The Hindu Business Line : Ministry asks Serious Fraud Office to probe Elder Pharma case

New Delhi/Mumbai, Sept. 26 Past records seem to be catching up with the Mumbai-based Elder Pharmaceuticals Ltd, with the Ministry for Corporate Affairs (MCA) asking the Serious Fraud Investigation Office (SFIO) to probe whether the company has violated disclosure norms under the Companies Act.

A senior Ministry for Corporate Affairs official told Business Line, “Based on the report submitted by the Registrar of Companies (RoCs) who was working in co-ordination with the Income-Tax department, it was felt that a deeper investigation was required on whether the company had shown inflated expenses and purchases to reduce its tax burden.”

SFIO, a multi-disciplinary body, under the Ministry, looks into white-collared crimes and frauds. In 2005-06, it was alleged that the company inflated its purchases to show less profit in order to save taxes. “There was an income-tax search and based on the findings of the search, the tax department had requested the RoC to examine whether there have been any violations of the Companies Act. The RoC has forwarded its report to the Ministry and suggested that more investigations are required.”

The company had made disclosure of Rs 13.35 crore as bogus purchases. Besides, there were other violations of Sections 205-209 of the Act mainly pertaining to improper maintenance and falsification of books of accounts. While Sections 205-207 spell out the norms for dividends and manner and time of payment, Section 208 envisages the norms for payments of interest out of capital. Section 209 of the Act provides for norms for maintaining books of accounts by a company.

Another complaint against the company was that it had secured expense on advertisement of Rs 20 crore for three years, but debited it in one year, thus reflecting an unfair picture. It was also found that the company had not credited the unpaid dividend amount to the Investor Education & Protection Fund as required under the Companies Act.

Besides, it had also not made proper asset disclosure against which loans were taken.

When contacted, a company spokesperson said there were no violations of the Companies Act. As regards debiting of advertisement amount in one year, the spokesperson said, “this was to do with the sponsorship of Filmfare awards and the amount was paid over three years.”

On the issue of unpaid dividend amount not being deposited to IE&PF, the company said the money has already been deposited.

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