What stops you from writing a cheque for Rs 7.94 crore, if you are sure the payee won't present it for payment? Nothing, really, not even the fact that your bank account has a balance of Rs 1 lakh or less.
It is this confidence that seemed to have helped the Robert Vadra-promoted Sky Light Hospitality to write one or more cheques amounting to Rs 7.94 crore and account that as "book overdraft" in its balance sheet for the year ended March 31, 2008. A book overdraft is not an overdraft at a bank but an excess of outstanding cheques on a company's books over its reported bank balance.
This amount is crucial because the same year Sky Light Hospitality paid the first instalment of Rs 7.94 crore to buy land in Haryana's Manesar, thereby kicking off Vadra's foray into realty.
It is not clear when exactly Sky Light bought this piece of land. But it must be some time between November 2007 and March 2008, going by the fact that Sky Light was incorporated in November 2007 and DLF's statement that it had all the approvals for the Manesar land by March 2008.
Thus, Sky Light managed to buy the land by giving a cheque for Rs 7.94 crore, which was not encashed till March, to cover only half of the consideration of Rs 15.38 crore.
Then, it got approval for commercial development within the next four months.
By March 2008, it had got the necessary approvals for commercial development from the Haryana government, a DLF statement on October 6 said.
In 2008-09, Sky Light approached DLF to sell the 3.5 acres of land off NH-8 in Sikohpur village near Manesar.
"DLF agreed to buy the said plot, given its licensing status and its attractiveness as a business proposition for a total consideration of Rs 58 crore," according to a DLF statement.
However, it is not clear who sold the land to Sky Light. It is also not clear if the licences were granted after Sky Light took possession of the land. But if the licences were received earlier, that would raise a question over why the seller sold the land at the price he did.
If that price was right then why would DLF pay four times that sum a few months down the line? Vadra did not respond to queries in this regard emailed to his private secretary.
Accountants say it is common that there is a difference between banks' actual balance and companies' actual balance. This, in accounting parlance, is called bank reconciliation difference.
One of the causes is the time lag between the writing of cheques, their being presented for payment by the payee and the eventual debit in the bank account. Thus, say, you have a balance of Rs 10 lakh and a cheque of Rs 1 crore is deposited on March 31 but the amount is credited by the bank on, say, April 3.
Then while the bank account will show a balance of only Rs 10 lakh, your books will show a balance of Rs 1.1 crore. It is a prudent accounting practice that cheques issued are accounted in the books on the date of issue, whereas receipts are accounted only when they are actually realised.
A book overdraft becomes a bank overdraft when outstanding cheques are presented for payment. Since Corporation Bank has clarified there was no overdraft facility granted to Sky Light, chartered accountants say the only other possibility is the company issued cheques far in excess of the money it had in its account.
"That cheque, if presented, would have been dishonoured for want of funds and it would have been a criminal liability under the Negotiable Instruments Act. This also means that actually the person to whom the cheque(s) was/were issued was not at all paid and there were no arrangements with the bank to pay," said a senior chartered accountant.
He said full scrutiny of the bank accounts could reveal the actual transactions that happened. "My hunch is -- it is only a hunch as there is no proof -- the agreement would have been executed between the seller and the company and in the agreement they would have mentioned cheque details but those cheque(s) were not deposited with the bank immediately as that would have been agreed."
Transaction details of bank accounts are not normally annexed with balance sheets filed with the Registrar of Companies.
It is also possible that when money from DLF would have come in during the next financial year, these cheques were presented.
According to recent statements, DLF paid Sky Light an advance of Rs 50 crore in instalments against the Manesar land. A DLF spokesperson said the company was not involved in the first leg of the transaction when the Manesar land was originally bought by Sky Light. In 2008-09, it bought the land from Sky Light for Rs 58 crore and took possession.