing to delay in land sale

The promoters of JK Cotton have proposed roping in a strategic partner for getting funds for the company, because the land sale to reopen the factory is getting delayed.

The minutes of the meeting held on March 27 by the Board of Industrial & Financial Reconstruction (BIFR) have just been released.

The Rs 108 crore revival plan of the BIFR, drawn up in November 2002, was not implemented.

JK Cotton Mills was closed under a lockout declared on May 15, 1989. The lockout had been declared illegal by the UP government. The company was declared a sick undertaking on January 24, 1991.

The revival package of November 2002 envisaged selling its three properties, two in Kanpur and one in Delhi. The FIs and the banks agreed to write off all debts except the principal, whose payment schedule was decided after paying 10 per cent upfront.

The BIFR bench ordered the state should provide necessary clearances for the sale of land to implement the revival package, failing which, "the bench would permit the company to proceed with sale".

Kotak Mahindra Bank, which has taken over the debt papers of ICICI Bank, and was present for the first time in the BIFR hearing, said since the company had not taken any steps effectively for sale, there was no action. Therefore, the bank's position was that the company should "create charges on their assets in their favour because they had taken over the debts of the company from the ICICI group, through an assignment".

The BIFR rejected any charge creation on assets, because it was "not envisaged in the scheme". It further agreed with the JK management that the transfer of liability from one company to another was done without their consent or of the BIFR.

Lastly, it has passed orders for the JK Cotton karamchari Audyogik Utpadak Sehkari Samiti, (JKAUSS), which has been spearheading the workers' movement for the reopening of the factory for the past 17 years, to prove its bona fides, and its representative RK Tewari to submit a proof of approval for forming a co-operative society as well as certificate for registration/ recognition for his union by the company and appropriate authority concerned within 30 days."

However, the BIFR ordered the JK management to induct a strategic partner within two months to start the mills.

It ignored JK's protest at the "high" fee being asked for by the UP and the Delhi governments for the conversion of land from leasehold to freehold. In UP's case it will range between 25 per cent and 40 per cent and in the case of Delhi it will be 50 per cent, of the sale price.