The Chronology, As Per Tata Finance Fir

The Tatas in their FIR have alleged that former Tata Finance Ltd (TFL) managing director Dilip Pendse indulged in criminal conspiracy, forgery and falsification of accounts for over the last 18 months.

Here is the chronology of events, narrated by the Tatas in the FIR:

Sometime towards the end of 1999, Pendse commenced extensive share market operations in Niskalp with heavily borrowed funds.

The portfolio was lopsided in favour of K-10 stocks ("scrips linked with a broker who is currently under investigation").

From quarter ended December 1999 to March 2000, Tata Finance breached the prudential norms of the Reserve Bank of India as regards capital adequacy ratio (CAR) and single-company exposure.

 

On June 28, 2000, Niskalp paid an additional dividend of Rs 10.73 crore to Tata Finance on a provisional profit of Rs 119.76 crore (Niskalp's year is April to March).

With this, total dividend payout rose to 200 per cent (155 per cent interim dividend already disbursed).

However, in September it was found that Niskalp's profit is insufficient to justify the dividend and hence it was converted into an interim dividend for the next year (fiscal 2001) even though Niskalp was in losses. These facts were concealed from the Tata Finance board.

Between March 2000 and March 2001, Tata Finance's inter-corporate deposit exposure to Niskalp went up from Rs 220.37 crore to Rs 502 crore.

This act of lending is a breach of contract of employment and violation of prudential norms, the FIR says.

Pendse "managed" to keep the CAR of Tata Finance every quarter through circular transactions. The board discovered it on May 25, 2001, and Pendse was immediately censored.

On October 21, 2000, Pendse, along with company secretary B R Gazdar and present managing director Subodh Shah made a presentation to Tata Finance chairman F A Mehta and director Kishore Chaukar saying the CAR of Tata Finance was under pressure. The presentation did not disclose that Niskalp was suffering from losses.

On December 19, 2000, Pendse wrote a letter to Ratan Tata, N A Soonawala, Ishaat Hussain and Chaukar persuading Tata Finance to underwrite up to Rs 62 crore in the proposed rights issue.

This letter did not say that Tata Finance did not have the required CAR and had a huge exposure to Niskalp.

On January 4, 2001, Pendse called a board meeting to approve the Rs 90.93 crore rights issue. The draft offer letter was approved.

On February 8 Pendse informed the board that he would not seek re-appointment as managing director on expiry of the term on May 31

February 20, 2001: At a board meeting Tata Finance agreed to support the rights issue to the extent of Rs 55 crore.

On March 20, 2001, it was decided that Niskalp's financial performance up to September would be shown in the rights issue offer letter as its December results were worse than that of September.

Since Niskalp was suffering from losses even in September, Pendse proposed backdated sale and buyback transactions of securities between Niskalp and Tata Finance to eliminate the losses. Based on this the offer, letter was finalised.

On April 16, Sebi sought explanation from Tata Finance on the rights issue.

On April 17, Pendse sent in his explanation to Sebi executive director.

On April 26, Sebi asked Tata Finance to modify the open offer with additional disclosures.

On May 25, the real affairs of Tata Finance and Niskalp came to light when Subodh Shah made a presentation to the board. Pendse confirmed the presentation.

On May 31, Tata Finance chairman wrote to Pendse asking for his explanations. It also appointed a chartered accountant firm to probe the affairs.

Pendse wrote back to the Tata Finance chairman denying all charges. But Tatas dubbed the letter as baseless and untenable.

On August 6, Tatas filed an FIR with the economic offences wing of the Maharashtra government against Pendse and five other senior executives of the company.

Pendse was not available for comment. However, in his letter to Tata Finance chairman dated July 21, he has denied all charges.

The letter said that "it was totally incorrect and false" that the Niskalp's ill-health came to light on May 25.

The board was continuously kept informed about this and the "last such exercise was undertaken at board meetings on April 25 and 30".

He also said all necessary permissions were taken from time to time for investment in Niskalp. The cheques were given in small denominations for "administrative convenience".

He also said that the communication to the Securities and Exchange Board of India and all shareholders were approved by the board on April 25.