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Prithvi Info Solutions: Why regulators are silent over the scandalous saga?

This IT solutions and engineering services company has been involved in all kinds of financial manoeuvrings. However, regulators are looking the other way

Over the past year, Hyderabad-based Prithvi Information Solutions Ltd has lurched from one extraordinary scandal to another without once stirring the regulators into action. For starters, three international audit firms walked away without signing the balance sheet in 2009. First it was Ernst & Young (M/s SR Batliboi & Co), which resigned after signing a heavily qualified balance sheet in March 2009. It was replaced by Price Waterhouse & Co (PwC) which resigned in panic in the wake of the Satyam scandal—(the account was being handled by the same PwC partner who has been arrested in the Satyam case).

Is Prithvi Information Solutions another Satyam? It is certainly smaller in size by but the goings-on are as dubious or more. What is however truly scandalous is that the Securities and Exchange Board of India (SEBI), the stock exchanges and the Ministry of Corporate Affairs (MCA) have remained mute spectators to its brazen actions.

Consider this. When PwC resigned in June 2009, the company held an Extraordinary General Meeting (EGM) on 23 July 2009 and appointed Walker, Chandiok & Co. This firm made as fast an exit as PwC and resigned in less than four months without signing the accounts. Prithvi then held its Annual General Meeting (AGM) on 31st December, which was chaired by Madhavi Vuppalapati, a founder director. She apparently told the shareholders that the accounts were not signed and asked them to appoint VK Asthana & Co. She also used the opportunity to increase the company's authorised capital and appoint three new directors.

Despite the fact that three international auditing firms had walked out, Ms Vuppalapati adjourned the meeting by a mere month to 30th January. In under 23 days, VK Asthana & Co was ready with a limited review of the accounts that was presented to shareholders at the 30 January 2010 meeting. Shockingly, the Registrar of Companies granted two extensions to Prithvi for holding the AGM without once inquiring why its former auditors were refusing to sign the accounts. Also, if VK Asthana was appointed on 31st December and the statute requires 23 days’ notice for the AGM and seven days’ notice for a board meeting, then it is clear that it was fully assured that the auditors would sign the accounts without raising any questions. Some would even say that the ‘auditor’ was a mere rubber stamp.

According to our source, "The new auditor VK Asthana (this firm has apparently never been subjected to any peer review which is a mandatory requirement to be eligible to perform audits of listed companies) accepted the appointment and completed the audit in just 23 days and issued the report on the financial statements (including consolidated financial statements).”

Isn't it extraordinary that stock exchanges, who are the first-line regulators, acted like mere notice boards and are uninterested in watching companies? It is they who supervise the Listing Agreement signed by companies, which covers all key corporate governance and disclosure rules. Finally, on 4th March 2010, we received an email from the office of KM Abraham, whole time member (WTM) of SEBI, that the issue has been sent to the appropriate department for investigation. However, even today, and despite the Satyam scandal, the regulator seems clueless about the gravity of Prithvi’s financial machinations.

The frequent change of auditors is not Prithvi's only problem. In June 2009, CNBC reported that Deutsche Bank had filed a first information report (FIR) accusing Prithvi's promoters of a fraud of Rs40 crore. Although Deutsche Bank has remained tight-lipped in public, it is reported that Prithvi had diverted bank funds to real estate and made false claims about significant global contracts. Deutsche Bank was alerted when three of Prithvi's clients informed the Bank's New York branch that they had no dealings with the company.

The company had apparently raised money through bill discounting, by pledging future cash flow for work done for several marquee foreign clients. When it failed to pay on schedule, the Bank allegedly contacted the customers and learnt that they had no business with Prithvi. This too was neither reported to the bourses nor questioned by them. The details of the action are not known; however, Prithvi only informed stock exchanges about an interim order obtained by Deutsche Bank from the Debt Recovery Tribunal that was apparently vacated. On 4 August 2009 the company informed stock exchanges that it had obtained a letter from the authorities that the complaint by Deutsche Bank was ‘civil in nature’. Did this prompt the bourses to ask more questions? Not at all, the notice was merely posted on the respective websites of the Bombay Stock Exchange and the National Stock Exchange.

Less than a month after the AGM on 30th January, there was a report in Tehelka magazine dated 27 February 2010 about another scandal where Prithvi was issued a summons by a city criminal court. The Rs200 crore alleged fraud involves unpaid dues to a leading Japanese corporation. Tehelka says that the company diverted money to be used for buying telecom equipment for the State-owned Bharat Sanchar Nigam Ltd (BSNL) to itself, by shadily diverting payment terms and having the money credited to its own accounts, without informing Sojitz Corp of Japan.

A couple of days earlier, the company had planted a report in a couple of obscure journals that it was set to bag a Rs200-crore order—the exact amount diverted in the Sojitz case. It is also facing action from the Directorate of Revenue Intelligence (DRI) although the accuracy of these charges is not known.

Meanwhile, all the regulatory bodies have been maintaining a deafening silence throughout this sordid saga. 




2 years ago

We all are Ex Employees of VMC Systems Ltd, Hyderabad (Tan no HYDV08413G) Headed by Vupplapati Himabindu, Venketramanan B - Directors and has the following grievances unsettled. since long time , and no proper response to our requests
Our Salary has been unpaid from 2012-13 and final settlement. with interest.
TDS recovered from salary from Sep 2012 has still not been remitted to Income tax department and most of us have got demand notice. .
Form16 for the last two F-year-2011-12 and 2012-13 has not been provided.
PF amount deducted from salary pending remittance at PF office .

Reason cited for this by MD in a mail on 16th May 2014 was there is no fund in system and they would pay when they have.and same story since last one year with blind commitment.
P&L which was last approved by Ca Patawari (The Auditor) published in Oct 2012 at Indicate a very healthy status as below, CA can also share the Provisional Balance sheet of 2013 which is also equaly healthy

Profit declared was Rs 95.77 crores
Net reserves at Rs 411.77 Crores
Earning from interest of reserve was Rs 13.11 crores
Earning per share at 31.56% .
Turnover of 1245crores

The Contradiction's of actual over healthy balance sheet of Oct 2012 .But No salary including TDS recovered from salary of Sept 2012 is not remit citing no fund.

A working capital term loam agreement with Corpotratio bank on 31 Dec 13 , Mentions fresh Loan of Rs 3.5 crores has been allocated to meet the urgent requirement of working capital. We have also written to PNB where 41 cores of fresh CC limit enhancements has been confirmed to meet statutory requirement

Despite all this above fact VMC management cite no fund, Since there has been no response on our due from- VMC management since last one year and above .the entire team is in deep financial crunch and above all Income tax department has send Demand notice for TDS recovery to us the employee , and has left the employer VMC systems go scot free for best reason known to the regional officers.

Deepak C, Mr Muralidharan , Mr Suresh kumar , Mr Mukund vaidya , Mr Sunil Padhi , Mr Dhiren, Mr Srinivas Rao, Mr Shibu .Mr Srinivas Gurrem, Mr Ashoke Chakravathi, Mr Praveen Mr Deepak Mr Desai Prasad Reddy ,Mr Praveen Meddisetti , Mr Suyog Patil , Mrs Jyothy m ,Mr S Murthy , Mr Chakraborty_Ashoke , Mr Ramesh.g


2 years ago

after 2010 there has been no posting on this subject
what about the sister company VMC systems


Sucheta Dalal

In Reply to lamp 2 years ago

There are plenty of postings on Prithvi … please google Moneylife's website

Tom Harrington

3 years ago

Now Madhavi Vuppalapati defrauded kyko global of toronto, canada to the tune of 18 million USD. A court has issued a judgement against her. Her lexus, jewellery and house are being auctioned off. FBI should be very interested in Madhavi.


6 years ago

Employee provident fund is not paid by prithvi. Prithvi bribe the PF officials and manage.


7 years ago

Enam guys know what exactly goes on this company.. I chuckled when I saw that note in the comments about Enam.. Madhavi is highly educated and so was Raju and this is the next satyam for sure


7 years ago

Difficult to believe, as Ms Madhavi is highly educated and was among top 20 invitees to George Bush meeting with Indidan IT industry.
Also, her IPO was brought by a respected Merchant Banker "Enam".

R Balakrishnan

7 years ago




In Reply to R Balakrishnan 2 years ago

so is the case of VMC another sister company , from sep2012 TDS and Pf not paid and government is cool and has send employees demand notices....for IT TDS default... what do we do.. even indian Press is silent

SEBI to further probe insider trading charges in RPL shares

Market regulator SEBI will further look into trading of shares of Reliance Petroleum for alleged insider trading during November 2007, the government has said

Market regulator Securities and Exchange Board of India (SEBI) will further look into trading of shares of Reliance Petroleum Ltd (RPL), which is now part of Reliance Industries Ltd (RIL), for alleged insider trading during November 2007, the Parliament was informed on Friday.

SEBI had initiated an investigation into trades carried out in RPL shares between 1st November and 29th November 2007 to identify possible violation under various regulations, including SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations 2003, minister of state for finance Namo Narain Meena informed the Lok Sabha.

Besides, the regulator had also investigated the matter under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, he said.

"SEBI conducted an investigation in the trading pattern in the scrip of RPL for the period of 1st November to 29th November 2007 on completion of which quasi-judicial proceedings were initiated by SEBI against Reliance Industries (RIL) with issue of a show-cause notice under Section 11(1), 11B and 11(4) of the Regulation 11(1)", he said.

Based on the reply furnished by RIL, a competent authority in SEBI has been directed to further investigate the matter, he said.


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