In a major setback to cash-strapped infrastructure company Maytas Properties, promoted by former Satyam Computer founder B Ramalinga Raju’s family, a local court has passed an order barring it from using land as collateral for loans.
Private equity investors JM Financial and the Mauritius-based SRS Orion Investments, which had invested Rs 600 crore in Maytas Properties early 2008, had filed a petition with the court on November 6, after the property firm failed to return the funds.
The Hyderabad city civil court, in response to the petition, has ordered Maytas and its affiliates to maintain status quo until the date of the next hearing on November 26.
The order implies that Maytas and its affiliates can not approach the bank or any third party for raising funds till November 26. Moreover, it cannot enter into any agreement with strategic partners for developing projects on its land assets, sources said.
In January-February 2008, the PE players had subscribed to Maytas’s Rs 600-crore compulsory convertible debenture.
“During and after September 2008, the management and the board of Maytas Properties committed material breaches of the investment agreement and misused more than Rs 250 crore of the investors’ money by transferring them out of the company, and then giving us misleading information about the use of funds,” the PE investors alleged.
Due to such misuse of funds by the promoters, the investors initiated arbitration proceedings to recover their investment amount from Maytas Properties.
The arbitrator in August this year directed Maytas Properties and its affiliates to jointly pay an amount in excess of Rs 900 crores to the Investors.
Post that, Maytas had agreed to settle the issue by offering land to the PE funds.
However, the investors found that the land offered to them was already attached by the IT department or the Enforcement Directorate. So there was no other option but approach the court to settle the issue.
The PE firms had also written to the Company Law Board, ministries of finance, corporate affairs and commerce and industry, requesting them to assist in the recovery of over Rs 900 crore.
