High-level panel to sort out Caparo's MP investment

Swaraj Paul-promoted Caparo Group's deal with Steel Tubes of India Ltd (STI) to acquire the latter's Dewas stamping plant for an undisclosed sum has hit a roadblock because the plant has been attached by a department of industries arm.

Now a three-member committee, constituted on November 23, comprising the principal secretary (finance), principal secretary (commerce and industry), and the managing director of the Madhya Pradesh State Industrial Development Corporation (MPSIDC), will decide on the deal.

The issue has been brought to the notice of Chief Minister Shivraj Singh Chouhan in a meeting held at the chief minister's residence today, where senior government officials, MPSDIC officials and Caparo group representatives took part.

"The chief minister has instructed the committee to look into the matter and solve the issue within a week," said a government insider, adding, "Caparo, the IDBI and MPSIDC will have to enter into a tripartite agreement probably to swap the loans since the MPSIDC also owes a loan amount of Rs 135 crore to IDBI."

Steel Tubes owes a huge amount of about Rs 97 crore, disbursed by the MPSIDC as inter corporate deposit (ICD).

Steel Tubes got Rs 25.7811 crore and its subsidiary STI Products Ltd Rs 9.88 crore, in 1997 and 2000 (Rs 35.33 crore principal and Rs 58.11 crore interest as on March 31, 2006).

"Steel Tubes has paid only Rs 1.50 crore against the outstanding amount as part of one-time settlement of Rs 5,810.72 lakh, and signed an MoU with the MPSIDC to pay the rest of the amount but later asked dilution in the conditions. The corporation rejected the demand and issued a revenue recovery certificate (RRC) against the outstanding. Further, the corporation filed criminal cases against the company under Sections 138 and 141 at the Dewas district court after cheques of Rs 14.57 crore had been dishonoured," said a government source.

The Corporation also has attached the properties of the company by issuing a revenue-recovery certificate, against which the company has filed a case in the high court bench, Indore.

The court issued orders to the MPSIDC to maintain the attachment and granted 'status quo' to bar the company from selling or transferring the assets, including Dewas stamping plant.

"Meanwhile, IDBI acquired the Dewas plant of Steel Tubes of India (against some other loan) and sold it to Caparo Engineering and duly informed the MPSIDC about the deal. Acting upon the information the MPSIDC filed a writ against the deal on September 20, 2006. The high court on September 27 stalled the sale and ordered the parties to maintain status quo," a government source told Buisness Standard.