A subsequent investigation would reveal that many of the ICDs made to Tata Finance by its sister companies were not equity investments but rather loans. In either case, the ICDs should not have been considered by Tata Finance when computing its CAR.
As Niskalp’s losses continued to rise in 2001, Tata Finance used one final measure in a desperate attempt to resolve, or at least conceal, its rapidly deteriorating financial condition. The company chose to “desubsidiarise Nisklp, allegedly to protect its own balance sheet by not having to disclose the losses of its subsidiary any more.This stopgap measure failed to remedy Tata Finance’s underlying financial problem , namely, its lack of adequate equity capital. Pendse then turned to his superiors at the Tata Group who provided the equity capital needed to rescue Tata Finance. Shortly after Tata Finance’s true financial condition was revealed to the public, the Tata Group dismissed Dilip Pendse and four of his key subordinates. In August 2001, the Tata Group filed a complaint with law enforcement authorities charging Pendse with criminal breach of trust. Two months later, the remaining members of Tata Finance’s board resigned as did the company’s audit firm, S.B. Billimoria’s managing partner noted, “Operating under the constraints of time and cost, we presume full honesty from our clients. After all, an audit is not an investigation.