Lilliput Kidswear ? the troubled retailer that is beset by fraud allegations from its investors as well as dwindling working capital ? on Friday received a respite as the Delhi High Court asked the income-tax department to defreeze the company’s bank accounts.
Earlier in the week, the office of the additional commissioner of the income tax range 4 in New Delhi had attached Lilliput’s accounts in various banks throughout India after the firm failed to pay income tax worth R13 crore within the deadline.
The court’s stay came with the condition that Lilliput would deposit a sum of R1 crore to the I-T department in the next seven days.
Lilliput was facing severe cash crisis in the wake of the tax department’s action. Before moving the court, the company had filed an appeal with the I-T department. ?Our appeal is pending with the income-tax department and we were left with no option but to approach the court as we were facing day-to-day operational problems due to the freezing of our accounts,? says Arun Jain, the company’s chief financial officer.
Once a rising star as the country’s largest kidwear retailer, Lilliput’s fortune started to reverse from October when tension between its promoters and the US-based private equity investors Bain Capital and TPG Capital surfaced. Since then, banks have refused to disburse more funds to Lilliput even as the troubled retailer defaulted on payments.
The two foreign investors, that collectively own 45% of the retailer, accused Lilliput of fudging its accounts ahead of a proposed public offering to raise R850 crore. Both Bain and TPG asked for re-auditing of the company’s books by an independent audit firm even as its auditor SR Botliboi as well as four independent directors on the board quit.
The spat was dragged to the Delhi court with allegations and counter-allegations from both the sides.