core sector communique

Misuse of Public Issue Funds

A number of complaints are received by the Government against companies involved in misuse of public issue funds relates to misuse by way of diversion of funds, non-fulfillment of terms and conditions for the completion of the projects as per the time schedule given in the prospectus, no-traceability of the companies and their directors; etc. Where a company is found violating the provisions of the Section 62, 63, 68 and 628 of the Companies Act, 1956, prosecutions are filed against the companies and their officers found to be in default. Where a company or its directors are not traceable, FIRs are filed. If circumstances warrant, private detective agencies are also engaged to trace out the disappeared companies and their directors. The Ministry has also devised an e-Form to be filed by the companies which came out with IPO so as to monitor the utilization of funds raised through IPOs and also, to detect the diversion of funds. During 2009-10, 2010-11 and 2011-12, 27, 05 and 01 cases respectively were filed against the companies for violation of provisions of Sec. 63, 68 and 628 of the Act. This information was given by Minister of State for Corporate Affairs Shri R.P.N. Singh in reply to a written question in the Lok Sabha today.