Source: K V Ramana / DNA
Wednesday, March 10, 2010 2:22 IST
Hyderabad: Even as Satyam Computer Services struggles
to overcome the accounting scam,
another Hyderabad-based information technology
company has landed in a controversy over a supply contract.
IT and telecom services player Prithvi Information Solutions
is facing charges of criminal breach of trust and cheating from its Japanese supplier Sojitz.
The case pertains to a Rs 226 crore tender awarded by BSNL to Prithvi for supply of equipment. In turn, Prithvi roped in Sojitz for supply of the equipment and the two opened an escrow account in Punjab National Bank for receiving payments from BSNL against the supply value.
However, Sojitz has now taken Prithvi to court alleging it unilaterally diverted the money from BSNL to its own account instead of the escrow account.
The case is currently at the hearings stage in a local court in Hyderabad.
Prithvi managing director Satish Kumar confirmed that BSNL had indeed paid Rs 196 crore out of the total consideration and the money was sent into Prithvi’s account and not the escrow account. He, however, denied any wrongdoing.
“Sojitz had given us faulty documents while shipping the equipment. The faulty documents have landed us in the enquiry by the Directorate of Revenue Intelligence (DRI). The documents have also caused us a loss to the tune of Rs 97 crore. So, we had to hold back the money from BSNL,” Kumar said.
While Sojitz argues that there was no scope for ignoring the escrow account, Kumar said, “Owing to the breach of contract by Sojitz initially by not providing correct documents, we also get certain rights to protect our interests. We have used those rights to hold back the money from BSNL without depositing them in the escrow account.”
According to Kumar, DRI had seized the equipment supplied by Sojitz due to faulty documentation including improper way bills. “Even now, about 40% of the equipment supplied to BSNL is with DRI. BSNL, too, is yet to pay us about Rs 30 crore since the equipment is under seizure,” he said.
Prithvi claims that the defects in documentation were pointed out to Sojitz much before the equipment was shipped and delivered to BSNL. Oddly, however, Prithvi allowed the equipment to land on Indian shores despite noticing the discrepancy.
Sojitz was the first to seek a legal remedy for Prithvi’s action. It has approached the London Court of International Arbitration apart from taking it to a local court in Hyderabad.
“We are not keen on litigating it. We still hope to settle it through arbitration. But, we never cheated Sojitz and it was the non-performance of contract by Sojitz, which had created problems for us,” Kumar said.
The company has so far changed auditors thrice. “We had E&Y for 2007-08. PWC was brought in for 2008-09 since they are good at auditing IT companies. But, PWC was caught in other issues and we had to bring in Walker Chandiok. This firm wanted more time to audit the books and we did not have that much time. So, they resigned. There is no point in talking about the reasons. There is no problem with our accounts,” Kumar said.
Earlier, Deutsche Bank too had filed a case against Prithvi over a Rs 30 crore claim slapped by it on the bank through factoring of certain receivables. The bank proceeded against Prithvi after finding the receivables unrecoverable. The case is now in the Debt Recovery Tribunal, Bangalore.
“The bank failed in recovering the money. We had given the receivables to the bank for a discount and it is the bank’s responsibility to recover it,” Kumar said.
Prithvi had raised about Rs 135 crore through an IPO in 2005 for setting up an overseas development centre (ODC), among other things. However, the company is set to drop the ODC plan to prepare a plan for moving into an SEZ to offset the impact of sunset on the STPI Scheme.
Also, in 2007, the company had raised $50 million through an FCCB issue from Lehman to pursue acquisitions. Though it has spent about $14 million on acquisitions so far, the remaining funds are lying with the company.
“Now there is a liquidator taking care of Lehman affairs. We are talking to them to see if we can change the objectives of the funds raised and use the funds for other purposes also,” Kumar said.
The company is again working on a plan to raise funds through a rights issue. It has sought approval for an enabling resolution to mop up about Rs 250 crore.
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