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Commerzbank files case against ICICI, Arvind

The Indian unit of Commerzbank has filed a criminal complaint against ailing textile company Arvind Mills Ltd and financial services firm ICICI for breach of trust, the bank said on Friday.

The complaint was filed in Ahmedabad, the capital of the western Indian state of Gujarat, on June 6, the Indian unit of the German bank said.

Officials of ICICI and Arvind Mills, which manufactures Lee jeans and Arrow shirts in India, both told Reuters that they were unaware such a complaint had been filed.

Commerzbank's Singapore branch was part of a group of 14 banks that lent AML $75 million in November 1996. US listed ICICI was one of the lenders, and also appointed to serve as trustee for the loan.

The statement said AML executed a series of sale and leaseback transactions with ICICI between 1998 and 1999 involving a total of Rs 3.62 billion of assets without the knowledge of the other creditors.

"These assets actually were part of the very assets which constituted the security of the syndicate and the transactions were done between AML and ICICI without the knowledge or consent of the syndicate in breach of obligations of AML as a borrower and that of ICICI as a trustee," the statement said.

The bank also alleges that AML sold a part of its garment manufacturing divisions to ICICI without the knowledge of the other creditors.

The Commerzbank statement further alleged that AML diverted Rs 3.95 billion to various subsidiaries at a time when the firm was defaulting on payments to creditors. AML had begun defaulting on its payments in September 1999, it said.

In February, Commerzbank and the Bank of Nova Scotia, a Canadian bank, filed suit in a London court against AML as they were unhappy with a debt restructuring plan agreed to by other lenders to the financially struggling Indian clothing maker.

That suit also seeks damages against ICICI for "serious breach of their fiduciary duties and trusteeship obligations."

In February, Arvind's board approved a debt restructuring plan, under which it will repay Rs 5.5 billion of debt without interest. Its remaining debt of Rs 21.5 billion will be restructured, and lenders paid low interest rates on the five to 10-year debt.

The restructuring plan was worked out by lenders holding 58 per cent of the company's Rs 27 billion in debt.

AML's shares closed 3.17 per cent lower on Friday at Rs 9.15 ahead of the announcement by Commerzbank.

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