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Journalism of Courage
Over 400 companies listed on the stock exchanges in Mumbai are facing prosecution for violating various statutory requirements. The Department of Company Affairs (DCA) has moved for prosecution of these companies as they failed to file annual returns and submit balance-sheets, mandatory under the Companies Act provisions. The government suspects many of these companies might have vanished after raising money from the public. ‘‘We have issued notices to them. But some of these letters have come back saying ‘addressee not found’,’’ said a government source.
According to market estimates, assuming that each company mobilised an average of Rs 10 crore, these companies might have raised at least Rs 4,000 crore from the capital market. Besides, at least Rs 1,000 crore of investors money could be locked up in these companies in the form of fixed deposits and other instruments.
Market sources feel that most of these companies may not be having any operations. ‘‘They came to the market only to siphon off investors’ money. These companies were listed in the 1990s when the listing guidelines were weak,’’ said an investor.
These 400 companies form part of the Mumbai region, where over 1,200 listed companies are registered. If such erring companies from other regions are also considered, the number of such companies will be in thousands and the amount collected from the public in thousands of crores.
DCA follows the required procedure while taking action against erring companies. Once the violation comes to its notice, DCA first issues a show-cause notice to the company. If the reply is not found satisfactory, it will initiate prosecution proceedings against the company. However, companies can get away from any action — especially in the case of financial violations — by compounding the offences. But the government agencies are in a dilemma. Many show-cause letters and prosecution papers have come back as the addressee is not traceable. The Rs 5,000-crore question is: Who will they prosecute?
To prosecute Sun Earth Promoter
MUMBAI: DCA has moved the Mumbai Metropolitan court for prosecuting the promoter of Sun Earth Ceramics Suresh Motwani for failing to refund fixed deposits of small investors. Government officials said they have moved the court against Motwani as, even after repeated notices from DCA, he did not refund the money deposited by investors. DCA, however, could not file a prosecution case against Roofit as Motwani had already moved the Board of Industrial and Financial Reconstruction thus taking protection from all borrowers. Indian banks and FIs, led by IDBI and UTI, have lent close to Rs 600 crore to Motwani companies and have failed to take any action against the companies to get back their funds. DCA sources say the company has even stopped filing its annual returns with both DCA and stock exchanges since March 2002. —ENS
