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CMJ Breweries was a chronic defaulter: CAG

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  3 April 2017 12:00 AM GMT

From A Correspondent

Shillong, April 2: The report of the Comptroller and Auditor General (CAG) of India has revealed that CMJ Breweries Private Limited was a “chronic defaulter” repayment of Company loans.

As per the report, the CMJ Breweries had taken fince from the Meghalaya Industrial Development Corporation (MIDC) Limited in two term loans and repeatedly rescheduled them.

Audit observed that in the year 2009, the company (MIDC) sanctioned a term loan of Rs 26 crore to CMJ and disbursed the same during April 2010 to March 2012.

According to the CAG report the first repayment installment by CMJ was done in June 2012, but however, CMJ, citing delay in commencement of commercial production in April 2011 requested for rescheduling of loan and based on it the Maging Director of the Company approved rescheduling of the loan allowing the repayment to commence from the fincial year 2014-15.

“It was further observed that even before CMJ started repayments towards this loan, the company (MIDC) in May 2013 sanctioned and disbursed (July 2013 to July 2014) the second term loan of Rs 19 crore to CMJ to be repaid in seven yearly installments starting from May 2016.

The CMJ said that in respect of the first term loan of Rs 26 crore the CMJ in July 2013 repaid an amount of Rs 2.50 crore towards the principal.

The CAG stated that to facilitate its third expansion project, CMJ in October 2014 again approached the MIDC to reschedule the repayment periods of the two loans.

The CMJ asked the MIDC to reschedule the first term loan (with outstanding balance of Rs 23.50 crore) and allow the repayments to start from 2017-18, in eight yearly installments instead of 2014-15 which was already allowed during first rescheduling of loan. CMJ also wanted the rescheduling of the second term loan of Rs 19 crore and allow the repayments to start from 2018-19 in seven yearly installments instead of 2016-17.

“The above proposal of CMJ was agreed to in November 25, 2014 by the Maging Director and the two loans were re-scheduled accordingly,” the CAG report stated.

The accrued interest liability against the two loans for the fincial year 2014-15 worked out to Rs 4.81 crore (first loan-Rs2.82 crore and second loan Rs 1.99 crore), which was to be paid by CMJ within March 31, 2015.

However, CMJ in February, 2015 again proposed to convert the interest liability into a fresh term loan citing fincial crunch in implementing its third expansion project.

The MIDC, however, declined this proposal but decided to allow to defer the payment of interest accrued by one year and permitted CMJ to pay off the interest accrued (Rs 4.81 crore) against the two loans for 2014-15 in March 2016.

“CMJ, however, did not pay the interest overdue of Rs 9.91 crore for the years 2014-15 and 2015-16. It was noticed that due to default in March 2016 in payment of interest by CMJ, the loan outstanding (principal) against CMJ was transferred under Non Performing Asset category,” the CAG said.

As per the CAG report, the Maging Director, despite involving significant fincial implications, accorded approval to re-schedule the repayment period of loan (principal) on two occasions (April 2011 and November 2014) and deferment (March 2015) of interest payment.

“Examition of the records of the company further revealed that while responding to the advices sought by other fincial institutions on the credit worthiness of CMJ, the company had responded (April 2015-January 2016) positively to these queries,” the CAG said.

“This was surprising in view of the fact that CMJ had not been able to comply with the origil loan terms and was repeatedly seeking re-scheduling. Further, as the majority of loan was extended to CMJ, the loan assets of the Company were highly exposed to the risk of defaults and non-recovery considering poor track record of the CMJ,” the CAG added.

The CAG recommended that the Company may consider constituting a screening committee to carry out appraisal of loan proposals in an effective manner duly taking into account the credit worthiness/track record of the loan applicants before approving loan proposals.

According to the CAG, loan appraisal is being done solely by the loan section headed by a Deputy General Mager who also recommends for sanction of loan without taking inputs of fince/recover section of the Company.

The CAG also stated that the Company needs to fix responsibility for repeated rescheduling of the outstanding loans of CMJ without adequate justification and without approval of the Board of Directors of the Company.

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