Tuesday, December 25, 2007

Vanishing Cos that siphoned Rs 10,000 cr of investor money

15 years ago, Satpal Kashyap invested his hard earned money into Ready Foods Limited, a company which the Government now calls a 'Vanishing Company'.
Today, only some documents are the proof of his investments.
Says an investor Satpal Kashyap, "They used to ask for Rs 2 or Rs 2.50 above the application and the total expenditure was just about Rs 250, so the public would get attracted to these companies and buy their shares. However, they would then ask for extra money over and above everything and the investor would get stuck."

Several companies tapped into the stock market boom of the early '90s only to vanish soon after. The promoters, the offices of such companies are simply untraceable.

Says Director Investor Helpline, Virendra Jain, "We look at the figure of 1992 when it was a boom period. There were 8 crore applications in primary issues and there were a spate of issues for next the four to five years. Then in this face, the company just vanished."

The Government has a list of 114 Vanishing Companies, estimated to have siphoned off over Rs 10,000 crore of investor money. However, the Minister of Corporate Affairs blames investors saying they should have been wiser.
Says Central Minister, Corporate Affairs, Prem Chand Gupta, "Investors should think twice. They shouldn't go with rumor mongers and instead should take an informed decision before they invest money in a company."

The police admits that tracing the owners of these companies, prosecuting them and recovering the money is practically impossible.

Says Additional DCP, Economic Offence Wing, K K Vyas, "By the time the complaint comes to us, the company has already vanished. There is a time gap of four to six years of a complaint being made and then it is difficult for us to trace the people running the company. So it's always better that people should file a complaint much earlier.

"The question now is whether the thousands of investors will ever recover their money? And why aren't the promoters of these vanished companies being tracked down and held responsible? The Government, sadly, has no answers.

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