The contentious takeover of SAIL-Steel Complex Limited in Kerala | Explained

National Company Law Tribunal’s order to hand over SAIL-SCL Kerala Limited, the only mini-steel plant in Kerala, at Cheruvannur in Kozhikode to Chhattisgarh Outsourcing Services Private Limited as part of insolvency proceedings has triggered protests from Kerala government and company employees

Updated - July 11, 2024 12:41 pm IST

Published - July 11, 2024 12:15 pm IST

A protest organised by the District Congress Committee at the gate of SAIL-SCL Kerala Limited (SSKL) at Cheruvannur, Kozhikode, Kerala, on July 10, 2024..

A protest organised by the District Congress Committee at the gate of SAIL-SCL Kerala Limited (SSKL) at Cheruvannur, Kozhikode, Kerala, on July 10, 2024.. | Photo Credit: K. Ragesh

The story so far: The National Company Law Tribunal’s (NCLT) order to hand over SAIL-SCL Kerala Limited (SSKL) at Cheruvannur in Kozhikode district in Kerala to Chhattisgarh Outsourcing Services Private Limited (COSPL), as part of insolvency proceedings, has triggered protests from the Kerala government as well as employees of the company. A blame game is now on over the public sector undertaking (PSU) being allegedly run down and finally sold.

The SSKL, the only mini-steel plant in Kerala, was founded in 1969 as a joint venture of the Kerala State Industrial Development Corporation and a private entrepreneur. The company mainly manufactured TMT steel bars used for construction and with a production capacity of 55,000 tons per annum and it had made substantial profits in the mid-1980s. However, it faced turbulent times later and in an attempt to save it, the Kerala government entered into a partnership with the Steel Authority of India Limited (SAIL) in 2010.

Matters got out of hand after the SSKL procured a loan of ₹45 crore from Canara Bank in 2011 for the construction of a state-of-the-art re-rolling mill. The company could not clear the debt that accrued to ₹104 crore by 2023. As debt mounted and unable to manage the expenses, the company partially ceased operations in 2014, and has been completely out of business since December 2016.

Upon Canara Bank’s request, the NCLT appointed Anish Aggarwal as the Receiver/ Resolution Professional in March 2023 to smoothen the insolvency proceedings. The NCLT-Kochi Bench order to hand over the company to COSPL, a Raipur-based business services company, for ₹30 crore came in June 2024. However, the employees of SSKL fought the takeover tooth and nail and stopped the Receiver and a representative of COSPL from entering the premises of the company twice so far. Meanwhile, the Government of Kerala approached the National Company Law Appellate Tribunal (NCLAT) challenging the NCLT’s order, citing that it had not heard the government before coming up with the order and also that the SSKL cannot have the right to hand over the land acquired by the State without its permission. Even while the NCLAT served an interim injunction over the NCLT order, COSPL obtained an order from the Kerala High Court directing the police to offer protection to the company’s officials to enter the SSKL premises. Their second attempt to enter the premises in the first week of July also turned futile due to stiff resistance from the employees under the aegis of various trade unions.

Meanwhile, the Kerala High Court cancelled its earlier order offering police protection to the officials on grounds that COSPL’s right to enter the premises was contentious. In the most recent order, the Kerala High Court ordered to implead the Receiver in the case against the takeover filed by the State government.

Conspiracy theory

Ever since the NCLT order came, the employees and the trade unions have been alleging a conspiracy in it and the involvement of the land mafia. “The company is worth over ₹300 crore and they are selling it for a mere ₹30 crore. It does not even cover the debt owed to Canara Bank. The NCLT did not give the State government a chance to present its case or settle the issue amicably. COSPL does not have any experience in this field. It is a business services company. Hence we suspect something shady in this deal,” K. Shaji, convenor of the Steel Complex Employees Coordination Committee, told The Hindu.

The employees also blame the State government for its lack of understanding with the SAIL. “SAIL had failed to keep its end of the deal, which led to the closure of the company in 2015. It refused to cancel the partnership deal. Also, Canara Bank refused to accept the State’s one-time settlement offer,” said CITU district president Mampatta Sreedharan.

On the other hand, SAIL had washed its hands off the SSKL long ago alleging that the Kerala government did not keep its part of the partnership agreement.

“The State government always blamed SAIL for its neglect. On the other hand, SAIL has clarified that the State did not keep its word that TMT bars from the steel complex will be used for works under the Public Works department in Kerala by default. The Public Works Minister, who is also the local MLA, could have made it possible quite easily,” Mr. Shaji alleged.

The employees also suspect the role of the Receiver in the deal, citing that he had published the advertisement inviting expression of interest from prospective buyers in a Malayalam daily and only in its Malappuram edition, effectively “hiding” it from a majority of the stakeholders and even the State government. That the company is located on 33 acres of prime land along the national highway 66 is the reason why the employees suspect the involvement of land mafia.

Employees’ plight

The primary concern of the trade unions, including CITU, INTUC, AITUC and STU, is the job security of the employees of SSKL. The company that had around 700 permanent staff and 300 temporary staff in the 90s, has only around 30 people on its rolls now. The retired employees have not yet received their retirement benefits, while some of the remaining employees have been appointed in several government departments and boards on deputation. “We only want job security for current employees and ample benefits for those who have retired,” Mr. Shaji said.

COSPL recently started distributing benefits to some of the retired employees as part of the takeover settlement. However, the trade unions allege that it is only a part of what they are entitled to.

What next?

The plight of the SSKL now rests on the decision of the NCLAT, which is to hear the petition of the Kerala government on July 22. Meanwhile, another petition against the takeover by CITU (on behalf of the Employees’ Coordination Committee) and the State government in the Kerala High Court has its next hearing on July 15. Even if the cases are settled in favour of the State, the chances of SSKL resuming operations in the near future appear quite bleak.

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