BANGALORE: The alleged wilful flouting of regulations by executives of Mysore Sales International Limited (MSIL) has caused a loss of Rs 35.05 crore to the state-owned firm in a lease finance deal with a Chennai-based private company, which has vanished after defaulting on payments.The committee on Public Undertakings of the Karnataka Legislature, which has unearthed the fraud, has made scathing remarks against these officials, who, it says, “failed to exhibit a sense of business acumen, trade experience and managerial effectiveness” while signing the agreement with the Chennai company.According to information available with the Express, MSIL, one of the few profit-making state-owned enterprises and a marketing arm of the state government, had entered into an agreement with Klen and Marshall Manufacturers and Exporters Limited to install 40 capacitor banks (power equipment) for Andhra Pradesh State Electricity Board at a cost of Rs 7.25 crore in 1998. MSIL had paid an advance to the private company under its lease finance business without verifying details about the supplier or whether the capacitor banks were actually installed at the sites or not. MSIL authorities also failed to get details of the promoters or directors of the company.The Chennai company, which was supposed to clear all dues by 2004, not only started defaulting on payments to MSIL, but made another proposal to install 46 capacitor banks to APSEB by managing to raise another loan of Rs 10 crore. To the shock of MSIL authorities, the company completely stopped remitting instalments from 2003. However, no tangible efforts were made by MSIL to recover the money.According to the terms and conditions of the agreement, MSIL would become the owner of the equipment in case the Chennai firm defaulted on payments.When MSIL wrote to APSEB to ascertain the status of the equipment, APSEB in its reply said that two other financial institutions, IDBI and Canara Bank, too had made claims over the equipment. All along, MSIL had been kept in the dark about this. MSIL approached the arbitrator for enforcement of rights and liabilities and only in 2009, got an exparte order against Klen and Marshal to the tune of Rs 35.05 crore, which included penalty and interest.However, MSIL could not enforce the arbitration award as the company had shut shop and the whereabouts of its directors and promoters was unknown.MSIL’s efforts to trace the directors of the company by hiring a private detective agency hit a dead end.Taking the case seriously, the committee on Public Undertakings chaired by senior BJP member M K Pattanashetty recommended prosecution of all the officials responsible for criminal negligence, which led to revenue loss to the company.
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