The institution's report, submitted to the Supreme Court on October 5, is said to have expressed the view that PSL had used practices which were not in conformity with accounting standards laid down by the Institute of Chartered Accountants of India (ICAI).

The ICAI guidelines are conventions followed by Indian companies and auditing firms, although they are not of a legally binding nature. They are meant to reflect prudential accounting by corporates.

It is believed that IDBI has expressed adverse opinion on the accounting practices adopted by Parasrampuria while calculating interest and depreciation for proving the case of sickness. The Supreme Court had asked IDBI to give itsversion on six major issues following a special leave petition filed by ICICI which said that PSL had made a false reference to BIFR.

The company's decision to change to written down value method from straight line method for calculating depreciation cannot be justified as it did not satisfy major clauses in the accounting standards set out by Institute of Chartered Accountants of India, the IDBI report is believed to have said. A top IDBI official refused to comment on the issue.

The whole controversy started in August, 1997, when ICICI recalled loans from the company as it had found that Parasrampuria Synthetics was not in a position to implement the proposed expansion-cum-diversification project involving a huge sum of Rs 569 crore.

The company, then, made a reference to the BIFR by stating that it had run into a phenomenal loss of Rs 318 crore for the 15-month ended September, 1997, forcing ICICI to approach Delhi high court for an injunction. The Delhi high court rejected ICICI's plea for aninjunction and the institution, then, approached Mumbai high court for the recovery of dues from the company.

The Mumbai high court rejected ICICI's plea for the appointment of a receiver on March 3, 1998, and also rejected the contention that PSL cannot be considered as pending before BIFR.

PSL's tale of woes began when it embarked on a project for the setting up of polycondensation plants at Bhiwandi and Silvassa without realising the cyclical downturn in the petrochemical industry.

The project also involved a diversification into the manufacture of polyester staple fibre with a capacity of 12,250 tpa at Bhiwandi and 26,250 tpa at Silvassa. The company came out with a rights-cum-public offer to finance the project in 1996.

ICICI has valued the project in October, 1994, at Rs 534.85 crore but reviewed the project again in 1995 when the public issue failed to take off. However, the institution, it is learnt, had made the mistake of maintaining the project cost at the same level. ICICI could haveforeseen the cyclical downward trend in petrochemicals and should have gone for a conservative estimate, they added.

With both Mumbai and Delhi high courts rejecting ICICI's plea, the institution had filed a special leave petition with the Supreme Court requesting for a relook into the whole issue. The Supreme Court had asked IDBI to make an enquiry into the contentious issue.