The ministry of corporate affairs has begun prosecuting directors of Kolkata-based Balrampur Chini Mills, India's second-largest sugar company, for not complying with accounting standards and Schedule V1 (Section 211) of the Companies Act. The prosecution has been initiated after inspection under the Companies Act.
In a letter written in the first week of January, the ministry has asked its regional director in Kolkata to initiate action and submit an "action taken" report in the matter within 30 days, according to an inspection officer with the ministry.
The company did not follow disclosure requirements under Schedule V1 (Section 211), which relates to the inclusion of notes or documents with reference to a balance sheet or profit and loss account.
The prosecution has been recommended against the company, its directors and auditors. Kolkata-based G P Agarwal and Co is auditor to the company. The ministry has also directed to refer the matter to the Institute of Chartered Accountants of India to examine the auditors' actions.
The company, promoted by Vivek Saraogi, claims that the matter has been resolved. "There was an inspection around February 2008 under Section 209A of the Companies Act and some minor violations related to accounting standards and regrouping of figures in accounts were found. But the company had approached the Company Law Board. The Board imposed a penalty of Rs 18,000 on the company and the matter has been disposed of," said a company official.
Default by a firm in complying with Section 209A can lead to a fine not less than Rs 5,000 on every involved official along with imprisonment not exceeding a year. The officer or director convicted of an offence under this section has to demit office and will be disqualified from holding a similar office in any company for five years.
Balrampur Chini owns ten sugar mills, all located in east Uttar Pradesh. For the year ended September 30, 2008, the company reported a turnover of Rs 1,475 crore and net profit of Rs 97 crore. The company's share price on the Bombay Stock Exchange today closed at Rs 61, up 3.21 per cent from the previous day.