Calcutta, Jan. 31: Calcutta High Court today ordered the winding up of ailing tyre-maker Dunlop India Ltd and directed the official liquidator to take over the assets of the company.
Allowing the plea of 17 creditors, Justice Sanjib Banerjee upheld his March 30 interim order where he had appointed a provisional liquidator and ordered closure with "immediate effect".
The once-marquee firm is now owned by Pawan K. Ruia. Dunlop has plants at Sahagunj in Hooghly and Ambattur in Chennai. The company has around 800 workers.
According to an estimate, Dunlop owes Rs 1,000 crore to 17 creditors, including Rs 50 crore to the Bengal government.
"The official liquidator is directed to take over the property, assets, books of accounts and records of the company with immediate effect," Justice Banerjee said.
The company said in a statement: "We are yet to receive the court order. We'll decide on the next course of action after getting our counsels' advice on the issue."
The company told the court that it was willing to settle the dues and sought time. But the court felt Dunlop was not in a position to settle the dues. If Dunlop can convince a division bench that it can return the dues, the company can hope to restart operations.
Sources said the Dunlop management would appeal against the order in a higher court.
The Bengal government hinted that it could take over the company from the liquidator and run the factory for the sake of the workers.
"I haven't yet got a copy of the verdict. After seeing it, we'll talk to lawyers and decide our plan of action. If there is an auction, the WBIDC can participate in it on behalf of the government," labour minister Purnendu Bose said at Writers' Buildings.
"Yes, it's true that many of the factory's machines have been moved out of the premises. But now that an order has been passed for its liquidation, let's see what can be done to save the rest," he added.
The winding-up petition was filed in 2008 when two creditors, E.V. Mathaia and Company and A.K. Kundu and Company, moved two pleas against Dunlop. Both the companies had claimed Dunlop could not pay for articles they supplied to it.
Subsequently, 15 other companies joined the case with the same claim. According to the court's assessment, Dunlop has credit of over Rs 1,000 crore in the market.
Madura Coats Limited moved a petition in 2009 claiming Dunlop owed it Rs 2 crore. Madura Coats also demanded that the court direct Dunlop to wind up to pay back dues.
The post of the official liquidator is under the court's supervision. After winding up is directed, the liquidator takes control of a company's assets, sells them and pays off creditors and employees. A senior high court advocate said a liquidator would approach the company law board for formal approval. Thereafter, the court will give a sale notice.
On March 26 last year, Justice Banerjee had barred Ruia from selling any property of the company by appointing a provisional liquidator.
Justice Banerjee had also said the provisional liquidator would try to bring back any asset that might have been "fraudulently" sold by the management after 2009.
The court had also asked the provisional liquidator to make an inventory of the property assets and machinery of Dunlop.
The Mamata Banerjee government is against the liquidation of the company as many people will lose jobs.
Advocate-general Anindya Mitra had informed a division bench headed by Justice K.J. Sengupta that the state wanted the revival of Dunlop and was ready to provide assistance to the company.
Dunlop had moved an appeal against Justice Banerjee's order before the division bench and demanded a stay. However, the division bench upheld Banerjee's order and sent the matter back to his court.
Bitan Chowdhury, the general secretary of the Citu-affiliated workers' union at Dunlop's Sahagunj unit, welcomed the high court order.
"Ruia did not have any intention to run the factory. He has not paid workers' dues. Dunlop owes nearly Rs 46 crore to about 1,400 present and former workers," he said.
The president of the INTTUC-affiliated union, Bidyut Raut, described the verdict as "historic". "The order has been given in the interest of the workers," he said.
The joint secretary of the Intuc-affiliated union, Tanaji Sengupta, said: "It may take a long time to implement the order."
Sahagunj factory worker Adesh Singh, 55, said he had not been paid for over a year. "I have to work as a hawker to run my family of four."
Operations are suspended at the Sahagunj unit since October 2011. In February 2012, the Ambattur unit shut shop.
However, Dunlop-branded tyres, especially for two-wheelers and cycles, are available in India and they would continue to be so.
Ruia's group manufactures Dunlop-branded tyres from Falcon Tyres, which is based in Mangalore.