The board noted that the accumulated losses for the company as on November 30, 1998 stood at Rs 127.1 crore even as its paid-up capital was Rs 20.4 crore and free reserves were Rs 79.88 crore.

PPL was declared sick under section 3 (1) (0) of the Sick Companies Industrial Act after the bench brushed aside doubts raised by banks and other financial institutions on certain provisions of the company's balance sheet. Grave questions were raised about the provisions relating to Rs 43.89 crore of bad debts and booking of Rs 16.55 crore due to expired and soiled goods.

However, the board noted that the banks and other FIs could not establish that any of these entries should be excluded from the balance sheet in order to arrive at the networth of the company.

The Industrial Development Bank of India, Punjab NationalBank and UTI Bank which have recalled their loans to PPL, submitted to the board that the balance sheet of the company has been totally fabricated.

They said that all the expenditure during the last financial year appears to have been inflated.

The company's operations had been profitable till 1996-97 but it incurred a huge net loss of Rs 130.86 crore during the period ended November 30, 1998 mainly on account of very high interest expenses of Rs 46.62 crore (Rs 13.2 crore), provision for bad debts to the extent of Rs 43.9 crore (nil) and loss of Rs 16.65 crore (nil) during the period due to expired and soiled goods.

``From the nature of exceptional loss or provision shown by the company in one account period, it appeared an attempt by the company to avoid suits filed or likely to be filed against them,'' the reports of IDBI and PNB submitted to the board pointed out.

During the 18-month period upto November 30, the company had earned Rs 84 crore profits but had written off half of it without givingany explanation, the report alleged.

The company, however, refuted the allegations by giving details of interest sources and deployment of funds, details of the losses on sale of fixed assets, list of employment of key employees, list of prior expenses and certificate of the drug controller on soiled stocks.

PPL said Rs 16 crore worth of stocks were destroyed in the presence of drug inspection because they were beyond human consumption.

Moreover, the company had purchased high value raw-materials for their Bhiwadi expansion project but because of the entry of MNCs, they had a tough time competing with them. Due to this, all their plans went awry and the working capital cycle broke down.

As a result, they tried to push their products on credit. However, goods worth Rs 32 crore were taken back and since they were time-barred, they had to be written off and were destroyed.

On the other hand, the company managing director Anil Bhargava alleged that the banks were being informed about the developmentsbut no response has been received from them for the last two years.

The board accepted the explanations of the company and declared it sick after reviewing the form `a' of the company detailing its networth.