Financial Daily from THE HINDU group of publications
Friday, Aug 13, 2004
Industry & Economy
APTransco alleges cheating Raids on Spectrum Power's former MD
Mr M. Kishan Rao (in safari suit), former MD, Spectrum Power Generation Ltd, talking to police officers at his house during the raid in Hyderabad on Thursday. - A. Roy Chowdhury
Hyderabad , Aug. 12
OFFICIALS of the Andhra Pradesh Crime Investigation Department raided the residence and other premises of Mr M. Kishan Rao, former Managing Director of Spectrum Power Generation Ltd (SPGL), one of the first few fast track independent power projects to be set up in Andhra Pradesh, following a complaint filed by Mr G. Patanjali Rao, Chief Engineer (Commercial and IT) of the Transmission Corporation of AP (APTransco).
In his complaint filed on behalf of APTransco on August 8, Mr Patanjali Rao stated that Mr Kishan Rao with "dishonest intention for wrongful gain, had shown knowingly false, incorrect and inflated figures of capital cost in the records and thus fraudulently induced APTransco to part with their huge monies of approximately Rs 2 crore excess per month, than they are entitled, from 1997 onwards."
The Chief Engineer also stated that APTransco had recently issued a notice to SPGL to reduce capital cost of the project as well as the fixed charges paid every month. But the company refused to accept the proposal. "Mr Kishan Rao also misappropriated the monies entrusted to him".
Narrating the sequence of events in his complaint, Mr. Patanjali Rao, stated that in 1992 the A.P. State Electricity Board had entered into a memorandum of understanding with SPGL for establishment of a generation unit and later, in 1997, entered into a power purchase agreement (PPA). As per the PPA, the capital cost, as approved by the Central Electricity Authority, was Rs 748.43 crore. APTransco had to pay fixed charges every month on the basis of capital cost.
However, the complaint stated that the actual capital cost incurred by the company was Rs 97.71 crore less than the approved capital cost of Rs 748.43 crore. But SPGL "knowingly made false entries in records and showed capital cost of the project as Rs 748.43 crore" and received about Rs 14.50 crore per month towards fixed charges. This was Rs 2 crore more than the fixed charges per month for which the company was entitled to.
The complainant stated that SPGL, headed by Mr Kishan Rao, had given engineering procurement contract and O&M contracts to Rolls Royce, UK.
With a view to receive "kickbacks" from Rolls Royce, Mr Kishan Rao had established a "bogus company by name Towanda Services (TSL) in British Virgin Islands. Except Mr Kishan Rao there is no other person in the said company."
The complainant pointed out that Mr Kishan Rao, in his deposition before the Enforcement Directorate, had admitted that TSL was "brought up only to receive the monies from Rolls Royce and the said company has not done any business except receiving the said monies".
Thus, Mr Kishan Rao received Rs 67.9 crore from SPGL during 1995 as kickbacks. This apart, the complaint stated, SPGL had created records "showing sham transactions as if some civil contract works were given to five persons during October 1993 to March 1994".
These transactions were to the tune of Rs 29.3 crore. The Blue Star Constructions, a firm represented by the five persons, "neither has any infrastructure nor even telephone connection to undertake and execute such huge works".
Further, the complainant stated, the amounts drawn by the firm as mobilisation advance was found to have been transferred to the group concerns of SPGL.
"All these facts are found by the Joint Commissioner (Income Tax), Hyderabad". Even the chartered accountant firm, Billimoria & Co that audited the accounts of SPGL, reported that the said civil contracts in the name of Blue Star Constructions and others "are a sham transaction".
These apart, the complaint stated that SPGL in its records, particularly in the register of shareholders, has shown that Bambino Finance Ltd took 5 lakh shares of the company by investing an amount of Rs 50 lakh.
"In fact, the said entries are made without consideration." This fact was established in the court of the Second Additional Chief Judge, Hyderabad. The court has passed orders on August 24, 2002 holding that "transaction is bogus" and directed SPGL to delete the shares recorded in favour of Bambino Finance.
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