Bombay Dyeing Overstated Profits, Bajoria Tells Clb

The Bombay Dyeing & Manufacturing Company Ltd overstated its profits by Rs 175.76 crore between 1996-97 and 1999-2000, Kolkata-based jute and real estate baron Arun Bajoria has alleged in a petition filed before the Company Law Board (CLB).

"Though the company has purported to show profits for the years 1996-97 to 1999-2000 and paid dividends, in reality it has made a loss and/or overstated its profits," the petition reads.

Though Bajoria has charged Bombay Dyeing chairman Nusli Wadia of financial mismanagement, this is the first time his specific charges have come to light. Last year, Bajoria had acquired a 13.5 per cent stake in Bombay Dyeing which brought him in direct confrontation with Wadia.

In response to a faxed questionnaire sent to Wadia, Bombay Dyeing executive director S S Kelkar said: "The petition filed by Bajoria is clearly a motivated one and without any substance whatsoever."

In his petition, Bajoria has said that during the four years, the company charged a premium of Rs 79.29 crore on special promissory notes (SPNs) issued by it in 1993-94 to the share premium account and not the profit and loss (P&L) account.

The SPNs did not carry a rate of interest and were to be redeemed at a premium. The premium, Bajoria's petition says, is a borrowing cost and needs to be charged to the P&L account.

Further, Bajoria has said in his petition that during 1996-97, Bombay Dyeing sold almost all of the 19.4 million bonus units of Unit Trust of India issued to it during the year for Rs 27.64 crore and the entire amount was booked as profit as the cost of acquisition of the bonus units was taken as nil.

The petition says that the acquisition cost cannot be taken as zero as the bonus units were received on the basis of an investment of Rs 346.49 crore in 194 million units.

As per the petition, the prorated cost of investment works out to Rs 31.49 crore and, hence, the company actually made a loss of Rs 3.85 crore on the transaction and not a profit of Rs 27.64 crore as reported in the balance sheet.

The petition has also alleged that expenses worth Rs 43.68 crore during the four years on voluntary retirement compensation, catalysts, Navnirman Project and advertisement of new brands have been carried forward as deferred revenue expenditure instead of being debited to the P&L account.

In response to these charges, Kelkar said: "The so called charges refer to information disclosed in the prior years' balance sheets and are being challenged by us on the question of maintainability."