The Supreme Court has restrained Central Bank of India (CBI) from auctioning ailing tyre manufacturer Dunlop India’s factory land in Sahaganj, West Bengal, after a creditor sought to protect the property from being “frittered away” by the present management.

Unsecured creditor M/s SMIFS Capital Market has alleged that Pawan Kumar Ruia, chairman of Falcon group which took over Dunlop from late Manohar Rajaram Chhabria’s Jumbo Group in 2005, has surreptitiously transferred properties and siphoned off Rs 2,300 crore to its overseas entities.

Both factories of the country’s oldest tyremaker — at Sahagunj in Hooghly and Ambattur in Chennai — are shut since 1998.

A bench headed by Justice Eqbal while posting the matter for final hearing on February 24 said: “In view of the order dated 12th June, 2013, no auction shall be held.”

Earlier, the apex court in June 2013 had stayed the Calcutta High Court order on winding up of the sick company and had asked the tyremaker not to sell or create any third-party rights in its properties. The HC, while directing Dunlop to wind up and pay off creditors, had also directed the official liquidator to take ‘immediate possession’ of assets.

However, senior counsel AM Singhvi, appearing for the Ruia group company, opposed SKIMP’s application saying this amounted to review of the apex court’s earlier order and no further restraint order was required. It had earlier claimed that the management was genuinely trying to revive and run the factories.

SMIFS, which wants to recover around Rs 339.11 crore (inclusive of interest) as on March 31, 2008 from Dunlop, had challenged the CBI e-auction sale notice of December 27, 2014 for auction of parcels of land worth Rs 81 crore. Senior counsel K K Venugopal, argued that if CBI is allowed to go ahead with the auction, the sick company will be left with no other substantial asset which could be utilised to either revive it or repay the unsecured creditors who have been waiting the repayment of their dues since 1995.

Citing a newspaper report, the creditor alleged that Ruia has been misleading the banks and financial institutions by painting rosy pictures and also playing fraud on the courts by using Falcon Tyres and Dunlop India interchangeably to collateralise its borrowings from the bank and siphoning off the monies through its overseas body corporate bodies.

The application filed through counsel Gaurav Kejriwal also stated that “… Falcon Tyres, which till recently was a Ruia group company has now ceased to be so, as ICICI has invoked the pledge acquired 29.5% shares of the 31.62% shares as a result, Ruia owns only 2.12% shares of Falcon Tyres.”

Citing newpaper reports, he further added that Ruia planned to repay ICICI Bank by selling Dunlop properties, but the same did not happen” as the SC barred sale of Dunlop properties.

According to Skimps, it is for the very same loan, for the default of which the pledge of shares of Falcon Tyres have now been invoked, that two out of four properties of Dunlop had been utilised as collateral, while the matter was before the BIFR, which the courts have now directed to be restored.