Raghav Chandra?s rejoinder | india | Hindustan Times
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Raghav Chandra?s rejoinder

THE INFERENCES drawn in your articles entitled ?ICD Scam and Bureaucracy (Part- I Part- II),? published on February 10 and 11 are misleading and purport to obfuscate the truth about the matter.

india Updated: Feb 16, 2006 15:28 IST

THE INFERENCES drawn in your articles entitled “ICD Scam and Bureaucracy (Part- I Part- II),” published on February 10 and 11 are misleading and purport to obfuscate the truth about the matter.

At the outset let me clarify, I had never asked for the job of MD, MPSIDC. I had submitted a report to the Government entitled “MPSIDC's Inter-corporate Deposit Scheme - Financial Consequences” within a few weeks of my taking charge of this assignment. It was my duty to report the precarious financial health of MPSIDC. Thereupon, the Department sought advice of the Advocate General.

In my report, I presented a preliminary white paper on the ICD scheme covering irregularities, financial consequences, beneficiaries and most importantly, my recommendations for resolving this matter.

I urged help from the Government both to reinforce the efforts of the MPSIDC and for Rs 400 crores so that MPSIDC could repay its loan liabilities and undertake debt-swapping of high cost debt.

In the second part you have said that bonds worth Rs 15 crores were raised from Bank of Punjab. In fact, the full volume of bonds floated in 1999 was Rs 81 crores, (without obtaining approval of the appropriate authorities), and the money came in 2000.

You have alleged that because of their unsecured nature bonds were worthless; thereby implying that MPSIDC could have avoided repayment to bond holders.

The inference drawn by you is not based on full facts and is incorrect. Being a Government company and having promised securitisation, we are bound to repay bondholders.

The bond-prospectus promised full securitisation, which included mortgages and charges, including creation of an Escrow account to repay the bond holders.

However, the promised securities were, surprisingly, not created. Thus, when I joined MPSIDC, I was stunned to find that bond money was given away as ICD to the tune of Rs 81 crores to existing defaulters and to companies whose ability to repay was highly suspect.

The money diverted into ICDs from bonds, has like other ICD money, been largely defaulted upon in repayment. Bond funds were given away as ICD to the following companies: M/s Som Distilleries & Group (Rs 8 crores), Snowcem India (Rs 13 crores), S Kumar Power (Rs 10 crores), Killik Nixon (Rs 5 crores), Bhaskar Industries (Rs 5 crores), Surya Agroils (Rs 12 crores), Geekay Exim (Rs 4 crores), Bhanu Iron & Steel (Rs 5 crores), Jamna Auto (Rs 4 crores), Ritspin Synthetics (Rs 5 crores), Sidhartha Tubes (Rs 4 crores), Sarita Software (Rs 2 crores). While Bhaskar Group has fully repaid, and S Kumar's

has settled and is repaying (settlement period 3 years), all others have not repaid. Where has this money gone? Had this been returned, the bond holders could have been repaid in a timely manner!

As regards Bank of Punjab, this is not a case of doling out money to private company / industrialist / stock market broker. It is a matter of repayment of borrowed money.

This is also a case of conversion of debt through a debt-swapping mechanism (whereby a high-cost debt at 14.4% was converted into a 6.5% low-cost debt). Further, about Rs 2.5 crore of lump sum interest reduction was negotiated apart from savings from reduction of interest rate from 14.4% to 6.5%.

Also, money for repaying the Bank of Punjab was uniquely brought in by the bank itself, which no other bond holder was in a position to do. Also, Bank of Punjab was the single largest bond holder having subscribed Rs 15 crores. It had also threatened MPSIDC with liquidation and criminal breach of trust proceedings for violation of bond prospectus etc.

As regards the letter of the then Principal Secretary Dr Vishwapati Trivedi, his views have been misinterpreted. At that point of time he was not aware that certain directions had been issued by the Government to urgently resolve the matter. Ex-post facto approval by the Board was in acknowledgement of the existence of such directions.

MPSIDC is committed to repaying all its dues including to the bond holders, cash flow and legal orders of courts permitting. Proposal has also been sent to Government to help MPSIDC tide over this extraordinary crisis.

Insinuations about under-hand dealings in re-payment and possibility of payment of commissions are absolutely baseless, preposterous and malicious.
(Raghav Chandra) MD, MPSIDC