JK Cotton ropes in Yes Bank for revival

JK Cotton of Kanpur has roped in two strategic investors in the company -- Yes Bank and Ayodhya Finlease Ltd. This is likely to pave the way for resuming production after about 19 years.

JK Cotton has been under lockout since May 15, 1989. The lockout was prohibited and later declared illegal by the UP government.

The JK management said it would resume production once the UP government gave permission for selling surplus land, as was envisaged in the scheme of the company's revival, passed by the Board of Industrial and Financial Reconstruction (BIFR) in 2002. But from what emerged out of the last review hearing of the BIFR on January 21, it appears that it may resume production without the sale of land. The next BIFR meeting is on February 18.

The meeting saw differences between Kotak Mahindra Bank representatives and the JK Cotton management over the demand of the former for winding up the mills to pay its dues and the latter questioning the former's role in the affairs of the company.

However, the BIFR gave permission to the company to create charge on a piece of surplus land, known as Lakshaman Bagh, even when the government has not yet taken a final stand on its ownership.

On the other hand, Kotak Mahindra Bank had acquired the loan portfolio of ICICI Bank, including the loan of Rs 6.50 crore to JK Cotton. But JK is opposed to this and the BIFR concurred that since the deal was executed without the permission of either the management or the BIFR, Kotak Mahindra Bank will not be called for the meeting.

But Kotak has approached the appellate authority of the BIFR, the Appellate Authority of Industrial and Financial reconstruction (AAIFR), which remanded the case back to the BIFR to determine whether the ICICI Bank's assignment of debt to Kotak was in accordance with the sanctioned scheme and seek the opinion of all the parties, 51 in all.

Kotak Bank has argued that if it is barred, by the same logic, other assignees of company's debt viz Yes Bank and Ayodhya Finlease Ltd as assignees, too, should be barred from appearing as a party.