Business: ABCL; Badshah in the Red

After the mortification of seeing his dream venture go bankrupt, Bachchan now faces a legal battle with his creditors.

If only it was reel life. The angry young man of the '70s would have straddled the 70 mm screen, delivered well-scripted dialogues in deep baritone -- peppered with a few left-handed punches -- and saved the day a la Muqaddar Ka Sikandar. Unfortunately, this one is for real. The not-so-young Amitabh Bachchan today has to resort to rather unheroic ways to wriggle out of the financial mess his dream venture Amitabh Bachchan Corporation Ltd (ABCL) has landed him in.

As gurantor for the bank loans taken by the ABCL, Bachchan faces the threat of its creditors taking possession of his Juhu house, Pratiksha

Pushed into a corner by creditors and running up losses of over Rs 70.82 crore against a net worth of Rs 60.52 crore, the ABCL approached the Board of Industrial and Financial Reconstruction (BIFR) last month. While the move insulates the company from creditors, the Bollywood badshah, as the guarantor of the loans taken by the company, now faces the danger of losing Pratiksha, his swank Juhu house. It hasn't quite come to that as yet. But it could when the case filed by Canara Bank against ABCL is decided this week before the court of Justice A.P. Shah at the Bombay High Court. The bank leads a consortium which gave credit facilities to the tune of Rs 22 crore to the ABCL in 1996 when it expanded its business and the numbers didn't quite add up.

THE FLOP SHOWS

Miss World Show: Besides the controversies it generated, the show did not bring in the money it was expected to.

Mrityudata: Amitabh Bachchan's comeback film, it took the ABCL several steps back as it bombed on Day One.

Saat Rang Ke Sapne: Despite the star cast of Juhi Chawla and Arvind Swamy, and a hot-shot director, Priyadarshan, the film failed at the box office.

Major Saab: Though the film fared better than Mrityudata, it could not pull back the declining fortunes of Bachchan or ABCL.

Aby Baby, the music album: With its American dancers and MTV video, the album topped the charts, but couldn't set the cash registers ringing.

Naam Kya Hai: Like its name, nobody seems to have heard of the film, starring Mukul Dev, since it was made. It has yet to find buyers.

As the company failed to meet the terms and conditions of the agreement and even defaulted on the payment of interest, the Canara Bank moved the Bombay High Court in December last year for an order for the sale of stocks and securities and payment of the proceeds to the bank. On March 17 this year, Justice Shah granted the bank leave to take possession of two flats hypothecated with the bank. Though the ABCL stalled the move by going to the BIFR, the bank has now set its eyes on Pratiksha. "The action against ABCL left us with no option but to move against guarantors. The BIFR may shield the company from creditors but it offers no protection to the guarantors. Our aim is to recover our money," says Nishit Dhruva of M. Dhruva and Co, representing the bank.

For the Big B this is real bad news. No wonder he is keeping a low profile and is not available for comment. Backed by the hype of the superstar's brand equity and revenue possibilities, ABCL did spectacularly well in the first year of its operation, declaring a profit of over Rs 15 crore. Boosted by the success, it went into television and other allied activities. It even hosted the Miss World contest at Bangalore amidst great controversy, not the least being complaints from those who worked for its success that they had not been paid. Obviously, along the way the company ran out of money and found it necessary to approach a consortium of banks for further accretion of funds.

In January 1996, the ABCL approached the Canara Bank for credit facilities totalling Rs 14 crore. The company also got credit worth Rs 8 crore from the Allahabad Bank which joined the consortium in May that year. The credits to the ABCL were backed by two sets of safety instruments: two flats in Juhu -- valued at Rs 40 lakh each -- current assets and receivables including raw stock. Bachchan also executed a personal guarantee stating his net worth (as of March '94) at Rs 63.98 lakh and net annual income at Rs 34.52 lakh. He listed his assets at Rs 64.90 lakh (movable) and Pratiksha at Rs 8.06 lakh. In effect Bachchan, his wife Jaya and their investment outfit Tansy Investments guaranteed amounts advanced to the tune of Rs 17.5 crore along with interest and costs. Subsequently, ABCL officials deposited the title deeds of the two flats and also signed a memorandum recording the deposit of title deeds promising to create a security (a set of papers hypothecating property of said value) of fixed assets as equitable mortgage for the value of Rs 10 crore.

Thanks to the new line of credit, the funds flowed in and it was business as usual at the ABCL. But gradually things began to go wrong. Two years ago several top officials including the chief executive quit the company in a cloud of allegations of mismanagement. But still Bachchan and ABCL limbered on -- through infusion of equity and credit. The other strategy was of course to bring in a white knight. Over the past year, several suitors, including the Sahara Group and Seagram, evinced interest in the company and there were strong rumours of Sahara having taken over the day-to-day management of the company. These moves came to nought, however, because by this time Canara Bank developed serious differences with the ABCL and charged it with violating the agreement. The company's defaults, according to the bank, were many:

Charging the company with "acting contradictory to the terms and conditions of the documents executed", Canara Bank set the legal process rolling on January 6, 1998, asking the company to pay-up the dues with interest or face proceedings. In a delayed response, the company assured the bank that it would make some payments by June 1998. Thereafter followed a series of agreements, which were signed but not upheld. The subsequent prolonged legal communication culminated in the bank toting up liabilities of Rs 9.93 crore and pursuing recovery procedures in December, 1998.

The ABCL's decision to go into the BIFR is more than just an admission by the company of its bankruptcy. It seems more a strategy to save the two flats hypothecated with the bank. Since the law protects companies from creditors once they enter the BIFR. In fact, debtors in financial circles often threaten to go to the BIFR if the creditors pester them too much. But the strategy seems to have boomeranged on Bachchan.

The Canara Bank has now decided that it will call for possession of Pratiksha -- valued at Rs 12 crore in the market -- as Bachchan had personally guaranteed the loan, when the case comes up for hearing in Justice Shah's court. Says R. Ranganathan, DGM, Canara Bank: "It is sub-judice, so we may not be able to comment on it. But this is not the first high-profile case that we are chasing. We have done it earlier, only the media has not noticed."

For Bachchan the real problem is the threat of losing his house. With him avoiding the media, his strategy for trying to retain his house is also not known. There's little doubt though that a messy legal battle lies ahead. And this is one fight, in which the now-greying hero will require much more than racy dialogues and south paw punches.