Summarily throwing KDL out of the purview of the Sick Industrial Companies (special provisions) Act, 1985, AAFIR said, ``We have no doubt that if the monies released by the financiers for fictious hire purchase and lease transactions and bill discounting had actually been brought into and utilised for the genuine purpose of KDL, there would have been no sickness at all.''

The list of misdeeds pointed out by AAFIR is indeed long.

The appellate authority concluded that ``KDL has continuously practiced deception, made fraudulent transactions, prepared falsified accounts, created bogus debtors to square up the lease and hire purchase finances received by dummy companies without creating any assets, made payments to finance companies against lease and hirepurchase finances provided to dummy companies, charged depreciation on non-existent assets, wrote-off or made adjustments of huge sums of money, thereby depleting the assets shown as realisable in the notes on accounts without inducting corresponding cash from dummy companies...And thereby presented a manipulated picture of sickness in its reference to BIFR.''

Further, the AAFIR observed that there was no doubt whatsoever that if the lease and hire purchase finances released by the lease finance companies to the dummy companies of KDL had actually been brought into KDL by creating genuine assets or even for operations, KDL would have been a highly profit making company.

Citing an instance of ``extraordinary deception, fraud and siphoning away of funds from KDL,'' AAFIR noted that the false assets created in KDL's accounts for squaring up the lease and hire purchase finances released by the lease finance companies to dummy companies have been reversed or written off without substituting these byalternative assets in the form of cash induction or recoverable inter-corporate advances, whereas a liability has been created by way of loan from the lease and hire purchase financiers.

The company had made the ``so-called accommodation bills'' to the tune of Rs 100 crore - Rs 41 crore as leased assets adjustments Rs 52.32 crore as write-offs of sundry debtors and bill discounting debtors and Rs 6.78 crore as hire purchase assets adjustment in its financial year 1997-98.

In August 1998, the Board for Industrial and Financial Reconstruction (BIFR) had accepted KDL as a sick company after accepting three items of losses amounting to Rs 46.34 crore (operational losses of 1997-98, unprovided interest, write-off of unrecoverable debts of more than three years old).

``BIFR should have made an analysis of the financial data before accepting the figures of losses on the three items at their face value,'' AAFIR commented.

On the operational losses of Rs 21.22 crore submitted by KDL, the appellate authorityconcluded that there was a clear indication of either suppression of income from sales or inflation in raw materials cost consumed or combination of both.

Regarding the unprovided interest of Rs 8.78 crore, the AAFIR noted that if KDL can advance money to the extent of about Rs 47 crore to its sister corporate bodies, the need for taking inter-corporate deposits of Rs 15 crore from other parties is not acceptable in any case the interest receivable from sister companies on the aforesaid deposits will be much more than the interest that may be payable by KDL to inter-corporate depositors.

The AAFIR observed that the company played ``a deliberate fraud on the shareholders'' when it wrote off sundry debtors to the extent of Rs 16.33 crore before taking any legal steps to recover these.

It also noted that KDL had given an altogether different explanation to SBI: ``These are the consequential effect of the sales inflation done in the previous years keeping in view the proposed public issue of 1995-96 whichare not genuine in nature and hence the management to reflect a true and fair picture of the company's affairs has decided to write-off the fictitious debtors.''

On the plea of the company for not taking a final view about the accounts of KDL at the appellate stage, the AAFIR said it can take any enquiry as it deems fit and in fact, dismissed the permission given by BIFR for the special investigative audit.

The AAFIR concluded, ``A person who practices deception and approaches a court or tribunal with unclean hands deserved to be thrown out by the court or tribunal. KDL approached BIFR with unclean hands.''