Ministry of Corporate Affairs advise against Vaishnavi group prosecution

NEW DELHI: The Corporate Affairs Ministry may not initiate prosecution against some entities of lobbyist Niira Radia's Vaishnavi group in a case of alleged falsification of financial statements, as these charges may not stand judicial scrutiny.

This follows a probe conducted by the SFIO ( Serious Frauds Investigation Office) into alleged violations by certain Vaishnavi entities. After its probe, SFIO is believed to have recommended prosecution proceedings for falsifying financial statements, as also for various other charges.

However, the Ministry's legal division has advised against prosecution proceedings under Section 628 of the Companies Act under which the punishment could include two years of imprisonment, sources said.

Section 628 pertains to providing false information in financial statements by a company.

The Ministry had earlier granted permission to begin prosecution for certain other violations as well.

The SFIO had recommended initiating prosecution proceedings against four entities -- Vaishnavi Advisory Services, Vaishnavi Corporate Communications, Vitcom Consulting and Neucom Consulting -- under Section 628.

These four companies mentioned certain transactions (rent payments) as professional fee in their balance sheets and this amounts to falsifying statements, the probe found.

However, in its opinion given earlier this month, the Ministry's legal division said that the "findings of the investigating officer(s) do not meet the basic ingredient(s) of the violations under Section 628 of the Companies Act, 1956 and may not withstand the judicial test in the Court of Law".

After finding various violations of other sections, the SFIO had recommended prosecution under Section 628 citing cumulative effect of these violations.

The legal division has also observed that findings of the Investigating Officer are based on presumptions and assumptions whereas the fundamental principle of the criminal jurisprudence is that "prosecution or proposed prosecution has to stand upon its own legs and must establish the culpability beyond all reasonable doubt".

Last month, Vaishnavi Corporate Communications wrote to Corporate Affairs Minister requesting him to examine the SFIO report dispassionately on the allegations made against them.

"If necessary, we are ready to offer a complete explanation on any matter at any stage either to the Government or in the public domain," the group had said and also requested for a copy of the probe report.

"We continue to be victimised by the vested interests which has resulted in irreparable damage to us and many investigations, none of which have led to detection of any illegality on our part," it had said.