BoB seeks action against RoC, Vision Organics

Bank of Baroda (BoB) has moved the Gujarat High Court seeking action against the Registrar of Companies (RoC), Gujarat, for failing to act against Vision Organics, a Vadodara-based vanishing company.

The bank also sought legal action against the Secretary of the Department of Company Affairs (DCA), New Delhi, officials of Vision Organics and two other banks, including a leading private bank.

Following the special civil application filed by the bank on February 17, Justice R M Doshit issued a notice to the RoC, Gujarat, Secretary of DCA, New Delhi, and other respondents. They were given time till April 9 to respond to the notices.

Interestingly, Gujarat has the maximum number of vanishing companies in the country.

"This case can be considered as an instance of how DCA remained negligent towards vanishing companies though it is primarily responsible for acting against such companies. This is first such case where a nationalised bank had to seek the court's intervention as the government agency did not even bother to acknowledge its complaints against Vision Organics," said Indravadan Parmar, senior advocate of Gujarat High Court, who filed the application for BoB.

Vision Organics, which took term loans of Rs 6.8 crore and Rs 7.95 crore from the Mandvi branch of BoB in May 1999 and November 1999 failed to pay back the loans. It also misled the investors at the time of its Rs 14.5 crore IPO floated in October, 2000.

"The company informed the bank about its IPO plans only on the day when the public issue opened, thus leaving no way for the bank to inform the concerned agencies and stop the IPO. The company furnished false information in the prospectus, besides omitting and concealing certain crucial facts. Vision was legally bound to furnish these details while going for the public issue," said Parmar.

Though the RoC in Ahmedabad was informed thrice by BoB officials about the irregularities in October 2001 and on October 8, 2002, RoC neither acted against the company nor confirmed receipt of the complaints. "Had the RoC acted when BoB informed them, Vision could not be able to shut down operations and cheat its shareholders and the bank," Parmar alleged.