In all, 37 cases were referred to the Serious Fraud Investigation Office (SFIO) during the last three years i.e. during the years 2006-07, 2007-08 and 2008-09.
Out of these 37 cases, investigations in respect of 9 cases have been completed. The number of people in respect of three cases against whom action has been initiated are as follows :
Number of people in respect of other six companies will be known only after launching prosecutions. In respect of the remaining 28 cases, investigations are under progress.
An elaborate regulatory framework is in place to deal with such incidents. This framework provides for statutory disclosures about the affairs of companies intended to inform the stakeholder the truth about the state of affairs of companies. To facilitate making of such disclosures by companies, and for stakeholders and regulatory agencies to easily access and view them, Government has set up an electronic registry with round the clock access through internet. The Government has powers of inspection of the books of accounts of companies and also to investigate their affairs, if need be, under the Companies Act, 1956. In addition, the Act provides for appointment of independent, statutory auditors to audit the accounts and report to the shareholders. Such audited accounts are also displayed on the electronic registry for general viewing. While the reporting requirements are regulated under the Companies Act, 1956, the conduct of auditors is regulated under the Chartered Accountants Act, 1949. In addition, for listed companies, compliance with these statutory requirements is required to be certified by a company secretary in practice, who in turn is regulated under the Company Secretaries Act, 1980. Government has amended the Chartered Accountants Act, 1949 and the Company Secretaries Act, 1980 in 2006 to provide for a more effective disciplinary mechanism to deal with cases of misconduct by Chartered Accountants, Company Secretaries respectively. In 2006, the Government has notified Accounting Standards to enable accounts of companies to be drawn up and disclosed on the basis of fair, transparent and internationally accepted principles. Government proposes to re-introduce Companies Bill, 2008 as the Companies Bill, 2009 which seeks to make more stringent provisions in cases of frauds by companies, their directors and auditors, etc.
Morepen Laboratories Ltd. (MLL)
MLL created equity through fraudulently rotating funds siphoned out of the company. Money was siphoned from the company to promoters’ personal accounts. Higher net worth of the company was shown through rotation of funds, fictitious investments and fictitious debtors. Company indulged in overvaluation of stocks to book higher profits and obtained more loan from banks by hypothecation of stocks.
Shonkh Technologies Ltd.
The promoters in this case were found to have caused wrongful loss to the company by allotting shares at arbitrary rates of premium to Directors and their relatives. They were also found guilty of falsification of accounts by creation of false equity through rotation of cheques and by showing fictitious sales to inflate revenue and profit.
Shonkh Technologies International Ltd.
The Directors of the Company were found to have violated various provisions of Companies Act including preparation of Annual Reports in a manner not reflecting true and fair view of the operations of the Company.
JVG Hotels Limited, JVG Publications Ltd., JVG Techno IndiaLtd., JVG Holdings Ltd
These four companies are part of JVG Group of 13 companies referred to SFIO for Investigation. The main promoter is Shri Vijay Kumar Sharma. There are allegations of siphoning off funds invested by the public in JVG Finance Limited, which was a non-banking finance company, and some of these companies were used for this purpose.
Leafin India Limited
The funds of the Company were siphoned off by creation of lease agreements in respect of non-existent assets and lease rentals were paid thereon. There was an attempt to defraud the exchequer.
Stock Holding Corporation of India Limited (SHCIL)
There was fraudulent issue of shares of the company and books of accounts were falsified. The management was found guilty of the offence of criminal breach of trust in transferring tangible assets of the company. The officials of the company intentionally gave false evidence on oath during investigation.