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| Edited By: Anurag Shah |Source: Zee Business |Updated: Mar 20, 2018, 05:05 AM IST
The government is taking strong action against shell companies with the Ministry of Corporate Affairs (MCA) terminating 2.36 lakh non-compliant companies and investigating bank account trails of these companies and handing a few cases to the Serious Fraud Investigation Office (SFIO) also. According to the minister of state for corporate affairs P P Chaudhary considering adding Artificial Intelligence to MCA21 portal with to detect finer discrepancies in details provided in companies balance-sheets. P P Chaudhary spoke to Anurag Shah on Insolvency and Bankruptcy Code and independent directors' role and other corporate issues.
The NPA mess was created by the UPA, resulting in the deterioration of banks' health. Thousands of crores were given by banks to a few companies, and after becoming NPA too, rules were relaxed and these accounts were not classified as NPAs. If these accounts were classified as NPAs on time, our banks wouldn't have been is such bad situation. The NDA government brought IBC and now the resolution is happening. In these 12 NPA cases referred by RBI, there is a company worth Rs 10 crore which got a loan of 900 crore. Despite being defaulter, this company wasn't brought under NPA as norms were relaxed. Companies were misusing IBC as promoters were buying their firms at a lower rate despite being defaulters. This January we made an amendment to IBC Act. In that amendment, we have made a few conditions such as promoters would not be allowed to bid. The new law is most compatible and in favour of ease of doing business. The government is committed for transparent structure and non-misuse of the corporate system.
Banking fraud will comes under the finance ministry, but companies or subsidiaries come under the corporate affairs ministry. SFIO is looking for frauds in these companies. As CBI, SFIO too has sufficient powers. SFIO is getting all money trail details related to the case.
About 2.97 lakh companies identified as non-compliant, many among these 2.97 lakh firms can be shell companies. Although a shell company is not defined in Companies Act, these firms are hollow entities just registered, but they don't have any business. These companies are involved in money laundering and illegal activities. Of the 2.97 lakh firms which were sent notices, about 60,000 have done compliance. In result around 2.36 lakh companies have been terminated. Investigation has started and bank accounts of non-compliant companies has been frozen, and investigation of bank trails of these companies is on. We recently held a meeting with banking secretary, Indian Banks' Association chairman and asked banks to give information about specific companies' accounts. We are getting information about these companies bank account trails, especially before and after demonetisation money. A few companies deposited thousands of crore during demonetisation and withdrew later. A few cases have been handed over to SFIO also.
At present, the MCA21 portal is used and it is doing some sort of flagging. But MCA21 is not able to pick up the finer details of the balance sheet. Now we are seriously considering artificial intelligence to be incorporated with MCA21. By this we would be able to catch fraud of companies, which is not visible in accounting. With artificial intelligence, minor details of uneven activities can be traced. Recently, we came across 10,000 companies that have taken deposit from public, now these companies are not giving back money, interest and other accrued benefits. Big investors can approach the court, but small investors have limited options to fight in the court as the proceedings are costly. So in the interest of small investors, we are asking all information from companies electronically about deposits, interest, etc, and with artificial intelligence software it would be matched with the balance-sheet of the company. If there is any discrepancy, action can be taken against the companies and their directors in the interest of small investors.
About 10,000 companies have been given a warning.
NFRA is a part of Section 132 of Companies Act 2013 and just the implementation is remaining. Provisions of Companies Act are being implemented on different dates. We have taken views of all stakeholders, including professional bodies. A high powered committee has also taken views related to the professional bodies.
There are lakhs of independent directors in all private, public, listed and unlisted companies. But for PSU companies, there is a selection process for directors. The government is seriously considering taking training and awareness courses for PSU independent directors. We are discussing with stakeholders for all independent directors (public and private) registration and data base, which can be used by government to avoid frauds. We are talking to all stakeholders as it should not hamper ease of doing business.
The ministries of corporate affairs and finance are working in coordination. Internal and high powered committees are working on it. The MCA will give direction to the Securities and Exchange Board of India (Sebi) and will get details also.
There is a category of creditors in invoking of insolvency. These creditors can approach NCLT under IBC. Because of IBC investor confidence has been established. Creditors can invoke IBC and can do recovery through NCLT.
