In a very significant development, ten days ago, on the 20th of December,
the Khargone district administration seized and attached the immovable
properties and 326.7 hectares of land of the S.Kumars promoted privatized
Maheshwar Project in Madhya Pradesh, including all dam site lands on behalf
of the Madhya Pradesh State industrial Development Corporation under the
Madhya Pradesh Public Money (Recovery of Dues) Act 1987 and the Madhya
Pradesh Land Revenue Code, 1959. This attachment was for the recovery of a
short-term loan of Rs. 44.75 crores taken from the MPSIDC by the Promoters
of the Maheshwar Project - the S.Kumars in 1999-2000.

This loan was taken in the form of Inter-Corporate Deposits by the Induj
Enertech Limited (formerly S.Kumars Power Corporation Limited) - of which
the the Shree Maheshwar Hydel Power Corporation Limited is a 100% held
subsidiary, for the purposes of financing the Maheshwar Project. Both Induj
Enertech Limited and Shree Maheshwar Hydel Power Corporation Limited are
group companies of the S.Kumars. The S.Kumars company - Induj Enertech
Limited who had borrowed these monies for the avowed purpose of financing
the Maheshwar Project had refused to pay back the amount despite the fact
that they were posting profits on its accounts for the last three years. The
movable properties of the Project have already been attached earlier by the
MPSIDC, an All India financial institution notified by the RBI.

This attachment of the movable and immovable properties of the Maheshwar
Project and recovery actions against the Induj and SMHPCL has confirmed and
vindicated the concerns consistently raised by the Narmada Bachao Andolan
about the large-scale abuse of public funds by the S.Kumars and grave
financial irregularities in the Project and the multiple instances of
diversion of public funds and willful defaults by the Promoters. The
attachment of the Project assets has come on the heels of the formal refusal
of the Rural Electrification Corporation to participate in the Maheshwar
Project as a strategic partner. The REC had been approached by the S.Kumars
to participate in the equity of the Maheshwar Project but after studying the
Project as well as the issues raised in the legal notice served by the NBA
to the REC, in November, they declined to participate in the Project.

Apart from these grave financial irregularities in the Project and of the
Promoters, it is clear enough that the Maheshwar Project is fundamentally
flawed and cannot be justified on grounds of public interest. For the last
six years, the people of the Narmada valley and the Narmada Bachao Andolan
have been pointing out that the electricity to be produced by this Project
will be both very little and prohibitively expensive. Since the Power
Purchase Agreement of the Madhya Pradesh government with the S.Kumars
undertakes to pay the Promoters nearly Rs. 600 crores a year for the next 35
years, whether or not electricity is produced or not or can be sold or not
on the basis of a deemed generation clause, it is clear that this Project is
likely to become an stranglehold around the shoulders of the government and
the people of Madhya Pradesh very much in the manner of Enron's Dabhol plant
in Mahrashtra. Through the process of struggle, it has also became very
clear that there was no possibility of rehabilitation of the 50,000 farmers,
fisherpeople and boatspeople to be affected by this Project. Thus it is very
clear that the Project is fundamentally flawed on technical, financial and
social, and human grounds. The NBA also demands that all public financial
institutions and banks who have invested in this disastrous Project must
immediately institute legal proceedings for the recovery of public monies.

The NBA also notes that the instances of diversion of public monies and
willful defaults by the various S.Kumars companies - the SMHPCL that is
building the dam, its holding company - the Induj Enertech Limited, the
S.Kumars Tyres company now known as Modak Rubber and Textile Company Limited
as well as the flagship company of the S.Kumars group- the SKNL are not
isolated instances, but multiple and recurring, and that they constitute a
dark track record of the misuse and abuse of public money. The NBA notes
that the RBI notification of May 2002 states that not only units but
promoters/ entrepreneurs who are guilty of multiple willful defaults and
diversions and siphoning of public funds must be debarred from any
institutional finance from banks and financial institutions and access to
capital markets for the next five years. It demands that the S.Kumars group
be denied any further access to public money and penal action in the form of
initiation of crminal proceedings must be taken against this group.

The Andolan expresses surprise that as per reports in the media the lead
institution for this Project - the IFCI had responded to a Ministry of
Finance query in November 2002 on the matter of defaults of public money by
the S.Kumars (prior to yet another bail-out package for the IFCI,) by
encouraging the Promoters to go in for a bonds issue to finance the
Maheshwar Project, although it has been very much aware for the last number
of months that the Project assets were in the process of being attached and
sold. It also expresses surprise that the Power Finance Corporation has been
actively considering giving a defaulter guarantee to this bonds issue and
Project while at the same time being in correspondence with the MPSIDC about
the attachment of the Project assets because of default. There is no doubt
that this is exactly how the Indian financial institutions and banks have
promoted the creation of non-performing assets, abuse of public money and
the large scale loot of public money by certain delinquent corporates, whose
magnitude has crossed over one lakh crore rupees today.

The NBA calls on the FI's and banks to report their investment in the
Maheshwar Project as non-performing assets and begin recoveries of these
public monies, and warns them that the public will not tolerate any action
by the Institutions to support this disastrous Project further and will
respond by public and legal action on this issue. It may be noted that over
ten Indian public financial institutions and banks led by the IFCI have
contributed Rs. 350 crores of public money to this Project, despite the fact
that there has been no financial closure till date, no confirmation of any
strategic investor and violation of the pre-disbursement conditions,
including the return of Rs. 106.4 crores of public money that had been given
away by the promoters to agencies who had NO contracts for Project works. It
may also be noted neither the Lender's Engineer- NHPC's Report nor the
Report of the KPMG are publicly available, despite repeated requests to
confirm the full use of the Rs. 560 crores already claimed to have been
spent by the SMHPCL. The NBA demands that these reports be made publicly
available and that the RBI and the Ministry of Finance institute a Committee
of enquiry to examine the cumulative evidence of large scale abuse of public
funds by this corporate group and take penal action on this matter. The NBA
is in the process of serving legal notices on all FIs and banks involved in
the Project as well as rating agencies on this matter through Shri Prashant
Bhushan, Supreme Court lawyer as well as apprising the RBI and the SEBI as
well as the Ministry of Finance and Power, the CEA and the Government of
Madhya Pradesh of this matter.

It may be noted that this final nail on the coffin of this Project in the
shape of attachment of the movable and immovable properties of the Project
is only the last of the various critical events and withdrawals surrounding
this Project. As the struggle of the people made the critical issues
surrounding the Project public knowledge, a string of investors including
the Siemens, Bayernwerk and VEW Energie of Germany as well as the PacGen,
Ogden and Harza Engineering of the US withdrew from the Project. The German
and Portugese governments also refused to give export credit guarantees to
this Project. A number of Indian financial institutions including the REC
have also refused to associate themselves with the Project.

Thus, the current outcome in Maheshwar as well as the experience of Enron in
India and world wide establishes that projects with bad economic
fundamentals and the financial irresponsible behavior that these corporates
have displayed are unlikely to ever be viable propositions in the long run.
And that not all the King's horses and all the King's men in shape of
political support from the ruling establishment can hold them up or put them
together again.

Some instances of defaults and diversions by the S.Kumars group are
mentioned below:

A. The Induj Enertech Limited had been declared "willful defaulter" by
the
MPSIDC through a public notice in the Economic Times on the 13th of
September 2002 for defaulting on a loan of Rs. 8.02 crores plus interest
taken from the MPSIDC in 1997-98. That by the public notice of the 13th
September, 2002 another S.Kumars company - M/s Modak Rubber and Textile
Industry Private Limited was also declared a willful defaulter to the
MPSIDC.

B. That the CAG report of the year ending 2000, has noted that these Rs.
8.02 crores of Inter Corporate deposits taken by the S.Kumars from the
MPSIDC were in contravention of the limits of Rs. 3 crores and hence
irregularly obtained. That the CAG Reports of the years ending 1998 and 2000
have noted that the S.Kumars are yet to pay the MPSEB and the NVDA several
crores of rupees (over 50 crores) for the properties that they took over
from the state agencies after privatization of the project in 1992 - ten
years ago.

C. That the MPSIDC issued a Revenue Recovery Certificate on the 10th of
September 2001 to the District administration of Khargone to recover the
amount of Rs. 18.97 crores outstanding on the second loan taken by the
S.Kumars from the MPSIDC in 1999-2000 from the attachment and sale of the
movable and immovable properties of the project. That the MPSIDC
re-directied the District administration Khargone by its letter of 30th of
April 2002 to immediately proceed for recovery from the movable and
immovable properties of the Maheshwar Project, as if it were arrears of land
revenue , clarifying that its claim on the Maheshwar Project is by operation
of law due to recovery as arrears of land revenue under the Madhya Pradesh
Public Money (Recovery of dues )Act, 1987, and thus prior to the claims of
the PFC and the IFCI, who were in correspondence on this matter.

D. That the IFCI Reappraisal report of March 2000 had noted that the
S.Kumars had given away Rs. 106.4 crores of the public money received for
the construction of the Maheshwar Project to agencies who had no contracts
for the work on the project and who subsequently did no work on the project.
That the IFCI Reappraisal report of March 2000 also noted that the S.Kumars
had given away another Rs. 19.3 crores of the public money received for the
construction of the Maheshwar Project to its group company - the Induj
Enertech Limited despite the fact that the said group company also had no
contracts for the Project.

E. That, as per an IFCI note dated the 10th of June, 2002 , the IFCI and
the IDBI have identified the S.Kumars company- the S.Kumars Nationwide as a
willful defaulter, and were considering reporting it to the RBI as such.That
in the same report, the IFCI has stated that the SKNL has diverted
substantial funds without permission from lending institutions to their
Ready to Wear business division.


F. That the SBI Caps has filed a winding up petition under Section 434 of
the Companies Act, 1956 against the SMHPCL for non- payment of dues worth
Rs. 3.7 crores plus interest in the Indore High Court and a winding up
petition under Section 434 of the Companies Act, 1956 against S.Kumars
Nationwide Ltd. in the Mumbai High Court. In May 2002, the SBI Caps also
started separate legal proceedings under Section 138 of the Negotiable
Instruments Act against the textile firm for issuing post date cheques that
have bounced.



Suresh Verma Alok Agarwal