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Employees of one of India’s oldest glass making company, the Hindustan National Glass and Industries (HNG), have written to the Committee of Creditors (COC) led by consortium of banks, about how an ageing glass melting furnace plant could impact the safety of thousands of workers due to delay in the corporate insolvency resolution process (CIRP).
A ‘furnace’ is a giant heater that melts raw material for making glass. Each day, 600,000 food grade bottles are produced by HNG in Puducherry since the company is a leading supplier of containers to the beverage, food and pharma industry.
The letter states that since COC had approved a bidder, lacking an approval from the competition commission of India (CCI), it fears delay of the insolvency resolution. Usually, a CCI approval is required before a resolution plan is finalised.
Delay hurts company
Puducherry furnace plant, says the letter, was rebuilt in 2004 to typically run for 10-12 years. Hence, only when HNG’s CIRP is concluded soon and a new owner comes in with funds to infuse, can the furnace be rebuilt to keep the company’s operations financially viable. Employees have told COC that dis-functioning or shutdown of HNG’s Puducherry plant could hit the financial feasibility of the insolvency process as the company’s asset base will be affected. Employees say their last wage settlement due in 2014 is also pending after it was done more than a decade ago in 2010.
“The current condition of the furnace is very poor and it is at an imminent risk of failure. The furnace was designed in 2004 to last for 10-12 years max. Its life has been more than spent. To ensure a long term sustenance of the company’s operations and market share, it is important that the entire CIRP process be completed at the earliest and new management considers rebuilding the furnace on priority,” the letter from employees to COC said.
HNG’s current Puducherry unit was built and commissioned in 1992 by Ballarpur Industries with technology from Owens Illinois, USA. It was later acquired by HNG in 2002 from Owens Brockway (India). As per the letter, the last full rebuild of the furnace was done in 2004 and “subsequently patchy, short term repairs have been carried out in 2007 & 2014 followed by running repair activities in 2017,” the letter says.
On verge of closure
HNG’s insolvency resolution started in January this year but has run into a controversy after COC selected a bidder lacking CCI approval. No deadline had been set by COC for the bidder to get approval, which could even take months. This move f by the COC and the resolution professional has been challenged at the National Company Law Tribunal (NCLT), Kolkata. The employee letter further states that E&Y, HNG’s financial watchdog, has not appointed experts to run the existing plants. Hence, the Puducherry plant, among others, was on the verge of closure, which could distort the financial feasibility of the resolution plan submitted by the applicants under CIRP and may potentially lead to a disinterest in acquiring assets if plant closure continues.
“We are concerned about the potential directives from CCI to the currently approved bidder asking to divest a few plants for meeting market share norms. It may impact Puducherry plant and its employees,” the letter states.
On November 28, even the Nashik-based employees union of HNG dashed off a letter to the Maharashtra State Labour Minister highlighting lack of information on the CIRP. An independent insolvency professional said that if any of the company’s plants get affected due to issues then it would drastically impact the financial viability of the deal for any bidder and hence COC needed to take note.
Email query sent by businessline on December 2 to COC and various other parties including the RP, ARC and even consultancy firms remained unanswered.
Sources say that COC led by SBI has taken a view based on the ArcelorMittal v/s Abhijit Guhathakurta case that it had the discretion in choosing a bidder since a timeline for CCI approval was not mandatory. Yet, parties were informed via emails to get CCI approval before the final submission, which one of the parties is unlikely to have secured, the sources said.
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