The Hindu Business Line : Violations under Companies Act — Ministry to start prosecution of Vatsa Corporation

THE Ministry of Company Affairs is all set to initiate prosecutions against Mumbai-based Vatsa Corporation Ltd (VCL) for violations under Companies Act, including allotment of shares in a fraudulent manner.

After examining the report submitted by the Serious Fraud Investigation Office (SFIO), the Ministry has decided to initiate prosecutions. For the criminal offences committed by the company, the Ministry has referred it to the Law Ministry for proceedings under the Indian Penal Code (IPC), official sources told Business Line. The SFIO had submitted its report last year.

The SFIO has detected a wide range of irregularities, while investigating into the affairs of Vatsa Corporation. The company is stated to have started with a small share capital and went up to a paid-up capital of around Rs 7,500 crore with an authorised capital of Rs 50,000 crore. "This is the magnitude of how this company came into being and the matter comes under SFIO lens," sources said.

Vatsa started with financial investments and rapidly expanded into many areas. Vatsa Music, a listed company, in 1998, invited fixed deposits from the public at 15-16 per cent, but the Reserve Bank of India had issued a warning against investing in its fixed deposits. A year later, the company started defaulting on payments. The SFIO was asked to look into the equity structure, shareholding pattern, cross-holdings and equity base of the Vatsa Group of Companies of which Vatsa Corporation was the flagship company.

Two of the group companies — Vatsa Music and Vatsa Education — were listed on the Bombay Stock Exchange. Both are virtually defunct today. The Vatsa group had diversified interests ranging from finance to education to trading and entertainment.

SFIO, which started its investigations on Vatsa Corporation around June 2004, was given six months time to submit its report. The Ministry had then set up high-level committee to examine the SFIO report.

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Violations under Companies Act — Ministry to start prosecution of Vatsa Corporation