TNPL was approached by Hindustan Paper after Indian Granite Pvt Ltd, which expressed interest in buying Mandya, failed to put in the token credibility amount of Rs 2 crore.

Industry sources said that Indian Granite of the Manasa Group, owned by a non-resident Indian, had repeatedly failed to mobilise the credibility amount. "Indian Granite was given quite a few opportunities but it failed to lodge the sum of Rs 2 crore with the Appellate Authority for Industrial & Financial Reconstruction (AAIFR) as credibility amount, which was to be adjusted with the overall deal of Rs 48 crore. In December last year, the company sought some more extra time for putting in this amount," the sources said.

When the privatisation attempts failed, TNPL was approached to give a proposal for Mandya, Hindustan Paperchairman & managing director, ARK Rao told The Financial Express.

"TNPL proposed to test-run the unit for one year before taking it over. At present, the proposal is being considered by the Government and the AAIFR but nothing has been finalised yet," Rao said. After Indian Granite failed to lodge the credibility amount, the appellate authority cancelled the deal in its meeting on March 12. "Even the revival proposal of Indian Granite, which worked out to Rs 180 crore, was cancelled," industry sources added.

The Karnataka-based Mandya National Paper Mill, which produces a variety of writing and printing paper, was closed down in April 1993. However, in August 1997, under the instructions from the Government, the mill was overhauled and reopened at a cost of Rs 8 crore to find a suitable buyer.

Initially it had an employee strength of around 700, including 50 casual employees. When the company offered a voluntary retirement scheme in 1997-98, 122 workers accepted it. In that fiscal, the millcould only produce 1,213 tonne owing to poor market conditions and registered a net loss of Rs 31.69 crore.

On June 22, 1998, at a meeting with the officials of AAIFR, Indian Granite offered to take over Mandya National Paper Mills. It also submitted a revival report prepared for it by Chellam Consultants.