The board also expressed regret that a company ``of this size and nature was not respecting the rights of nominee directors of institutions in proper perspective''.

With no bank or financial institution objecting specifically to the Chemox's assertion that its net worth has turned negative, the board was left with no option but to declare it as a sick company under Section 3 (1) (0) of the Sick Industrial Companies (special provisions) Act, 1985.

Earlier, the Gujarat-based company which manufactures chemicals and bulk drugs had submitted that its net worth amounted to Rs 13.69 crore consisting of paid-up share capital of Rs 4.85 crore and free reserves of Rs 8.83 crore. Against this, the accumulated losses of the company were Rs 23.46 crore indicatingthat the net worth had fully eroded.

ICICI which has exposure to the tune of Rs 17 crore told BIFR that their nominee director was not called for the board meeting in which the aforesaid accounts were approved. The notice was received one day before the board meeting, after working hours, and despite conveying to the company to stop the meeting, it went ahead with the same, ICICI representative Nimesh Shah said.

On being informed by ICICI that it did not complain to the company law authorities for the late notice, the board mentioned that the institutions were ``apparently functioning in a totally helpless manner while tackling the recalcitrant managements''.

The BIFR said instead of taking any effective action, ICICI withdrew its nominee director and did not raise any objection to the balance sheet for eight to nine months, giving an impression that it was not able to handle such situations. ``ICICI should now re-appoint its nominee director on the company's board, who should take up his responsibilityin proper spirit and should be made accountable,'' it added.

Realising that the company is not being properly monitored by banks and FIs, the board appointed K Chandramouli as the special director on the board of the company to look after its financial and other interests.

The special director was appointed as the State Bank of Travancore, which had opposed Chemox being declared sick, pointed out that the value of stocks declined by Rs 15 crore in a span of 12 months or so during 1997-98. The bank's representative pointed out that while the company has not been able to satisfactorily explain the steady erosion in stocks, there was an unusually massive build up of debtors. On the other hand, the company listed its cupful of woes which began in late 1996 with massive raids from the Department of Revenue Intelligence. Within one month thereafter, income tax raids took place which went on for next six months and soon afterwards sales tax and excise raids were also there.

Around the same time, the Gujarathigh court (GHC) ordered the company to stop operations in May 1997 on account of pollution-related problems.

Accordingly, the turnover had dropped steeply from Rs 84 crore in 1995 to Rs 16 crore in 1996 and losses had gone up.