Simplified Laws Guide to Taxation and Legal Concern The country’s largest lender State Bank of India is exploring ways to declare the company, Chairman and CEO of the company a Wilful defaulter and is presently making forensic audit of the documents
What is Forensic Audit? It is a known fact that every company has to get its books audited by a qualified Chartered Accountant. What necessitates the forensic audit of audited books of accounts?
The term ‘Forensic’ means ‘suitable for use in a court of law’. The objective of Forensic Auditing is to relate the findings of audit by gathering legally tenable evidence and to identify the fraud (if any) and the persons responsible for it. So, it is an examination and reporting of company accounts for use as evidence in courts. In other words, the aim of forensic audit is to find out whether or not true value has been reflected in the financial statements and whether any fraud has taken place.
SBI is the lead banker who has funded Kingfisher Airlines (KFA). SBI along with a consortium of 17 banks have lent over Rs.7500 Crores to Kingfisher airlines. They have now hired Ernest and Young to conduct a forensic audit on KFA to determine if funds were diverted from the airline to other group companies. If the audit report throws up a conclusive proof of fund diversion or other such activities, the banks could proceed with declaring KFA a willful defaulter.
About Collateral Security
If you have to borrow Rs.1 Crore, banker will ask 1000 questions and ask for immovable property worth Rs.1 Crore to Rs.1.33 Crores as collateral security. After giving collateral security, you may still have to visit the banker another 20 times. I know some entrepreneurs become so desperate and frustrated at not getting the loan sanctioned that they finally rely on God! They make a vow to Lord Venkateshwara or Lord Manjunatheshwara that once the loan is sanctioned they will visit the temple and tonsure their head (clean head shave) and also give 1% of the loan amount as offering!
Can you guess the quantum of collateral given by KFA to SBI and other banks for a loan of Rs.7500 Cr?
- 2 helicopters – worth Rs.90 Crore. (Will it fetch so much? God should tell)
- Immovable property at Mumbai and Goa – Worth Rs.118 Crores (SBI – please forget this. Income tax has already attached this property, legally their claim to be settled before paying your loans)
That’s all. I have no other asset to add. They told SBI to consider their brand value for 7300 Crores!! (Believe me; the banker has blindly accepted it. Lord Venkateshwara, tell me who has to have a clean head shave now?)
Banker is sure that they can’t recover any money (NOT EVEN A NAYA PAISE). So they are trying to treat the company and CEO as wilful defaulters. What do we mean by wilful defaulter and what are the consequences for KFA if they are called as wilful defaulter? I will post this information in tomorrow’s article
Thought for the day
Always borrow money from pessimists. They will never expect it back
I request you to upload some pessimists’ (from whom i can borrow!) names in your next write-ups please…