The Madras High Court, which dismissed Subhiksha’s merger proposal on Monday, has raised serious objections and doubts over the Rs 230 crore which was claimed to be transferred between Subhiksha Trading Services Limited and Blue Green Constructions & Investments Limited (BGCIL).
In his order passed on Monday, Justice V Ramasubramanian said, “Given the financial status of the transferer Subhiksha and the transferee BGCIL as on date, I do not think that any amount of safeguards can protect the gullible public from becoming victims. The reason for this conclusion is that even while committing default in payment of statutory dues, from June 2008 onwards, the transferor and the transferee have managed to bring entries on record as though a sum of Rs 230 crore was exchanged between themselves”.
The order further doubted the transfer of money during August 8 to 15, 2008, saying both the companies do not appear to have had so much of funds during the period.
On the petitioners' (Subhiksha and BGCIL) claim that these payments were cheque payments, reflected in the books of accounts, the order said, “Given the financial position of both, this could have been accomplished only by way of cross cheques issued by one to the other and the bank neutralising their effect by one credit entry and one debit entry."
The Court observed that all the 1,600-plus retail shops run by Subhiksha had been closed and the inventories valued at Rs 551 crore were said to have evaporated into thin air.
The Court, which dismissed the merger proposal stating that it was mainly to protect public interest, said that the revival plan submitted by Subhiksha was was based on certain presumptions including infusion of Rs 150 crore as equity at par, infusion of Rs 100 crore as fresh debt/debt convertible into equity, incorporating the effect of debt restructuring, utilisation of Rs 51 crore of the infused cash to create the balancing investments in the fixed assets.
The Court also dismissed the company's revival plan, saying even if any one of the presumptions made by the company does not materialise, the revival plan would collapse.
