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Loot and Plunder — The Story of Closure of Darbhanga’s Ashok Paper Mill

Tarique Anwar |
A “dormant” and “vanishing” company was awarded the tender for its revival, which has not happened. While the company management claims it is ready to begin production as soon as funds come in, its workers allege that the mill is in ruins.
 Darbhanga’s Ashok Paper Mill

Darbhanga: Occupying about 400 acres of prime land in the outskirts of Bihar’s Darbhanga district, Ashok Paper Mill has been defunct since November 11, 2003. Like the sugar industry in the state, it is another example of a diseased public enterprise, once known for the quality of its printed paper.

The enterprise was established in 1958 by the Darbhanga Raj (Khandwala dynasty) at Rameshwar Nagar in Hayaghat Assembly constituency, a few kilometres from Darbhanga town in the vicinity of the Bagmati river. The land was acquired from the peasants in the area with the promise of jobs and the prospect of the development of the area. At the time, it was the only major industrial enterprise in North Bihar.

The company was liquidated in 1963 and its two units — one at Rameshwar Nagar in Darbhanga and the other at Jogihopa in Assam — were taken over by the government in 1970 as a joint venture between the Centre and the governments of Bihar and Assam, with the Industrial Development Bank of India (IDBI) a key financier. The company’s financial health began deteriorating after 1978 because of alleged corruption and mismanagement, leading to a shut down in 1982. Some say that aside from the finances, the lack of electricity and raw material also forced its closure.

 Darbhanga’s Ashok Paper Mill

The Assam Accord, signed between the Rajiv Gandhi-led Central government and the All Assam Students’ Union (AASU), on August 15, 1985, paved the way for a revival of Ashok Paper Mill. The Centre sanctioned Rs 67 crore to revive the Assam unit.

Alleging unequal treatment to the two units of the mill by the Centre, the Ashok Paper Mill Kamgar Union (APMKU) staged a protest in New Delhi and demanded that the units be accorded similar benefits and revived.

Following a nine-day hunger strike in May 1987 – staged by then APMKU President Umadhar Singh, a Communist Party of India (Marxist) leader who was elected as a legislator from Hayaghat twice (1985-1990 and 2000-2005) – then Union Minister for Industry, J. Vengal Rao, agreed to their demands and communicated the same in writing. However, nothing came of it.

The Bihar unit’s financial health did not improve. In 1988, it was referred to the erstwhile Board for Industrial and Financial Reconstruction (BIFR) where an agreement to bifurcate the two units was reached on November 15, 1989. It was decided that both the state governments would take over their respective units and that the Central government would provide financial and technical assistance to both units.

The government of Assam took over its unit in 1990, but the Bihar government did not do so. As a result, the APMKU filed a writ petition in the Supreme Court.


On November 15, 1991, the apex court ordered that the agreement reached by the BIFR should be implemented. However, the Centre changed tack and came up with a proposal for privatisation as a remedy for industrial sickness.

In 1995, the top court ordered the secretary of the Department of Industrial Policy And Promotion, Government of India, to make an assessment of the possibility of the revival of the Ashok Paper Mill — keeping in mind protection of workers’ rights.

The department later submitted a draft scheme, detailing its plan to revive the industry through privatisation. In July 1996, the court accepted the draft scheme.

Dormant Company Awarded Tender

The IDBI was made the merchant banker and bids were put in. Ashok Paper Mill was finally handed over to Mumbai-based Noveau Capital & Finance Limited (NC&FL), owned by entrepreneur Dharm Godha, as part of an agreement in 1997. As per the deal, NC&FL had to pay the government Rs 6 crore in 16 interest-free installments for acquiring the shares of both the state governments.

The Reserve Bank of India (RBI) had declared the company a “vanishing” or “dormant” company. It is not registered with the central bank as a Non-Banking Finance Company (NBFC).

 Darbhanga’s Ashok Paper Mill

“Godha’s previous track record does not paint a good picture of the man. The factories he acquired earlier could not be revived and met the same fate as the Ashok Paper Mill. He is also accused of defrauding public sector banks and financial institutions,” a senior technical worker of the company, who did not wish to be named, told NewsClick.

In 1988-89, he said that Godha had taken over Universal Paper Mill – which was incorporated in 1972 at Jhargram in West Bengal. Within a year, its net worth turned negative and a reference related to the company was made to the BIFR.

In 1997, the company’s paper mill was devastated by a fire. Godha, he said, was accused of staging the fire to claim insurance money and defraud banks.

Godha had a company named Apollo Paper which secured land from the Gujarat government in 1997-98 for setting up a paper plant. The plant was never established, and the land was sold.

However, these allegations can not be independently verified. This correspondent spoke to a senior NC&FL official, who denied having any information about the allegation.

A Saga of ‘Loot’ and ‘Plunder’

According to the scheme, the investor had to put in Rs 504 crore for the revival of the Ashok Paper Mills within a period of 36 months – else, the agreement would be declared invalid.

Approved by the Supreme Court, the 38-point scheme included a plan for the revival of the mill in two phases. In the first phase, the investor had to make the mill operational within 18 months of signing the agreement with the government.

Among other terms and conditions, one was the absorption of the total available work force of the mill, payment of previous dues of the employees and prohibition on the exit of any asset of the mill from the premises — except the machinery parts for repair.

Notably, in violation of the Supreme Court-approved scheme, the first phase never took off in the real sense. A trial run of the factory was carried out in November 1998 under the supervision of a technical consultant, who said that 95% of the plant and its machinery was working well and that only five percent required minor repair. The certification enabled Godha to fake another certification which said that Ashok Paper Mills had begun producing paper, and managed to secure loans from two public finance institutions (Rs 19 crore from the IDBI and Rs 9 crore from the United Bank of India) as working capital. However, the amount was never invested in the mill.

NewsClick has learned that the promoter had paid first two installments to the government till 2012, but the status of the remaining amount is not known.

Employees said dues were paid to the workers despite the fact that the NC&FL raised Rs 28 crore. They said that the workers were not even paid wages for their services to the factory post-acquisition.

“The company owed 19 months worth of salaries to my late father, who had joined it in 1970. After Godha took over, he was assured that all their previous dues would be cleared. But it did not happen. In fact, he was removed from the company’s pay roll and turned into a daily wager. He was not even paid for his work under the new management. He retired in 2018 without any post-retirement remuneration. He got around Rs 55,000 from the provident fund,” said Kedar Yadav, the son of Motilal Yadav, who was posted in the factory’s spare parts division.

The workers alleged that soon after the takeover, their employment status was changed from permanent to casual. “After Godha took over, all 471 workers were turned into daily wagers. This was done with the sole aim to harass and exploit the workforce,” alleged Ramu Yadav, who served as a security guard.

Others said they resumed work after being given false promises that their previous salaries would be paid once the company begins operations. “We agreed to work post-acquisition only after the new management promised that our dues would be cleared in installments soon after production begins. Later, it turned out to be a false promise as the company did not even pay our salaries. Those who raised their voice were fired and new appointments were made,” said 55-year-old Suresh Yadav, who also served the factory as a security guard.

As per the company’s records, seen by NewsClick, it owes 179 workers to the tune of Rs 2.50 crore between August 18, 1997 and December 31, 2002. The amount excludes other benefits like increments and promotions. Also added to this is the additional 10 years since 2002.

Suraj Sahni, in his late sixties, patiently listened to others before intervening. He said he continued to receive a salary and benefits even when the mill was largely defunct since the late 1980s.

 Darbhanga’s Ashok Paper Mill

“I worked in the mill my entire life. Even after it stopped working, Lalu (former Bihar chief minister) made sure we got benefits. But ever since Nitish Kumar (Bihar chief minister) gave the mill over to Godha, we have received nothing. The few workers he had were not locals. Nitish stole our livelihood,” he said.

Another elderly man said Kumar cannot face them and is making the false promise of revival for the past 15 years. “During the 2015 Assembly election, Kumar was scheduled to address a rally in the paper mill’s campus. The factory had issued an NOC to use its campus. The stage was set. The chief minister’s helicopter hovered above the stage, but did not land. Sensing trouble, the district administration canceled the event at the eleventh hour. Everyone knows people are extremely angry with his non-performance and false promises. He will be wiped out in this election,” he added.

A Story with Many Versions

The story differs depending on who one speaks to. The company claims it continued production for 10 years; however, the workers said it barely continued production for a year.

“We began production in November 1998, and it continued for around next 10 years. The operation was discontinued because the electricity supply was cut without any prior notice. With technical modernisation of the plant, production resumed in 2012 and continued till 2015; however, it was not commercial production,” said a chief engineer working with the NC&FL, requesting anonymity.

The company holds the state government responsible for the non-functioning mill. “It was a total failure of Nitish Kumar’s government, which did not support us at all. As per the agreement, the government is supposed to give us financial assistance. Even the Supreme Court had ordered the government to support the second phase of the mill’s operation after we had successfully completed the first phase of the operation. The workers’ union was misled and turned against us. Left with no option, we had to close the mill,” he said, claiming that “the company will resume production the day it gets funds from the government as all machines are upgraded and in order”, he said.

Asked if there is any chance of revival once again, he said, “The company is looking for a promoter. Even now the government is not helping us find one,” he added.

However, the workers junked all the claims, stating that production happened for just a year after Dharam Godha took over the mill.

“Production began in 2001 and was discontinued in 2002. During this period, the paper quality being produced from the factory was extremely poor. The production quantity also witnessed a sharp decline during this period. The official production capacity of the mill is 80 tonnes per day, but we used to produce 150 tonnes of the best quality paper everyday. When Godha took over, production dipped to 40 tonnes per day. The argument that non-commercial production began in 2012 is false,” Manoj Kumar Yadav, who was an employee of the. He alleged that Godha was never interested in running the mill.

His allegation was backed by several workers who said not a piece of paper was produced after 2002. “Every time a government official would come for a visit, they would burn ‘bhusa’ (hay) to let smoke out of the chimneys of the factory,” they alleged. About the claim of the plant’s machinery being in order and that production can be begun any day, the workers said the plant is nothing but a “khandhar” (ruins).

“The plant has been ruined. The assets have been looted  in the name of revival. The plant had modern machines imported from Germany and France. If they claim that the plant is well in order, why don’t they give access to journalists to go inside and click pictures? They are lying. They have looted everything. The goods smuggled away by Godha runs into crores,” alleged Surendra Yadav, who worked as a fitter in the Instrument Department of the factory.

ashok paper mill

Even the rail lines connecting the paper mill with Thalwara railway station for transportation of the raw material and the paper were not spared, they alleged.

Firing Incident

After taking the loan from IDBI and the United Bank of India for revival of the plant, Godha shut down the plant and disappeared for seven years beginning November 11, 2003. He resurfaced in 2011, soon after the National Democratic Alliance government returned to power in Bihar.

He began removing high-tech machines from the mill in the guise of repairs, alleged mill workers who were protesting the iron and scrap-laden trucks coming out from inside the mill premises on the night of November 10, 2012. An armed guard of the company fired upon the protesting workers, killing one Sushil Shah and injuring two, Dukhi Yadav and Jai Kumar Yadav.

Godha was named a prime accused in the case on August 3, 2013. Despite the rejection of his anticipatory bail in the case, he was never arrested and is still an absconder. Yet, he was granted permission to take over the mill.

No one in the Department of Industries agreed to comment on the matter.

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