SET did not renew the contract beyond July 31 because, it is understood, they were unhappy with the way certain forms for the funding of trainees were completed. Instep said the decision to terminate the contract had cost 28 jobs and is threatening closure of the company’s office in Perth.

However, it has emerged that SET had asked Tayside Police to investigate alleged irregularities over Instep’s handling of the contract.

In a later statement, SET explained “irregularities” had been uncovered in a Scottish Enterprise Network Compliance Service investigation into the delivery of SET contracts by Instep.

A report was sent by SET to Instep earlier this month with a request that they provide a written reply addressing all areas of concern.

“They were unable to provide an explanation and through their legal representatives requested detailed evidence,” the SET statement continued.

SET felt it was inappropriate to provide the further evidence, and referred the matter to the police.

Today Mervyn Rolfe, chairman of Instep and chief executive of the chamber, said, “The chamber of commerce’s solicitors are writing to SET’s solicitors to demand they retract part of their statement which alleged Instep were unable to provide an explanation.

“This is both inaccurate and inflammatory. We haven’t been given the opportunity yet because we are still working on providing the explanation.

“We always promised to fully co-operate with SET in this investigation and we are disappointed that we are not receiving reciprocal treatment.”

Mr Rolfe said Instep was convinced the company was not at fault, and was dismayed SET had not been prepared to accept the offer of an independent audit of the dispute. Instep was also contacting Tayside Police “to ensure matters are properly investigated.”

In response to Mr Rolfe’s remand for a retraction, a spokesman for Scottish Enterprise Tayside said, “Instep was provided with a full report on the findings of our audit and we requested they respond within five workings days with a full explanation.

“We felt we had supplied sufficient information in our report for Instep to respond and that the level of detail requested was inappropriate and might compromise any future legal proceedings.”