Mantralaya, the Maharashtra government's seat of power, is about to be attached, at least partially.
The Debt Recovery Tribunal-II, Mumbai, on Monday authorised the Industrial Development Bank of India and the Industrial Finance Corporation of India to attach the offices of the secretaries of the cooperatives and textiles departments in Mantralaya to recover Rs 50.69 crore (Rs 506.9 million) in outstandings owed by the Sindkheda Cooperative Sugar Factory.
What's more, even the Maharashtra government's treasury and bank account with the Reserve Bank of India may be attached.
The DRT has asked the state government to explain within 15 days why an application filed by these financial institutions for attaching the Maharashtra government's treasury and its bank account held with the RBI should not be granted.
Recovery officer DRT II, RD Gupta, who issued the order, confirmed the development to Business Standard.
The loan was backed by a state government guarantee. The Sindkheda CSF is controlled by Nationalist Congress Party MLA Hemant Deshmukh, who is minister of state for labour in Maharashtra's Democratic Front government.
The financial institutions have decided to go ahead and attach the Mantralaya offices.
"We believe that the Maharashtra government has enough resources and the wherewithal to meet its liabilities. The DRT judgment also indicates that the government needs to take its commitment to guarantees more seriously. May be it needs to use discretion while offering guarantees," said an institutional source.
Maharashtra Finance Minister Jayantrao Patil was in a party meeting and unavailable for comment.
State Chief Secretary Ajit Nimbalkar was out of Mumbai. But Rajiv Aggarwal, secretary, cooperatives, whose office has been attached, told Business Standard: "We will appeal against this."
Another senior official at DRT II said: "The DRT II (Gupta) recovery officer had rejected the submission made by the state government that it did not need to pay the guaranteed amount as the appraisal report submitted by the financial institutions was faulty. Subsequently, the state government approached the Debt Recovery Appellate Tribunal which also refused to stay the DRT proceedings initiated by the FIs to recover the amount owed by the sugar factory."
He added that while Rs 50 crore (Rs 500 million) was owed by the SCSF, a valuation of its assets commissioned by the recovery officer at DRT II revealed that not more than Rs 5 crore (Rs 50 million) would be realisable by selling its assets.
This means that the state government will have to cough up Rs 45 crore (Rs 450 million) to bridge the gap.
Several other DRT cases are entering the final stages after which the DRT is expected to issue attachment orders.
The state government is facing the prospect of mounting liabilities in respect of several public enterprises that have defaulted on loan and interest repayments.
Attachment proceedings against some of these outfits have been initiated by the financial institutions at the DRT.
The DRT has already issued a demand notice for Rs 19.79 crore (Rs 197.9 million) to the Baramati Co-operative Spinning Mill. The matter was subsequently transferred to the Pune DRT.
Similarly, the Vasantdada Co-operative Spinning Mill case has been transferred to the Pune DRT and Rs 14.18 crore (Rs 141.8 million) is sought to be recovered from it.
The list of defaulting units that took loans backed by state government guarantees includes Jawahar Shetkari Cooperative Roto Spinning Mill (defaulted to IFCI in paying Rs 15.68 crore- (Rs 156.8 million)), Khandesh Spinning and Weaving Mills, Satvahan Cotton Growers Mill, Jawahar Shetkari Cooperative Spinning Mill and five cooperative sugar factories -- Jaikishan, Sanjay, Shetkari, Satpuda Tapi Parisar and Satpuda.
According to sources, the DRTs in Uttar Pradesh, Punjab and Andhra Pradesh have passed orders attaching state government property.
However, these governments came forward to clear their liabilities. Banks and institutions are now keeping a close watch on Bihar and Maharashtra.
