Auditors and chartered accountants that Business Standard has spoken to are not convinced with real estate company DLF's clarification that it had given a 'business advance' to Robert Vadra, son-in-law of Congress President Sonia Gandhi, and that there was no quid pro quo between the two.
The accounting and audit fraternity clearly wants to disassociate itself from the DLF-Vadra saga. While those who spoke to this newspaper for the story did not wish to be named, many other large audit firms refused to talk on the matter, citing "client confidentiality" or providing a "no comment" reply.
A senior partner of a leading audit firm pointed out accounting rules did not permit companies to give interest-free loans even to their subsidiaries, let alone others.
Even as DLF claimed a business advance, and not an unsecured loan, was given to Vadra's company, the realtor had not done enough to give specifics about the business for which the advance was paid, he said.
Another chartered accountant, who also did not wish to be named, argued if an advance amount was refunded without the business maturing, there was always a doubt about the nature of the transaction.
He was referring to the Faridabad land deal, in which DLF found legal infirmities at a later stage and Vadra's company Sky Light Group refunded the Rs 15-crore 'advance'. DLF had not shown any papers yet on any of the deals with Vadra, he said, adding the company might however do that over the coming days.
According to analysts, the going rate of interest for loans in the real estate sector is anything between 14 and 18 per cent. In this case, no interest has been charged.
Another auditor, who did not wish to be named, said for DLF to give a business advance to Vadra's company, there must have been prior linkages between the two.
"Interest is not the only aspect to look at here. The alleged nexus between Vadra and the real estate company should be investigated, too," he added.
A senior representative of an accounting firm pointed out the difference between an unsecured loan and a business advance. Broadly speaking, while any loan is a contractual agreement between two or more parties accompanied by an interest at the time of payback, a business advance is usually not a contractual pact and mostly there's no interest attached to it.
While a loan is usually given against a security from the borrower, an unsecured loan is not accompanied by any such security. He added business advances were not very unusual in the industry. "Companies do give advances to suppliers or customers in the hope of a return without a contractual agreement."
DLF had on Saturday said its business relationship with Vadra or his companies was transparent and at an arm's length basis. "Our business relationship has been conducted to the highest standards of ethics and transparency, as has been our business practice all around."
The company denied it had given any unsecured loan to Vadra or his companies, claiming an amount of Rs 65 crore was given as a business advance for the purchase of two pieces of land from Sky Light Group.
DLF gave an advance of Rs 50 crore to Sky Light Hospitality against a piece of land at Sikohpur village, Gurgaon, in 2008-09, the company said.
DLF bought the land for Rs 58 crore, according to its statement. Subsequently, Sky Light Group offered DLF an opportunity to purchase a large land parcel in Faridabad in 2008-09, and DLF agreed to advance Rs 15 crore in instalments.
"After concluding that the said land had certain legal infirmities, we decided against its purchase. Accordingly on DLF's request, Sky Light Group refunded the advance of Rs 15 crore in totality," said DLF in its statement.
DLF said "at no stage was an interest-free loan ever given to Sky Light Group. There were two sets of business advances against purchase of property, one of which amounting to Rs 50 crore resulted in a satisfactory conclusion of purchase of commercial land and the second advance of Rs 15 crore was fully refunded."
DLF shares fall
DLF shares fell on Monday after anti-corruption activists accused the company of improper dealings with Robert Vadra, son-in-law of Congress President Sonia Gandhi.
Vadra and DLF have denied the allegations. DLF shares closed down 7.2 per cent at Rs 224.25 on the BSE. The Sensex declined 1.2 per cent.
On Tuesday, DLF shares were trading at Rs 219.80, down 1.98%.
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