Delhi court orders closure of Data Access

The Delhi High Court has ordered winding up of Data Access (India) Ltd on account of its huge liability of over Rs 530 crore and inability to carry on its business.

On a petition filed by Pacific Convergence Corporation Ltd alleging that Data Access was unable to repay a loan of $10 million, Justice A K Sikri said the company's activities had come to a halt over the last few months.

"I am of the prima facie view that the company is indebted not only to the petitioner but had huge liability towards other creditors too; there were a spate of winding up petitions filed by these creditors who had refused to agree to the scheme of reconstruction proposed by the company. There were bleak chances of the company's revival, which has no business activity at present, and thus it had lost its substratum as well."

It also directed the Official Liquidator, appointed as the provisional Liquidator last year, to take possession of all the assets and records of the company.

"There is a plethora of evidence on record to show that $10 million is the liability of the company towards the petitioner. The liability of other creditors to the tune of Rs 530 crore is also not disputed by the company. It was also stated at the bar that these liabilities have risen to more than Rs 700 crore which was not denied by the company," the court said.

It also dismissed the company's scheme of reconstruction proposed by its shareholder Cheran Holdings Pvt Ltd (holding 12.5% of the total issued and paid-up share capital). The scheme had proposed the loans to be paid off from 2005-2006 up to 2010-2011 for various categories of creditors.

However, most of the creditors, including Canara Bank, IDFC, BSNL, MTNL, etc had opposed the scheme. While the banks were unwilling to restore and permit the company to operate the credit facilities as per their sanction letters, two service providers, MTNL and BSNL, had disconnected the company was not in a po

Canara Bank had levelled allegations of fraudulent transfer of funds and had filed various applications seeking attachment and remittance of those funds.

According to Data Access, the new investors, CHPL and KCP Associates Holdings (KCPH), had purchased the shares from its promoter Sidhartha Ray and his group of companies and SPA Enterprises Pvt Ltd through a series of shareholders' agreements.

As per these agreements, the new investor and Ray would invest Rs 75 crore and Rs 20 crore, respectively, for the company to tide over the cash crisis.

At the request of the new investors, Odyssey Re, America had agreed to lend the funds to the company on certain conditions. The amount was given to the company on two conditions --roll-over of all loans and bank guarantees with the banks for a period of at least 12 months and reinstatement of all points of interconnect with BSNL and extension by BSNL of all outstanding dues.

But Ray did not fulfill his obligations under the agreements. According to the court, the company had not been able to show that it had sufficient assets to meet the existing liabilities. In fact, even Rs 75 crore which the new management wanted to put in, had got embroiled in controversy and the new investor was showing its reluctance to provide these funds.

During the hearing, ABN Amro Bank had brought to the notice of the court that Rs 78.45 crore was credited to the company on August 19, 2004, and on the same date it was transferred to CHPL account maintained with the bank.

From this amount, CHPL had transferred Rs 35.30 crore to Cheran Enterprises, Rs 25 crore to Sporting Pastime India Ltd. (SPIL) and Rs 18.05 crore to KCP Associates Holdings.

These parties as well as Data Access wanted the interim order, dated December 17, 2004 passed by the Court virtually staying the transferred money to the various parties by ABN Amro Bank, Chennai, vacated.

The court directed ABN Amro Bank to recover the monies transferred (Rs 78.45 crore) and remit all the monies to Canara Bank pending final orders to be passed in the company's petition at a later stage. '...in case it is found ultimately that the money is to be refunded to Odyssey Re etc., appropriate orders can be passed directing Canara Bank to refund the amount and the bank has sufficient means to carry out such directions', the court said.