Financial Daily from THE HINDU group of publications
Tuesday, Jun 18, 2002
Regulatory Bodies & Rulings
Vanishing cos get show-cause notices
NEW DELHI, June 17
THE Department of Company Affairs (DCA) has initiated action against 70-odd companies and their promoters who had "vanished'' after cheating the gullible investors.
"Show-cause notice has been issued to some of these companies and their promoters by the appropriate authority,'' officials sources told Business Line.
"The Department is determined not to let such people go without punishment,'' sources said.
Almost 225 companies were reported to have vanished after mobilising money from the public through public issues. The Department had also sought the help of the concerned State police, sources added.
"Prosecutions have been initiated against the last known directors,'' sources said adding that "while dealing with such companies the Department has put the completely vanished companies on top priority.''
DCA has been proposing to initiate stringent action under the Companies Act against the directors of such companies - - imposition of high penalty and even imprisonment.
It has initiated action under Section 68 and Section 63 of the Companies Act. Section 68 prescribes penalty for fraudulently inducing persons to invest money, while Section 63 provides for criminal liability for mis-statement in prospectus.
Section 63 states that if prospectus issued includes any untrue statement, then every person who authorised the issue of the prospectus shall be punishable with imprisonment or a stipulated fine or with both.
Further, Section 68 prescribes that any person who knowingly or recklessly makes a statement, promise or forecast which is false, deceptive or misleading to the gullible investor could be imprisoned or penalised, or both as stipulated.
"Serious offenders need to be punished. This move will help DCA in sending a clear signal to the corporate sector to take the law more sincerely. Besides, the Department is also working in close co-ordination with the market regulator, Securities and Exchange Board of India (SEBI),'' sources said.
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