As many as 87 companies have come under the scanner for alleged irregularities related to chit fund schemes and money circulation in the garb of multi-level marketing, the government said on Monday.
The Registrar of Companies (RoC) and its Regional Directors have been asked to scrutinise the balance sheets and inspect the books of accounts and other records of these 87 companies, minister of state for corporate affairs RPN Singh informed the Rajya Sabha on Monday.
In reply to a query whether the Ministry has asked RoC to probe the accounts of chit fund companies and certain Multi-Level Marketing (MLM) firms, the minister replied in affirmative.
RPN Singh said the directions have been issued on the basis of specific complaints received by the ministry against these companies, which are "alleged to be carrying on the activities related to prize chit fund and money circulation in the garb of multi-level marketing".
The minister was asked whether complaints have been received from investors about being cheated through MLM money circulation schemes.
Singh further said that SFIO (Serious Fraud Investigation Office) has recommended setting up of a specific central regulatory agency for the implementation of the Prize Chit and Money Circulation Scheme (Banning) Act, 1978.
The Act is administered by the Department of Financial Services (DFS), which has constituted an Inter-Ministerial Group consisting of representatives from DFS, Ministry of Corporate Affairs (MCA), the Reserve Bank, Securities and Exchange Board of India (Sebi), Department of Consumer Affairs and Central Economic Intelligence Bureau.
The Group will draft model rules on MLM companies and on the prohibited schemes under this Act, and also frame clarificatory guidelines on how to distinguish between direct sales from disguised money circulation schemes. To another question on whether the investigations were being referred to SFIO, rather than being conducted by RoCs, Singh said that multi-dimensional financial irregularities and frauds of complex nature are normally assigned to SFIO.
He said that SFIO is a "multi-disciplinary investigative agency comprising of experts from banking sector, capital market, company law, general law, forensic, audit, taxation, information technology etc."
The minister further said that various sections of the Companies Act empowers the central government to appoint inspectors for investigation of affairs of a company, but no extra-judicial power is bestowed upon the SFIO.
He said that RoC has powers to call for necessary information or explanation from any company, based on the documents submitted to its office by the company, and submit a report to the central government.
On the basis of RoC report, the government can order investigations into the affairs of the company.
In reply to another question on whether applications under RTI (Right to Information) Act are piling up in the various offices of the Corporate Affairs Ministry, Singh said that all RTI applications are attended to on a priority basis.