Raju firms claim return of advance made to firm in 2006-08

Brahmayya and Co, the chartered accounting firm, has said Mahindra Satyam is justified in the treatment of Rs 1,230 crore in the books.

The IT firm faces a claim from 37 companies over alleged unsecured advances they made to Satyam.

The audit firm was asked by the Andhra Pradesh High Court to look into allegations made by some shareholders with regard to the accounting system adopted by the IT company.

Contentious advances

The audit firm submitted a seven-page report to the Official Liquidator in the Mahindra Satyam - Tech Mahindra amalgamation petition early this week.

The issue of the advances is the most contentious, with the 37 companies, reportedly promoted by the kin of Satyam’s former Chairman Ramalinga Raju, alleging that they had lent this sum to the IT firm during 2006-08. In the same year, the company’s fortunes sank with Raju confessing to inflating the financials in order to artificially keep in the top league of IT firms. They wrote letters to the company, asking it to repay the sums borrowed.

One of them, Ekdanta Greenfields, now owned by IL&FS (after it took over Maytas that was owned by Raju’s family), too approached the court, calling for winding up of Satyam over the issue of advances.

The new management under the Mahindras has been asserting that the claims are legally not tenable as the advances were not accounted for in the books of the company. The Enforcement Directorate, which is probing the scam under the Prevention of Money Laundering Act, had asked the company not to return the alleged advances until further instructions from it.

Auditor observations

The auditing firm said the IT company received Rs 1,425 crore from 37 companies during 2006 and 2008 into five of the bank accounts.

“But these amounts were not accounted in books by the erstwhile management,” they said in the report. They observed that companies had to pass a resolution by its board while accepting unsecured loans. “But in the advances from the 37 firms neither the resolution of the board nor any document evidencing such receipt are made available to us,” it said.

In this backdrop, “the new management is justified in not crediting the amounts to the firms, not showing them as creditors in the books”.

On the Ekdanta Greenfields claim that it should be recognised as a creditor, the auditor said the bank statement it submitted (to supports its claim on cheque payouts to the tune of Rs 36.50 crore) was in the name of Ekdanta Greenlands and not in the name of Ekdanta Greenfields.

kurmanath.kanchi@thehindu.co.in

(This article was published on March 8, 2013)
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