In our two-month long search of promoters of ‘vanishing companies’ we came across dozens of irate shareholders—Xerox operators who were owed money and even chai-wallahs who were looking for justice.
Their wait for justice could be futile because the authorities plead helplessness. Sebi officials say that they lack the teeth to initiate criminal proceedings against India’s ‘vanishing companies’. The most they can do is to make new issue norms stricter so that the shams can’t slip past (not an ideal solution since that could unfairly block some good issues as well) and debar the promoters of ‘vanished’ companies from coming to the bourses for five years (though a life term would have been better).
The only authority, apart from the shareholders themselves, that can take these outfits to the courts is the DCA. The DCA claims that it has started investigating the matter and is in the process of proving that the companies (and their promoters) have well and truly vanished. And only once that process is over can the DCA prosecute the ‘vanishing’ companies. The DCA officials, however, are unable to put a time to how long this entire process may take.
So, we would like to put the issue back in your hands. On the next two pages, you will see the full Sebi list of 70 companies, alongwith our own helpful additions—the addresses and the phone numbers of the companies which are supposed to have vanished. If you are one of those who have been waiting for justice, go ahead, pick up the receiver and make that call.
For those who have not burnt their fingers, this is a cautionary tale. When markets are booming and sentiments are up, investors all over the world believe in the Greater Fool theory—that even if I make a bad investment, there will always be a bigger fool than me who will come along and buy it off me. Indian markets are not exactly “booming”, but there are a large number of companies which are getting ready to hit the market with new issues when sentiment picks.
This time, they will tell you fascinating tales about the New Economy. Don’t tell us we didn’t warn you.
Rajeev Dubey,Businessworld, 24 July 2000
