BIFR rejects DSJ communications application to be declared a sick company

NEW DELHI, MAY 7: The Board for Industrial and Financial Reconstruction (BIFR) has rejected an application by DSJ Communications, publish...

NEW DELHI, MAY 7: The Board for Industrial and Financial Reconstruction (BIFR) has rejected an application by DSJ Communications, publisher of Dalal Street investment journal, to be declared a sick company as it did not perform any industrial activity.

"It is evident from the audited annual reports that the company was engaged in publication of magazines, all its printing work was done on job work basis and it did not perform any industrial activity," the BIFR order said. Under the Sick Industrial Companies (Special Provisions) Act (SICA), BIFR considers only those companies cases which are engaged in industrial activity.

BIFR further stated that the company did not have Secretariat of Industrial Assistance (SIA) registration and the same was applied in November 1998 when the application was filed with it.

For a company engaged in industrial activity it has to be registered with SIA under industry ministry. The order said the company had informed BIFR that it did not require SIA registration for operating printing machine.

However when the application was filed with BIFR, as a matter of abundant precaution, they (DSJ Communications) had obtained an SIA registration also, the order stated. Banks and financial institutions – Bank of Baroda, State Industrial and Investment Corporation of Maharashtra (SICOM) and Industrial Development Bank of India (IDBI) – had opposed the company move to be declared sick by BIFR.

Institutions had alleged that the company’s 80 per cent of the erosion in reserves of Rs 63 crore between 1996-98 was on account of write-off of doubtful debts and advances and investments made in group companies and the actual loss from the company’s main activity was only Rs 8.12 crore.

Bank of Baroda (BoB) had alleged that the company had written off advances of Rs 12.08 crore given to the group companies without taking any recovery action against them. Investments were also made in group companies at prices much higher that those prevailing in the market and subsequently provisions were made for reduction in the value of such investments, BoB had alleged.

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It further stated that the DSJ had extended its accounting period to 16 months and made huge write-offs in the extended period of four months, indicating that the main purpose of extension in financial year was to write-off the debtors and investments.

However DSJ said these allegations were not true and write-off of bad debts amounting to Rs 28.91 crore pertains to various companies on whose behalf they were doing advertising work. The company also said many of group companies whose dues were written off were floated by the promoters under diversification programme taken-up at a time when stock market was doing quite well. “All these sister companies were floated through public issues and the investments were made after disclosing the full facts,” the company stated.