The Commerce Department has stepped up pressure on the cash-strapped apparel company Lilliput Kidswear for payment of an alleged $4 million it owes to vendors from Bangladesh in an unusual case of intervention by the Indian Government on an issue concerning private companies.

Lilliput Kidswear founder Sanjeev Narula, when contacted by Business Line , said he hoped to clear all dues in two-three months.

“We have withstood huge storms recently and resolved all issues related to our bankers and investors. I hope to clear the amount owed to the vendors in Bangladesh in the next 60 days,” Narula said.

Narula says that the amount owed to the Bangladeshi vendors was half of the $4 million claimed by them.

A Commerce Department official said, “We stepped in after the Bangladeshi Government sought our assistance to help its vendors retrieve their payments from Lilliput. We are in regular touch with the company and have been promised that all dues would be cleared.”

Lilliput, established in 2003, hit troubled waters in 2011 when private equity investors Bain Capital and TPG accused Narula of not providing auditors access to financial documents. Bain and TPG had invested $86 million in Lilliput in 2010.

Narula worked out his differences with the investors last October after they sold their 45 per cent stake to him. The company has a debt of Rs 850 crore, of which Rs 586 crore has been restructured.

Narula explained to the Commerce Department that the default to Bangladeshi vendors by Lilliput was unintentional as the payment was due at the time when the dispute between the shareholders was on-going and the banks had put on hold all payments. That is why the letters of credit could not be honoured.

“The company has told us that while it may not be legally obliged to make the payments as the LCs had expired at the time shipments were made, it intended to settle claims as soon as it had enough resources,” the official said.

Narula said that the Bangladeshi vendors had taken a risk when they decided to export on the basis of expired LCs and in some cases the shipments were late by up to two-three months.

“But we had always worked on the basis of goodwill and we are going to maintain it by making the payments,” he said.

The company has got some additional funding by banks and intends to come out with an IPO in October that will sort out its resource problem, Narula added. Lilliput continues to run 260 stores in the country in 165 cities.

The Commerce Department usually keeps away from matters concerning private companies but in this case it made an exception as Bangladesh was keen that the Indian Government assists it in its attempt to retrieve stuck payments, the official said.

>amiti.sen@thehindu.co.in

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