New FICCI chief is a defaulter but it doesn’t matter: PM his chief guest

Muthiah’s inauguration as chief of the Federation of the Indian Chambers of Commerce and Industry (FICCI) at its 75th annual general meeting comes just five days after financial institutions warned his company, Spic Petroleum.

After building a petrochemicals empire, nurturing the best race horses, being Indian cricket’s supremo, and a member of the Prime Minister’s Advisory Council on Trade and Industry, Muthiah is ready for his latest honour as FICCI president. None of this impresses his bankers.

‘‘In all our interactions with him, he did not seem to be energised in paying back his dues,’’ a highly placed financial institution source told The Indian Express.

‘‘We have given him a week’s notice — and we might extend that by a few more days — but we are now ready to take his company to the debt recovery tribunal.’’

It is a move that is not only embarrassing for Muthiah but the government as well. It comes less than a month after Parliament passed a tough new law to crack down — ‘‘without fear or favour’’, as finance minister Jaswant Singh promised — on a mountain of unpaid corporate debt that now threatens the stability of the Indian financial system.

Muthiah does not see how his defaults are connected with his new job. ‘‘What does this have to with FICCI?’’ he asked when contacted by The Indian Express. ‘‘Everyone lives in a glasshouse and they should not be throwing any stones.’’

FICCI’s outgoing president, Rajendra S. Lodha, was wary of commenting. He said he had read about Spic’s non-performing assets (NPAs) — a euphemism for overdue, unpaid loans. ‘‘But we will have to take an objective view of this,’’ Lodha said. ‘‘We will have to see whether in this case the bankers dragged their feet (a reference to the Spic view that banker delayed payments). The case will have to be examined from both sides.’’

Asked about the propriety of being a defaulter and the FICCI president, Mr Muthiah said, ‘‘I am not a defaulter, except (with) Spic Petro.’’ He went on to add that ‘‘this is no wilful default’’.

‘‘The environment itself is like that, and I am no exception to the rule,’’ said Muthiah, refusing to accept that his appointment would send the wrong signals to the ongoing drive against corporate India’s unpaid loans. The government conservatively estimates these defaults at a humungous Rs 1,10,000 crore.

A consortium of banks and financial institutions led by ICICI, IDBI and Dena Bank have loaned the group, mainly Spic Petro, about Rs 1,000 crore. Much of it is now overdue but not listed as NPAs because a restructuring of the troubled company could be on the anvil — if the bankers agree. Muthiah claimed Spic Petroluem’s giant project in Tamil Nadu had been delayed — it was embroiled in a decade-long corporate battle with former collaborators Madras Refineries Ltd — and the financial institutions themselves had asked for a fresh appraisal.

Spic sources in Chennai said the conflict had now been settled out of court. But despite the fact that two international consultants — one appointed by the company and another by ICICI — had recommended the project for restructuring, a lenders committee had not reacted to a Spic request for funding since April. ‘‘We’ve asked for Rs 250 crore relief to get the project restarted, but after being silent for so long, they suddenly send us this repayment notice,’’ says a Spic official.

Banking sources clarified that the move against Muthiah goes down the older route of approaching legal bodies and does not use use the new law against defaulters because there isn’t yet agreement among the lenders.

The Spic (Southern Petrochemical Industries Corporation) Group — or M.A. Chidambaram group as it’s also known — consists of eight companies. Muthiah, president of the South India Chambers of Commerce and Industry for eight years, is the chairman and his son Ashwin is the vice chairman.

The family has been embroiled in controversy earlier as promoters of now-defunct MCC Finance. The company — after being passed on from Muthiah to his son to their kin by marriage, the Vadivels — allegedly diverted investor money and despite a scathing judgement against it by the Madras High Court, still owes thousands of depositors Rs 160 crore. (with Ritu Sarin)