Bomb drops on Kilburn Engineering:Background:

1. Profitability of the Company has been negative in the past. The Company undertook an expansion project in the year 1995 for setting up additional facilities in Baroda. Thereafter, in the year 1999 the Company witnessed a slide in sales coupled with an increase in input cost due to the following reasons : 2. KEL was declared sick u/s 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 in November 2000. The Company has reported a profit during the FY 2004 and as per the audited financials for the twelve months period ended on September 30, 2005. However, the networth of theCompany as on 30th September 2005, as per the audited figures, was negative. But now it has bounced back to positive.This is the only oasis in a Desert. The rehabilitation scheme, prepared by the Operating Agency and approved by BIFR, was implemented. The Company has witnessed a turnaround in turnover and profits during the twelve months period ending, 30th September, 2006, owing to the Rehabilitation Scheme and on the back of the overall growth in the economy, specifically in the engineering segment. . 3. The company has delayed the redemption of its debentures during the year 1998 upto 2004. KEL has issued the following debentures : ß 1,15,000, 14% non-convertible debentures of Rs. 100/- each aggregating to Rs. 115 Lacs. The same were redeemable in five equal annual instalments commencing on 28th November, 1995. ß 2,00,000, 20.50% non-convertible debentures of Rs. 100- each aggregating to Rs. 200 Lacs. The samewere redeemable (after being rolled over) at par on 8th August 1999. ß 5,00,000, 18.50% non-convertible debentures of Rs. 100/- each aggregating to Rs. 500 Lacs. The same were redeemable at par in three equal annual installments commencing on 21st November 1999. The Company has failed to redeem the above debentures as scheduled from the year 1998 onwards. 4. The Company had not redeemed its debentures as scheduled from the year 1998 upto the year 2004. In view of this, directors of KEL were disqualified from being appointed as directors in terms of Section 274(1)(g) of the Companies Act, 1956 during the period from the year 1999 upto the year 2004. Further as per Section 274(1)(g) of the Companies Rules, 2003 directors of KEL were disqualified from reappointment in the year 2004. During this year one of the directors has been reappointed in the Company. The said director had subsequently resigned w.e.f 16th July, 2004. However, considering the rescheduled redemption of debentures as per the Rehabilitation Scheme approved by BIFR, noneof the directors is disqualified as on date. 5. The company has not been regular in payment of statutory dues in the past. The Company has not been regular in depositing certain statutory dues pertaining to Provident Fund, EmployeeState Insurance, Income Tax, Sales Tax and Service Tax dues in the past till 6. The company has defaulted in payment of interest and principal on the term loans and other securedloans availed from banks and financial institutions in the past.KEL had availed of Term Loans and other secured loans from Banks and Financial Institutions from time to time aggregating to Rs. 804.78 Lacs as on 30th September, 2005. The Company had defaulted in repayment ofprincipal and interest thereon on the said loans from the year 1999 upto year 2004. The Company approachedthe Board for Industrial and Financial Reconstruction in the year 2000 and the Rehabilitation Scheme was approved in May, 2004. The Scheme has been implemented and it is presently out of BIFR.. 7. There are 36 litigations/ disputes pending against the Company as detailed below : Particulars No. of Amount involved of the cases cases where quantifiable Civil Proceedings: Number of Pending cases--> 8. Aount Involved --->Rs.23.98 Lakhs(with interest thereon) Labour Related Cases----> 4 Labour matters pertaining to Baroda--->11 Criminal-----> 8. Amount Involved-->Rs. 58.37 Lakhs Income /SalesTax---->Rs. 4. Amount Involved Rs.260.62 Lakhs Central Excise Act/Customs---> 1. Amount Involved-->Rs. 13.12 Lakhs The Company has received 34 Legal Notices amounting to Rs. 139.60 Lacs from various suppliers. However,the legal notices have been suitably replied by the Company and there are no further developments. The said amount has not been included as Contingent Liability in the annual accounts of the Company. 8. License under Shops and Establishment Act for Kolkata office The Company has not obtained a license under the Shops and Establishment Act in respect of the regional office of the Company located at Kolkata. 9. Owing to the losses incurred, the Company had closed down its business operations at the Bhandup factory from 15/10/1999 till 31/12/2001. During this period and subsequently upto the year 2004, the Company had failed to renew the consent received from the MPCB. However, the Company has made an application to MPCB, vide its letter no. KEL/HRD/07/2004-05 dated 28th July 2005, for renewal of the consent w.e.f. 01/08/1998 upto 31/07/2007. Approvalof the same is still awaited. 10. The Company has some contingent liabilities , determination ofwhich against the Company may adversely affect the financial position : Particulars As on 30th September, 2005(Rs. In Lacs): a) Demand raised by ESIC 0.80 b) Liability in respect of non submission of C Form pertaining to Baroda Works 138.80 c) Guarantees issued by Banks 681.07 d) Claims raised by contractors/others 86.38 e) Demand notice from DGFT for non-fulfilling of export obligations 137.00 f) Liquidated damages for delay in execution of contracts 18.50 11. Compensation of workers at Baroda Unit KEL’s unit at Baroda was ceased operations and was closed w.e.f. November 2001. The erstwhile workersof the Baroda Unit of the Company have claimed for wages for the period of closure of the factory (viz. fromNovember 2001 to January 2003) through the Industrial Tribunal, Baroda. Though, the Company has made a provision of Rs. 41.24 Lacs, the balance Rs. 109.04 Lacs has not been provided for in the books, since the same is not been recognized as a contingent liability. This is the background of Kilburn Engineering Ltd which one of the Analyst recommended it as a delivery pick. But the company is trying to cope with all these.....and in future we can look forward for a cleaner and a more healthy company in all respects. Plese visit this blog for more such startling news here in future...... Best regards, Suman Mukherjee India. www.sumanspeaks.blogspot.com