By Ruma Dubey

Companies continue to do the ‘vanishing act’. The latest figure is 238 and this is the same as what Sachin Pilot had declared in 2012.

And this ‘latest’ figure comes from Arun Jaitley, who in July,gave this number while replying to a question in Lok Sabha. But the only new change since 2012 is that some 128 such companies were ‘traced’ and put on the ‘Watch List’ because they had started filing their returns and annual reports. Some 32 companies are presently under liquidation. So sum total - there are 78 companies that continue to be classified as ‘vanishing companies’and money these companies raised through IPOs was Rs.310 crore.  

This amount, Rs.310 crore seems like a very small amount compared to the looting in crores which happens otherwise but the worrying aspect is that companies continue to vanish and we can only watch them disappear, with our money. It is also a pity that the new proactive Govt has not updated this data and we continue to rely on outdated data on the website of Ministry of Corporate Affairs (MCA).  

Action was initiated against these companies for violation of the provisions of the Companies Act, 1956 by filing complaints u/s 159/220 of the Companies Act, 1956 apart from filing of prosecutions u/s 63/68 and 628 of the Companies Act, 1956 besides seeking assistance of police authorities and filing FIRs. One question – how will action be initiated on companies which do not simply exist anymore?

Promoters have been using this method to get rich quick and fast. It is an easy modus operandi. Float a company, run it for some three years, show profits and then take it public, collect horrendous amounts of money from the people, get it listed and after the first year, slowly start erring on publishing results and other basic corporate governance requirements. There will be tonnes of legal notices getting piled up but ignore all of them. Then slowly just disappear from the scene. Voila! The best magic trick to make big money! Get listed and then just scoot away. After all, history has proven that none of the authorities could do much to either trace these companies or bring such promoters to book.

Investors are left just high and dry, with no clue about the company. All of a sudden neither the company nor any of the directors can be traced. Countless letters to SEBI, the Registrar of Company (RoC) and the company does not get any response. The promoters make merry, earn a life time of money and the investors are left merely wringing their hands in frustration.

As per the definition stipulated by SEBI, any listed company, which raised money through initial public offer and, thereafter, stopped operations, did not file returns either with the RoC or SEBI, did not exist on the registered premises, managing director or any of the whole-time directors also could not be traced is termed as vanishing company.

Most of these vanishing companies were incorporated during the capital market boom in the 1990’s where any and every company was raising money. The plantation companies, finance companies, cotton ginning and milling companies, oil extraction companies, shrimp/prawn farm companies, soya companies; they all just came and disappeared with the public money.

What is required is a set of punitive action. The moment a company fails to publish its results for one or two consecutive quarters, SEBI should issue a warning to the investors, so that they have the opportunity to get out before it vanishes. Also the promoters should be black listed. None of the promoters should be allowed to raise money or even stand in as non-executive director for other companies for the next 10 years. From being a mere ornament on the Board, these non-executive directors need to be made more accountable. After all, MCA has changed the definition of ‘vanishing companies’ based on the role of non-executive directors.  

LIST OF SOME VANISHING COMPANIES:

• Ambuja Zinc
• Asian Vegpro
• Oriental Remedies
• SSK Fiscal
• Saket Extrusions
• Aashi Inds
• Bhavna Steel
• Citizen Yarns
• Bodh Gaya Ceramics
• Oriental Remedies
• Girish Hotels
• Global Network
• Hi-Tech Drugs
• Hitesh Textile 
• Ichakalanji Soya 
• Manav Pharma 
• Protech Switchgears 
• Topline Shoes 
• Carewell Hygiene 
• Hallmark Drugs
• Simplex Holdings 
• Zed Investments 
• Aditya Alkaloids
• Crestworld Marine
• Deccan Petroleum
• Kamakshi Housing 
• Nagarjuna Jiyo 

Go to the official website of MCA -http://www.mca.gov.in/MinistryV2/vanishing.html and there you are sure to come across the entire list of vanishing companies.