Three companies to face prosecution for fraud

The Ministry of Company Affairs has ordered prosecution of three listed companies "" Soundcraft, Kolar Biotech and Adam Sof "" under the Companies Act and Indian Penal Code.

The ministry took the decision following a report by the Serious Fraud Investigation Office. The Serious Fraud Investigation Office, which started the probe in 2005, found that all three companies have defaulted on the payment of principal and interest to the fixed deposit holders.

Soundcraft had also defaulted on payments of loans to 17 banks. These banks include "" Andhra Bank, Canara Bank, Dena Bank, Uco Bank, Oriental Bank of Commerce, SIDBI , Punjab National bank, Punjab and Sind Bank, Catholic Syrian bank, Central Bank of India, Bank of Baroda, Bank of India , UTI Bank, Bharat Overseas Bank, Vijaya Bank, Dombivili Nagrik Sahkari bank and Greater Bombay Nagrik Sahkari Bank Ltd.

The advances from these banks and financial institutions work out to around Rs 300 crore including the interest payments.

The investigations revealed that the company artificially boosted the sales turnover by creating banking entries through these bank accounts to attract banks and FIs to lend. These banks have also filed suit for recovery of their dues.

The company have also manipulated the share prices and duped Unit Trust of India and General Insurance companies as these shares are of no value now.

UTI holds shares of around Rs 7-8 crore, as per the investigation report.

It was also found that the company has also exported diamonds and the sale proceeds were not routed back to India.

The local trading of diamonds was found to be only done as paper transactions and entered into the books of accounts by preparing false invoices and circular trading without any actual movement of goods.

The promoter of Soundcraft had incorporated almost 50 companies to carry out these fraudulent activities which made New Indian Assurance Company Ltd and General Insurance Company to invest Rs 13.59 crore.