Auditors' Disclaimer On Swc Is Justified: Clb
The Company Law Board (CLB) has observed that the nature and contents of the qualifications made by the auditors in the last two annual reports of Shaw Wallace & Co Ltd (SWC) fully justify the disclaimer.
Defining the annual report as the only media through which the affairs of the company can be appreciated, the CLB, in its latest order on SWC, has given its verdict that "the company has indulged in manipulating the accounts to show artificial profits through fictitious transactions".
This may strengthen the case on the repayment scheme for the creditors of the company, as, according to section 391 of the Companies Act, the courts need to be satisfied about the firm's financial position.
It may be mentioned that in the last two annual reports, the auditors have mentioned that the net worth of the company is not ascertainable.
Section 391 requires that the court be satisfied that all material facts relating to the company, such as the latest financial position, the pendency of any investigation proceedings in relation to the company under sections 235 to 231 and the latest auditors' report on the accounts of the company have been disclosed to it.
A company spokesperson, when contacted, however, said that this argument does not hold water as Company Law Board has not been able to point out any specific findings against the company. "The quasi-judicial body has not indicted the company", he said.
On April 7, the creditors, who are owed Rs 263 crore by the liquor major, had voted on a revised repayment scheme proposed by the management. The original report stated that 61 per cent of the creditors in terms of value had voted in favour of the Shaw Wallace plan. But some other major creditors, who had voted against the plan, subsequently filed affidavits and sent letters to Shaw Wallace stating they were changing their earlier stand and would support Shaw Wallace's debt liquidation plan. The creditors are also believed to have expressed their grievances on the addition of the company's associate firms and subsidiaries to the list of creditors inflating it from 179 to 191, sources said.