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Rise and fall of CA-turned-businessman Pawan Ruia

Pawan Ruia, known as the turnaround tycoon till recently, bought sick companies with plans to turn these into profitable ventures, but failed in his attempt

Pawan Ruia
Pawan Ruia
Avishek Rakshit Mumbai
Last Updated : Nov 15 2016 | 1:48 AM IST
When the former Left Front regime in West Bengal was trying to revive industry a few years ago, a chartered accountant-turned-businessman shot to fame proposing new jobs and restoring industrial confidence, but only to fall from grace a decade later as he failed to turn around Jessop and Dunlop.
 
Pawan Ruia, known as the ‘turnaround tycoon’ till recently, bought sick companies with plans to turn these into profitable ventures, but failed in his attempt. The industrialist is now investigated by the West Bengal CID for his alleged role in the fire incident at the closed unit of Jessop. 

Ruia shot to limelight in 2003, when he bought a controlling stake in Jessop and Co from the central government. At that time, the company was reeling under pressure of a depleting balance sheet and Ruia promised a turnaround. His next bold move was to acquire another sick company, Dunlop, in 2005 from the Jumbo Group owned by the Chhabria family. 

The moves were welcomed amid much fanfare in a state which was then plagued by factories closing down and rising unemployment. 

Dunlop’s Sahagunj factory was reopened with much optimism in 2006 and Ruia managed to take the company out of the purview of the Board for Industrial and Financial Reconstruction in 2007. After three years, Ruia went ahead to re-list the company’s shares on the BSE but in effect, Dunlop’s operations never really revived, with Falcon Tyres (another acquisition by Ruia) taking up the slack. 

Although the Sahagunj factory reopened in 2007, it did not see a single day of full production. While the plant recorded an average daily production of five to 10 tonnes, the installed capacity was of 90 tonnes a day. Operations were riddled with stop-work notices due to labour issues and closure in March 2008 as electricity supply was cut, owing to accumulated dues.
 
Jessop, too, had a sorry story to narrate. Like Dunlop, Jessop also faced production issues and the company’s management repeatedly shut down operations, citing labour indiscipline. The last time it was functional was in 2014 after which it closed down never to open again under the aegis of the Ruia Group.

“It seemed that the management was not willing to run the plant or clear the workers’ dues,” Ramen Pandey, president of the West Bengal unit of Indian National Trade Union Congress, said.

In 2013, the Calcutta High Court directed winding up of Dunlop, a ruling challenged by Ruia in the Supreme Court. The apex court had then stayed the order. However, in December 2015, the Calcutta High Court came down heavily on the company and finally instructed it to wind up. 

It was at this point of time the West Bengal government took a stand to take over Jessop and Dunlop from the Ruia Group and hasten legislation in February this year, just ahead of the Assembly elections. 

Two Bills – Jessop and Company Ltd (Acquisition and Transfer of Undertaking) Bill, 2016 and Dunlop India Ltd (Acquisition and Transfer of Undertaking) Bill, 2016 – were passed giving the state government managerial control over these two ventures. 

While Ruia had time and again stated his intention to reopen Dunlop and Jessop to the state government, he gradually drew the Trinamool Congress-led government’s ire because of rising labour unrest. 

In May 2014, when the Jessop factory suspended operations, the then state labour minister, Purnendu Bose, said Ruia would get “one last chance” to figure out a solution or face the wrath of the state administration. 

“Ruia was never serious of running these companies. The kind of attitude he has shown over the years to reopen the plants is not conducive to his claims that he wants to restart operations,” said Partha Chatterjee, the state’s parliamentary affairs and education minister. 

Chatterjee, who once headed the state’s industries department as minister, claimed it was the valuation of the real estate of these plants which Ruia was interested in. 

“Every time he opened the factory, there was labour retrenchment. Nobody runs a factory like this,” the minister added.

A Ruia Group spokesperson, on the other hand, claimed that Jessop had been running without any problems from 2003 till 2012 when suddenly problems erupted. 

“A small section of people were manning the gates protesting and slogans against Ruia were raised. This resulted in bankers as well as buyers losing confidence in Jessop,” the spokesperson said claiming that from 2003 to 2010, Jessop had earned profits. 

The state’s criminal investigation department is now probing into the matter. So what prompted the state government to take this step? 

Last month, Kolkata mayor Sovan Chatterjee, who also is the fire minister, suspected foul play causing fire incidents inside the closed Jessop factory on the city’s fringes and recommended a probe. Soon, the state government and the fire department charged Ruia under Sections 435 (mischief by fire or explosive substance with intent to cause damage), 436 (mischief by fire or explosive substance with intent to destroy house) and 120B (criminal conspiracy). 

“There is obviously some foul play which is going on after the state decided to take over Jessop and Dunlop,” the mayor said. 

Partha Chatterjee said Ruia was the owner of these two companies till the time the Bill became an Act. “This prompted the government to go ahead with the FIRs.” 

On the other hand, the Ruia Group has questioned the legality of these FIRs stating that Pawan Ruia doesn’t have any stake in these companies.

“The state Assembly has passed the Bill to take over Dunlop and Jessop and is now paying the wages of the workers. Pawan Ruia (chairman of Ruia Group) doesn’t hold any position in this company or have shares in Jessop. Thus, how can there be an FIR against him?” asked the Ruia Group spokesperson. 

The present Trinamool Congress state government had long viewed Ruia with suspicion for his alleged closeness with the Leftist leaders. 

“His case was taken up by Left legislators who voiced for him,” Chatterjee alleged. 

Having failed to appear before the CID in relation to the Jessop fire probe, the industrialist is now reportedly facing a medical condition and is admitted in Moolchand Hospital, New Delhi. 

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First Published: Nov 15 2016 | 1:48 AM IST

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