OGL winding up case: Petitioner submits CEO’s report on lack of cash
Thursday, 19 March 2015 00:05
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The petitioner of Orients Garments Plc, Dr. Senthilverl, while winding up action, has produced, along with his petition, a report on the OGL’s financial status by the Chief Executive Officer thereof, submitted by the CEO to the Board of Directors as recently as 13 February 2015.
According to the petition, this report shows the terminal situation of OGL. Salient observations made in the said report by the CEO are as follows:
Backlog of the statutory dues of OGL are Rs. 177,300,865 (EPF + ETF + Gratuity).
n$ 1 million is required to finance the orders placed for the months of February and March 2015.
nThe bank facilities of Bank of Ceylon, Seylan Bank and NDB were already saturated and non-performing and all collateral has been fully utilised.
nMoney that is received through export revenue is absorbed as penal interest and insufficient money is available as working capital.
nAs the expected profitability was not achieved, OGL is unable to settle the payments due to backlogs of all creditors therefore causing supply chain issues.
nPast seven months due to the lack of funds regular maintenance has not been carried out and the factories have fallen below the required standard.
nAs OGL is forced to subcontract due to lack of working capital the link between the end customer and OGL is cut and the company runs the risk of losing customers.
nOGL is planning to seek financial recourse from President Maithripala’s 100-day program.
nDue to the current creditor backlog, it has been difficult to convince the existing suppliers unless a large component of their arrears is settled in full.
nAttempts made to obtain a long-term bank loan of Rs. 400 million to revive OGL were unsuccessful and avenues of receiving loans from banks have been exhausted.
nThe management is left with no choice but to dismiss innocent employees in order to reduce operational cost.
Therefore the petition says that when a company that is unable to pay its debts continues to operate incurring losses as is the case herein, the company’s capital continues to erode and it accumulates liabilities, which in turn further deteriorates the ability of the company to settle its debts.
As per the petition nominee, the Directors of Adam Investments Plc have sought to ratify Adam Investments Plc or its affiliate/subsidiary, Adam Apparel Ltd. lending approximately Rs. 180 million.
Adam Apparel Ltd. has failed to pay its statutory payments due to the Employees’ Provident Fund from March 2014 to September 2014 amounting to approximately Rs. 6.5 million and has sought a 24-month time period from the Employees’ Provident Fund to settle such an amount.
Therefore the petitioner questions these landings to OGL by Adam Apparel Ltd. as suspicious on the grounds that a company which cannot even pay its statutory dues on time could not have had the ability to lend Rs. 124 million to OGL.
Adam Apparel Ltd. and Giorgio Morandi Ltd., another subsidiary/affiliate company of the Adam Group of companies, have allegedly rented their respective factories to OGL. Hence both companies are now receiving $ 37,500 each from OGL as monthly rent payable for their respective factories.
Like Adam Apparel Ltd., GiorgioMorandi Ltd. has also failed to pay its statutory dues amounting to approximately Rs. 15.8 million due to the Employees’ Provident Fund from July 2013 to September 2014.
Therefore, the petitioner claims that the “nominee directors of Adam Investments Plc are now financing their ‘debt-ridden’ related companies at the cost of OGL and the third parties who have claims over the assets of OGL”
In the affidavit in reply filed by the petitioner, in response to OGL’s allegation that the petitioner has ulterior motives in bring the winding up petition, he states:”I have not sought any relief with financial benefit to me from Your Honour’s court by filing the Winding Up Petition and I have in good faith, being the major shareholder of the company and a director thereof who therefore owes a sacred duty of care to all the parties who have claims against the company, presented the Winding Up Petition to safeguard the rights of all the those parties concerned and I state that I have no other ulterior motive as alleged by the company controlled by the Chairman and other nominee directors of Adam Investments Plc.”
The matter was fixed for hearing on 4 June 2015 and Avindra Rodrigo with Shanaka Gunasekara, instructed by F J & G de Saram, will appear for the petitioner and Paul Rathnayake Associates will act as the instructing attorney of the OGL.
