It will not be appropriate for me to keep my readers guessing about what happened ultimately during the stock inspection at Bombay. But as far as I was concerned it was actually an anti-climax. The stock inspection did take place – but not by me! Let me explain.
The DM had recommended my name fully knowing the implications of making a report that would have landed the company in a difficult situation. More so, on account of the ensuing rights issue. Some of my colleagues had even started telling me that I would be in definite trouble whether I gave a clean report or otherwise. According to them it was a ‘no-win’ situation for me.
Two days after sending the recommendations, our DM received a sealed envelope from the DGM’s Office delivered directly to him by a messenger. It was an order signed by the DGM himself. It clearly stated that the stock of the company with the consignment agent at Bombay should be checked by the DM and a report sent to the DGM expeditiously! By the stroke of a pen, the DGM had shifted the onerous duty from me to the DM, who had recommended my name for the purpose. Needless to say it was a great relief for me.
But whether it was me or the DM, the problem was very much the same. The DM was also not new to Bombay. In fact he had come to our branch on transfer from the Girgaum branch there. But understandably, he did not possess the skills of an experienced inspecting officer in conducting the inspection of stock. But in all probability this fact helped him in handling the situation with ease and with very little tension! It is a well known and established fact in banking parlors that it is always easy to convince a high-cadre executive than a junior officer! While the former is not bothered about the details, the latter is particular about each and every aspect and is generally a hardnut to crack!
The DM did prepare himself well for the task before leaving for Bombay. He took all the details of the stock dispatched to Bombay by the company from Bangalore. We were waiting for him anxiously when he came back after two days. To be frank, we expected him to be tensed up on return. But to our surprise and relief we found him quite cool!
The DM told us that he was shown the physical stock valued at about Rs50 lakh by the consignment agent at his Vile Parle godown. As to the balance stock of around Re1 crore, he was told that the agent had sold it on credit to different parties! The agent also made it very clear that he had not received any payments from them so far. Any further physical verification of stock with those parties was only a wild goose chase!
The DM submitted a report to the DGM basing on his visit to the party’s godown. It was drafted in such a way that it neither hurt the party nor exposed the DM to any undue risk! Needless to say the ‘ambiguity’ helped both him and the company to come out of the difficult situation at that juncture.
Meanwhile there was absolutely no improvement in the affairs of the company. In fact there was another shocking development. The company had opened a current account with us for payment of interest warrants on its debentures. One fine day we found it running into debit balance (overdrawings)! As the warrants had been issued payable at par at our branch under an arrangement with HO, there was no way we could dishonour the same. Actually the company should have provided funds in the account before issuing the warrants. But it appears that it had not disclosed the actual amount to the bank before issue. On enquiry we were told by the company it would provide funds from the rights issue proceeds!
The rights issue opened with a bang. There was overwhelming response from the shareholders and it was heavily oversubscribed. Those who got the allotment made a killing in the market as the premium in the market was nearly two times the issue price. The issue proceeds were pooled at our Bombay branch. The company requested our bank to be the bankers for refund of excess subscription. It submitted a request to our branch for the purpose as the refund warrants were to be drawn on our branch payable at par.
As per the procedure, the sanction had to come from the HO basing on the recommendations from the branch. This aspect of recommendation was supposed to be handled by the Manager at the branch, as Corporate Cell was dealing with only the credit matters. But the SM wanted to push it to the Corporate Cell. It became an internal issue. The hesitation was in view of the earlier bad experience in respect of debenture interest warrants. The account had ended up in debit balance as mentioned by me earlier.
The DM was ultimately obliged to send the recommendations somehow. But the Corporate Cell was kept out of the responsibility. The company provided funds from the pooling branch in Bombay and it covered the amount of refund orders as mentioned in the company’s letter. Soon the refund orders started pouring in for payment through the clearing house and from our notified branches. One fine morning we found the amount of refund orders presented on that day overshooting the balance in the account by a few lakhs! It was uncertain as to how much more refund orders were still in pipeline. However, it was obvious that the company had not disclosed to us the actual total amount of the refund orders issued. It was also not clear where the balance proceeds of the excess subscription amount had been placed by the company. As far as the branch was concerned another storm was just brewing!
------- (To be continued)
A V Krishnamurthy