Lok Sabha Question No. 2022 (UNSTARRED), answered on 2018-12-21
Subject: Corporate Frauds
Ministry: CORPORATE AFFAIRS
Asked by: RAJU ALIAS DEVAPPA ANNA SHETTI

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA UN-STARRED QUESTION NO.2022 ANSWERED ON FRIDAY, THE 21 st DECEMBER, 2018 [AGRAHAYANA 30, 1940 (SAKA)]

## CORPORATE FRAUDS

## QUESTION

## 2022. SHRI RAJU SHETTY:

## Will the Minister of CORPORATE AFFAIRS be pleased to state:

कॉर्पोरेट कार्यमंत्री

- (a) whether the Government has taken cognizance of a study report of the Thought Arbitrage  Research  Institute  (TARI)  which  has  revealed  that  dimensions  of corporate frauds have increased manifold in the last 15 years in which half of the cases relates to misappropriation of funds by the promoters/top management and cheating the money lenders;
- (b) if so, the details regarding conclusions of the said report and the reaction of the Government on the opinions of market regulator like SEBI and the ample number of auditors of these companies; and
- (c) the steps proposed to be taken by the Government to improve the situation?

## ANSWER

MINISTER OF STATE FOR LAW AND           (SHRI P.P.CHAUDHARY) JUSTICE AND CORPORATE AFFAIRS ( श्री पी पी चौधरी )

विधध और न्याय  एिं कॉपोरेट कायय मंत्रालय में राज्य मंत्री

- (a)  to  (b):No  such  report  has  been  shared  with  Serious  Fraud  Investigation  Office, Ministry  of  Corporate  Affairs  or  with  SEBI  by  the  Institute.  However,  the  Central Government  has  ordered  and  assigned  to  SFIO,  number  of  investigation  cases involving many companies during the last 15 years ending 31.03.2018 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.

(c) 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) statutory status to the Serious Fraud Investigation Office has been granted under the said Act, (iii) stricter norms of Corporate Governance and their implementation  have  been  prescribed  in  the  Companies  Act,  2013,  (iv)  it  has  been made  mandatory  for  every  existing  or  prospective  directors  to  obtain  a  'Directors Identification  Number'  (DIN),  (v)  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, (vi) The Ministry has also undertaken pre-emptive measures aimed at sensitizing people through investors awareness  programmes.  These  programmes  are  organized  regularly  in  association with  the  three  professional  institute-Institute  of  Chartered  Accountants  of  India (ICAI),  Institute  of  Cost  Accountants  of  India  (ICAI)  and  Institute  of  Company Secretaries of India (ICSI) in various cities.

Further,  SEBI has put in place systems and practices to promote a safe, transparent and  efficient  securities  market  and  to  protect  market  integrity.  SEBI  maintains constant vigil in the securities market and in case where any entity/listed company is found  to  have  engaged  in  any  fraudulent  activity  in  the  securities  market,  it  takes appropriate action, wherever warranted. In order to prevent fraudulent and unfair trade practices,  SEBI  has  put  in  place  a  regulatory  framework  viz.  SEBI  (Prohibition  of Fraudulent  and  Unfair  Trade  Practices  relating  to  Securities  Market)  Regulations, 2003. 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.

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