Daewoo land sale gets stuck in legal wrangles

The sale of Daewoo assets in Surajpur to Crosslinks, a company floated by former Hyundai executive B V R Subbu and Spicejet promoter Ajay Singh, has hit a legal quagmire with a slew of new players staking a claim for the 205-acre land, thus delaying the revival plan of the plant.

Sources said JP Morgan Chase and Canara Bank, which have the second charge to the assets, and Rajpal Singh Chowdhary of New Delhi have moved the Debt Recovery Tribunal, Mumbai, claiming to better the offer made by Crosslinks, which made the winning bid of Rs 765 crore in February this year.

The offer from Chowdhary was made to the DRT after Crosslinks deposited Rs 76 crore, or 10 per cent of its bidding amount in March. The DRT has now asked all the parties to give detailed offers with all the terms and conditions by this month-end so that it can pronounce an order thereafter.

"We are losing close to approximately Rs 10 crore a month as interest on the Rs 765 crore payment," sources said. The sale is being handled by Asset Reconstruction Company India or Arcil, which buys bad loans from financial institutions and sells the assets to the highest bidder.

"The Supreme Court has already made it clear in two separate cases that once the price is known through bidding, no other party can make a counter-offer," sources said.

Crosslinks was planning to revive the plant by making car engines for exports. "The jobs of more than 2,500 workers are at stake due to the closure of the plant," sources close to the development said. Subbu declined to comment on the issue, saying the matter was now sub-judice.

Sources say the new player, backed by a Mumbai-based private equity fund, are interested in the real estate of the company which could be developed for commercial purposes.

The proceeds was to shared by the financial institutions and by the Indian Customs which had made a duty claim on the Daewoo Motors when it was making the small car, Matiz. The Indian Customs have now written to the Arcil seeking reasons for the delay in the payment of the duty from the sale proceeds.

When contacted, Arcil officials say they have now made an application to the DRT to hear the Daewoo asset sale case on a daily basis from June 6th onwards so that the matter can be expedited.

Sources say the rising real estate prices has led to increased interest in the land which is 60 per cent occupied by the plant. The land was allotted by the Uttar Pradesh Industrial Development Corporation for encouraging manufacturing and creation of jobs in the area. The plant is closed since 2002 as its Korean parent firm Daewoo collapsed as it failed to pay back a mountain of debt.