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Hyderabad, Jan. 23

ASSET Reconstruction Company India Ltd (ARCIL) has taken possession of the sponge iron plant of Kumar Metallurgical Corporation Ltd (KMCL), the city-based ailing enterprise that defaulted in payment of interest and principal instalments of loans to banks and financial institutions.

The plant, with 60,000 tonnes per annum capacity, situated at Chityal in Nalgonda district here, was initially taken possession of by the District Magistrate on Saturday and was handed over to the authorised officer of ARCIL.

The Andhra Pradesh Industrial and Technical Consultancy Organisation (Apitco), the regional partner of ARCIL, in a statement issued here on Sunday, said KMCL, promoted by Mr Satish Kumar Agarwal and Mr Anil Agarwal, was classified a wilful defaulter by various lenders.

"They have been defaulting and owe around Rs 250 crore to various lenders like ARCIL, IDBI, IFCI and others. Earlier, KMCL also defaulted on the orders of the Debt Recovery Tribunal (DRT), Hyderabad, and the Debt Recovery Appellate Tribunal (DRAT) directing it to deposit monthly payments to lenders," Apitco said.

Having taken the consent from more than 90 per cent of the lenders for taking action against KMCL under the SARFAESI Act, ARCIL had served notices on the KMCL management on November 1 last year asking the company to pay Rs 78.25 crore as of September 30, 2004 together with further interest and other amounts within a period of six days from the date of notice.

The KMCL management had raised certain objections to the show cause notice served on it by ARCIL. Apart from terming the action as unlawful in the absence of consent from the Board for Industrial and Financial Reconstruction (BIFR), the KMCL management also said that participation by secured creditors in the revival scheme was mandatory.

Finding these objections as untenable and unacceptable, ARCIL moved ahead in taking possession of the KMCL assets under the Act and sought the assistance of the District Magistrate.

After taking possession of assets, ARCIL appointed Manaksia Ltd as custodian-cum-agent to operate and maintain the unit until a final solution was formed for recovery of dues of lenders by way of sale or merger or acquisition or tolling or other suitable arrangements, the Apitco release said.

Apitco, which has been associated with ARCIL and carried out an inventory of the assets, said Manaksia Ltd is currently discussing with the workers and employees of KMCL and is understood to have given an assurance to them that it wanted to continue the services of the entire workforce and sought their cooperation to operate the plant, the release said.

(This article was published in the Business Line print edition dated January 24, 2005)
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