Corporate governance... what’s that?

EVERY so often, it takes one isolated instance of misdemeanour to spark off renewed demands for improved corporate governance. The need is felt more acutely in times of slowing demand; when the going is good, caution–and, indeed, good corporate governance – is thrown to the winds. Everybody swims along with the tide, and the whistle blowers are branded society’s curmudgeons.

The whole corporate governance issue is popping its head up again after the pandemonium over the sordid Satyam-Maytas business. Much has been written, debated and blogged over the proposed $1.6-billion merger between the two companies, but you can bet your last last dollar that the last word has not been spoken yet. The government in Delhi, the regulators in Mumbai, the shareholders in New York have all jumped in and expect some more fireworks over the next few weeks.

The initial public outburst was caused by news that listed company Satyam Computer Services was using its free cash – which belongs to all its shareholders — to buy out two unlisted infrastructure and property development companies, both owned by the managing shareholders of Satyam. These companies were ostensibly incurring losses and the buyout would have given them a fresh lease of life. The deal had to be subsequently jettisoned as shareholder fury shaved off over 30% of the share price in India and over 50% in the ADR values in New York. Chastened by the loss to the shareholders, the company then announced a buyback. Even this is being seen as weird – using company cash once again to prop up share prices when other options could have been examined.

But, all this has refocused attention on what constitutes proper corporate governance. One of the issues raised is the role of independent directors and whether they can be held accountable in decisions like these. Market regulator Securities and Exchanges Board of India has been pressing companies to increase the number of independent directors on their boards who will, presumably, represent the interests of the minority shareholders. In the Satyam-Maytas muddle, fingers have also been pointed at some of the independent directors, eminent professionals in their own right, who unanimously approved the deal.

So, does the mere fact of having a certain percentage of the board as independent directors really help? In USA, it was found that many CEOs were getting their pals and cronies appointed as “independent” directors and using them to get their pay packets and bonuses inflated. Who monitors whether the word “independent” truly stands for what it is supposed to denote? It is difficult to really prove that a person is truly independent, unless his actions prove otherwise.

Sebi has been trying hard to get public sector units, which are listed on the stock exchanges, to appoint at least 50% of the board as independent directors. This has led to enormous complications, including the debate whether in the case of a breach, Sebi had the powers to penalise a PSU company, which can be considered as an arm of the government. The situation could also extend to the bizarre. Take the case of steel maker SAIL, which now has about 22 members on its board. Or, the case of ONGC which has 17 members, comprising six executive directors (besides the CMD), two government nominees and eight independent directors

There is a similar farce playing out in the public sector banks. Vadodara-based Senior Citizens Service Trust has filed a public interest litigation (PIL) in the Gujarat high court over the way 37 “independent” directors have been appointed to the boards of various PSU banks, of which 33 owe their allegiance to the Congress party. The independent directors are supposed to act as custodians of the public money deposited with the banks and ensure that it is not all frittered away through dubious loans.

Another area that’s crying out for some vigilance by its directors is the mutual fund industry. The recent crisis in the mutual fund industry – especially, as a result of the spree in launching fixed maturity plans — should force Sebi to begin reviewing the role of trustees in the three-layered mutual fund industry. Many experts believe that trustees in an asset management company are somewhat like independent directors in companies and should truly live up to their role of safeguarding investor interest.

The point is this: none of the trustees was asking questions when the funds were busy launching one FMP after another. In many other companies, directors looked the other way while managements were busy massaging valuations with fictitious data. Today, they are trying to court indignant shareholders and convince cash-flush banks that they run bankable businesses. But no one’s biting yet.

Source:http://economictimes.indiatimes.com

Rel Infra told to pay Rs 125cr for Fema violation

RBI Asks Co To Pay Compounding Fees For Parking $300-M Foreign Loan Proceeds In India.

THE Reserve Bank of India has asked Anil Ambani group firm Reliance Infrastructure (erstwhile Reliance Energy) to pay just under Rs 125 crore as compounding fees for parking foreign loan proceeds worth $300 million with its mutual fund in India for 315 days and then repatriating the money abroad to a joint venture company. These actions, according to an RBI order passed on August 27 this year, violated various provisions of the Foreign Exchange Management Act (Fema).

An official spokesperson of Reliance Energy said it has not paid the compounding fees to RBI “as it was the company’s option either to pay the fees and complete the process of compounding or not to pay the fees and prove the correctness of the company’s claim on merit, if the occasion arises. The company chose the second option.” The order came after the company made an application dated April 17 this year for compounding of contravention of offences under Fema, an act of Parliament which governs foreign exchange transactions. The company also denied violation of any ECB guidelines.

In its order, the RBI said Reliance Energy raised a $360-million ECB on July 25, 2006, for investment in infrastructure projects in India. The ECB proceeds were drawn down on November 15, 2006 and temporarily parked overseas in liquid assets. On April 26, 2007, Reliance Energy repatriated the ECB proceeds worth $300 million to India while the balance remained abroad in liquid assets.

It then invested these funds in Reliance Mutual Fund Growth Option and Reliance Floating Rate Fund—Growth Option and next day (April 27), the entire money was withdrawn and invested in Reliance Fixed Horizon Fund III Annual Plan Series V. On March 5 this year, Reliance Energy repatriated $500 million (which included the ECB proceeds repatriated on April 26, 2007, and invested in capital market instruments) for investment in an overseas joint venture called Gourock Ventures based in the British Virgin Islands.

The RBI said,under the Fema guidelines issued in 2000, a borrower is required to keep ECB funds parked abroad till actual requirement in India. Further, a borrower cannot utilise the funds for any other purpose.

“The conduct of the applicant was in contravention of the ECB guidelines and the same are sought to be compounded,” the RBI order signed by chief general manager Salim Gangadharan said. These ECBs were the subject of an unrelated ET story in the edition dated December 16, 2008. That story related to a fraud in which 4 UBS employees lost their jobs.

During the personal hearing on June 16, 2008, Reliance Energy, represented by group managing director Gautam Doshi and PricewaterhouseCoopers executive director Sanjay Kapadia, admitted the contravention. The company said due to unforeseen circumstances, its Dadri power project was delayed. Therefore, the company said, the ECB proceeds of $300 million was bought to India and was parked in liquid debt mutual fund schemes.

Reliance also contended that they invested the ECB proceeds in debt mutual fund schemes to ensure immediate availability of funds for utilisation in India.
Rejecting Reliance Energy’s contention, the RBI said it took the company 315 days to realise the ECB proceeds are not required for its intended purpose and to repatriate the same for alternate use in an overseas joint venture (on March 5, 2008).
“I do not find any merit in this contention also as the applicant has not approached the RBI either for utilising the proceeds not provided for in the ECB guidelines or its repatriation abroad for investment in the capital of the JV,” the RBI official said in the order. ET has a copy of the order.
In its defence, the company said the exchange rate gain on account of remittance on March 5, 2008, would be a notional interim rate gain as such exchange rate gain is not crystallised.
But RBI does not think so. “They have also stated that in terms of accounting standard 11 (AS 11), all foreign exchange loans have to be restated and the difference between current exchange rate and the rate at which the same were remitted to India has to be shown as foreign exchange loss/gain in profit and loss accounts. However, in a scenario where the proceeds of the ECB are parked overseas, the exchange rate gains or losses are neutralised as the gains or losses restating of the liability side are offset with corresponding exchange losses or gains in the asset.

In this case, the exchange gain had indeed been realised and the additional exchange gain had accrued to the company through an unlawful act under Fema,” the order said.

It said as the company has made additional income of 124 crore, it is liable to pay a fine of Rs 124.68 crore.

On August this year, the company submitted another fresh application for compounding and requested for withdrawal of the present application dated April 17, 2008, to include contravention committed in respect of an another transaction of ECB worth $150 million. But the RBI said the company will have to make separate application for every transaction and two transactions are different and independent and cannot be clubbed together.

Source:http://economictimes.indiatimes.com

BMC panel demands BEST electricity services in suburban Mumbai

Cutting across party lines Standing Committee
members of the civic body today demanded to replace Reliance Energy
with the BEST Undertaking to supply power in suburban Mumbai.
BEST Undertaking is a part of BMC and has been supplying electricity
in the city limits and has all the expertise, know-how and manpower
to supply power at affordable rates and also to provide efficient
services, Congress corporator Vinod Shelar said.
"There are also a lot of complaints against Reliance sending `exorbitant'
electricity bills to households and commercial setups," Shelar said
at the Standing Committee meeting.
The Anil Dhirubhai Ambani owned Reliance Energy, which had taken
over the state-controlled Bombay Suburban Electric Supply Ltd (BSES),
has been supplying power in the suburban Mumbai for the past couple of years.
"It is a welcome decision that people are demanding for a
change as they are fed up with them (Reliance Energy). It is good
that the corporation is doing something," said Congress corporator
Sameer Desai.
Supporting opposition members, Standing Committee Chairman
and Sena leader Ravindra Waikar, said, "We would provide what ever
help we can in getting the BEST services".
"If any problem arises with BEST services, we can always go and
discuss with the officials. With Reliance it is difficult as they
do not pay heed to the problems," Desai said.

source:www.ptinews.com

What is common between Ramalinga Raju and Anil Ambani? : Ill intention

• Satyam’s minority investors are saved but no one came forward for Reliance Power shareholders

• Are government and regulatory authorities willing to introspect their role in Reliance Power case in the wake of Satyam episode?

• Can we have adequate rules and regulations to safeguard interest of minority shareholders in a company?

At last we can see a ray of light at the end of the tunnel for minority investors as the government, regulators and analysts are seem working in the interest of the minority shareholders of Satyam Computers Ltd. The institutional investors raised their concern against the Satyam promoter’s ill intentions which led tem to call off the deal.

Satyam yesterday said it planned to enter the construction industry by buying all of privately held Maytas Properties shares for USD 1.3 bln and 51 percent of builder Maytas Infra for USD 300 mln.

Satyam founder and Chairman B. Ramalinga Raju and other insiders hold 36 percent in Maytas Infra and 35 percent in Maytas Properties. The two are builders that work on infrastructure projects including highways, ports and water treatment systems. Satyam helps develop software for other businesses.

As Satyam announced the move after market hours here in India, the investors in US dumped the ADRs of the company which fell by whooping 59%.

Institutional investors believe that the deal is against the interest of the minority shareholders. They are of the view that the huge investment in Mytas Properties and Mytas Infrastructure could exhaust it’s nearly USD 1.2 bln cash reserves and bury it under the huge debt burden.

The government and regulators have taken the serious stance on the issue and initiated investigation. The department of Company Law Board is examining the case for the role of the board of directors in the decision making and following corporate governance guidelines.

It’s good to see that government and regulators are acting swiftly. However, a year back in the similar situation when the minority investors of Reliance Infrastructure were robbed by the Anil Ambani the same government and regulators have royally ignored the complaints of several investors. Projects worth thousands of crores of Reliance Infrastructure were transferred to the Reliance Power where Anil Ambani holds higher stake of 51%.

Further Anil Amabni’s holding company AAA Projects had acquired 105 crore shares of Reliance Power Ltd at Rs. 10 and the same shares were issued to investors through public issue at Rs. 430 to retail investors and Rs. 450 to institutional investors. The current share price of Reliance power is Rs. 115.95 and the investors have lost substantial investment. Even if one considers the bonus issue of the company the cost of a share comes to about Rs. 269.

Transferring of projects of Reliance Infrastructure to Reliance Power was against the interest of the minority shareholders of the former company, however, the government, institutional representative on the board of the company or any regulatory agency failed to take action against the ill moves of the company promoters. The move was clearly not in the spirit of good corporate governance. If government would have acted in time huge losses to the lakhs of investors would have been averted.

Reliance Power entered the primary market last year with the largest IPO in terms of money being raised, at Rs 11,700 crore, drew a phenomenal response from both institutional and retail investors by taking the subscription count to 73 times the 22.8 crore shares on offer. However, due to weak fundamentals of the company and highly overvalued issue the shares failed to cheer investors after the listing. The share price fell sharply after listing and most of the investors were found them selves trapped, resulting in huge losses to them.

The irregularities in the issue were brought to the notice of SEBI, RBI, the Company Law Board, Ministry of Finance and Prime Minister’s Office. Despite pile of complaints by several agile investors and analysts the government, SEBI, LIC (representative on the board of the company), the stock exchanges and the Company Law Board were silent on the subject. If these agencies would have taken timely steps against the promoters of Reliance Power and its promoters the losses to the investors would have averted.

The track record of the ADAG group is suspicious as other group companies such as Reliance Natural Resources Ltd and Reliance Infrastructure Ltd is likely to be nailed for serious violation of foreign exchange rules and regulations.

Indian government and regulatory authority should wake up and make necessary changes in laws governing the management of the company so that the interest of the minority shareholders is safeguarded and promoters such as Anil Ambani and Ramalinga Raju should be penalized for indirectly siphoning of money of the company to personal ventures

Satyam’s deal fiasco puts spotlight on governance

What were directors doing in approving Satyam’s $1.6 billion deal? Some $1 bn in market value destroyed

An independent director of Satyam Computer Services Ltd continued to defend the company’s decision to acquire two companies controlled by Satyam’s promoters for $1.6 billion (Rs7,568 crore) even after the computer services firm scrapped the deal in the face of intense and angry investor protest.

“We believed in it (the value-creating opportunity in the buyouts), not otherwise at all, ” said independent director V.S. Raju, in a phone interview with Mint.

The decision to call off the deal didn’t help Satyam’s cause, with the stock closing almost 30% down and brokerages and research firms releasing reports to their clients that termed Satyam’s act a “breach of trust” (ICICI Securities Ltd), and “daylight robbery” (Dolat Capital Market Pvt. Ltd). Deal or no deal, the “damage is done” said CLSA Asia Pacific Markets in its report.

Also See Whither independent directors?

“Our only regret is the reaction and we didn’t anticipate it (opposition to the deal),” added V.S. Raju.

Facing flak: B.Ramalinga Raju. Madhu Kapparath / Mint

Still, within 10 hours on Tuesday evening and early Wednesday morning, the board of the software firm first decided to spend $1.6 billion on acquisitions that would enrich the family of chairman B. Ramalinga Raju, and then decided to walk away from the deal.

Three independent directors on Satyam’s board—Raju, a former director of Indian Institute of Technology, Delhi; retired bureaucrat T. R. Prasad; and M. Rammohan Rao, dean of Indian School of Business—attended the first meeting. Two others—Vinod Dham, who designed the Pentium computer processor, and Mangalam Srinivasan, an academic with stints in University of California at Berkeley, and Harvard—and Krishna G. Palepu, a professor of business administration at Harvard Business School, who serves the company’s board as a non-executive director, phoned in.

Also See Fall from grace

Satyam’s chief operating officer Ram Mynampati and chairman Raju and his brother Rama Raju, who is managing director of Satyam, also sit on the board and attended the meeting.

All the directors phoned into the second meeting to pull the plug on the transactions.

Prasad declined comment. Rao could not be reached for comment on Wednesday. The directors based in the US also could not be reached by phone. Palepu is travelling and is currently in West Asia on business, his office said.

Still, analysts say the directors have some explaining to do.

“Despite Satyam’s reversal of its decision to buy out common promoter-owned realty and construction businesses, questions will linger on, perhaps for a long time,” wrote CLSA analysts Bhavtosh Vajpayee and Nimish Joshi in their report. “Why did the board not oppose the move? Who voted for and against the resolution? Was the board truly independent?”

source: www.livemint.com

ED probes India connection to UBS fraud

In February this year, an online news service had flashed a report saying, ’UBS suspends four private bankers for unauthorised

activities’. The news, soon forgotten, seemed to be yet another case of cowboy bankers pushing the envelope in the secretive world of Swiss banking. But months later, the story drew the attention of authorities in New Delhi because of its strange and multiple India connections.

The accounts in the London branch of UBS belonged to two Indian companies — Reliance Natural Resources (RNRL) and Reliance Energy (REL), part of the ADAG group. Overdrafts had been fraudulently drawn against these overseas accounts in order to route funds througesourceh a number of Indian diamond traders. The money was suspected to have been used to buy participatory notes (PNs) — derivative instruments with Indian stocks as underlying. Among the alleged perpetrators of the fraud are two UBS officials of Indian origin, who were later sacked by the bank. In all, four officials lost their jobs.

The plot, which could have been taken straight out of the pages of a thriller, is now being investigated by the Directorate of Enforcement (ED), which is under the administrative control of the finance ministry. In an eight-page letter dated August 11, 2008, the directorate has requested the Swiss authorities for relevant documents. ET has a copy of the letter.

ED is probing the matter because the transactions may amount to violation of Indian foreign exchange and anti-money laundering laws. The money, which was lying in the RNRL and REL accounts, were funds raised by these firms through foreign loans and convertible securities. Such funds have strict end-use conditions and cannot be used to play the market. While ED, in its letter, has made no allegation against the two Indian companies, the directorate is carrying out a detailed probe on how the accounts were misused.

The exact status of the investigation, post-the August 11 letter, could not be ascertained. ED officials did not respond to phone calls and an e-mail. There is no evidence, at least in the public domain, which indicates that ADAG entities were involved in, or were aware of any misuse of their UBS accounts.

A company spokesperson told ET: ”The ECB/FCCB proceeds of Reliance Energy and Reliance Natural Resources have been deployed in bank deposits, money market instruments etc, in accordance with RBI rules and regulations, and have been repatriated to India way back in April/May 2007.

No borrowings have been made by us against the said proceeds at any time. We are in full compliance of FEMA and all applicable rules and regulations, and have duly filed the prescribed reports, chartered accountants’ certificates etc, with RBI from time to time. We have not received any enquiries and/or communication from any government agency regarding this matter, and are not aware of the same.”

The spokesperson further said all relevant papers have been filed with RBI on time, and they have not received any communication either from UBS

or from RBI relating to misuse of funds.

The spokesperson also said the group has not found any irregularity with its accounts maintained at UBS. ”There is nothing to indicate from the account statements we received that funds were misused. Quarterly statements were filed with RBI in keeping with regulatory requirements. If any unauthorised overdraft has been issued, it is an internal problem for UBS,” the spokesperson said.

According to the ED letter, between January and April 2007, these accounts were used without RBI’s approval by obtaining overdrafts against cash collateral security provided through funds held in these accounts. Both companies had parked their external commercial borrowings (ECB) and foreign currency convertible bonds (FCCB) worth $660 million with UBS.

Opening an overdraft would not require any funds to be physically transferred from these accounts. The ED letter claims that substantial amounts were transferred, using the overdraft, to the accounts of 8 to 10 diamond dealers based in India and Belgium. Indeed, in a communication to UBS, one of the diamond traders has claimed that close to $104 million was routed through his account to Pluri Emerging Companies PCC Cell E Growth Fund, which is controlled by UBS. ED, in its letter to the Swiss authorities, had referred to this communication.

The ED, in its letter, has said: “The said diamond dealers claim to have no concern whatsoever with these unauthorised transactions routed through their accounts. It is suspected that funds into the Indian stock market have been moved through the fund manager M/s Pluri Emerging Companies PCC Cell Cell E Growth Fund, by way of subscription to participatory notes issued by various FIIs...” The letter also said that the Mauritius-based Pluri is controlled by UBS.

Two persons in the know offered different estimates of the amount which finally moved through these accounts into PNs. One estimated the amount at $60 million, while another said it could be $30 million; both figures differ from the $104 million mentioned by the diamond merchant. ET was not able to reconcile these varying numbers.
UBS has informed the Financial Services Authority (FSA) of UK and Swiss Federal Banking Commission (SFBC) about the unauthorised transactions from their London branch. When contacted by ET, Mark Panday, a UBS spokesman based in Hong Kong, said he would not be able to comment.

The ED has asked the Swiss authorities for details of overdrafts, loans, credit facilities permitted or sanctioned to RNRL and REL or any other accommodation allowed. These include the opening of any other account in the names of RNRL and REL by UBS Switzerland/London, along with copies of statements of such accounts. It is not known if the Swiss regulator has replied to the ED letter. A source said no reply had come.

The regulators concerned did not offer any substantive comment on the matter. The SFBC spokesperson declined to comment, while the official from the FSA press office said, “As a matter of policy, the FSA does not comment on whether or not we are carrying out inquiries. In relation to working with other authorities — the FSA, in its role as the UK regulator, works with a range of organisations around the world to ensure that it meets its objective of reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.”


Source: http://economictimes.indiatimes.com

Reliance Comm revenue reporting comes under Central vigilance scanner

The Central Vigilance Commission has asked the Department of Telecom to investigate alleged irregular revenue reporting by Reliance Communications.

The Cellular Operators Association of India had earlier pointed out to the Government that Reliance Communications was showing its income from non-voice services under the Internet licence even though the facility was being provided through the cellular network.

The CVC has asked the DoT to submit a report within 12 weeks. Its action is based on a letter written by a Member of Parliament alleging irregularities in the way the DoT had handled the issue. “In exercise of powers conferred on the CVC- the Commission hereby directs that an investigation be conducted on the charges/irregularities pointed out in the enclosed complaint (the letter written by the MP). The report of this investigation should be submitted to the Commission within 12 weeks of receipt of this order,” said the letter from the CVC to DoT.

Senior DoT officials said that the CVC order was procedural in nature since an MP had lodged a complaint and an investigation was already under way in this regard.

While operators do not pay any revenue share for income earned from Internet services, they have to pay between 6 and 10 per cent of their annual revenue to the Government from mobile services. In addition, mobile firms also have to pay up to 4 per cent of the income as spectrum charges.

COAI had pointed out that an operator could make huge profits by showing income from data services under the ISP licence. According to the estimates made by the MP, who filed a complaint with the CVC, Reliance may have benefited up to Rs 352 crore by separating non-voice revenues. The same MP had earlier shot off several letters against Reliance-Anil Dhirubhai Ambani’s various businesses including Reliance Power and Reliance Energy.

The COAI’s observation was in turn based on a report by financial services firm UBS, which said that Reliance Communications reported revenues of Rs 3,160 crore to the telecom regulator in June 2008 but showed revenues of Rs 4,118 crore in its financial statements. “The main reason for the discrepancy between RCom reported revenues and the TRAI reported revenue is that RCom reports all its non-voice revenues through one of its subsidiary that has an ISP status,” said the UBS report.

In an earlier response to similar query, Reliance Communications had stated that its accounts have been duly audited and certified by internationally recognised auditors and are in full compliance with the prescribed reporting framework. The company had stated that it has a substantial customer base of over one million Internet services subscribers under its ISP licence.

Additionally, the company has a subscriber base of over 3 million in rural areas under the USO Scheme of the government whose revenues have certain exemption under the policy guidelines.

Source: http://www.thehindubusinessline.com

Corporate Governance

Reliance-ADAG group claims to have highest standards on corporate governance. If I am able to recall properly during the fighting with his elder brother Anil Ambani alleged that his elder brother doesn’t adhere to high standard of corporate governance. Now it seems to be that it was only a tactic of Anil Ambani to extract money from Mukesh Ambani. Anil Ambani is back on his own tract of cheating government and public to fill his coffers.Now its up to us if we can trust any of the claims made by Anil Ambani?

BSES twisted facts to make case for tariff hike:DERC

In an affidavit submitted before the appellate tri-bunal for electricity. Delhi's power regulator has accused Reliance-backed discoms, BSES Yamunaand Rajdhani, of "misrepresentating facts" for making a case to raise tariff.

The affidavit was filed on tuesday by Delhi Electricity Regulatory Commission after its tariff order had been challenged by BSES in the appel-late tribunal . The hearing is close in a day.

DERC's affidavit said the discoms' pettition should be rejected as documents submitted by them to legitimize a deal with sister firm Reliance Energy Ltd were "not genuine".

The tribunal's judgement on the affidavit is crucial for consumers. If the affidavit is accepted in the hearing, the tribunal would have also accepted DERC's decision to disallow a Rs. 950 Crore transaction by BSES to purchase capital goods for REL, effectively squashing the discom's a major point of contention against the DERC tariff order. If that happens, officials said, the tribunal will not allow a major tariff hike even if BSES's other points of contentions are accepted.

BSES said the matter would be decided in court, a BSES official said, " We have right fully asked to be compensated for some genuine expenses and we will fight it out in court. The matter is up for hearing."

A source said DERC had disallowed the capital expenditure as it felt the transaction amounted to ripping off Delhi consumers. "BSES's petiotion against DERC's disallowance of this expenditure is the biggest point in their anti-DERC pettion which could have led to a tariff hike amounting to
Rs 2 / Unit,"
source: http://www.hindustantimes.com

BSES filed fake papers in court, says regulator

The capital’s biggest power distributor, Reliance Anil Dhirubhai Ambani Group’s BSES, has been accused of submitting fake documents to a court as evidence to bail itself out of an alleged scam involving Rs 950 crore.

In an affidavit submitted to the Appellate Tribunal for Electricity on Tuesday, power regulator Delhi Electricity Regulatory Commission (DERC) said the fresh documentary evidence submitted by BSES — such as quotations from various companies and proof of the additional work done as part of the deal involving the purchase of transformers — was doctored and fake.

If the charges are established, BSES will face punishment for committing perjury.

BSES said the DERC’s affidavit was “malicious”. “It is absurd,” said a BSES official. “The tribunal will decide on the matter.”

The matter goes back to 2004 when the discom had bought transformers from Reliance Energy Limited (REL) and given a bill of Rs 950 crore to the government under capital expenditure.

When the DERC ran a customary scan through the deal, it found that BSES had inflated the bill by about 68 per cent. Also, BSES had bought the equipment from its sister company, REL, allegedly without any competitive bidding.

The matter reached the appellate tribunal after BSES said it would pass on the burden to the consumer, by increasing the cost of power, if the bill was not settled.

The Hindustan Times broke the story earlier this year.

Among the fresh evidence, which the DERC says is fake, are quotation letters from three companies (including REL) to show that the work was awarded after a fair and competitive bidding. Letters showing that additional work was awarded to REL have also been submitted to justify the increase of 68 per cent over the actual cost of transformers.

The 14-page DERC affidavit, however, goes in detail to explain that the documents are “not genuine” and full of “insertions” which establish that “they are not genuine”.

“There is a mismatch between the original tender papers and the papers submitted now,” said a power department official.

source: http://www.hindustantimes.com