The transaction was done for the "...only purpose of window dressing the accounts of SWC and Dunlop," the CLB noted in its July 27 judgment on separate cases relating to mismanagement and funds diversion at SWC, the Manu Chhabria-owned liquor major.

The CLB said the price tag of Rs 47 crore for purchase of software is `astronomical.'

When contacted by The Financial Express, SWC's media consultant declined to comment on the software deal.

The CLB bench comprising chairman justice PK Majumdar and vice-chairman S Balasubramanian said the board failed to understand how SWC could agree to purchase software from Dunlop for Rs 30 crore. They observed that this was possible only because "...all the three entities are under a common control".

Theobservations were part of the 52-page CLB order on the charges of mismanagement and fund diversion, levelled by the All India Shaw Wallace Employees' Union and the centre. The employee-shareholders had filed their petition in July 1996.

In the SWC accounts for 1995-96 and 1996-97, the software transaction is show under the category of sundry debtors, which is considered doubtful.

In the 1995-96 annual report, note 9(b) on the accounting policy says: "Rs 47,000 thousands due from a party on account of a sale of computer software in the previous year, the realisability of which could not be ascertained at this stage and accordingly no provision has been made in these accounts."

The auditors noted: "Extent of non-recoverability (likely to be material) of certain debts included under sundry debtors, loans and advances and other current assets as indicated in Note 9 not ascertained and provided for."

The CLB observed that, it "...failed to understand how SWC could have agreed to purchase software fromDunlop for Rs 30 crore (the cost of acquisition by Dunlop as per the Enforcement Department (ED) report is Rs 3 crore) and within a short period, sold to a trading company for Rs 30 crore."

"For a software, as far as our knowledge goes, the price of Rs 30 crore/Rs 47 crore is astronomical," the bench noted.

The CLB order also noted: "The very fact that Jumbo had returned the software after sometime, that is after the financial year is over, makes us to conclude that the entire transaction was purely for the purpose of showing a rosy picture about the performance of Dunlop and SWC."

The CLB said although window-dressing to an extent is practised by many companies, the extent to which SWC has gone is `unheard of.' It noted that while SWC has shown a profit of Rs 17 crore from this incomplete deal, the extent of profit shown by Dunlop is not known as it depends on the acquisition price.

It said that although SWC might find an alternative purchaser at the same price or more, the deal "does not bringlaurel to the management as this is definitely a grave act of manipulating the accounts of the company to show artificial profits, having its own adverse effects against the interest of the company as such attempt would also have taxation implication".

Repayment plan hearing on Monday

Justice SK Sinha of the Calcutta high court on Wednesday adjourned the hearing on Shaw Wallace & Co Ltd's repayment plan. The case will again be heard on Monday, August 11. Kirloskar Investment & Finance Co, Hindustan Development Corp and other creditors, which are claiming a total of Rs 263 crore from SWC, are opposing the repayment scheme filed by the company in response to their windup petition.