The Banque Nationale de Paris Paribas (BNP Paribas) on Wednesday dragged the state to court over the issue on the contention that "This is likely to cause irreparable damages not only to the petitioner, but to various creditors" of the company. Moreover, the bank is contesting the very grounds on which AML has been accorded the status of a relief undertaking by the state government, for which fulfilling of numerous preconditions is mandatory. Among these is the precondition that the company being granted this status should have availed of financial assistance or a loan from the state.

Significantly, BNP Paribas (henceforth referred to as the petitioner) has already hauled the erring AML to the Debt Recovery Tribunal last month for its failure to redeem non-convertible debentures of Rs 100 each, totalling Rs 10 crore, which it had acquired by private placement way back in July 1998 which were due for redemption on June 16, 1999. However, as per the contention of the petitioner, AML "failed and neglected to redeem the said debentures on the said maturity date" following which it asked AML to redeem the said debentures along with overdue interest at the rate of 18 per cent per annum without further delay.

According to the petition before the Gujarat High Court, the petitioner has contended that AML sought reschedulement and suggested November 30, 1999 as the rescheduled redemption date, but failed to redeem the debentures even on this date or thereafter. As on July 10, 2000, a sum of Rs 12.08 crore was due and outstanding from AML to BNP Paribas.

In view of this, BNP Paribas filed a case against the defaulter with the Debt Recovery Tribunal last month. In its application before the tribunal, BNP Paribas has stated that AML has "transferred valuable property in the form of brands to its wholly-owned subsidiary, Arvind Brands Limited. This action is a clear indication of the intention of respondent no 2 (AML) to defraud its creditors and make it feasible to easily transfer its brands without any interference from its creditors while retaining control over the brands."

Furthermore, the petitioner also "requested the Tribunal to lift the corporate veil with a view to protect creditors and sought interim reliefs restraining (AML) from transferring any of its shares in Arvind Brands Limited and restraining Arvind Brands Limited from transferring any of the brands owned by it." BNP Paribas also sought a security of Rs 13 crore from AML, pending which it sought that AML "be directed to deposit all recoveries from its subsidiaries in a separate account and should not utilise the said money for its own purpose." Also, in view of the fact that AML has made huge loans/investments with third parties, BNP Paribas sought "a direction that (AML) not to alienate, mortgage, transfer, sell or encumber any of the investments held by it to any third party."

Interestingly, pending further proceedings of the Tribunal, the state government recently went ahead and issued a notification dated June 13, 2000 of the Labour and Employment Department, declaring AML a relief undertaking under Section 3 of the Bombay Relief Undertakings (Special Provisions) Act, and directed that in relation to the said undertaking, "all rights, privileges, obligations and liabilities (other than those liabilities towards its employess) occured or incurred before the said undertaking, if declared as a relief undertaking and the remedy for the enforcement thereof shall be suspended and all proceeding relating thereto pending before any Court, tribunal, Officer or Authority shall be stayed for a period of 12 months."

The government's directive, not surprisingly, has raised the hackles of BNP Paribas, which has dragged the state government to court since its main contention is that while granting AML the status of a relief undertaking, the Gujarat government has overlooked several preconditions, which the company should have fulfilled before being accorded the status. Meanwhile, the next hearing of the Debt Recovery Tribunal is scheduled for August 16, 2000.