DCA set to reopen 107 vanishing firm cases

Gujarat has the maximum number of vanished companies

The Department of Company Affairs (DCA) has been instructed to reopen cases against 107 companies across the country which vanished after floating initial public offerings (IPOs).

Talking to Business Standard on Saturday, Union minister of state for company affairs Prem Chand Gupta said, "More than a year back the DCA had identified 227 entities registered with various Registrars of Companies (RoCs) as vanishing companies, but the earlier NDA government had wrongfully exempted 107 firms from this list, saying that these companies had complied with the respective RoCs in regard to filing financial results. Our investigations have revealed that these 107 companies were freed of any charges even though they did not pay back the money which they had raised though initial public offers. I have instructed the DCA to reopen the cases and take necessary action against the directors/promoters," Gupta said.

He also levelled allegations against the Gujarat government for not taking proper action against vanishing companies registered with the RoC, Ahmedabad.

"The new Companies Act, 2005, which would be in force from mid-2005, is strong enough to handle vanishing companies and also to curb such cases in the future. In the new Act we have worked out a fool-proof system to handle the initial process of registering a company with RoCs so that the directors /promoters are identified and they could be tracked down, if there is a need."

Interestingly, Gujarat witnessed the highest number of vanishing companies at 33. In spite of repeated orders, the Gujarat government has not taken any legal action against the directors/promoters of these companies.

Levelling allegations against the Narendra Modi-led state government, Gupta, said, "Unfortunately the state government is reluctant to take any legal action against these companies while after lot of persuasion, the state police registered cases against only a few such entities, thus not protecting the rights of the investors. The DCA has started talking to the chief secretary of Gujarat, P K Laheri, asking him to start taking action against promoters of these companies."

Laheri was not available for comment. A senior police officer in Gujarat, said, "We have registered cases against a few companies including Topline Shoes. But because of lack of knowledge among the police officials in the lower level to handle such cases, we are unable to chargesheet these cases. This is also the main reason for not registering new cases."

Minister of state for home Amit Shah could not be reached for comments.