It may be recalled that FIs had recently invited bids for their 44 per cent stake in Modi Rubber. Once the FIs divest the stake, the management control of MRL will slip out of the Modis, the original promoters, as the latter hold only 33 per cent holding.

Bajajsaid repeated instances of mismanagement coupled with strategic debt defaults by companies should be firmly responded to by lenders and shareholders alike to ensure efficient management and good corporate governance. However, if there was no mismanagement and company promoters were seen to be taking remedial steps to restructure and reorient their businesses, then banks and FIs should encourage them to do so without threatening takeover of management, the CII president said. However, Assocham had supported the Modis on the issue. It said the reported move of the financial institutions to dispose of their stake in the open market to a highest bidder instead of negotiating with the existing promoters will disturb the existing management of the company and will not be in the long-term interest and sustainable growth of the Indian industry. Expressing concern about the deterioration of the health of Indian financial system, he said FIs, banks should initiate steps to reduce the current stock of NPAs and preventtheir build-up in the future.