Derivative deals: Karur firm takes ICICI to court

Sabare International, a Karur-based home furnishings company, has taken ICICI Bank to court over a foreign exchange derivative contract. The company has requested the Karur civil court to declare the contract void.

This is the second company to have gone into a legal dispute with ICICI Bank after the Chennai-based Sundaram Multi Pap, which had alleged "mis-selling of certain foreign exchange derivative contracts for speculative purposes".

The amount of exposure Sabare had in the contract could not be ascertained.

The company, which exports home furnishings to the US and Europe, supplies to global retail chains such as Wal-Mart, Target and J C Penny. It has plants at Karur, Erode, Noida, Panipat and Allepey.

So far, almost a dozen companies all over the country have taken their bankers to court in similar cases.

They include two companies based in north India, Nahar Industrial Enterprises and Garg Acrylite. One of the banks involved in these cases is believed to be Axis Bank, against which Coimbatore-based Rajshree Sugars had earlier filed a case in the Madras High Court.

A couple of other banks are now trying to settle these cases out of court. However, at least two firms "" Hexaware and Amtek Auto which had disclosed losses arising out of derivative contracts "" had not taken legal action against their bankers.

Meanwhile, ICICI Bank today managed to get an injunction vacated in its case against the Hyderabad-based NCS Sugars. The company, it is believed, had requested the court to prevent ICICI Bank from treating the loans given to it as a non-performing asset. The injunction was vacated today in the Hyderabad civil court.

ICICI Bank has also filed a criminal suit against Sundaram Multi Pap as the latter had failed to honour a cheque. The bank had submitted the cheque for clearance to recover a part of the losses that Sundaram Multi had posted on derivative contracts.

The company is believed to have incurred losses of nearly Rs 3 crore on the derivatives contracts. The bank has also moved the debt recovery tribunal (DRT) in Mumbai to recover its dues from the company.