The high court’s decision to appoint a Provisional Liquidator for the beleaguered retail chain, Subhiksha, was completely counter-productive to the aim of swiftly reviving the business, the company’s counsel argued today.
In an affidavit, Subhiksha said the bankers with whom it was negotiating a restructuring of debt, with the court’s knowledge, were of the same opinion. It said an agreement with bankers was expected in a fortnight if this development hadn’t taken place.
What is more, its proposed merger with city-based Blue Green Constructions, also something the court was aware of, might come completely unstuck, it warned. According to Subhiksha, Blue Green has already told it that it might withdraw if a PL took charge.
“The company is in a temporary financial distress at this stage, but the issues are recent, temporary and related to the global financial recession. Appointing a PL will completely destroy the notion of a going concern,” pleads the affidavit.
The HC had issued orders for a PL on an application by Kotak Mahindra Bank, which had lent the former Rs 40 crore. Then, after Subhiksha asked for a review, the HC had rejected the plea. However, Subhiksha hasn’t given up the attempt to change the court’s view.
Bankers currently associated with Subhiksha’s debt negotiations said the appointment of a liquidator would force lenders to shift focus from restructuring of the troubled business to recovery of dues from sales of assets. Kotak Mahindra declined to comment.
When spoken to, R Subramanian, promoter and head of Subhiksha, said: “In a merger, the fate of both companies gets intertwined. So, if one company is under a PL, the other company gets impacted when the merger happens. Why would Blue Green, why would anyone, want to take over a a company under liquidation and buy the problems of that company?”
