Survival of the Sick

Survival of the Sick Hansavivek KOHINOOR MILLS' 1975-76 results are a classic example of mismanagement. The accounts show a net loss of Rs 6.83 crores, a fifth of which pertains to working during previous years though crystallised during the latest completed period. The entire reserves and equity stand wiped out, and the company is more than totally financed from bank borrowings. The company carries a heavy burden of repairs, reconditioning and maintenance of plant and machinery, and replenishment of stores, which were not carried out in the past and which would now require about Rs 2 crores spread over two years. Bad shape of machinery and equipment has resulted in "normally unacceptable'' quality of yarn and cloth, "lower than usual" realisations in the market, and accumulation of large quantities of defective cloth in stock. Disposal of such cloth has become a "losing proposition''. Some creditors have been contemplating winding up petitions and legal actions against the company. The company proposes to contest these petitions and suits, and the legal costs are likely to go higher. The company is now being run by nominees of the Central Bank of India, which has an abnormally high stake; it issued a threat on June 16 last that it would be no longer interested in either providing any additional financial requirements or even continuing the existing credit arrangements unless management was completely professionalised, responsibility lor running the mills delegated exclusively to competent professionals, and the board reconstituted. These conditions and changes were promptly accepted by the board of directors. At the instance of the bank, all directors, except M C Kapadia, resigned. Another member of the Kapa- dia family, N P Kapadia, and two of the bank's nominees, H S Bapna and N L Hingorani, were appointed as new directors. The bank later inducted another nominee, M R Damle. Notes appended to the accounts reveal that the company has entered into various contracts or arrangements with firms in which directors of the company or their relatives are interested and for which no approval of the board and the Central government have been obtained as required under the Companies Act. Even details of these contracts or arrangement have not been entered in the register of contracts as required under the Act. Sundry debts include Rs 10,57,165 due from 1 J Pra- kash, M and N Textiles and H K Ka- poor and Sons, in respect of sales made through NCK Sons Corporation, a firm in which a director is a partner, Sundry credits include statutory liabi-