The Hindu : RPL admits reversal of interest income

Online edition of India's National Newspaper
Wednesday, Jul 17, 2002

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Business

RPL admits reversal of interest income

NEW DELHI JULY 16. Reliance Petroleum has admitted reversal of entries of about Rs. 47 crore interest income shown in the 1993-94 balance sheet in the very next year due to its non-payment on advances given to Reliance Industries and other group companies for the Jamnagar refinery project.

The revelation came during the Department of Company Affairs probe into the accounts books of the Reliance Petroleum (RPL) under Sec.209 A, following allegation from the BSP MP, Raashid Alvi, that it had diverted funds mopped up from a public issue through Reliance Industries (RIL).

Responding to various objections and charges communicated to it by the DCA, RPL in its reply said, ``The interest accounted for in 1993-94 by the company was reversed in the next accounting year, that is, 1994-95.''

Justifying the reversal, RPL said the advances totalling about Rs. 800 crores were refunded after the delays in execution of the project due to some public interest litigation.

"The company, however, accounted for the interest on its own in its books of account as interest income on the assumption that the company would be able to persuade those parties to effect payment of interest,'' RPL's Vice President (Corporate Secretarial), K. Sethuraman, said in his reply to DCA.

Earlier the DCA had sought explanation from the company on the reversal of entries of interest payable from RIL (Rs. 42.61 crores), Lavanya Holding and Trading Private Ltd. (Rs. 2.59 crores), Reliance Industrial Infrastructure Ltd. (Rs. 1.55 crores) and Reliance Filament Ltd. (Rs. 59 lakhs).

"The company was beset with litigations after it had entered into conracts with RIL, LHTPL and RIIL under which project advances were made in connection with setting up of the refinery project,'' RPL said.

As the litigations appeared to delay the implementation, RPL on its own made a request to these parties to make payment of interests on the project advances made to them after calling back the advances, RPL said.

On the charge that company divested funds from the Rs. 1,000 crore raised by it during September 1993 which were utilised for the benefit of 66/250 privately owned Ambani companies (POACs), RPL said "We deny that the industrial house of Ambanis through RPL had diverted any amount received from the public.''

After analysing the RPL response, the DCA inspection report observed that the entire amount that was deployed with the aforesaid companies was received back by RPL and in "some cases without interest or without making any profit.'' Neveretheless, the company has some notional interest in some cases.

Commenting that the cost of the refinery project had come down, the report said, "Thus, the diversion of funds, if any, as alleged by the complainant had no effect on the cost of the project and also in its implementation.''

The inspection report said the allegations were centred around the utilisation of the money by the company (RPL) immediately after the closure of the public issue.

Based on the agreements entered into, the company had advanced loans to the aforesaid companies (RIL, LHTPL and RIIL), while RIL refunded Rs. 681 crore and the balance as on March 31, 1994 was Rs. 115 crores.

The report said "The company had wrongly classified these advances under the head `Loans and advances' in the balance sheet as at March 31, 1994 and thus violated the provisions of Sec.211 read with Schedule VI of the Act.'' — PTI

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