HM executive vice-president R Santhanam told The Financial Express that the company is seeking legal opinion on the issue of moving the Calcutta high court against the state government's rejection as an aggrieved party under Article 226(2) of the Indian Constitution.

However, he bypassed the issued of a possible suspension of work at the Uttarpara unit in the near future, by saying that, "we cannot comment as of now" and "we are fully committed to running the unit". On the future of this unit he said whatever will done will be "well thought out".

On the ballooning interest cost for the Rs 503 crore cost of funding the modernisation and expansion plans,Santhanam said that the financial institutions, which had advanced Rs 320 crore, have taken a long term view of the issue.

"The first year of modernisation is always a tough year," he said. The company spent Rs 75 crore to modernise the Uttarpara unit, which makes the Ambassador. The interest cost together with the depreciation to be charged in HM's accounts for the year to March 31, 1999, is likely to affect profitability.

The Uttarpara unit, HM's oldest, has already posted a loss of Rs 11.20 crore in the period April-September 1998. Santhanam complained that while the state issued the rejection order on January 14, it kept on postponing a meeting sought by the management with the state labour minister SR Ghatak. Unlike other states which had granted a partial lay-off to their automakers, the West Bengal government has failed to appreciate HM's stance, he said.

Also, the state government had always cold shouldered its various proposals among which were issues like lower taxes though the rates in thestate were not the highest and for faster entry permits for components used at the Uttarpara plant.

In December last year, West Bengal government gave back the Ambassador its decades-long monopoly as a taxi vehicle after a brief competition with Premier Padmini and the Maruti Omin.

Santhanam said the industry was going through a recessionary trend, and the government should have taken a long-term view and allowed the proposed partial three day lay-off for the entire staff for a 18-month period. y