The apex court has stayed Bombany High Court's order and has Videocon to create a lien on its fixed deposits of Rs 120 crore. The SC will hear Videocon's plea in December.
Videocon has moved Supreme Court against Bombay High Court's order directing it to repay a sum of 38 million euros to an Italian bank or face winding up proceedings.
According to Videocon, the "Patronage Letter" issued was in violation of FEMA regulations and it can't be used to raise any liabilities on the company.
The apex court has stayed Bombany High Court's order and has Videocon to create a lien on its fixed deposits of Rs 120 crore. The SC will hear Videocon's plea in December.
Background
In 2007, Italian Bank Intesa Sanpaolo had extended a loan of 35 million euros to a step down Italian subsidiary of Videocon named VDC Technologies.
To secure credit for its subsidiary, Videocon Industres had offered a "Patronage Letter" as a guarantee to pay a maximum of 38 million euros, in the event of a default.
The subsidiary, however, struggled with repayments and eventually defaulted. Intesa Sanpaolo sought legal remedies by moving a local court in Italy.
In July of 2011, the Italian Court issued a decree directing Videocon Industries to make good the promise of repaying 38 million euros. Intesa Sanpaolo also filed a winding up petition before the Bombay HC, seeking to recover dues.
Videocon responded by arguing that the petition was time barred. It argued that Videocon had divested its shareholding in the company in 2008, allowing the bank time till 2011 to file a suit. The winding up petition was filed in 2012. However, the Bombay HC dismissed Videocon's arguments, observing that Videocon had failed to build a bona fide defense of its conduct.
The HC held that as a guarantor for the loan for a subsidiary, the company was liable to make the repayment. The court also made some stern observations against the company.
The HC observed that corporate morality and confidence of global investors was of public interest. Observing that Videocon was being allowed an opportunity to take remedial action, Bombay HC has directed Videcon industries to deposit 38 million euros with the Italian Bank, on or before, January 27, 2014.
The HC has also warned that failure to make repayment will result in the initiation of winding up proceedings against the company.
Videocon Ind stock price
On October 01, 2014, at 14:10 hrs Videocon Industries was quoting at Rs 171.25, up Rs 3.75, or 2.24 percent. The 52-week high of the share was Rs 211.05 and the 52-week low was Rs 153.00.
The latest book value of the company is Rs 316.39 per share. At current value, the price-to-book value of the company was 0.54.
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