"MFCL has not paid any interest so far except for some deposits made to the banks despite making profits for the last two years. The institutions wanted the company to increase the outstanding interest amount," said an institutional source.

In a recast proposal submitted to IDBI recently, MFCL had said that it would go in for a one-time settlement by paying off Rs 200 crore (including principle plus 25 per cent outstanding interest).

If accepted, MFCL will be required to pay only Rs 120 crore as Rs 70 crore had already been deposited with the banks as payment towards outstandings.

With the institutions not willing to accept the terms of settlement, the proposed revamp of the company's plant will also beput on the backburner. The entire exercise was aimed at revamping the plant through internal generation after clearing the institutional dues.

MFCL, which has been making profits after a stint with the BIFR, has also started rationalisation of manpower. However, it is yet to make profits in diammonium phosphate (DAP) operations due to the remunerative pricing mechanism and steep depreciation of the rupee against the dollar

It is believed that Krishik Bharati Cooperative (Kribhco) had earlier approached the BIFR with a takeover plan which was later abandoned. IDBI, industry observers said, had rejected Kribcho's plan in 1997 owing to reluctance on the part of the Karnataka government to provide reliefs and concessions sought by it.

The Maharashtra-based Rashtriya Chemicals & Fertilisers was also believed to have made a strong pitch for the company's plants, industry sources said.

MFCL reported a net profit of Rs 1.81 crore for the quarter ended June 30 against a loss of Rs 2.94 crore in the sameperiod last year.