Lok Sabha Question No. 1455 (UNSTARRED), answered on 2019-07-01
Subject: Corporate Frauds
Ministry: CORPORATE AFFAIRS
Asked by: Amol Ramsing Kolhe, Supriya Sadanand Sule, Subhash Ramrao Bhamre, Heena Vijaykumar Gavit, Kuldeep Rai Sharma, Sunil Dattatray Tatkare

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS LOK SABHA UNSTARRED QUESTION NO.  1455

ANSWERED ON MONDAY, THE 1st JULY, 2019/ ASHAD H A 10 , 194 1 (SAKA)

## CORPORATE FRAUDS

## QUESTION

1455 :  DR. AMOL RAMSING KOLHE:

SHRIMATI SUPRIYA SULE:

DR. SUBHASH RAMRAO BHAMRE:

DR. HEENA GAVIT:

SHRI KULDEEP RAI SHARMA:

SHRI SUNIL DATTATRAY TATKARE :

Will the Minister of CORPORATE AFFAIRS

कॉर्पोरेट कार्य मंत्री

be pleased to state:

- (a) whether  the  Government  is  aware  of  the  growing  Corporate  Frauds  reported during the last three years;
- (b) if so, the details thereof along with the action taken against corporate frauds;
- (c) whether  the  Government  has  signed  a  Memorandum  of  Understanding  (MoU) with Securities and Exchange Board of India (SEBI) recently to curb the white collar frauds;
- (d) if so, the details thereof;
- (e) whether the Government will also constitute Data Exchange Steering Group to review the data exchange status periodically and if so, the details thereof; and
- (f) the steps taken/being taken by the Government to minimize these white collar frauds in near future?

## ANSWER

THE MINISTER FOR FINANCE AND CORPORATE AFFAIRS

( SMT . NIRMALA SITHARAMAN)

वित्त एिं कॉर्पोरेट कार्य मंत्री

( श्रीमती निमयला सीतारामि )

- (a) & (b): Yes. Government is aware of the Corporate Frauds reported during the last three years. 79 investigations were assigned to Serious Fraud Investigation Office (SFIO) in last three years wherein 594 companies are involved. Further, 256 investigations have also been assigned to Regional Directors (RDs) / Registrars of Companies (ROCs) of  Ministry  of  Corporate  Affairs  in  last  three  years.  Further, SFIO has filed number of complaints before the Competent Court. Prosecutions have  been  filed  by  Registrars  of  Companies  for  fraud  and  non-compliances  of various provisions of the Companies Act.  Securities and Exchange Board of India (SEBI) conducts investigation to examine alleged or suspected violations of laws and Regulations relating to the securities market. Post investigation, whenever violations are established, appropriate enforcement actions are taken under the provisions  of  the  SEBI  Act,  1992  and  Regulations  framed  thereunder  which culminate in the issuance of Orders. These Orders are available in public domain and can be accessed from SEBI website.
- (c) & (d): Securities and Exchange Board of India (SEBI) has signed Memorandum of Understanding (MoU) with Ministry of Corporate Affairs (MCA) for exchange of data on June 07, 2019.  MoU will facilitate the sharing of data and information

between SEBI and MCA on an automatic and regular basis. It will enable sharing of specific  information  such  as  details  of  suspended  companies,  delisted companies,  shareholding  pattern  from  SEBI  and  financial  statements  filed  with the Registrar by corporates, returns of allotment of shares, audit reports relating to  corporates.  The  MoU  will  ensure  that  both  MCA  and  SEBI  have  seamless linkage for regulatory purposes. In addition to regular exchange of data, SEBI and MCA will also exchange with each other, on request, any information available in their respective databases, for the purpose of carrying out scrutiny, inspection, investigation and prosecution.

(e): A MoU was signed on 07-June-2019 between MCA and SEBI for exchange of data. A Data Exchange Steering Committee will be constituted vide clause No. 24 of the said MoU as follows:-

- a)
- Executive Director, SEBI
- b) Joint Secretary, MCA
- c) Nodal officer and alternate nodal officer, SEBI
- d) Nodal officer and alternate nodal officer, MCA.

(f): The Government had set up Serious Fraud Investigation Office (SFIO) through a  Government  Resolution  dated  2nd  July,  2003  to  look  into  cases  of  serious corporate  fraud.  The  Central  Government  has  ordered  and  assigned  to  SFIO,  a number of investigation cases involving many companies where alleged fraudulent  activities  by  corporates  were  reported.  These  include  cases  of misappropriation  of  funds  by  the  promoters/top  management  and  cheating  the money  lenders.  Statutory  status  to  the  Serious  Fraud  Investigation  Office  has been  granted  under  the  Companies  Act,  2013.  The  Government  has  taken  a number  of  measures  to  curb  and  prevent  corporate  frauds;  (i)  'Fraud'  as  a substantive offence has been introduced in the Companies Act, 2013; (ii) stricter norms of Corporate Governance have been provided in the Companies Act, 2013; (iii)  it  has  been  made  mandatory  for  every  existing  or  prospective  directors  to obtain a 'Directors Identification Number' (DIN); (iv) in case of incorporation of a new  company  or  change  of  address  of  an  existing  company,  the  Ministry  has made  it  mandatory  for  professionals  to  verify  details  of  the  company  and  to personally visit their premises and certify that the premises are at the disposal of the company; (v) the Ministry has also undertaken pre-emptive measures aimed at  sensitizing  people  through  investors  awareness  programmes  which  are organized regularly in association with the three professional institutes namely Institute of Chartered Accountants of India (ICAI), Institute of Cost Accountants of  India  (ICoAI)  and  Institute  of  Company  Secretaries  of  India  (ICSI)  in  various cities. Ministry  of  Corporate  Affairs  also  initiated  KYC  Norms  and  16,80,472 Directors  have  complied  with  these  norms.  SEBI  has  put  in  place  systems  and practices  to  promote  a  safe,  transparent  and  efficient  market  and  to  protect market  integrity.  The  systems  and  practices  are  reviewed  continuously  and modified  to  meet  emerging  needs.  SEBI  maintains  constant  vigil  in  the  market and  wherever  any  entity  is  found  to  engage  in  any  fraudulent  activity  it  takes appropriate  action  against  it.  Further,  where  irregularities  are  noticed,  SEBI investigates  and  takes  appropriate  actions  such  as  direction,  adjudication, enquiry, etc. under the provisions of the SEBI Act, 1992 and Regulations framed thereunder.

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