Daewoo and Vatsa face ministry heat

The ministry of company affairs has framed criminal charges against the top management of the two vanishing companies "" Daweoo India Corporation and Vatsa Financial Corporation.

Investigations are also under way in erstwhile listed companies like Kolar Biotech and Soundkraft.

These actions follow the investigation report by the Serious Fraud Investigation Office (SFIO) set up by under the Ministry of Company Affairs.

This means that small investors, who usually get duped and see their savings disappear together with the numerous vanishing companies, can finally have some respite.

The SFIO was formed as part of the recommendation of the Joint Parliamentary

Committee post the Ketan Parekh scam under the jurisdiction of the Ministry of company affairs.

In its investigation report, SFIO has found that Daewoo officials had inflated the stock of goods by almost Rs 150 crores to avail bank loans worth Rs 400 crore. The entire portfolio has turned into non performing assets in the books of many banks.

Similarly, 100-odd cases under the Indian Penal code have been charged against Vatsa Financial Corporation, which had been registered as a non-banking financial company with the Reserve Bank of India.

The company had gone for a public issue in 1994, thereby enhancing the paid-up capital to Rs 7,500 crore and authorised capital to Rs 50,000 crore.

Barring the public issue, there was no real inflow of funds. The NBFC had resorted to creation of artificial equity base through fictitious book entries. Fictitious shares were sold in the secondary market and also offered as collateral for bank advances.

Investigations further found that Vatsa had earlier filed its return with RBI as a NBFC. However, once Vatsa came under the RBI scanner as the regulator streamlined its vigilance, the NBFC converted itself into a trading and non deposit taking company. The Income Tax department has also put up a claim of non payment to the tune of Rs 30-40 crore.