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Corporate frauds: SFIO booked 93 companies last fiscal; Fraud now defined in New Companies Act

By TIOL News Service

NEW DELHI, AUG 09, 2014: DURING the last three years and the current year from 01-04-2014 to 30-06-2014 the Ministry of Corporate Affairs has ordered investigations under section 235 and section 237 of the Companies Act, 1956 through the Serious Fraud Investigation Office (SFIO) of the Ministry in respect of 152 companies for alleged corporate frauds. These cases involve allegations of siphoning off/ diversion of funds belonging to companies by the promoter/directors, manipulation  of  books  of  accounts  and  other  records  and  frauds  through running of schemes by companies for collecting money from the public, etc. Year-wise details are as under:

Year

No. of companies ordered for investigation

2011-12

13

2012-13

43

2013-14

93

2014-15
(up to 30-06-2014)

03

Total

152

Government has initiated a number of measures to prevent and deal with occurrence of corporate frauds.  These are as under:

  • Enhanced disclosure norms under the Companies Act, 2013 so that investors get all relevant information from the companies;


  • “Fraud” has been defined under the Companies Act, 2013 for the first time as a substantive offence, and cover many dubious activities which were not specifically covered under the Companies Act, 1956;

  • Serious Fraud Investigation Office (SFIO) has been granted statutory status with adequate powers under the Companies Act, 2013.

  • Provisions for attachment and disgorgement of assets introduced under the Companies Act, 2013.

  • Auditors' accountability and independence enhanced through provisions which inter alia include rotation of auditors, etc.  This would improve objectivity of audit and provide better insights to the investors;

The Ministry organizes investor awareness programmes regularly in association with the three professional institutes – Institute of Chartered Accountants of India (ICAI), Institute of Cost Accountants of India (ICAI) and Institute of Company Secretaries of India (ICSI) in various cities under the aegis of Investor Education and Protection Fund (IEPF). The programmes are held for creating awareness and empowerment amongst investors.  Since 2012-13, MCA has also started organizing such programmes in rural areas through CSC e-Governance Services India Ltd., an entity under Department of Electronics and Information Technology.  2897 such programmes were organised during the year 2013-14.

This information was given by Ms. Nirmala Sitharaman, MoS in the Ministry of Corporate Affairs, in written reply to a question in the Lok Sabha yesterday.


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