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Sell sugar factories’ assets: HC

The Maharashtra government may have been loath to rein in sugar co-operatives controlled by the state’s top politicians, but the Bombay High Court has taken a serious view of their inability to repay huge bank loans.

mumbai Updated: Jan 15, 2010 01:40 IST

The Maharashtra government may have been loath to rein in sugar co-operatives controlled by the state’s top politicians, but the Bombay High Court has taken a serious view of their inability to repay huge bank loans.

A week after issuing an ultimatum to the state over dues of Rs 263 crore owed by 15 sugar factories, the high court has asked the lender, the Maharashtra State Co-operative (MSC) Bank, to seize and dispose of properties of the defaulting factories to recover the amount.

The state is guarantor to the loans.

The process of seizing the plants, machinery and other properties under the Securitisation Act should however begin only after the ongoing crushing season ends, the court has said.

The MSC Bank and the Mumbai District Central Co-operative (MDCC) Bank had given loans to these factories, mostly run by politicians or their kin (see box), in 1994. The city-based Sundarbag Co-operative Credit Society, affiliated to MSC Bank, filed a public interest litigation in the HC after the factories failed to pay back.

A division bench of Justice F I Rebello and Justice J H Bhatia told the state last week that it should allow the banks to recover the amount or pay the sum itself.

On Thursday, the state government told the court it had filed an affidavit saying its guarantee was “the last option”, and that the lenders could not directly seek repayment from the guarantor.

The judges allowed the banks to proceed against the factories in view of the state’s contention that all legal remedies had not been exhausted in the matter.

MSC Bank’s lawyer Murlidhar Patil said the banks had got meagre amounts after initiating recovery proceedings against three factories. “We haven’t even received 20 per cent of the dues by selling their assets,” he stressed.

The bench then assured Patil that if action against the factories did not lead to recovery of the full amount, it would consider recovery from the state.