Montari, Ispat rapped for bogus bill discounting

NEW DELHI, SEPT 6: The Appellate Authority for Financial and Industrial Reconstruction (AAFIR) has rapped the fund raising route of Monta...

NEW DELHI, SEPT 6: The Appellate Authority for Financial and Industrial Reconstruction (AAFIR) has rapped the fund raising route of Montari Industries Limited (MIL) and Mudra Ispat Ltd by discounting bogus bills on factious transactions.

“We strongly disapprove of the practice of getting funds by presenting bogus bills for discounting without any real sale or purchase of goods or acquisition of fixed assets. This is a pernicious practice having serious adverse implications for the financial sector of the economy,” an AAFIR bench comprising acting chairman M S Dayal and member J K Bagchi observed in its recent order.

Dismissing an appeal of Mudra Ispat, a part of the Ispat group, against the agro-chemical company MIL, promoted by the Bhai Manjit Singh group, the bench noted that funds raised through bogus bills are of high cost and used for non-productive purposes as there is no addition to either fixed assets or goods for trade. Therefore, there is a strong in-built probability of defaults inrepayments.

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The non-banking financial company of the Ispat group had sought that MIL should be declared that is not a sick company as it had manipulated its accounts for being declared sick by BIFR. Also, it should be allowed to proceed with its civil suit in the Calcutta high court for the recovery of its dues from MIL. On Mudra Ispat’s role, the AAFIR said, “utilisation of the funds of depositors for bogus bill discounting amounts to breach of trust with the depositors.”

Holding both companies as equally blameworthy, the bench observed that MIL had admitted that the transactions were entered into knowingly and Mudra Ispat had not denied them.

At the same time, AAFIR asked IDBI to verify whether MIL’s current liability under sub-head “acceptances” was Rs 22.74 crore on March 31, 1994 Rs 17.76 crore on September 30, 1995 and Rs 14.77 crore on September 30, 1996. It should also examine whether these monies were obtained by availing of bill discounting facility on bogus sale or purchasevouchers.

The appellate authority said IDBI should complete its report expeditiously and submit it to BIFR for their consideration with a copy to secured creditors and the appellant.

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Earlier, Mudra Ispat alleged that it had discounted the bills for sale of leather goods by Monporte Implex Private Ltd (MIPL) to MIL and made payment to MIPL. The liability for repayment was taken over by mil. No leather goods were actually supplied by MIPL to MIL. “This amounts to siphoning of funds”. Denying that it had siphoned off funds, MIL said it transferred the money to itself and accounted for as “acceptances” under current liabilities.