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BIFR spikes Steel Strips' reference

Richa Mishra

NEW DELHI, June 5

THE Board for Industrial and Financial Reconstruction (BIFR) has dismissed the reference filed by Steel Strips Ltd (SSL) as ``non-maintainable''.

The Bench observed that the company has not filed the reference with ``clean hands''. It was satisfied that SSL did not fulfil the criteria of a sick industrial company in terms of Section 3(1)(o) of the SICA, the Board said.

It observed that the company had not satisfactorily explained and justified the sale of shares to group companies and the reasons for changing the method of charging depreciation.

SSL had booked losses on the sale of investments/shares and repaid/settled ICDs of group companies. It had not paid the dues of its secured creditors despite the promise made at a meeting of consortium of banks in March 1999.

The Bench was of the view that shares or investments in sister concerns or group companies should have been treated on a long-term basis.

Further, the State Bank of India, the operating agency, had submitted, on the basis of a special investigative audit (SIA) report that the net worth of the company was still negative by Rs. 3.96 crores. It said the company had followed imprudent practice s regarding the sale of investments and repayment of ICDs, purchase of SAB Industries Ltd and improper follow-up of debtors.

At the recent hearing, it has been noted that SSL had decided to change the method of charging depreciation based on the company's own commercial view.

At the earlier hearing, the Bench had categorically asked the OA and the auditors to examine the need to sell investments to sister companies, whether it was done in a transparent manner, if the company had adopted prudential systems and kept the public interest in view.

According to the SIA report, the company had followed imprudent practices in conducting its affairs, the Bench observed.