The Hindu Business Line : Vanishing cos: SEBI issues notices to merchant bankers

THE Securities and Exchange Board of India has issued show-cause notices to merchant bankers that had handled the public issues of companies that have subsequently vanished after raising money.

This action of the capital market regulator follows close on the heels of the Ministry of Company Affairs issuing similar notices to the statutory auditors of the companies that had raised public funds, for possible collusion with promoters.

"Notices have been issued to 22 merchant bankers that have handled the public issues of 15 vanishing companies. Of these 15, replies have been received in respect of seven such entities," official sources said.

Official sources, however, refrained from disclosing the names of the merchant bankers to which notices were issued. This move follows the recommendations of the Central Coordination Monitoring Committee constituted to monitor the progress made by various Task Forces for taking penal action against the directors of vanishing companies.

The committee had recently met to review the current position of these entities. It is co-chaired by Secretary, Ministry of Company Affairs, and Chairman, SEBI.

While the Ministry has initiated action under the Companies Act, SEBI has issued orders against the vanishing companies and their promoters/directors, prohibiting them from associating with the capital market for five years.

"A concerted effort for tracing the vanishing companies and their promoters/directors and also taking necessary action as per law is going on. Prosecutions have been filed against the directors of 104 vanishing companies. Besides, first information reports have been filed against promoters/directors of 92 such companies," the Company Affairs Minister, Mr Prem Chand Gupta, told Business Line.

Names of seven companies are being considered for deleting from the list of vanishing companies from the existing 115 such companies. Till now names of 107 such companies have been deleted from the original list of 229 furnished by SEBI.

Some of the companies considered for being struck off from the list of vanishing companies include ACME Spinners Ltd, DEE Kartavya Finance Ltd and Maa Leafin and Capital Ltd.

When asked about the notices to the auditors, official sources said the Ministry is awaiting the report from its regional offices on whether action needs to be initiated under the Companies Act or refer the cases to the Institute of Chartered Accountants of India.

Western India Industries Ltd and Vini Metaspin Steels Ltd are some of the cases where notices to the auditors have been furnished.

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