Action on companies taking investors for a ride

New Delhi, Aug 27: The Ministry of Company Affairs has initiated stern action in cases where private companies, including finance companies Kuber Mutual Benefit Fund, Kuber Plants, Escorts Ltd and Morepen Laboratories have defaulted in refunding the money taken as fixed deposits from the gullible public, mainly small investors, long after maturity.

Figuring in the long list of defaulting companies are Duncan Industries, Escort Finance, McDowell Krest Finance, Rannaque Finance and Lloyds Finance among others.

Aware of the problems being faced by small investors who had invested in the fixed deposits of these private companies, the Company Law Board (CLB) has approved a scheme for repayment of deposits in 85 cases involving private companies, including finance companies.

Under the Companies Act 1956, the Company Law Board can on its own or on the application of the depositor, direct the company to make repayment of deposits in a time-bound manner.

A mechanism has been put in place to route the complaints of the depositors to the company concerned through the jurisdictional Registrars of Companies (RoC), for redressal of their grievances.

Now, auditors are required to make a statement whether any Director is disqualified from being appointed as Director of the company. Directors of such company which have failed to repay its deposits are deemed ineligible for appointment as director.

Two petitions filed in 2005 and 2006 are pending before the CLB respectively in connection with the Escort Finance and Escorts Ltd cases.

Regarding the case of Duncan Industries, Kolkata High Court in 2004 granted a restraint order on the RoC West Bengal following an application by the company apprehending criminal proceedings against its officers. This came in the wake of a scheme drawn up by the CLB for repayment of matured deposits in a phased manner.

With regard to Lloyds Finance, Bombay High Court in 2004 appointed a special committee to manage the affairs of the company with the mandate to formulate a scheme for repayment of deposits.

In the case of Morepen Laboratories, the RoC launched prosecution against the company in the court of Chief Judicial Magistrate, Solan and Jalandhar, for non-compliance of the orders of the CLB which had worked out the scheme for repayment in August 2003. However, the company has gone to court and the matter is pending before the Shimla High Court.

In the case of Kuber Mutual Benefit Fund, the scheme for repayment of deposits was approved by the CLB in 1995. The company is under liquidation and an official liquidator attached to Allahabad High Court was appointed seven years ago. Similarly, Chennai High Court wound up Mcdowell Krest Finance Ltd and a liquidator was appointed.

However, Kuber Plants, a plantation company, is under the purview of SEBI.

In the case of Rannaque Finance Ltd, RBI has filed prosecution against the company for non compliance of the CLB order of 1998 regarding repayment.

To protect the interests of the small investors, a facility has been opened for online filing of complaints by the depositors on the Ministry's website www.mca.gov.in. These complaints are being taken up in e-governance mode for speedy redressal.

Through the 'Investor Education&Protection Fund' set up to educate the investors about their rights, awareness programmes for investors have been taken up through involvement of voluntary organisations and investor associations.

Similarly, a new web-site www.watchoutinvestors.com has been created with financial assistance from the 'Investor Education and Protection Fund' to help the investors to protect themselves from unscrupulous promoters, companies and entities. This website is a national web based registry of economic defaulters, who are indicted for economic offences/defaults.

UNI