Register of delinquents
Ashok V Desai
I learnt from the web site of the Ministry of Company
Affairs that All Seasons Foods had been liquidated in 1997. High time too. This
company was set up in the 1980s by someone who claimed to have been a film
producer. With the government’s consent, it issued shares to the public; it
took loans from banks. It never paid dividends; it soon stopped servicing its
bank loans too. When the banks sent people to its factory, they found that it
had no assets worth the name. Then, in the early 1990s, the company asked to be
allowed to make another public issue. Officials opposed it; but the promoter
had the support of a political leader who had fled to India from the same
province of Pakistan. So the finance minister, who had not yet changed party,
allowed the issue. It could not raise the minimum capital required if it was to
keep the money; so the promoter asked for an extension. I have not been able to
discover whether the minister allowed the extension. But I am happy that the
promoter will no longer be able to cheat investors. At least, not through All
Seasons Foods.
Since the ministry was taken over
by Prem Chand Gupta, its web site has become a mine of information. It now
gives R&S. When you open the window, you find it means research and
statistics, put out by a division of that name. I could not find any research,
bt gives figures of the number of companies registered, amalgamated,
liquidated, transferred, renamed and taken public or taken private.
Thus I learnt that the number of
registered companies is about 700,000, up from half a million in 1998. Over
600,000 of them are private (that is, not government) and private (that is, not
public). But 77,000 are public. Even BSE has only about 7,000 companies on its
board; where are the remaining 70,000 quoted?
I suppose they are like Krishna
Continental, in which I invested ten years ago because a friend said his uncle
was setting it up; it was called something else then. It has never paid
dividends. I understand from its annual reports that it built a hotel, which
promptly made losses and was closed down. I have no way to ascertain whether
the promoters blew up the money or pocketed it; but either way I lost it. And
the statutory audit is such a sham. The auditors say: records of fixed assets
are outdated. They have not been reconciled because, according to the
promoters, the hotel is being renovated. And they take the promoters’ word for
it that they have not disposed of the assets. The auditors did not verify
inventories, but took the promoters’ word for it that they had verified it.
They certified that the promoters’ verification procedures were “reasonable”,
whatever that might mean. Purchase procedures were commensurate with the size
and nature of the company, but at the same time needed to be strengthened. The
company has no internal audit; its controls are adequate, but need to be
strengthened. The company has paid its statutory dues in time, but the auditors
have only its word for it. The auditors take the promoters’ word for it that
they have committed no fraud. I think the auditors are just covering their ass;
if this is all the law requires them to do, the law is an ass too. My only
consolation is that if I lost a few thousand, Housing and Urban Development
Corporation and Tourism Finance Corporation of India lost Rs 20 million –
though all that too will eventually come from taxpayers like me.
I looked up the company affairs
ministry site to find out more about Krishna Continental. It was registered in
Delhi. When? Not known. Address? Directors? Financial accounts? None of these
is available. So then I searched for status of annual return and balance sheet.
I discovered that both had been filed up to 2002-03. I have balance sheets up
to 2004-05, so how did the Registrar of Companies (R0C) have them only up to
2002-03? Maybe the company sends me its annual accounts but has not filed them
with the RoC. But more likely, the RoC just receives annual accounts from
companies, ties them up into bundles and stacks them in some rain-sodden
warehouse.
Finally, I searched the list of
cases before Debt Recovery Tribunals; Krishna Continental was not amongst them.
That is strange, considering that its auditors say it is. Prem Chand Gupta has
done a good job of making government departments put information on the web.
But unless he can make them file, process and analyse the information, the
results will continue to be incomplete and unreliable.
