A day after Zee Telefilms Ltd board decided to take legal action against G A Seshagiri Rao, chairman and managing director of Padmalaya Telefilms and Padmalaya Enterprises for alleged fraudulent acts, Rao has threatened to file a defamation suit against Subhash Chandra-controlled ZTL.
Zee, in a press release on Tuesday, said that PTL had overstated the turnover and profits for financial years 2002-03 and 2003-04. Zee Telefilms had appointed Chennai-based chartered accountants firm Guru and Ram to conduct an investigation into the affairs of PTL and PEPL. The report was submitted on December 9 and the accounts were recast.
Zee to drag PTL founders to court
While the audited accounts dated July 26, 2004 showed PTL's revenue at Rs 106 crore (Rs 1.06 billion) with a net profit of Rs 18 crore (Rs 180 million); the re-cast accounts of December 6 showed that the revenue was Rs 94 crore (Rs 940 million) with a net loss of Rs 32 crore (Rs 320 million).
Speaking from Hyderabad, Rao told Business Standard: "The accounts that were recast were in full compliance with ZTL as it was in charge of the corporate governance. ZTL was fully aware of all the changes made in the accounts as it has been overseeing the working of both the companies since June 2002."
Responding to the Zee allegation that his brother Krishna Murthy was involved in fraudulent activities, Rao said: "My brother was not connected with the workings of the companies and the charges against him are false and baseless."
A ZTL spokesperson said, "We do not wish to refute any statements made by Rao. The financial irregularities are findings of an independent body. The onus lies on Rao to refute the report."
The 2003-04 annual report of Padmalaya Telefilms mentioned that Krishnamurthy had resigned as the chairman and managing director on February 2, 2004.
Early this month, PTL informed stock exchanges that it had restructured its animation business and revised the accounts.
The stock market notice (dated December 9) said: "... Based on the reorganisation and reconstruction exercise management took a decision to re-orient and refocus the animation business, the company has re-assessed projects mainly in animation. "Considering the significance of the matters involved the board of directors considered it prudent to revise the accounts to consider impact on account of infructuous projects and other non-recoverable amounts by providing for an amount of Rs 56 crore (Rs 560 million) in respect of such projects and other accounts."
"Further, income tax demands amounting to Rs 1.69 crore (Rs 16.9 million) in respect of previous years received subsequent to the previous approval of accounts by the board of directors have been considered and included under prior period expenses. Consequently the provision for dividend has been reversed in the absence of profits," the notice said.
Zee had alleged that Rao along with his brother G S R Krishnamurthy had raised loans against 62.6 lakh (6.3 million) shares of PTL that was held by PEPL. PEPL is a subsidiary of Zee Telefilms where Zee has a stakeholding of 63.8 per cent while PEPL's share in PTL is 50.12 per cent making it the major stakeholder.