The Hindu Business Line : BIFR seeks explanation from Dunlop on transfer and sale of assets

Chennai, Aug. 21 The Board for Industrial and Financial Reconstruction (BIFR) has sought an explanation from Dunlop India Ltd on why it transferred or sold some of its assets to its subsidiaries and others without its clearance.

It has directed the company not to dispose of any of its assets.

According to a copy of the order available with Business Line, the BIFR has also asked Dunlop to give the details of permission it had given the company for the issue of Rs 100 crore on preferential basis and to whom it was issued.< /p>

Dunlop had applied to be taken out of the purview of BIFR because its net worth has turned positive and was no longer a sick company.

The company returned to black thanks to income from sale of some of its assets to its wholly owned subsidiaries and others.

According to the balance sheet for the year ended March 2007, the company reported a profit after tax of Rs 488.81 crore primarily from “other income” than operations.

Listed among its subsidiaries are Dunlop Infrastructure Pvt Ltd, Dunlop Properties Pvt Ltd, Bharatiya Hotels Ltd and Dunlop Estates Pvt Ltd.

At a hearing held on July 23, the representative from the Operating Agency (SBI) said that the company should not be taken out of the purview of the BIFR.

The BIFR’s Nominee Director on Dunlop’s board said that the company has not sought the permission of the asset sale committee for sale or transfer of assets.

These were also not routed through the committee.

The Operating Agency’s representative also submitted that the company’s shares were not being quoted on the stock exchange and that as on March 31, 2005 the company showed a negative net worth of Rs 330.32 crore.

The factories had been closed since 2000 except for a few days of operation.

So, the losses were bound to increase but the net worth had turned positive through sale of assets (Rs 335.66 crore), sale of shares (Rs 1.87 crore) and profit under miscellaneous heads (Rs 40 lakh).

The details of the assets sold were not available with the banks.

The performance does not reflect the real health of the company and does not take care of the interest of all the stakeholders.

The representative objected to the company going out of the purview of the BIFR.

In the order passed last month, BIFR has sought an explanation as to how the company effected the transactions without first taking a clearance from BIFR and why the transfers should not be nullified.

The order also said that Dunlop should also explain whether valuation of the assets was done and reserve price fixed, advertisements given as required and whether the assets were transferred or sold through a transparent bidding process through the asset sale committee.