November 06, 2000

Bombay Dyeing not alone
Several months ago, this paper had written about a Reserve Bank inspection report which had unearthed the fudging of commercial paper (CP) documents by Bombay Dyeing in order to raise funds quickly. The company had claimed that the fudge was not a fraud but only because the CP issue procedures were very cumbersome. The RBI reacted with stunning silence and instead set up a committee to change the CP rules. We now find Bombay Dyeing was not an isolated example. Others too had fudged about CP documents even though it they may not have resorted to blatant use of white ink. A RBI inspection of ICICI has unearthed three more cases. ICICI, it says, purchased CPs of Sterlite industries of Rs 30 crore on October 20, 1998 with an undated issuing and paying agent (IPA) agreement which was attested by the company itself. Also, details such as reference number, date of bank NOC and maximum amount under issue were simply omitted. Similarly, in case of a June 11, 1998 CP for Rs 5 crore of the Infrastructure Leasing and Financial Services and an April 13, 1999 CP of BASF Ltd for Rs 40 crore it had accepted old IPA agreements executed in 1994 and 1997 respectively. It makes you wonder how much of a mess there really was in the CP issue business which was quietly covered up by the RBI’s committee.

ICICI’s property deals
Where ICICI is concerned, necessity is the mother of diversification. An inspection report of the RBI says that three group companies – ICICI Properties, ICICI Realty and ICICI Real Estate were acquired in lieu of dues recoverable from the loss making Mafatlal Industries. More recently, ICICI acquired nearly Rs 60 crore worth of property from the Lokhandwalas and Stanrose. In a detailed reply to this paper, ICICI had said that its property acquisitions were meant to house all its new businesses and that it was running out of space at the spanking modern ICICI Towers at Bandra Kurla. Soon after, a business paper confirmed market reports that ICICI was only acquiring property in lieu of loan repayments. Recoveries in the form of real estate are an excellent idea, but if the swap is to be profitable then ICICI’s property companies need to buck up. After all, with three property companies under its belt it cannot goof up on a simple requirement like seeking permission from the Maharashtra government before selling old corporate office building, built on leased land.

Destructive didi
The fiery Mamata Banerjee may not have got her way with rolling back petroleum prices, but the misguided didi has managed to wreak some damage on the packaging industry. Under pressure from Mamata, the government, which was fairly prepared to scrap the antiquated and protectionist Jute Packaging Materials (compulsory use in packaging commodities) Act 1987 did an about-turn. Under a textile ministry order of 1999 July, foodgrains and sugar have to be compulsorily packed in jute material. Following large scale protests from consumers and consumer bodies about the damage caused by spoilage, leaks and seepage, the order was modified to allow a small portion of the produce to be packed in polythene or plastic material. But under pressure from the powerful jute lobby the government has taken the retrograde step of reversing the concessions and re-iterating the textile ministry order on October 31. So powerful the lobby that government ignores the fact that jute, apart from being a lesser packaging material is in fact a more expensive to use.

Not quite PIL
SeBI chairman D R Mehta received quite a drubbing in the press, for reportedly telling the Parliamentary Committee on Finance that he was considering a public interest litigation (PIL) in order to get more powers. Reports on the meeting even referred to several MPs on the committee expressing surprise at the proposed SEBI move. While none of the papers have issued any direct clarification, Mehta tells us that the facts are entirely different. He did not mention a PIL in connection with getting more powers, but had pointed out to the committee that SEBI had filed a PIL in order to initiate action against shady plantation companies, because it had no other powers. It is in this connection that the MPs seem to have said that SEBI ought not to have to resort to a PIL. But there is still the issue of whether or not SEBI needs more powers. Our contention still is that SEBI demonstrates that it does use all its powers (we pointed to several specific cases) and drops its tendency to push inconvenient cases into cold storage, its plea for more powers will always sound weak.

Updated weekly.

The author's e-mail address is: suchetadalal@yahoo.com

Other columnists:

Other articles by the columnist Columnist's New Article A pointless apology? Multiple remote controls Learning about technology The market is wrong The Rs 20,000 crore question Y2K = More advances MTNL's net tariffs No wealth creation please Backdoor to advice BPL, Videocon and Sterlite Who gets the SEBI jobs? The Mayor and the RBI Governer A pie in the sky? Speeding up the Special Court The dot - con Game Vanishing company case reappears Those missing VIPs Governer takes over Against what odds? CRB going dot.com? ICICISUCKS.com No The pecking order As The angel gang Deficient disclosures? India changes? Short Memories Bankrupt Maharashtra Another Committee? ALBEM = BADLA The Lloyds example Reliance underpriced? Careless regulator The NAV game Women directors quota Rumblings at SHCIL Yeh Dil Maange More Bombay Dyeing problem A No takers for dollar returns What Federation? Insurance ordeals It On Dadiseth's trail Collection problems Net frauds and e-mail A Tough Decisions Nandy's natter Misplaced optimism Crore ya dus-crore SEBI and rolling settlements Plummeting credibility