ISLAMABAD, Dec 24: Monopoly Control Authority (MCA) has accepted the road-map for payment of Rs389.7 million dues by Kohinoor Industries Limited (KIL) to its associated company, Kohinoor Power Company Limited (KPCL) and compliance report after every six months.
During the scrutiny of accounts of the two companies for the year ending June 30, 1999 by MCA staff, it was observed that KIL had not credited to the account of KPCL the interest owed to it on account of delay in payment of Rs34.76 million on account of supply of electricity.
As the withholding of payment of dues, in effect, benefited the majority shareholders of associated undertakings, it, prima facie, constituted undue concentration of economic power as stipulated in section 4(b) of the Monopolies and Restrictive Trade Practices (Control & Prevention) Ordinance, 1970, according to the MCA.
While explaining that the dues remained unpaid owing to losses incurred by them as a result of prolonged economic recession and unfavourable policies of the government, KIL contended that, as per norms, interest is paid on cash loans/advance only, whereas the impugned dues were not loans or advances on which interest is paid on cash loans but only cash credit, on which no interest is paid.
During a series of hearings held by MCA in 2000-02, it noted that there was 50 per cent of common shareholdings of the two undertakings, while 50pc shares of KPCL were held by other than common shareholders i.e. small shareholders and DFIs and the small shareholders were the losers.
Moreover, it was observed that KPCL had obtained loans from the banks which were being paid with interest/mark-up because of its failure to recover its dues from KIL.
Interestingly, the two undertakings were represented jointly in the hearings before the Authority, although KIL had contended that KPC was not their associated undertaking. Meanwhile, the KIL, during the period 2000-02 has paid Rs153.1 million to KPC, leaving a balance of Rs236.5 million as on June 30, 2002 as against Rs389.7 million in 1999.
KIL and KPCL presented a road map for the clearing of the remaining dues. According to this plan, after KIL has retired 60pc liability towards secured creditors in the next two years, it would commence payments to KPCL.
After payment of Rs 110 million, the balance of trade debt payable by KIL to KPCL would stand at Rs125 million, which is a normal level and, according to KIL, does not warrant any further reduction.
MCA, while accepting the road-map submitted by them, warned that in case of any deviation, it would pass such order against the undertakings as deemed necessary.