The corporate affairs ministry is setting up a new intelligence unit that will perform ‘data mining’ from all possible sources to detect any wrongdoings by the companies and their promoters at the earliest possible stage. “The idea is to have a set of people to do the data mining, collection and checking of records that is available… and then link them with the inputs from investigating agencies,” corporate affairs minister Sachin Pilot said in an interview. The purpose of the exercise is to spot early warnings about corporate frauds by analysing the vast amount of electronic data available with the ministry.
THE BACKGROUND
In order to check frauds by corporates an agency by the name Serious Fraud Investigation Office (SFIO) already exists. SFIO has been in existence even before the new Companies Bill came into picture. However, the new bill contains special provisions for curbing frauds and other forms of wrongdoings by the corporate world. The bill also grants statutory status to SFIO. It is now realised that enough indications of misconducts were available in the case of many of the corporate frauds including the Satyam scam which occurred in the past. An Agency earmarked for detecting such corporate delinquencies is required. The present move of the ministry is a step in this direction.
THE OVERVIEW
Corporate fraud is an established fact. In fact this has become a part of the terminology, a parlance. Any use of the expression carries the exact meaning and everyone else understands what is meant by it. Even high-profile corporate entities [like Satyam] can be found indulging in malpractices. Satyam is not the first or last name in this class. We hear many stories, true or false, linked to corporate groups like Reliance, Sahara and Kingfisher. There should be some agency to unearth the truth. It is true that all stories cannot be pursued because that would amount to wasting time and energy. But it is also true that the whistle blown by genuine scribes and activists should not be ignored. However, if any whistle-blower is found to be unnecessary witch-hunting he/she should also not be spared by the law. Existing laws and agencies coupled with the mass of data available to the government departments like registration documents, bank accounts, tax returns and other periodical statutory reports filed, etc. are sufficient to show existing and intending frauds. The only requirement is that watchful eyes should be vigilant enough.
Corporate fraud is a global phenomenon. Many big names in the corporate world encompassing nations have been found indulged in mischievous deeds. However, one big difference is noted in the reaction of the political and civil administration in India and the western world. We in India start thinking in terms of enacting new laws and creating new agencies to ensure that similar frauds are not repeated. Our western counterparts, on the other hand, commence strict application of the existing laws. Existing laws suffice. The only condition is the strict application of existing laws and procedures.