Richa Mishra

New Delhi, March 29

BASED on complaints of fraud and siphoning off funds against Usha Group companies Usha (India) Ltd, Malvika Steels Ltd, and Koshika Telecom Ltd and their directors, Mr Vinay Rai and Mr Anil Rai, the Ministry of Company Affairs is expected to refer the case to the Serious Fraud Investigation Office (SFIO).

The Ministry had received complaints against the company from Industrial Financial Corporation of India (IFCI), one of the financial institutions. In its complaint, IFCI had stated that the total loans given to the companies by the FIs were to the tune of Rs 4,500 crore and the IFCI stake was Rs 1,700 crore . It alleged that the companies siphoned off the loan amounts in a fraudulent manner through 250 front companies.

Now armed with a Company Law Board (CLB) order for appointing inspectors to enquire into the matter, the Government is expected to refer the matter to the SFIO soon.

"The Government has been examining the complaint against the said companies and was in the process of referring it to the SFIO. We are now awaiting the CLB order. Once we receive the orders, appropriate action will be initiated," official sources told Business Line. The CLB on Thursday directed the Government to appoint inspectors to begin investigations.

IFCI had approached the CLB for ordering investigations under the company law provisions, which would allow access to the relevant documents of the companies and their promoters. IFCI is proceeding against the companies before the Debt Recovery Tribunal as well.

The CLB Bench, comprising Mr K.C. Ganjwal, while disposing of the petition, said: "... there are sufficient grounds to order investigations under Section 237 (b) of the Companies Act. The siphoning of the huge amount by 250 front companies in fraudulent manner has been indicated by the Income-Tax Authorities also."

The Bench further noted that the investigations under the company law is not enough by itself, but is only a means to find out the full facts of the acts complained of.

IFCI had also submitted that the new management of the company came much after the loan amounts has been siphoned out and the allegations pertain to 1997-2000. Further, the investigations conducted by the Central Bureau for Investigation is for trying the accused persons for criminal conspiracy and cheating as criminal offences.

"Without investigation under Section 237(b) of the Companies Act, it is not possible to discover the correct facts and the modus operandi adopted by the respondents (the Usha Group) in cheating the petitioners (IFCI) and siphoning of the public money," the Bench said.

(This article was published in the Business Line print edition dated March 30, 2005)
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