Tata Steel inches closer to buying ailing cable-maker Incab

Tata Steel is close to bagging the ailing cable-maker, Incab Industries, with the Delhi High Court recently rejecting the basic opposition of two competing bidders, RR Kabels and Pegasus Assets Reconstruction Co.

While the court would continue hearing the writ petition, it rejected their argument on the technical ground that the bench which passed the order was different from the one which heard the matter.

"We reject the preliminary question raised by petitioners in the writ petition to the effect that the proceedings before the Board for Financial Reconstruction (BIFR) offends the fundamental principle of natural justice that the one who hears, must decide. The writ petitions would, therefore, have to be heard on merits," the bench comprising of judges RV Easwar and Badar Durrez Ahmed said in their 52-pages order on April 24.

The bench, subsequently on May 5, fixed the next date of hearing on July 8.

Tata Steel in 2011 was considered the best bidder and new owner of the sick cable manufacturer Incab Industries by the Appellate Authority for Industrial and Financial Reconstruction (AIFR) in a selection process in which both RR Kabels and Pegasus also participated.

Once a major cable producer and owned by Kashinath Tapuriah, brother-in-law of MP Birla, Incab in good times employed close to 2,000 people at Jamshedpur, before being referred to the BIFR in 1999.

Efforts to revive operations by Malaysian outfit Leader failed, following which Tata Steel started showing interest in Incab.

The attraction for Tata Steel in Incab, whose plants and machinery are no longer useful, is that the acquisition would help it expand its allied operations in Incab's premises spread over 170 acres located next to the steel major own plant.

After Incab fell sick, State Bank of India (SBI) was appointed as the operating agency (OA), responsible for implementing a rehabilitation scheme, under the Sick Industrial Companies (Special Provisions) Act.
The process got legally tangled, reached Delhi High Court and the Supreme Court, after which the three parties submitted their rehab packages in 2009.

"The operating agency gave its comprehensive and comparative analysis of all the three schemes and reiterated its opinion that the scheme propounded by Tata Steel was best suited and the future of the workers of the sick company would be much secure with Tata Steel whose proposal was in the interest of workers and their job security," the judgment said, adding the schemes of RR Kabels and Pegasus weren't worthy of consideration.

"RR Kabels's scheme was such that the net worth of the sick company cannot become positive and Pegasus had no experience in running a manufacturing unit as it was only an asset reconstruction company. The operating agency also noted that the motive of RR Kabels and Pegasus appeared to be to grab the valuable real estate of the sick company as was evident from their proposal to sell the immoveable assets of the sick company to finance their schemes. Compared to this, Tata Steel did not propose to sell any of the immoveable assets to finance their rehabilitation scheme," the judges said.

The BIFR considered the three revival proposals, heard the worker's unions and took into consideration all the reports of the OA and passed a comprehensive final order, holding that the scheme submitted by TSL was the best amongst the three bidders and satisfied all the parameters set by the Delhi High Court and the Supreme Court. Accordingly, it directed TSL to submit its Draft Rehabilitation Scheme."

The appellants then contented before the AIFR that the bench of the BIFR which passed final order in 2009 was not the one which heard the entire proceedings and therefore couldn't passed the final order.

"Tata Steel resisted the contention by submitting that it is not possible for the same members to hear the proceedings before BIFR since the proceedings go on for several years during which members of the BIFR regularly change on account of retirement, etc."