Govt orders probe against record 76 cos for frauds in FY14

The government has ordered probes against as many as 76 companies -- the highest number of firms against which investigations were ordered for frauds in a single year till now -- in the current fiscal so far.

This has taken the number of total cases currently under investigation to 134 which include 58 cases related to chit fund activities in West Bengal and other states, Minister of Corporate Affairs Sachin Pilot informed the Lok Sabha in a written reply.

"During the last three years, the Ministry has ordered investigations under ... The Companies Act, 1956, in 134 cases of corporate frauds through the Serious Fraud Investigation Office (SFIO)," Pilot said.

In 2013-14 fiscal, investigation has been ordered against 76 companies for alleged frauds, according to the year-wise details provided by the Minister.

Probe had been ordered against 46 firms in 2012-13 and 12 companies in 2011-12.

On government measures to deal with increasing cases of corporate fraud, Pilot said that government has initiated a number of steps including stricter norms of corporate governance and their implementation under the new companies law and conferring statutory status to the SFIO.

Pilot also said the government has brought in amendments to securities laws enabling market regulator Sebi "to deal effectively to violations of laws by companies and individuals including those running Ponzi schemes".

The government has also increased the application of technology to help detect potential frauds through data mining and forensic audit technique, he said.

Citing a study by Thought Arbitrage Research Institute, Pilot said that frauds in companies occur "due to factors like inadequate internal control procedures, diversion of funds by promoters/ top management, failure of auditors in detection of frauds, etc".

"These factors are in any case widely recognised causes of frauds in companies," he added.