Financial Daily from THE HINDU group of publications
Saturday, Dec 04, 2004
Financial Daily from THE HINDU group of publications Saturday, Dec 04, 2004 |
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Economic Offences Corporate - Regulatory Bodies & Rulings `Misappropriation and mismanagement of funds' — Ministry to prosecute Daewoo Motors Richa Mishra
Mr Prem Chand Gupta
New Delhi , Dec. 3 DAEWOO Motors India Ltd's (DMIL) troubles seem to be far from over. Based on the recommendations of a high-powered team, the Ministry of Company Affairs is initiating prosecution against DMIL after following due process of law. The Ministry had set up a high-powered team to examine the investigation report of the Serious Fraud Investigation Office (SFIO) on the company. The committee has recommended prosecutions against the company and its promoters, besides suggesting further investigations into other issues. The committee has recommended that the company and its officers in default should be punished under the Indian Penal Code for falsification of accounts and records for withdrawal of working capital. It has also endorsed prosecutions for fraud in providing under benefit to the parent company, Daewoo Corporation of Korea, to the extent of $36.8 million in respect of effect of exchange rate fluctuations resulting in cheating with Indian financial institutions. Further, the committee has also pointed out violation of conditions imposed by the Union Government on inter-corporate deposits. Prosecutions have also been recommended for non-maintenance of records and disposal of assets without shareholders approvals. According to Ministry sources, the committee has suggested further probe on issues such as over-invoicing of capital goods imports, investment in shares and securities and the role of auditors. The company had appointed three different auditors including A.F. Ferguson at various points. Speaking to Business Line, Mr Prem Chand Gupta, Minister of State for Company Affairs (Independent Charge), said, "We would definitely like to take the investigation to its logical end. Further, this would also send a signal that the Ministry was committed to promoting good corporate governance regime." He, however, refrained from commenting on the findings of the investigations. SFIO's first case: The investigation against Daewoo for misappropriation and mismanagement of funds was the first case referred to the SFIO, an agency set up for looking into serious corporate frauds. Regarding why the SFIO report is being examined by a Ministerial team, sources said that, "the intricacies of the case, being the first report submitted by the SFIO, required multiple investigations." The Ministry had referred the case to the SFIO on complaints received from the bankers of Daewoo India. The complaint against the company that the office was asked to investigate included siphoning and diversion of funds, improper invoicing and manipulating accounts. The company is stated to have understated its losses in the past. According to sources, the amount involved was close to Rs 3,000 crore. Of this amount, Rs 1,240 crore is owed to financial institutions such as ICICI Bank, IDBI and Exim Bank. In fact, before referring the matter to investigation office, the department had invited presentations from independent investigators for outsourcing investigations for the case.
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