GKB Ophthalmics Limited, a prominent player in the ophthalmics industry, has announced a significant corporate restructuring move involving its material subsidiary, GSV Ophthalmics Private Limited (GSV). The company's Board of Directors has approved a proposal to initiate voluntary liquidation of GSV under the Insolvency and Bankruptcy Code, 2016.

Key Highlights of the Decision

• Proposal Approval: GKB Ophthalmics' Board of Directors reviewed and approved the proposal for voluntary liquidation of GSV Ophthalmics.
• Subsidiary Status: GSV, despite being a material subsidiary, has had no business operations since its inception. Its primary function has been to earn passive income through interest on fixed deposits and loans advanced to GKB Ophthalmics.
• Financial Impact: As of March 31, GSV held Rs. 5.00 crores in unsecured loans to GKB Ophthalmics. It contributed Rs. 1.16 crores to the total income (1.05% of consolidated income) and Rs. 16.21 crores to the net worth (28.72% of consolidated net worth).

Implications of the Liquidation

1. Consolidated Financials: The primary impact on GKB Ophthalmics' consolidated financials will be through reduced other income, specifically from interest on fixed deposits.
2. Loan Repayment: GKB Ophthalmics will repay the unsecured loan of Rs. 5.00 crores to GSV during the liquidation process, in accordance with applicable laws.
3. Investment Recovery: GKB Ophthalmics expects to recover its 79.54% equity investment in GSV after deducting liquidation costs.

Next Steps

1. Shareholder Approval: GKB Ophthalmics will seek shareholder approval through a postal ballot, with a cut-off date of September 26.
2. Regulatory Compliance: The company is complying with SEBI LODR regulations by seeking prior approval from shareholders through postal ballot under Regulation 24(5).
3. Postal Ballot Process: A postal ballot notice and explanatory statement will be issued to shareholders whose e-mail addresses are registered with the company or depositories as of the cut-off date.

Management Commentary

The Board of Directors noted that the proposed voluntary liquidation of GSV Ophthalmics Private Limited does not constitute a sale, lease, or disposal of GKB Ophthalmics Limited's undertaking outside a Scheme of Arrangement. Therefore, the provisions of Regulation 37A of SEBI LODR are not affected.

This strategic move by GKB Ophthalmics to liquidate its non-operational subsidiary appears to be aimed at streamlining its corporate structure and potentially improving overall financial efficiency. Shareholders and market observers will be keenly watching the outcome of the postal ballot and the subsequent liquidation process.

GKB Ophthalmics Limited, a leading ophthalmics company, has been directed by the Labour Commissioner to pay Rs 8.82 crore in relation to an ongoing labour dispute. This development marks a significant turn in a legal battle that has been unfolding since 2009.

The Labour Dispute

The dispute originated in 2009 when the Goa Trade & Commercial Workers' Union filed for adjudication of a Charter of Demands on behalf of GKB Ophthalmics' workmen. On May 25, 2021, the Industrial Tribunal in Panjim, Goa, passed an award in the case.

The Recovery Order

On September 12, 2023, at 10:22 AM (IST), GKB Ophthalmics received an order from the Labour Commissioner directing the recovery of Rs 8,82,00,856.00 from the company. This order is related to the execution of the award passed by the Industrial Tribunal in 2021.

Company's Response

GKB Ophthalmics has stated that it does not admit to this liability and plans to challenge the recovery order in the High Court of Bombay at Goa. The company is already contesting the original award through a writ petition (WP/358/2021) filed in the same court.

Legal Arguments

The company argues that several crucial factors were not considered by the Industrial Tribunal while passing the award, including:

1. Industry cum Region formula
2. The financial position of the company
3. Comparable industries in the region

GKB Ophthalmics believes these omissions provide strong grounds for setting aside the award.

Financial Implications

In its disclosure to the BSE, GKB Ophthalmics acknowledged that the order is likely to have a material impact on its financial position. However, the company emphasized that it is not admitting the liability and will be taking appropriate legal steps to challenge the order within the permitted time period.

Next Steps

The company is currently in consultation with its legal counsel to prepare its challenge to the Labour Commissioner's order in the High Court. This legal action will be in addition to the ongoing proceedings to set aside the original award dated May 25, 2021.

GKB Ophthalmics has assured its stakeholders that it will keep them informed of any further developments in this matter. The company's management is actively engaged in addressing this significant legal and financial challenge.

As this situation continues to unfold, investors and stakeholders of GKB Ophthalmics will be closely watching the outcomes of the legal proceedings and their potential impact on the company's operations and financial health.