COMPANIES VANISH RIGHT UNDER THE NOSE OF SEBI AND MCA
By Ruma Dubey
The young and suave new Minister for Corporate Affairs (MCA), Mr.Sachin Pilot stated yesterday that of the 238 ‘vanishing’ firms, 151 companies had been traced, which included 32 companies under liquidation. He has stated that 87 companies still remained untraceable.
One would have expected that the minister, being young and thus tech savvy, would have updated this data on his website but sadly, he seems disconnected with the website. In fact, the moment you login to the site, the message which greets you is “MCA Front offices situated at Delhi , Chennai , Mumbai and Kolkata are being discontinued with effect from Monday, the 8th of October, 2012 , and hence, will not be available to offer any assistance to MCA stakeholders. Kindly plan your activities accordingly.” This is how MCA now works under a young minister?
And one would have expected that Mr.Pilot would have updated the new list on the website but sadly, that too is not done. There is a cursor in ‘Vanishing Companies’ which flashes, “Latest Updates” and you click on it, the ‘latest’ update is as of January 2010. It gives a list of companies which MCA has found to have vanished. And as against what Mr.Pilot said, the list does not have 238 companies but 121 companies.
Mr.Pilot has stated that he has initiated action against these companies for violation of the provisions of the Companies Act, 1956 by filing complaints u/s 159/220 of the Companies Act, 1956 apart from filing of prosecutions u/s 63/68 and 628 of the Companies Act, 1956 besides seeking assistance of police authorities and filing FIRs. One question – how will action be initiated on companies which do not simply exist anymore?
Promoters have been using this method to get rich quick and fast. It is an easy modus operandi. Float a company, run it for some three years, show profits and then take it public, collect horrendous amounts of money from the people, get it listed and after the first year, slowly start erring on publishing results and other basic corporate governance requirements. There will be tonnes of legal notices getting piled up but ignore all of them. Then slowly just disappear from the scene. Voila! The best magic trick to make big money! Get listed and then just scoot away. After all, history has proven that none of the authorities could do much to either trace these companies or bring such promoters to book.
Investors are left just high and dry, with no clue about the company. All of a sudden neither the company nor any of the directors can be traced. Countless letters to SEBI, the Registrar of Company (RoC) and the company does not get any response. The promoters make merry, earn a life time of money and the investors are left merely wringing their hands in frustration.
As per the definition stipulated by SEBI, any listed company, which raised money through initial public offer and, thereafter, stopped operations, did not file returns either with the RoC or SEBI, did not exist on the registered premises, managing director or any of the whole-time directors also could not be traced is termed as vanishing company.
Most of these vanishing companies were incorporated during the capital market boom in the 1990’s where any and every company was raising money. The plantation companies, finance companies, cotton ginning and milling companies, oil extraction companies, shrimp/prawn farm companies, soya companies; they all just came and disappeared with the public money.
What is required is a set of punitive action. The moment a company fails to publish its results for one or two consecutive quarters, SEBI should issue a warning to the investors, so that they have the opportunity to get out before it vanishes. Also the promoters should be black listed. None of the promoters should be allowed to raise money or even stand in as non-executive director for other companies for the next 10 years. From being a mere ornament on the Board, these non-executive directors need to be made more accountable.
LIST OF SOME VANISHING COMPANIES:
- Ambuja Zinc
- Asian Vegpro
- Oriental Remedies
- SSK Fiscal
- Saket Extrusions
- Aashi Inds
- Bhavna Steel
- Citizen Yarns
- Bodh Gaya Ceramics
- Oriental Remedies
- Girish Hotels
- Global Network
- Hi-Tech Drugs
- Hitesh Textile
- Ichakalanji Soya
- Manav Pharma
- Protech Switchgears
- Topline Shoes
- Carewell Hygiene
- Hallmark Drugs
- Simplex Holdings
- Zed Investments
- Aditya Alkaloids
- Crestworld Marine
- Deccan Petroleum
- Kamakshi Housing
- Nagarjuna Jiyo
Go to the official website of MCA - http://www.mca.gov.in/ (under - Information and Reports) and there you are sure to come across the entire list of vanishing companies.