Lok Sabha Question No. 3147 (UNSTARRED), answered on 2023-03-20
Subject: Corporate Frauds
Ministry: CORPORATE AFFAIRS
Asked by: Chandeshwar Prasad

## GOVERNMENT OF INDIA

## MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA UN-STARRED QUESTION NO. 3147 ANSWERED ON MONDAY, 20 th  MARCH, 2023 PHALGUNA 29, 1944 (SAKA)

## CORPORATE FRAUDS

## QUESTION

3147. SHRI CHANDESHWAR PRASAD:

Will the Minister of CORPORATE AFFAIRS

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 by the Government against such frauds;
- (c) whether the Government has signed a Memorandum of Understanding (MOU) with Securities and Exchange Board of India (SEBI) to curb the white
- collar frauds;
- (d) if so, the details thereof; and
- (e) the steps taken/being taken by the Government to minimize these white collar frauds in near future?

## ANSWER

Minister  of  State  (Independent  Charge)  of  the  Ministry  of  Statistics  and Programme Implementation; Minister of State (Independent Charge) of the Ministry  of  Planning  and  Minister  of  State  in  the  Ministry  of  Corporate

Affairs.

कारपोरेट कार्य मंत्री

(Rao Inderjit Singh)

(a) & (b): Fraud is covered under Section 447 of the Companies Act, 2013, the  investigation  of  which  is  covered  under  section  210  and  212  of  the Companies Act, 2013. In the last 03 years (2019-20, 2020-21 and 2021-22) investigations relating to 491 companies were assigned to Serious Fraud Investigation  Office  (SFIO)  and  investigations  relating  to  293  companies have been assigned to Regional Directors (RDs) of Ministry of Corporate Affairs. SFIO has filed number of complaints before the Competent Courts. Prosecutions have been filed by Registrars of Companies for fraud and noncompliances  of  various  provisions  of  the  Companies  Act.  Further,  as intimated by Securities and Exchange Board of India (SEBI), it also 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. (c)  &  (d):  SEBI  has  signed  Memorandum  of  Understanding  (MoU)  with Ministry of Corporate Affairs (MCA) for exchange of data on June 07, 2019 with  the  objective  of  facilitating  the  sharing  of  data  and  information between  SEBI  and  MCA  on  an  automatic  and  regular  basis,  sharing  of specific information related to suspended and delisted companies, shareholding  pattern  from  SEBI  and  financial  statements  filed  with  the Registrars  of  the  Companies  by  corporates  etc.    In  addition  to  regular exchange of data, SEBI and MCA 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): 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. In addition, 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 has also initiated KYC Norms for  Directors  and  companies.  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 be engaged 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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