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SBI appointed OA for Midland -- To check for discrepancies in balance sheet

Richa Mishra

NEW DELHI, March 24

THE State Bank of India (SBI) has been appointed as the operating agency (OA) for Midland Industries Ltd (MIL) by the Board for Industrial and Financial Reconstruction (BIFR) to enquire on its own or through a firm of chartered accountants whether there were contradictions in the company's figures appearing in the balance sheet and in Form `A' filed by MIL.

Doubts were raised by secured creditors on the company's accounts for the financial year ended March 31, 1999, on the basis of which, the company filed its reference to the BIFR.

SBI had raised various issues by way of contradictions

between the figures appearing in the balance sheet and in Form `A' filed by the company.

The company had indicated that its losses were more than those indicated in Form `A' by about Rs. 6.2 crores on account of unprovided interest for 1998-99 but the Managing Director had not been able to indicate the components of the amount.

The MD also submitted that the High Court had stayed the winding-up proceedings but no stay order was produced for perusal by the Bench. Noting that the company had not given any satisfactory explanations on the doubts expressed by the banks, the Bench d id not declare it sick.

The charges of the chartered accountants, if appointed, shall initially be borne by the OA and subsequently be shared by the secured creditors on pro-rata basis. They could subsequently be included in the cost of the scheme, if formulated, the Bench said .

SBI or the auditors will, if necessary, restructure the company's balance sheet as on March 31, 1999, clearly indicating whether MIL's networth had been fully eroded or not and giving due justifications for each item of variation to be considered in such restructured balance sheet, the Bench observed.

MIL and its promoters were directed by BIFR to submit to SBI, various court orders issued against proceedings including that of the stay of such order as stated by the MD to enable the Bench to know whether winding-up or stay of winding-up has been order ed by the High Court or any other order passed.

The company and its promoters were also asked to route

their entire transactions through accounts with SBI and the bank will retain five per cent of the proceeds in an interest bearing ``no-lien'' account to be opened for the purpose, the proceeds of which will be utilised as per the directions to be given b y the Board in due course, the Bench noted.

The OA is to take into consideration the comments and observations of the company and the secured creditors and submit its final report to the Bench.

The Bench shall pass further orders after considering the report and submissions, if any, of the company and secured creditors without holding any further hearing in case the OA's report did not indicate any adverse features.

However, if the report revealed adverse features, the Bench will consider holding another hearing, the order said.

Meanwhile, the MD of MIL has been directed to submit an undertaking to the Bench that the company and its promoters shall not dispose of any fixed or current assets of the company without BIFR's consent. In case the company is running, the current assets can be drawn down to the extent required for day-to-day operations, the order said.