After falling out with its private equity investors Bain Capital and TPG over alleged inappropriate accounting practices, apparel retailer Lilliput Kidswear Ltd is now facing trouble on another front. One of its lenders, Tata Capital, has filed a winding up petition in the Delhi High Court to recover the outstanding debt amounting to Rs 10 crore.

Lilliput had apparently defaulted on the loan last October, following which rating agency ICRA downgraded the long-term debt note of the company. Bank of India is another lender to Lilliput.

The legal counsel of Tata Capital submitted to the court that Lilliput had failed to redeem the commercial paper and had defaulted in repaying the maturity value of Rs 10 crore. The case was filed a few weeks ago.

This comes as another blow for Lilliput after it got embroiled in a legal spat with its high profile PE investors. As earlier reported by VCCircle, Lilliput promoters were looking to bring in new investor(s) in the company.

Lilliput Kidswear hit the headlines four months ago after its PE investors took an unusual step and did not approve the annual accounts of the company in a board meeting held in September. The incident put a spanner in the proposed initial public offer (IPO), aimed at generating resources for the company.

The investors alleged that Lilliput did not maintain proper accounts while the promoters, led by Sanjeev Narula, counter-alleged that the PE firms were looking to take over the control of the company by derailing the public issue as they did not want to dilute their holdings. Read Our Previous Report Here.

Lilliput filed a case against the PE investors in Delhi High Court on October 3, seeking an ad-interim relief to stop them from obstructing the operations of the company or harming the image of the firm.

The court restrained the PE firms “directly or indirectly, from acting contrary to the minutes of the Board Meeting dated 28.09.2011” and forbade the investors from giving adverse publicity to Lilliput. The order was later modified to include Lilliput as well, from acting contrary to the minutes of the previous board meeting and giving adverse publicity.

In the judgement dated November 4, 2011, it was decided that SS Kothari Mehta & Company would be appointed to carry out an independent audit and both the parties would give their points of reference to the audit firm. Both the sides also agreed to resolve all their disputes and differences, claims and counter-claims at an arbitral tribunal. Thereafter, former Supreme Court judge H S Bedi was appointed as the presiding arbitrator.

Separate media reports suggested that the two sides had resolved their differences and agreed to a capital infusion of around Rs 500 crore ($100 million). However, the counsel of the PE investors has pointed out last month that communications show Lilliput is not providing relevant papers to the auditor.

With the latest case filed by Tata Capital, all eyes will be on who comes in to rescue the company and puts fresh money in the firm.

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