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Within weeks of unlisted Tata Capital writing off its massive loans given to Chennai-based entrepreneur C Sivasankaran, Tata Sons, the group's holding company, has also written off Rs 700 crore dues from the Siva group.
As per Tata Sons annual report of 2017, Tata Sons was to get Rs 700 crore from Siva group for the buyback of Tata Tele shares from NTT Docomo. But, after Siva defaulted to the payment in mid-2016, Tata Sons had to buy back these shares from Docomo by paying from its own kitty.
In 2016, former Tata Sons chairman Cyrus Mistry had initiated legal action against Siva that triggered a series of events eventually leading to Mistry's removal in October 2016. With this, the Siva group owes close to Rs 2,000 crore, including interest to the Tatas but with both Tata Sons and Tata Capital writing off these dues, the chances of Tatas getting this money is remote. While Mistry was chairman, Siva group had threatened to sue Tata Sons, Tata Tele and Docomo for mismanagement of Tata Teleservices, which failed miserably to make a mark in the telecom sector dominated by Bharti Airtel, Idea and Vodafone.
Interestingly, even after Mistry pointing out these dues from Siva, both the board of Tata Capital Financial Services and its auditor had given a clean chit to Siva. Mistry had alleged that the company had incurred huge losses as the loans given to the Siva group had turned bad.
In its annual report for the financial year ended March 2017, Tata Capital's board said, during the year, certain allegations were made in relation to the loans availed by Siva Ventures and Siva Industries and Holdings, firms promoted by C Sivasankaran from Tata Capital and its subsidiary, Tata Financial Services that turned out to be untrue.
The auditor, Deloitte, also gave a clean chit to the firm without raising any qualifications on loans given to the Siva group. The audit committee of the board reviewed the internal policies, processes, statutory requirements and the correspondence between the regulators and the firm.
“After due review and deliberations, the audit committee expressed its confidence in the company’s processes and due compliance with the applicable RBI (Reserve Bank of India) and Sebi (Securities and Exchange Board of India) Regulations,” the firm wrote to its shareholders.
The audit committee is chaired by independent director Janki Ballabh, former chairman of State Bank of India. Mistry had alleged that the loan given to the Siva group was under the strong advice of Tata Trusts executive trustee R Venkataramanan, which has since turned into a non-performing asset.
“All of this resulted in Tata Capital having to recognise an abnormal size of non-performing assets,” Mistry said in his letter to Tata Sons board members and Tata Trusts trustees soon after his ouster in October last year.
However, in an interview to Business Standard Sivasankaran (Siva) had denied defaulting on Tata Capital loans, saying the loans were covered by shares of Tata Teleservices as collateral. Siva also said the firm had defaulted on loans after it filed for bankruptcy and Tata Capital wrote off the debt and kept the collateral.
In the annexures to his petition filed with the National Company Law Tribunal early this year, Mistry had included his communication to N A Soonawala, a trustee of Tata Trusts, in early 2016 giving details of Tata group businesses which were facing headwinds. On Tata Capital, Mistry had said there would be a diminution in the value of investments and loans that Tata Capital pursued at the behest of the group. Mistry had also written that the lack of appropriate culture and risk management systems led high NPAs.