The government has widened the scope of its investigations into Reliance Petroleum Ltd (RPL) to include at least two other group companies -- Reliance Industries Ltd (RIL) and Reliance Industrial Infrastructure Ltd (RIIL) -- and three other companies Reliance Enterprises Ltd, Reliance Filaments Ltd and Lavanya Holdings & Trading Pvt Ltd.
A probe has been ordered into the books of these companies on a top priority basis under Section 209A of the Companies Act 1956 to verify the end-use of RPL funds. This section of the Companies Act relates to a company's keeping proper books of accounts with respect to all money received and spent. The department of company affairs is to verify whether Reliance Filaments and Reliance Enterprises used Reliance Petroleum funds to rig the prices of shares of Reliance Industries and other group companies. The investigation will also ascertain whether RIL, RIIL and Lavanaya Holdings & Trading had the technical know-how and professional expertise to executive the RPL refinery project.
The ministry of law, justice and company affairs directed the department of company affairs (western region) on September 4 to carry out a "full-fledged" inspection of the books of accounts and other records of RPL and a limited inspection of the five companies on a "top priority" basis.
The central government's approval was conveyed to the regional director (western region), department of company affairs, by SS Luthra, joint director (technical) of the department of company affairs, ministry of law, justice and company affairs.
Reliance Enterprises is part of the Reliance Industries Ltd (RIL) stable, though the group does not consider it a group company (only Reliance Industries, Reliance Pteroleum, RIIL and RCL are so regarded).
Little is known about the profiles of Reliance Filaments Ltd and Lavanya Holdings & Trading.
A Reliance spokesperson, however, denied any knowledge of the probe. He said: "Reliance Industries Ltd and Reliance group companies have not received any intimation from the department of company affairs regarding investigations and/or inspection of company books under the Companies Act." He also said that these allegations are "baseless, mischievious, factually incorrect and motivated".
He added: "Reliance reaffirms that it has complied with all applicable laws, rules and regulations. Further, Reliance is fully committed to cooperate with all appropriate authorities and provide all information as required by them."
The spokesperson blamed corporate rivalry for a "campaign of disinformation". According to him, the baseless allegations have been levelled against Reliance by "failed and unsuccessful corporate rivals".
Asked about Reliance Filaments Ltd and Lavanya Holdings & Trading, the Reliance spokesperson said they are not group companies while RIIL and Reliance Enterprises belong to the Reliance stable in some form or another. RIL holds around 46 per cent of RIIL. A listed company, RIIL's main business is construction and project-related activity. The profit for the year ended March 2001 was Rs 20.02 crore.
RIL has an investment of Rs 86 crore in Reliance Enterprises' 6 per cent cumulative redeemable preference shares of Rs 100 each which is redeemable at par at any time after October 1, 2002 but not later than October 1, 2003. Reliance Enterprises holds 3.15 crore of RIL shares, accounting for close to 3 per cent of RIL's equity.
The purpose of the "limited inspection" in three companies -- RIL, Lavanya Holdings & Tradings Pvt Ltd and RIIL -- as outlined in the government directive, a copy of which Business Standard possesses, is to verify whether these companies had the technical know-how and professional expertise to execute the refinery project of RPL and also to ascertain the end-use of the funds provided by RPL.
The central government's sanction to inspect the books of Reliance Filaments and Reliance Enterprises is "to verify whether the funds deployed by RPL in these two companies were utilised by different group companies for the benefit of RIL and other group companies for rigging their share prices".
"With reference to your letter no RD/STA/Compt/RPL/260/ 2001/4680, dated 11 July, 2001, I am directed to convey approval of the central government to carry out a full-fledged inspection under section 209(A) of the Companies Act 1956 of books of accounts and other records of Reliance Petroleum on top priority basis," the letter said.
The DCA inspections have been ordered on the basis of various complaints made by Rashid Alvi, a BSP member of Parliament. Alvi had alleged that RPL had routed part of the Rs 700 crore raised from the market through an IPO to group firms.
Alvi had alleged that the company did not make full disclosure to the shareholders in its annual report circulated for the financial year 1994-95. Not only had he alleged that RPL did not file copies of its balance sheet for 1994-95 with the Registrar of Companies, but he also said that RPL had not revealed to shareholders that it held Reliance Capital shares.
The charges made by Alvi
Bahujan Samaj Party member of Parliament Raashid Alvi had alleged that Reliance Petroleum Ltd diverted money out of its public issue proceeds to shore up the share price of Reliance Industries Ltd in order to make a placement of RIL
