MCA orders scrutiny of Subhiksha’s books

In another blow to the beleaguered discount retail chain Subhiksha, the Ministry of Corporate Affairs (MCA) has cleared the
recommendations of the Ministry of Corporate Affairs’ southern regional director for inspecting accounts of cashstrapped retail chain Subhiksha.

Acting on complaints filed by a clutch of investors and former employees alleging mismanagement of funds, the ministry on Monday instructed the regional director to go ahead with the inspection. “We have begun the enquiry and asked the company to furnish the requisite information,” the regional director told ET.

The company has a week’s time by which to submit the data called for by the regional director, including the balance sheets, books of accounts, the core activities of the company and members on the board of directors, he added. The regional director said although it wasn’t a time-bound process, the enquiry is being conducted on “priority basis” and would take about three months. The findings would be presented to the secretary of the corporate affairs ministry, he added.

When contacted, Subhiksha Trading Services managing director R Subramanian denied knowledge of any such move. “We have no intimation of any the ministry enquiry ... we have no comment on this as we have no knowledge of this... we cannot speculate on such matters.”

The MCA will check if all procedural norms under the Companies Act (maintaining accounts properly and conducting board meetings etc) are being complied with. In case of any procedural lapses, the managing director can be arrested. It will invite imprisonment of at least two years and a fine of Rs 1,000, a corporate lawyer who did not wish to be named told ET.

Meanwhile, a number of cases have been filed against the retail chain at the Madras High Court. Earlier, the court had appointed a provisional liquidator to control assets of the retail chain in response to a winding up petition filed by Kotak Mahindra Bank, which lent Rs 40 crore to Subhiksha.

It had later stayed the appointment when Subhiksha contended that such an appointment would hamper its corporate debt restructuring process, but asked the company to file financial details for the last three years and bank statements, which it did.

The petition against the amalgamation of Subhiksha Trading Services with Blue Green Construction and Investment filed by some of its creditor banks and investors will be heard on July 2.

TIGHTENING NOOSE



Who will inspect the accounts?



The south zone regional director will look into the account books. The company has a week’s time by which to submit the data called for by the regional director, including the balance sheets, books of accounts, the core activities of the company and members on the board. The MCA will check if all procedural norms under the Companies Act (maintaining accounts properly and conducting board meetings etc) are being complied with.

What is the status of cases against the company?



A number of cases have been filed against the retail chain at the Madras High Court. Earlier, the court had appointed a provisional liquidator to control assets of the retail chain in response to a winding-up petition filed by Kotak Mahindra Bank. But the court stayed the appointment when Subhiksha contended that such an appointment would hamper its corporate debt restructuring process. A petition against the amalgamation of Subhiksha Trading Services with Blue Green Construction and Investment filed by some of its creditor banks and investors will be heard on July 2.

When did Subhiksha land in a soup?



The retailer, founded in 1997, ran out of cash in October 2008 after relying on a ‘high level’ of debt. The unlisted company's operations are nearly at a standstill and it is undergoing a debt restructuring exercise.



source: http://economictimes.indiatimes.com/News/News-By-Industry/Services/Retailing/MCA-orders-scrutiny-of-Subhikshas-books/articleshow/4670317.cms