UTI AMC to sue Ispat Industries

Ispat

UTI Asset Management is taking Ispat Industries to court to recover dues of Rs 99 crore outstanding that’s part of a four-year debt-recovery saga.

The dues pertain to the investments made by what was then undivided Unit Trust of India in some debt instruments of the company in the early 2000.

After the initial default, the Ispat board had approved a settlement mechanism in April 2005, wherein it was to pay Rs 55 crore upfront and the balance in 35 installments.

The company had issued post-dated cheques for these payments. The last of these cheques were produced for payment in April 2008.

However, not all cheques have been honoured.

Ispat Industries cuts steel production

UTI says it has initiated proceedings under Section 138 of the Negotiable Instruments Act for recovery of the dues.

“They have defaulted. They have given us cheques that bounced. Bouncing of cheques is not a good thing. So we are taking legal action against them,” U K Sinha, chairman, UTI Asset Management, told DNA Money on Thursday.

A cheque is valid for 6 months from the date of issue. A notice can be issued within 30 days from the receipt of the information of dishonour of a cheque.

If the money is not paid within 30 days from the receipt of the notice, the payee can file complaint under Section 138 of the Negotiable Instrument Act.

UTI sources said Ispat owed a total Rs 659 crore (including interest costs) to the undivided UTI. Of this, around Rs 560 crore has been recovered.

That leaves an outstanding of Rs 99 crore. A majority of the money is due to the Special Undertaking of UTI, while UTI AMC had dues of about 10% of the total amount, sources said.

Ispat promoter Pramod Mittal is said to have met officials of both UTI AMC and special undertaking on Thursday and promised to pay as early as possible.

He is said to have explained the downturn in the industry due to crashing steel prices and asked for more time.

Mittal was not available for comment.

However, in the meantime, UTI is going ahead with legal action for the dishonour of cheques, UTI officials told DNA Money.

“Most of the settlement with UTI has been made and only a small due is being paid,” Anil Sureka, executive director (finance) of Ispat told DNA Money.

The CFO didn’t give exact figures but said “only a small portion is left”.

“There was a top-level official meeting today (Thursday) between UTI and Ispat to discuss the small amount of money which is still unpaid and we assured them that it will be paid in two-three months time,” he said.

Sureka said UTI hasn’t and is not going for litigation against the company.

Ispat had entered into the Corporate Debt Restructuring mechanism to settle the overdues in 2005, as had Essar Steel and JSW Steel.

Essar Steel had made a one-time bullet payment and had closed the issue.

JSW Steel and Ispat signed on a 3-year repayment schedule, which included one upfront payment and 35 equated installments.

According to an announcement on the Bombay Stock Exchange on April 5, 2005, the board of directors of Ispat at its meeting held on April 05, 2005 revealed the broad terms of settlement as under:

A. Cut-off date: December 31, 2004

B. Crystalised amount: 100% of principal amount of Rs 344.75 crore and 81.21% of simple interest of Rs 239 79 crore outstanding on cut-off date i.e. Rs 194.74 crore. The aggregate crystallised amount shall be Rs 539.49 crore.

C. Repayment: The crystallised amount to be repaid as follows:
i. Upfront payment of Rs 55 crore.
ii. Balance amount of Rs 484.49 crore to be paid in 35 monthly installments, commencing from April 30, 2005, in a graded manner.

D. Rate of interest – 8% payable half yearly from January 01, 2005.

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In terms of the aforesaid debt settlement, the up-front payment of Rs 55 crore has been made by Ispat on April 7, 2005 and the settlement has now become effective.

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