Green signal for Jessop rights issue

Jessop and Company Limited, an engineering and infrastructure development firm owned by the Kolkata-based Ruia Group, can now go ahead with its proposed rights issue worth Rs 52.04 crore as the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) has validated the rights issue.

In an order given on February 28 this year, the AAIFR quashed all the seven appeals against the four orders of the Board for Industrial and Financial Reconstruction (BIFR) and reiterated that Jessop had been recently declared out of the purview of the Sick Industrial Companies Act (SICA).

Commenting on the AAIFR order, Pawan Kumar Ruia, chairman of the Ruia Group said, Jessop will now go for completion of the process of the rights issue which was earlier stayed by AAIFR.

Jessop and Company Limited, formerly a PSU (public sector undertaking) was referred to the BIFR in 1995 after the entire net worth of the company got eroded.

In 1998, BIFR had directed a change of management in the company as it had failed in implementing the revival schemes approved by BIFR. Then, 72 per cent of Jessop's equity was transferred in favour of a consortium of the Ruia Group in 2003 as the strategic partner for the revival of Jessop.

In its four orders given by BIFR, it sanctioned a revival scheme for Jessop, permitted restructuring of the company's equity, exempted Jessop from the provisions contained in SICA as well as Sebi Act for the rights issue and also deregistered Jessop from the ambit of SICA.

These orders of BIFR were challenged by the different appellants and were subsequently referred to AAIFR.

In its final verdict, AAIFR said, "The said orders of BIFR were passed to facilitate the revival of the company through adequate inflow of funds. We are further of the view that neither of the appellants could be termed to be aggrieved by the said order."

The AAIFR also observed that there is no infirmity in the order of BIFR deregistering Jessop and Company Limited from the purview of SICA as the company has become a net worth positive entity. Jessop, divested in favour of Ruia Group in 2003, had turned around since then.

After the rights issue, Jessop's paid-up capital would be Rs 61.50 crore from Rs 19.87 crore now. The funds would help Jessop invest in rolling stock at a time when demand for wagons, coaches and EMU were rising, said the company. AAIFR reiterated Jessop was outside the purview of Sick Industrial Companies Act (SICA).

Ruia said Jessop would immediately go for completion of the rights issue. AAIFR justified its order by referring to judicial precedents like its own judgment in the matter of GKW Ltd, as also the judgment of the Madras High Court in the matter of Dunlop India Ltd vs. Container Corporation Ltd..