Hearing the MIL application, BIFR noted that creditors had approached it alleging manipulation by the company to avoid repayment of dues. It withheld its verdict declaring the company sick, and asked IDBI to inquire whether the provisions made in the company's balance sheet were in line with accounting standards.

Financial Institutions (FIs) and banks including IFCI, Industrial Investment Bank of India (IIBI) and Syndicate Bank had alleged that the company had made excessive provisions to show its networth negative and be declared a sick company.

IDBI has been asked to look into the balance sheet of the company with special reference to investments, loans and advances to sister/group companies for which it can appoint a reputed firmof chartered accountants as special investigative auditors.

FIs alleged that MIL's networth of Rs 272 crore up to December, 1998, was wiped out by losses amounting to Rs 258 crore besides other provisions, which were unjustifiable. In addition to this, the management of MIL had declared Rs 47.5 crore of loans, to sister/associate companies as doubtful, to jack up the losses, they alleged.

FIs in their submission to the BIFR bench said that the auditors in their report for 1996-97 had certified that the company was having adequate internal control procedures but in their report for 1997-98 they deviated stating that there were no adequate control procedures. "This fact was sufficient to initiate a special investigative audit," FIs informed BIFR. Syndicate Bank, alleged the company had submitted a proposal to the bank envisaging sale of some property mortgaged to it and repay the bank's dues but had not done so.

The bank stated that it had filed a criminal complaint against the company, its chairman andmanaging director. However, J K Singh, chairman of MIL said that the company was not able to repay the dues as it suffered losses on account of collapse of Russian and East Asian economies which were its key markets.

He further said that its Russian joint venture had incurred huge unrealisable debt due to bad economic situation of the country, forcing its foreign partner to recommend liquidation.

FIs also alleged that MIL's major investments were in Mideast Integrated Steels Ltd (MISL), a group company and had accounted for losses on these investments by way of difference in the cost or market price of these investments to the extent of Rs 58.93 crore. "The company had also given loans to group companies, which were invested in the shares of MISL," they alleged, adding "an investigative audit by a firm of chartered accountants needed to be carried out before the company was declared sick."

Refuting FIs allegations he said that MIL was the promoting company of MISL and had raised money from public andwith the knowledge of the FIs.