List of Companies involved in Corporate Frauds/Chit Fund Scams

Cases of Corporate Frauds/Chit Fund Scams Involving Companies

The Ministry, during the last three years and current year, has ordered investigation into the affairs of 145 companies which were allegedly involved in illegal deposit taking activities.  A State-wise list of these companies is enclosed as Annexure. In many of the cases where investigations have been completed, diversion of funds so collected and/ or default by the companies in repayment of such deposits has been observed.

Regulation of such activities is covered by the following statutes:

i. Chit Funds Act, 1982, under which all chit funds require previous sanction from the respective State Governments.

ii. Prize Chits & Money Circulation Schemes (Banning) Act, 1978, enforcement of which lies with State Governments, defines and prohibits illegal chit fund schemes.

iii. RBI Act, 1934, administered by the Reserve Bank of India, bars any individual or a firm or unincorporated association of individuals from accepting deposits.

iv. SEBI Act, 1992, administered by the Securities and Exchange Board of India, to regulate Collective Investment Schemes.

v. Companies Act, 2013 (Sections 73 to 76) read with Companies (Acceptance of Deposit) Rules, 2014.

vi.  Special legislations passed by certain States to protect the interests of depositors.

Apart from enforcement of the above statutes and regulations, the following measures have been taken to protect the interests of the investors and to enable effective investigation into the affairs of companies allegedly involved in frauds:

(i)         ‘Fraud’ has been defined as a substantive offence in the Companies Act, 2013;

(ii)        Section 143(12) of Companies Act, 2013 requires the auditor of a company to report any fraud to the Board of Directors or Audit Committee of that company or to the Central Government, depending on the amount of fraud.

Annexure

LIST OF INVESTIGATION ORDERED IN RESPECT OF COMPANIES INDULGING IN ILLEGAL COLLECTION OF DEPOSITS

Year – 2012-13

Year – 2013-14

Year – 2014-15

Year – 2015-16

This information was given by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Lok Sabha today.