Birla Power Solution, the Yash Birla group of company, has got into a further financial mess with the Economic Offence Wing (EOW) of Mumbai Police freezing the company’s two bank accounts last week, following payment defaults to depositors.
The move followed complaints by Somani Memorial Trust, which had invested Rs1 crore among the other 28 complainants received by EOW.
The total outstanding amount of corporate fixed deposits is pegged at Rs 21.66 crore, however it is likely to escalate further, Mahesh Athavale, an inspector from EOW of Mumbai Police told dna.
He said the EOW has already conducted searches at the company’s offices and are scrutinising their accounts. EOW has so far frozen the company’s two bank accounts with State Bank of India and HDFC Bank.
Several small depositors, especially senior citizens, who invested their life-time savings in the company based on the ‘Birla’ reputation are now at the wrong end of the stick.
It’s not just Birla Power, several other group companies of Yash Birla are also facing the flak.
Earlier this month, the income-tax department raided at least 20 offices of the group across Mumbai and Delhi for alleged tax evasions.
Zenith Birla, another listed entity of the Yash Birla group, has also defaulted on fixed deposit payments. The Company Law Board (CLB) has several cases registered against this company by depositors. According to annual report of Zenith Birla, the company has not paid deposits to 1,287 investors worth Rs5.39 crore.
As for Birla Power, the deposit scheme was launched by the company during 2010-11.
G M Pardeshi, who runs an investment agency for senior citizens and widows, said 60-70 clients of his has not received payment worth Rs70-80 lakh.
Another senior citizen, Srinivasan Swaminathan, has Rs50,000 deposit locked up with Zenith Birla even after surrendering the fixed deposit certificate way back in August 2013.
Executives at Zenith Birla said they were clearing the April-June 2013 outstandings and it would take at least another six months to clear the next quarter (July-September) outstandings.
Many depositors are not even aware of the legal route through the CLB for claiming their monies without which they are left at the mercy of company management. The EOW has registered a case against Yash Birla, PVR Murthy, Rajesh Shah and 11 other officials which include Anant Vardhan, president of corporate affairs who was recently arrested by sleuths for alleged possession of narcotic drugs.
According to 2012-13 annual report of Birla Power, it has not been able to service the repayment of deposits and interests to depositors and comply with the order of the CLB for refund of deposits, due to cash flow limitation.
The extent of the outstanding as of fiscal 2013 shows an interest outstanding of Rs1.26 crore on a principal amount of Rs11.92 crore on fixed deposits matured and presented for repayments. The company had then claimed that it was paying the amounts in staggered manner and hoped to clear the outstanding in due course of time.
However, at the January 17 hearing of the case in CLB, Birla Power asked for six months for making payments as its bank accounts were frozen. The advocate representing the company said that the company was looking at alternative resources to arrange funds. CLB is suppose to have registered 617 cases of payment defaults so far.
It is difficult to put an exact number to total outstanding amount and number of cases as new cases are being filed every month, said P Sawant, Bench Officer at CLB.In its order dated January 17, CLB has granted no further time to the company for making deposit payments and has directed the company to repay dues within 30 days or face action from Registrar of Companies.
Birla Power did not respond.
A source from the industry said that the company had suffered heavy losses due to a business venture in Gulf, which has led them to this crisis. According to the company website, Birla Power Solutions, a Rs2,500 crore company, was established in April 1984 in collaboration with Yamaha Motor Co by Ashok Birla. It produces generators, inverters, pumpsets, batteries, power tillers, etc.
A person close to the company said that while the Yash Birla group is going through financial crisis, they have means to recover and be up and running. He said the group has a plan to come out of the mess which should take them 6-7 months.