Cheating by the Company's management
Querist :
Anonymous
(Querist) 04 December 2010
This query is : Resolved
“A” is a holding Company and “B” its subsidiary. “A” transferred its goods manufacturing plant to its “B” subsidiary Company. The book value of the said plant was 20 crores. But the manaement of “A” pre-decided to got the plant’s valued at 40 crore from a valuer and was finally able to get the valuation done at 40 crores months after their recorded decision in their Board meeting. Is the act of the management pre- deciding the value before the valuer’s report legal as it effected the profitablity of both the companies (i.e. companies under the same management) and its shareholder. In other words the valuation was got done from the valuer as per the wishes of the “A”’s management. Can the holding company as well as valuer (for conniving with the management) be booked under the provisions of Indian Penal Code for manipulating the price and cheating shareholders of its subsidiary.
sachin sethi
(Expert) 04 December 2010
yes, it is an offense as the 'A' company has defrauded all of its shareholders, and management of the company is liable to be prosecuted under the provisions of penal code as well as offenses under companies act..
Guest
(Expert) 04 December 2010
Fraud is defined under the Companies Act. It also amounts to malfeasance/misfeasance on the part of the Board of Directors. You may send a notice to the concerned Companies asking for an explanation and fight it out legally. Companies Act is more effective than the I.P.C. in this case.
