Rajarathinam shares in BSBL attached

MUMBAI, Feb 10: The income-tax department has attached 1,40,000 shares held by the takeover tycoon P Rajarathinam in the Benarese State Bank...

MUMBAI, Feb 10: The income-tax department has attached 1,40,000 shares held by the takeover tycoon P Rajarathinam in the Benarese State Bank Ltd (BSBL) as part of the tax recovery measures. The IT department has also alerted in a public notice that nobody should deal in these attached shares worth Rs 14 crore.

According to sources, 14 lakh equity shares of Rs 100 each held by P Rajarathinam in BSBL were attached under section 281 B of the Income Tax Act, 1961 by tax recovery officials at Chennai. The attachment is in pursuance of the recovery proceedings

against Rajarathinam group of companies which have been defaulting in tax payments.

Chennai-based P Rajarathinam & Associates, had acquired 72,78,880 equity shares of Rs 10 each in the Varanasi-based private bank aggregating Rs 7.27 crore in 1995. This investment was made through Deve Sugars, a Karnataka-based sugar company, which the group acquired as part of its mega expansion plans. When these shares were acquired by the Rajarathinam group, thepaid-up capital of the bank was only Rs 15 crore.

However, the Varanasi-based bank’s financial strength has further deteriorated and the bank has one of the poorest capital adequacy ratio among the old private sector banks. Deve Sugars was engaged in a protracted legal battle with the income tax authorities over the purchase tax liability issue and the case was referred back by the Supreme Court to the Karnataka High Court for fresh disposal. The group also has other liabilities resulting from the takeover of Garware Paints Ltd (renamed Deve Paints Ltd), Deve Annapoorna Food and Beverages and Madras Motor Finance Company.