The Industrial Development Bank of India (IDBI), which was appointed by the BIFR as Dunlop's operating agency and asked to examine its accounts, will be submitting its report within this month.pThe bankers to Dunlop and the financial institutions holding substantial stake in it are steadfastly opposing the company's attempts to become "sick", since a sick company cannot be forced to repay loans.

The Dunlop management had revalued the company's assets three times since 1991 -- in 1991 itself, in 1993 and in 1995-96. The last time itraised the value of its gross asset block by Rs 114.57 crore. However, under the BIFR norms, a company's revaluation reserve is disregarded for arriving at the value of a company's networth. Therefore, Dunlop's networth, comprising only the paid-up share capital and general reserve, was no more than Rs 93.03 crore on December 12, 1994.

In the 15-month accounting period between January 1, 1995, and March 31, 1996, Dunlop showed a profit of Rs 39 crore which came from the sale of two properties -- one at Worli in Mumbai and the other at Pattulous Road in Chennai -- to one of its wholly-owned subsidiaries. The sale consideration was shown as Rs 169.26 crore under the head "other income" in the company's audited accounts. However, its auditors Lodha & Co's report the following year said there was no final offer from the buyer.

Supposing that the company did not see the money, instead of a profit of Rs 39 crore, as claimed, it incurred a loss of Rs 130 crore, which was more than its networth of Rs 93.03crore.

Supposing that the company did see the money, the management will not reverse it and the auditors will again put the disclaimer in its report on the company's accounts for 1997-98. This deal is unlikely to escape the attention of IDBI.

Another controversial deal has been the sale of software by Dunlop to Shaw Wallace & Co Ltd, the flagship liquor company of Dunlop's promoter Manu Chhabria. L C Gupta, former Company Law Board nominee on the Shaw Wallace board, had written a letter, dated February 24, 1998, on the financial mismanagement in the liquor giant. In this letter, he pointed out a "fraudulent purchase of software of no value by SWC from another Chhabria-controlled company (Dunlop) for a reported price of Rs 30 crores..." The letter continued, "in the process, the following things happened: (a) Dunlop was enabled to report fraudulently high profit..."Among the statutory liabilities, there are Provident Fund (PF) and Employee's State Insurance (ESI) dues. In 1993-94, the company's auditorsreported that the PF and ESI dues, "excepting in certain cases, have generally been regularly deposited by the company..."