Lok Sabha Question No. 3068 (UNSTARRED), answered on 2021-03-15
Subject: Corporate Fraud
Ministry: CORPORATE AFFAIRS
Asked by: Kapil Moreshwar Patil

## MINISTRY OF CORPORATE AFFAIRS

## GOVERNMENT OF INDIA LOK SABHA

## UN-STARRED QUESTION NO. 3068

ANSWERED ON MONDAY, MARCH 15, 2021/ PHALGUNA 24, 1942 (SAKA)

## CORPORATE FRAUD QUESTION

†3068. SHRI KAPIL MORESHWAR PATIL

Will the Minister of CORPORATE AFFAIRS

be pleased to state:

(a) whether the Government is aware that the cases of corporate fraud have increased in the country during the last five years;

(b) if so, the details thereof;

(c) the details of the punishment or penalty imposed on the defaulters during the said period; and

(d) the action taken/proposed to be taken by the Government to check the said fraud?

ANSWER

THE MINISTER OF STATE FOR

FINANCE AND CORPORATE AFFAIRS

वित्त एिं कारपोरेट कार्य मंत्रालर् में राज्य मंत्री

(SHRI ANURAG SINGH THAKUR)

(

श्रीअनुराग व ंह ठाक ु र )

(a)  and  (b):  The  Government  is  aware  of  the  Corporate  Frauds  reported  during  the  last  five years . Details of Investigations ordered during last five years is as under:

| Financial year   | No. of investigations ordered and assigned to SFIO   | No. of investigations ordered and assigned to SFIO   | No. of investigations ordered and assigned to RDs   | No. of investigations ordered and assigned to RDs   |
|------------------|------------------------------------------------------|------------------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|
|                  | No. of cases                                         | No. of companies                                     | No. of cases                                        | No of companies                                     |
| 2015-16          | 21                                                   | 184                                                  | 3                                                   | 3                                                   |
| 2016-17          | 25                                                   | 111                                                  | 2                                                   | 2                                                   |
| 2017-18          | 22                                                   | 226                                                  | 52                                                  | 117                                                 |
| 2018-19          | 33                                                   | 414                                                  | 27                                                  | 126                                                 |
| 2019-20          | 26                                                   | 326                                                  | 33                                                  | 100                                                 |

(c): Details of the punishment or penalty imposed on the defaulters during the last five years period is as under:

| Years   |   No. of Convictions | Fine Imposed (in Rs.)   |
|---------|----------------------|-------------------------|
| 2015-16 |                  927 | 64,01,902               |
| 2016-17 |                  828 | 1,14,05,987             |
| 2017-18 |                  572 | 7,02,10,532             |
| 2018-19 |                  680 | 3,97,83,699             |
| 2019-20 |                  424 | 5,24,30,392             |

कारपोरेट कार्य मंत्री

The  Securities  and  Exchange  Board  of  India  (SEBI)  has  informed  that  it  has  initiated  the following enforcement actions in the last five years:

| Type of Regulatory Action Initiated            | No. of Entities   | No. of Entities   | No. of Entities   | No. of Entities   | No. of Entities   |
|------------------------------------------------|-------------------|-------------------|-------------------|-------------------|-------------------|
|                                                | 2019-20           | 2018-19           | 2017-18           | 2016-17           | 2015-16           |
| Prosecution proceedings Initiated              | 10                | 0                 | 133               | 91                | 0                 |
| Administrative Warning                         | 69                | 40                | 322               | 206               | 454               |
| Proceedings under Section 11 of SEBI Act, 1992 | 678               | 498               | 1195              | 604               | 1726              |
| Proceedings under Intermediaries Regulations   | 0                 | 7                 | 1                 | 2                 | 0                 |
| Adjudication Proceedings                       | 1294              | 15910             | 1256              | 897               | 1257              |
| Enforcement under Summary Settlement           | 20                | 0                 | 0                 | 0                 | 0                 |

(d):  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,  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 SFIO 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  of  Corporate  Affairs  (MCA)  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) MCA has also undertaken pre-emptive measures  aimed  at  sensitizing  people  through  investors  awareness  programs  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.

Further, SEBI has informed that it 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 which culminate in the issuance of Orders.

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