Pertech fails to get ‘sick’ status

Pertech fails to get ‘sick’ status
ARPAN MUKHERJEE

KOLKATA, FEB 21: Dadan Bhai’s Pertech Computers Ltd has failed to get a ‘sick’ certificate from the Board for Industrial and Financial Reconstruction following its failure to repay creditors, meet sales obligations, get the approval from Industrial Development Bank of India Ltd for funds.

The BIFR rejected PCL’s plea on the ground that it was not a manufacturing company. The BIFR bench was told that the promoter/ managing director Dadan Bhai has already filed a petition for insolvency. The company’s counsel argued that it had a manufacturing facility, but was unable to back it up with documentary evidence.

Just six years ago, Dadan Bhai was dubbed the ‘Cyberspace Sultan’ when he talked about building PCL and Altos byte-by-byte into a Rs 600 crore group. PCL’s troubles began soon after, when it announced attractive prices for personal computers via a massive media campaign. The company was flooded with orders, but slipped up on its sales commitments and failed to deliver the bookings it had already accepted.

Rejecting the company’s application on February 9, BIFR bench members NP Bagchee and G Narayanan said: “...the company could not produce any other relevant judgement to substantiate its contention that it was a manufacturing company and they also failed to rebut the specific objections of the secured creditors....”

Industry sources say that the company went for the ambitious plan without having a manufacturing base. As a result, the order delivery system collapsed and the company went into the red. In 1998, secured creditors moved the Calcutta high court for their dues. Following this, on February 24, 1999, the company applied for a sick status before the BIFR.

According to reports, PCL had raised Rs 10 crore as advance payments from 2000-odd consumers, Rs 1.50 crore from 100-odd fixed depositors, Rs 15.10 crore as inter-corporate deposits and bill discounting, Rs 5.47 crore from lease agreements, Rs 14.84 crore from hire purchase agreements, Rs 22.17 crore as trade credit and Rs 18.65 crore from statutory creditors.

While the cases were on, PCL announced that IDBI had agreed to pay Rs 124 crore out of the Rs 148.56 crore revival package. IDBI promptly denied this statement in media advertisements. The BIFR bench noted that the company had earned a net profit till fiscal 1995-96 and suddenly reported a huge loss of Rs 366.12 crore, which the bench felt was “grossly disproportionate”.

Some of the parties told the BIFR bench that the company had disclosed before other fora that it is unable to foot the bill for undertaking a Special Investigative Audit. The counsel for operating agency ICICI pointed out that M/s Kesardas B & Associates reported in a letter that local commissioner who visited PCL’s factory found two telephone sets, one office table, four chairs, one computer and some documents. In fact, one of the officials, Gautam Maity, noted that, “PCL was never into manufacturing, rather it was in trading activity”.