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Richa Mishra
K.R. Srivats

New Delhi , Feb. 22

STATUTORY auditors of companies that had raised public funds and vanished have come under the lens of the Ministry of Company Affairs (MCA) for possible collusion with promoters.

"We have asked our regional offices to enquire into the role of these auditors. To find out whether there was any collusion between the promoter and the auditor. The reports from the regional offices are still awaited," official sources said.

Sources told Business Line that the matter would be taken up with the Institute of Chartered Accountants of India as soon as the reports from the Ministry's regional offices are received.

About 10 vanishing companies have been identified for special scrutiny. The services of the auditors of these 10 companies are also under review, they said.

The Ministry's action is an outcome of its recommendations to the Central Co-ordination and Monitoring Committee, co-chaired by the Secretary of the Ministry of Company Affairs and the Chairman of the Securities and Exchange Board of India.

The committee has adopted three criteria for identifying vanishing companies: companies that have not complied with the listing or filing requirements of stock exchanges/ registrar of companies for two years, those that have not communicated with the exchange for a long time and those whose offices were not located at the mentioned registered office address during stock exchange inspection.

The committee's next meeting is expected to take place in March, with the recently appointed SEBI Chairman, Mr M. Damodaran, and the Secretary of MCA, Ms Komal Anand, co-chairing it.

Besides bringing the auditors under scrutiny, the committee has also suggested that the merchant bankers concerned be brought into the picture.

The number of vanishing companies have reduced to 115 from the originally identified 229.

While the Ministry of Company Affairs has initiated action under the Companies Act against 115 companies, SEBI has issued orders against the vanishing companies and their promoters/directors, prohibiting them from associating with the capital market for five years. So far, SEBI has debarred 100 companies and 378 directors under this order.

The Ministry had filed prosecutions against the vanishing companies and their promoters and directors for technical defaults such as non-filing of balance-sheet/ annual returns, mis-statement in prospectus, fraudulently inducing persons to invest money and making false statement in the offer document.

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