Lender Banks are staring at a potential Rs. 6000 crore write-off on their books after the Central Bank of India has declared Walmart supplier Shri Lakshmi Costsyn’s promoter a wilful defaulter.
Mata Prasad Agarwal, who previously owned the company before it was plunged into bankruptcy, has challenged his classification as a wilful defaulter at the Delhi High Court and has won a stay in the matter, according to court filings.
The wilful defaulter classification of the promoter comes after other banks, such as Union Bank of India and State Bank of India, declared the company’s accounts as fraud, according to sources. Typically, when one bank declares an account as fraud, others follow suit. The Reserve Bank of India (RBI) mandates that banks make 100% provisions for fraud accounts. The classification of fraud is based on a forensic audit report of Grant Thornton that is said to have red-flagged transactions worth Rs. 800 crore between the Kanpur-based company and certain Singapore entities, these sources said.
Central Bank of India, Union Bank of India and State Bank of India. Collectively, these three banks account for almost 40% of the outstanding dues.
“We have not committed any diversion of funds,” Agarwal said in his comments.
Armed with a doctorate in textile costing, Agarwal earned his stripes as a favoured supplier of terry towels, sheeting and denim to global retail brands such as Walmart and JCPenney.
His company went into bankruptcy proceedings in 2018 after it defaulted on dues to banks. Agarwal claimed the banks stopped supporting his company after 2013 and did not disburse any new funding, as a result of which his expansion plans came unstuck.
The company received no bids during its insolvency process, raising eyebrows amongst some banking sources ET spoke with who could not understand why it had not found takers if so much money was invested in building fixed assets and buying plant equipment and machinery.
Rohit Sehgal is the resolution professional of the company. He has also been appointed as the official liquidator of the company after it didn’t get a buyer.
Agarwal is said to have made an offer to the lenders pegged at Rs. 650 crore to reclaim his company. His offer is said to be the best that they have. After liquidation, the banks may not receive much and may have to potentially write-off everything they are owed, according to sources.
“It’s a complex story. There are multiple issues and charges flying around,” said a seasoned ex-banker.
