Banks, Fis Oppose Modern Syntex Move Towards Bifr

Banks and financial institutions have contested the move by Modern Syntex, an H S Ranka group company, to get registered as a sick company with the Board for Industrial and Financial Reconstruction (BIFR).

At a hearing held here on July 17, 2001, banks and financial institutions charged that the company overstated losses for 1999-2000 in order to be declared sick and avoid legal action its creditors might initiate against it.

As on March 31, 2000, Modern Syntex reported accumulated losses of Rs 366.61 crore as against a net worth of Rs 359.41 crore.

At the hearing, BIFR did not declare Modern Syntex sick and ordered the IFCI, the operating agency, to file a report on the matter within six weeks.

Refuting the charges, Modern Syntex officials said the accounting practices of the company had been at par with the best practices in industry and The Institute of Chartered Accountants of India has given a certificate to that effect.

In addition, the company has already been recognised as a relief undertaking by the state governments of Rajasthan and Gujarat and a registration with BIFR will not help it get any special benefits.

The officials said the company had sought a registration with BIFR as it is obligatory on any company to do so if its net worth stands totally eroded at the end of a financial year under the Sick Industrial Companies (Special Provisions) Act, 1985.

The main objection raised by Bank of India, the lead bank, is that the company revalued the assets of its yarn and suitings division located at Alwar in Rajasthan from Rs 78.76 crore to Rs 28.42 crore during 1999-2000.

Out of this erosion of Rs 50.34 crore, Modern Syntex put Rs 38.62 crore in the profit and loss account for the year, while Rs 11.72 crore was charged to the revaluation reserves account.

Modern Syntex has responded to the charge by saying that the valuation of the assets was carried out by Anmol Sekhri & Associates, a reputed firm of professionals, and the valuation it arrived at is more or less the same as that of A F Ferguson, which was appointed by IFCI and had valued the assets at Rs 28.87 crore.

Bank of India has also said the company adjusted prior-period interest payments, expenses and arrears of depreciation aggregating Rs 20.79 crore in its profit & loss account for the year without giving any explanation.

It has also charged Rs 7.23 crore spent on the extension of the suitings division to the profit & loss account after the extension was abandoned.

To this, Modern Syntex has replied that a proper explanation for this was given by the board of the company to its members, while approving the accounts for the year.