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UNI
New Delhi, Aug 23: The Board for Industrial and Financial Reconstruction (BIFR) has directed the Industrial Development Bank of India (IDBI) to inquire into whether Mardia Chemicals Ltd (MCL) was justified in changing its method of depreciation following deterioration in its plant and machinery.
In its report to BIFR to be submitted by September 17, the IDBI will probe into the company's treatment of Rs 72.99 crore as to whether it was a capital or revenue item. The IDBI will also look into whether necessary justification was given to the board of directors before MCL, the flagship company of Mardia group, took a decision to change the method of depreciation and whether proper procedures were followed in respect of the meeting of bod on April 12, 1999 regarding incorporating the dissent of the institutional nominee directors.
Asking the company to give an undertaking that its fixed assets would not be disposed of without the consent of the BIFR, the bench comprising chairman PP Chauhan and member GNarayanan said MCL could draw current assets for day-to-day operations. These BIFR directions followed protests lodged by financial institutions and banks led by ICICI and Bank of Baroda respectively against MCL's claim to be declared sick under the Sick Industries Companies (Special Provisions) Act, 1985.
Citing the auditors' report, ICICI said the company's net worth would have remained positive had it not changed its method of depreciation. As a result of the same, the depreciation and losses were higher by Rs 132.92 crore (Rs 58.61 crore for 1998-99 and Rs 73.31 crore for the previous period) and fixed assets were lower by the same amount. Vikram Trivedi, advocate representing ICICI, said MCL chairman RS Mardia had reported in the bod meeting held on October 31, 1998 that caustic plant had still not been completed and the company capitalised all the expenses associated with the expansion projects for the six month period till October 31, 1998.
However, in March 1998, the company had declaredcommercial production of caustic and chlorine plant with retrospective effect from April 1, 1998 and wrote off these expenses in the revenue account.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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