New Delhi: The ministry of corporate affairs (MCA) will crack down on 12 publicly listed companies, which provided wrong information in annual reports that had been verified and signed by chartered or cost accountants or company secretaries.
MCA has asked the regional directors concerned to look into the role of the respective professionals. If proved correct, such professionals could lose their practising licences.
This could just be the beginning, according to Pavan Kumar Vijay, managing director, Corporate Professionals Group, which advises professionals and companies on corporate governance issues.
“Professionals as also companies were filing returns as a ritual so far, assuming that nobody will cross-check,” Vijay said. “With MCA making professionals responsible for certifying documents through their digital signatures, they need to be very careful, as there is a thin line of divide between negligence and intentional deed.”
MCA took just one variable, the number of shareholders in each of the 12 companies, and found several lapses in oversight.
“While in six cases, companies showed just one shareholder, in some they showed as high as 1.29 crore and 29 crore,” a ministry official said on condition of anonymity. The minimum number of shareholders in a publicly listed company by law should be seven.
“We have written to MCA’s regional directors to look into the matter. Based on their reports, the matter will be referred to the respective professional institutes such as the Icai (Institute of Chartered Accountants of India) and the ICSI (Institute of Company Secretaries of India),” said another top MCA official, who also declined to be named. “These institutes can take disciplinary action against these professionals, which can be as dear as taking away their licensing practices.”
A letter sent to all regional directors, a copy of which Mint has reviewed, said: “It can be also inferred that by putting (the) figure of only one shareholder in a listed company, the practising professionals have not discharged their duties prudently and are liable for professional misconduct.”
The letter also advised the respective regional directors to conduct quick enquiry against such professionals.
Information on only three of the 12 companies were found on the Bombay Stock Exchange (BSE) and only one on the National Stock Exchange (NSE).
“We have not heard from the RDs (regional directors) or MCA so far. But in 2010, we had 6,155 shareholders and this information is there in the company’s annual report as also (on) the stock exchanges. So how can we write six shareholders, especially when a listed company has to have a minimum of seven shareholders,” said a professional at Andhra Pradesh-based Suryalakshmi Cotton Mills Ltd, who did not want to be identified.
He added the company will respond to the ministry with clarifications once it is asked for.
An official at Chennai-based Raj Television Network Ltd, who did not wish to be identified, said: “Actually the company by mistake put share capital figures in the column for number of shareholders. But we rectified that by submitting a fresh form, as corrections cannot be carried in the same form, to RoC (Registrar of Companies). The ministry probably has not taken the updated form.”
He added the company will respond once it hears from MCA.
Raj Television, which is listed on both BSE and NSE, had 17,148 shareholders as of September 2010, the period for which ministry’s report pertains.
Turbotech Engineering Ltd, a Mumbai-based company, has filed one shareholder with MCA, whereas it had 362 shareholders in September 2010, according to BSE’s data of that period.
The phone numbers of the company given on the BSE website were found to be wrong. Email sent to the company remained unanswered.
Mint’s research shows that Greenearth Resources and Projects Ltd, a Mumbai-based company registered in Kolkata, had also put share capital in the place of number of shareholders.
An official at the company confirmed that the company’s share capital is Rs 29,0296,040, the figure shown as the number of shareholders with MCA. “The total number of shareholders with our company are 113,000,” said the official, who wanted to remain unnamed. He was neither aware that a wrong entry has been made, nor that the ministry is looking into the matter.
MCA will move on from merely counting the number of shareholders to other vital financial data and erring companies will face more action, Vijay said.
Ashok Haldia, director of PTC India Financial Services Ltd, said these aberrations can be taken into account only when the cases are referred to the respective institutes.
“The institutes will decide whether they are cases of professional negligence through their disciplinary mechanism and then take due action,” said Haldia, who is a former secretary of Icai.
Ashwin Ramarathinam in Mumbai contributed to this story.