Forensic Audit

Report
REPORT ON FRAUD COMPANY LIMITED

SARANG KHATAVKAR
RISKPRO MANAGEMENT CONSULTING P LTDP | PUNE
1 CONTENTS
2 OVERVIEW .................................................................................................................................................... 2
3 EXECUTIVE SUMMARY ............................................................................................................................ 2
3.1 Facts in Brief ......................................................................................................................................... 2
3.1.1 Methodology in brief ................................................................................................................. 3
3.1.2 Findings in brief ........................................................................................................................... 3
4 BACKGROUND .......................................................................................................................................... 3
4.1.1 Subsidiary Companies................................................................................................................ 4
4.1.2 Promoter Group Companies: ................................................................................................. 4
5 ALLEGATIONS ............................................................................................................................................. 5
5.1 DETAILED METHODOLOGY ........................................................................................................ 5
5.2 METHODOLOGY VERIFICATION ............................................................................................... 8
5.3 DETAILED TIME-LINE ....................................................................................................................... 8
5.4 SCOPE RECONCILIATION............................................................................................................. 9
6 MAIN REPORT ........................................................................................................................................... 10
6.1 Brief of the Company ...................................................................................................................... 10
6.1.1 Main objects of the Company ............................................................................................... 10
6.1.2 Details of Management of the Company ............................................................................ 11
6.2 Financial Position of the Company ............................................................................................... 11
6.3 Allegations in brief ............................................................................................................................. 12
7 FINDINGSIN DETAIL – POINT-WISE FINDING AND ANALYSIS ........................................... 12
Finding No. 1: Siphoning and misappropriation of Funds of the Company to the tune of Rs.
103.45 crores by acquiring immovable properties at Bangalore, Delhi and Chandigarh .......... 12
Finding No. 2: Failure on the part of the Company and its other group companies and/or
subsidiary companies in repayment of deposits accepted by them ................................................ 13
Finding No. 3: Non-maintenance of books of accounts and statutory records .......................... 14
8 DISCLAIMERS ............................................................................................................................................. 14

FORENSIC AUDIT REPORT | Report on FRAUD COMPANY LIMITED

2 OVERVIEW
The present assignment was handed over to Riskpro Management Consulting to conduct the
forensic audit of Fraud Company Limited as there were various allegations against the company
for misappropriation and siphoning of funds of the company and diversion of assets.
The engagement letter was executed on 25th August, 2015, as per which the scope of forensic audit
was defined to be as under:
a. Analyses of all relevant documents including the secretarial, accounting and
administrative documents in respect of the Company and its group and
subsidiaries companies;
b. Extracting data and collecting documents from all the concerned third parties
including government / statutory authorities and banks;
c. Interviews of management, staff and employees, and other relevant third
parties; and
d. Preparation of Report.

3 EXECUTIVE SUMMARY

3.1 FACTS IN BRIEF

The Department of Police, NCT had approached Riskpro Management Consulting for conducting a
forensic audit of the Fraud Company Limited ( in short the “Company”) which is a public limited
company incorporated on 25th November, 2003 under the provisions of the Companies Act,
1956.
As per the information available to the Department of Police, the Company had launched various
public deposit schemes such as recurring deposit scheme, fixed deposit and cash certificate.
The total amount of public deposits accepted by the Company amounts to Rs. 298.09 crores.
However, only 0.01% of the above amount has been invested by the company in statutory
liquidity ratio.
Further, upon a preliminary examination conducted by the Department of Police, it was observed
that the entire group of companies is in financial trouble and repayment of interest and principal
to depositors. It was also observed that various complaints including civil and criminal complaints,
complaints before statutory agencies such as EOW and RBI and various winding-up cases have
been filed against the different group companies and their directors / promoters primarily alleging
fraudulent diversion of money and dishonest misappropriation of funds.

FORENSIC AUDIT REPORT | Report on FRAUD COMPANY LIMITED

Under these circumstances, an Engagement Letter was signed between GRT Advisors and Consultants
and the Chief of Department of Police on 25thAugust, 2015 for conducting the forensic audit of
the Company.

3.1.1 Methodology in brief

It was decided and agreed by our team to follow a detailed methodology for conducting the
investigation for the purposes of forensic audit of the Company. The said methodology consisted
of the following broad steps:
a. Procurement of documents from the Company and its group / subsidiary
companies (if any);
b. Procurement of documents from necessary third parties;
c. Interviewing and recording the statement of the management of the Company,
including ex-management and also employees and staffs of the Company;
d. Interviewing and recording the statement of necessary third parties;
e. Detailed analyses of all necessary documents and evidence on record; and
f. Preparation of Report.

3.1.2 Findings in brief

Upon a detailed investigation, it has been found that the Company and its directors are liable for
prosecution under various provisions of the Indian Penal Code, 1860, Companies Act, 2013 and
any other relevant laws on the following three accounts:
a. Siphoning and misappropriation of Funds of the Company to the tune of Rs.
103.45 crores by acquiring immovable properties at Bangalore, Delhi and
Chandigarh;
b. Cheating and fraud and siphoning of money of the Company may be lodged
against the Company and its directors for siphoning of money of the Company
in the garb of deposit schemes being floated by the Company; and
c. Non-maintenance of the statutory records of the Company as well as its group
and subsidiary companies

4 BACKGROUND
Fraud Company Limited ( in short the “Company”) which is a public limited company
incorporated on 25th November, 2003 under the provisions of the Companies Act, 1956. vide
Registration No. 87-091345 having its registered office at Con Bhawan, UGF, Banke Road, Delhi
– 110056. The Company was listed on the Bombay Stock Exchange (BSE) from 1994 to 2007
after which it was delisted by the BSE.

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 • The Company was granted Certificate of Commencement of Business on 16th
December, 1988.
• The Company was promoted by 3 promoter directors being as under:
1.1.1 Mr. XYZ
1.1.2 Mrs. JHG
1.1.3 Mr. TYR
Later, various other directors were inducted on the Board of Directors of the Company, and a
detailed list of Board of Directors since inception of the Company is attached hereto as Annexure
– 1.
The main objects of the Company is as under:
“To promote the formation and mobilization of capital and to promote industrial finance by way of advance,
deposit of lending money, to manage capital, savings and investment, to act as a discount and acceptance
house and purchase.
To carry on and undertake business of finance and trading out, finance, re-finance, to act as or carry on
the business of consultants, advisers, experts and technical collaborators in matters pertaining to, without
prejudice to the generality of the foregoing, portfolio management services, syndication of loans,
counselling and tie-up for project and working capital, infrastructure finance, corporate re-structuring,
corporate planning & strategic planning, foreign currency lending or borrowing, project planning and
feasibility, investment counseling, setting up of joint ventures and further perform any other kind of role
as an Intermediary or Advisor in the Securities Market.”

4.1.1 Subsidiary Companies

The Company has one Company being Stock Frauds Private Limited which is a wholly owned
subsidiary of the Company. Further, Inventory Fraud Private Limited is the subsidiary of Frauds
Private Limited, and in effect is a step-down subsidiary of the Company i.e. Fraud Company
Limited.

4.1.2 Promoter Group Companies:

The Promoters of the Company had also promoted various other companies for the purpose
of its objects and for making investments in other verticals. The various other companies
promoted by the Promoters of this Company and details of their respective shareholding
and directorships has been detailed and marked hereto as Annexure – 2.

• As per the information made available, the Company had launched various public
deposit schemes such as recurring deposit scheme, fixed deposit and cash certificate.
The total amount of public deposits accepted by the Company amounts to Rs. 298.09
crores. However, only 0.01% of the above amount has been invested by the company in
statutory liquidity ratio. Also, it appears that the Company has failed to comply with
almost all the norms necessary for non-banking financial companies.

FORENSIC AUDIT REPORT | Report on FRAUD COMPANY LIMITED

 • Upon a preliminary examination conducted by the Department of Police, it was
observed that the entire group of companies is in financial trouble and repayment of
interest and principal to depositors. It was also observed that various complaints
including civil and criminal complaints, complaints before statutory agencies such as
EOW and RBI and various winding-up cases have been filed against the different group
companies and their directors / promoters primarily alleging fraudulent diversion of
money and dishonest misappropriation of funds. The above cases are pending trial
before the competent courts of law having necessary jurisdiction.
• Under these circumstances, it was felt necessary to conduct a forensic audit of the
Company and the team of the undersigned were appointed vide Engagement Letter
dated 21.04.2015.

5 ALLEGATIONS
The various allegations against the Company and its directors, which also form part of the scope
of the present audit, are as under:

• Diversion and dishonest misappropriation of funds to the tune of Rs. 103.45 crores
including acquisition of immovable properties at Bangalore, Chandigarh and Delhi.
• Failure on the part of the Company and its other group companies and/or subsidiary
companies in repayment of deposits accepted by them.
• Non-maintenance of books of accounts and statutory records.

5.1 DETAILED METHODOLOGY

The team of Certified Forensic Accounting Professionals (CFAP) was deputed to investigate
into the affairs of the Company and all its group / subsidiary companies since incorporation and
to analyse the financials of the said companies.

• Understanding the quantum of work and to facilitate a comprehensive report, the team
was divided into three groups who were assigned specific areas of work.
• One group was specifically responsible for scrutinizing and analyzing the documents
and records available with the Company and its group/subsidiary companies. The
team/group members scrutinized various secretarial, accounting and administrative
records of the companies which included financial statements of the said companies,
statutory records being maintained, ledger accounts, vouchers, registers, bank
statements and all other relevant documents being in the custody of the companies.
However, considering the fact that the company was quite old, most of the secretarial,
accounting and administrative records were hampered and most of the documents
were not maintained by the Company in its requisite form.

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• Second group was sent to the third parties including Registrar of Companies, Banks
where the accounts of the companies were maintained, Police and EOW Department
to investigate into the affairs of the said companies.
• Third group was deputed to interview the relevant persons including the management
of the said companies and third parties to confirm and verify the team’s understanding
of the entire assignment.
• The step-wise actions taken by the team for conducting the present audit are as under:
o As a first step, all the secretarial, accounting and administrative records of the
said companies including the books of accounts and statutory records were
inspected by the team and photocopies of all the necessary documents were
taken into custody by the team. The companies were specifically requested to
provide access to the said documents/records including the records of the
group and subsidiary companies. The team made personal visits to the premises
of the Company, group companies and subsidiaries at their registered offices as
well as all other corporate offices, and went through the voluminous records
and books of accounts stored therein. However, since the company appeared
to be quite old, thus all the documents could not be made available to the team
officials.
o It was also observed during the investigation that the Company had
accepted deposits from approximately 33,20,198 small depositors
through cash payments and not a single investor/depositor had made the
payment on non-cash basis or through cheque or any other mode of
payment. The details of all the investors / depositors as provided by the
Company were also taken. It may be worthwhile to mention here that
the Company and its officials were very reluctant at the first instance to
provide the exact details of such investors / depositors to the team
members. However, upon a lot of persistence and enquiry, the Company
provided uncollated and unorganized data of all the depositors and
considering the limited timeline of the entire assignment, the team could
not spend much time and effort on the said document and thus a detailed
finding could not be reached as regards the said data. However, it may be
advisable to depute someone to analyse the said data at a minute level.
o The companies were having bank accounts with various banks across the
country. However, it was observed that a large number of bank accounts
were maintained by these companies in unrelated states i.e., states where
no registered / corporate / regional offices of the companies were
present. It was also observed that only a few accounts maintained by the
Company were in the Public Sector Banks. Further, the Company also
had few accounts in non-scheduled banks. The major banks with whom
the Company and its group / subsidiary companies had important
accounts are as under:

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 i. A Bank, Delhi
ii. B Bank, Chennai
iii. C Bank, Puducherry
iv. D Bank, Assam
v. E Bank, Bombay
vi. F Bank, Link Road, Tirunevelli
vii. G Bank, Chandigarh
Certified copies of statement of accounts in respect of the accounts maintained by the
Company were sought from all the banks where the said companies had even a single bank
account. Accordingly, the team obtained the said certified copies of statement of accounts
along with photocopies of all relevant documents including account opening forms,
payment/receipt vouchers etc. However, various transactional vouchers could not be made
available to the team since the said vouchers were destroyed by the banks in terms of the rules
for preservation of records.

• Certified copies of the records available with the Registrar of Companies regarding
authorized capital, issued capital, changes in directorships, annual accounts etc. were
also obtained.
• The members of the team also went to all the places where immoveable properties of
the companies were situated. The team also went to the offices of patwaris, tehsildars
and Sub- Registrars of the area and collected the relevant documents / details in
relation to the said properties of the companies.
o Various litigations are also pending against the companies and accordingly the
relevant documents pertaining to the same were also collected by the team.
o Thereafter, the team interviewed the management (present and ex-
management), staffs and employees and all other relevant parties associated
with the companies. Further, the team also contacted and interviewed third
parties associated with the companies including the depositors, officials of the
banks, dealers etc. The management, especially the ex-management were
reluctant to reply to all the questions being asked by the team and most of the
replies given by the management could not also be corroborated with the
documents made available to the team since the concerned transactions were
old and proper records were not maintained.
o Upon completing a thorough exercise as detailed above, the present report has
been prepared by the team in view of the specific allegations. However, due to
various constraints as explained above, a lot of transaction which prima facie
appeared to be dubious could not be investigated by the team in a proper
manner and the team could not reach on proper conclusions in respect of the
same. Details of such dubious transactions on which no concrete findings could
be achieved are enlisted as Annexure – 3 to this Report.

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5.2 METHODOLOGY VERIFICATION
The team initially carried desk-based analyses and reviews of the records and documents
available to the team and categorized the details into various broad transactions.
After the first round of review and analyses, the transactions were also verified on the basis of
information obtained from the third parties. Further, to gain a better understanding of various
transactions and to validate various assumptions arising out of the initial desk-based review,
the team was deputed for actual field visits.

• Various transactions were also corroborated by way of the statements recorded during
the interviews.
• Thereafter, when the team found that documentary evidence supporting various
transactions was incomplete, the team undertook an in-depth analysis of the said
transactions. The in-depth analyses included field visits, verification of authenticity of
documents / records with records held by third parties and also roles and
responsibilities of each managerial persons (including ex-management), staff and
employees were determined transaction-wise. Further, at various places opinions from
Forgery Experts have also been taken to verify the authenticity of various documents.
• However, wherever the team could not determine the authenticity of documents /
record in relation to any transaction and / or the team could not collect necessary
documentary evidence, such transactions have been marked as inconclusive

5.3 DETAILED TIME-LINE

As per the engagement letter, the entire assignment was to be completed within a period of 10
months. The time lines for the said assignment are as under:
(a) 25th August, 2015–Date of execution of engagement letter;
(b) 28th August, 2015 – Deputation of team for the purposes of forensic audit.
(c) 30th August – 25th September, 2015 – Inspection and procurement of
statutory records of the Company and its subsidiaries and group
companies.
(d) 26th September – 13th November, 2015 – Inspection and procurement of
documents from third parties.
(e) 14th November, 2015 – 15th December, 2016 – Initial scrutiny and desk-
review of all the documents obtained.
(f) 16th December, 2015 – 29th March, 2016 – Interviews of all relevant
persons, management, employees and staffs of the Company as well as
relevant third parties, and recording of statement on oath.
(g) 30th March, 2016 – 15th May, 2016 – Detailed, in-depth analyses of the
allegations and corroboration of the same with the documents and
statements on record.

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 (h) 16th May, 2016 – 08th June, 2016 – Preparation of the Report.

5.4 SCOPE RECONCILIATION

Based on the initial meeting with the Department of Police, the scope of the forensic audit of
the Company was to look into the three broad allegations, being
a) Diversion and dishonest misappropriation of funds to the tune of Rs. 103.45 crores
including acquisition of immovable properties at Bangalore, Chandigarh and Delhi;
b) Failure on the part of the Company and its other group companies and/or subsidiary
companies in repayment of deposits accepted by them; and
c) Non- maintenance of books of accounts and statutory records.
• For looking into the above said allegations, a detailed analysis of all the secretarial,
accounting and administrative documents of the Company and its group and subsidiary
companies was required. Also, analyses of all the documents obtained from third
parties were also required.
• In addition to the above, detailed interviews were also required to be conducted to
extract relevant information.
• Accordingly, as per the tasks performed by the team in the past 6 months, the scope
reconciliation of the present assignment is as under:

[Link]. Scope Status Remarks

1. Analyses of all relevant Completed Certain aspects could not be

documents including the checked since the Company
secretarial, accounting and was quite old and the earlier
administrative documents in records were not properly
respect of the Company and its maintained by the Company.
group and subsidiaries Also, the management were
companies. initially reluctant in giving
all the details of the depositors.
Later an unorganized data was
given which was taking
considerably huge amount of
time for extracting relevant
information for the purposes of
the Report. Thus, various
transactions could not be
checked minutely

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 2. Extracting data and collecting Completed Certain transactional vouchers
documents from all the concerned could not be made available by
third parties including government the Banks since the said
/ statutory authorities and banks. vouchers were destroyed
by the Banks in terms of the rules
for preservation of records.

3. Analyses of all documents Completed Since certain

extracted from the third parties documents could not be made
available to the team thus
certain transactions which prima
facie seemed to be fraudulent
could not be analysed in detail.

4. Interviews of Completed Completed and detailed

management, staff and employees, transcript also prepared.
and other relevant third parties

6 MAIN REPORT

6.1 BRIEF OF THE COMPANY

Fraud Company Limited (in short, the “Company”) which is a public limited company incorporated
on 25th November, 2003 under the provisions of the Companies Act, 1956. vide Registration No.
87-091345 having its registered office at Con Bhawan, UGF, Banke Road, Delhi – 110056.
The Company’s original registered office was at RT-1, Block 2, Sector 3, Delhi and was later
shifted to Con Bhawan, UGF, Banke Road, Delhi – 110056 on 27.09.1997.
The Company was listed on the Bombay Stock Exchange (BSE) from 1994 to 2007 after which it
was delisted by the BSE.
The Company was granted Certificate of Commencement of Business on 16th December, 1988.

6.1.1 Main objects of the Company

The main objects of the Company is as under:
“To promote the formation and mobilization of capital and to promote industrial finance by way of advance,
deposit of lending money, to manage capital, savings and investment, to act as a discount and acceptance
house and purchase.
To carry on and undertake business of finance and trading out, finance, re-finance, to act as or carry on the
business of consultants, advisers, experts and technical collaborators in matters pertaining to, without

FORENSIC AUDIT REPORT | Report on FRAUD COMPANY LIMITED

prejudice to the generality of the foregoing, portfolio management services, syndication of loans, counseling
and tie-up for project and working capital, infrastructure finance, corporate re-structuring, corporate
planning & strategic planning, foreign currency lending or borrowing, project planning and feasibility,
investment counseling, setting up of joint ventures and further perform any other kind of role as an
Intermediary or Advisor in the Securities Market.”

6.1.2 Details of Management of the Company

As per the various documents received from the office of Registrar of Companies, the details of
management for the past 10 years are as under:

[Link]. Name and last known Designation Date of Date of

address Cessation
Appointment

1. Mr. XYZ Promoter Director 15.11.1988 Continuing

[Address]

2. Mrs. JHG Promoter Director 15.11.1988 Continuing

[Address]

3. Mr. TYR Promoter Director 15.11.1988 Continuing

[Address]

4. Mr. AHKJ Additional Director 19.04.1997 29.03.2007

5. Mrs. NBF Director 20.09.1994 11.08.2008

6. Mr. P.K. JHD Director 21.01.1999 04.01.2016

7. Mr. BHG Director 01.05.2000 08.03.2007

A detailed list of Board of Directors since inception of the Company is already attached hereto as
Annexure – 1.

6.2 FINANCIAL POSITION OF THE COMPANY

The Net worth of the Company for the financial year ending on 31st March, 2016 was Rs. 189.03
crores. The extracts of Balance Sheet and Profit and Loss Account for the financial year ending on
31st March, 2016 is reproduced herein below:
[Tip: The details of B/s and P/L account as per latest audited balance sheet be reproduced for the sake of
ready reference.

• Also, figures / extracts from any other financial statement may also be reproduced wherever
necessary for corroborating the same with the allegations as well as the findings]
• Certified copies of financial statements of the Company for the last 10 financial years, as
obtained from the office of Registrar of Companies is annexed hereto as Annexure – 4.
• Upon a preliminary examination conducted by the Department of Police, it was
observed that the entire group of companies is in financial trouble and repayment

FORENSIC AUDIT REPORT | Report on FRAUD COMPANY LIMITED

 of interest and principal to depositors. It was also observed that various
complaints including civil and criminal complaints, complaints before statutory
agencies such as EOW and RBI and various winding-up cases have been filed
against the different group companies and their directors / promoters primarily
alleging fraudulent diversion of money and dishonest misappropriation of funds. The
above cases are pending trial before the competent courts of law having necessary
jurisdiction.

6.3 ALLEGATIONS IN BRIEF

• Diversion and dishonest misappropriation of funds to the tune of Rs. 103.45 crores
including acquisition of immovable properties at Bangalore, Chandigarh and Delhi.
• Failure on the part of the Company and its other group companies and/or subsidiary
companies in repayment of deposits accepted by them.
• Non-maintenance of books of accounts and statutory records.

7 FINDINGSIN DETAIL – POINT-WISE FINDING

AND ANALYSIS
Finding No. 1: Siphoning and misappropriation of Funds of the Company to the tune of
Rs. 103.45 crores by acquiring immovable properties at Bangalore, Delhi and
Chandigarh
• That during investigation, it was observed that the Company had made payments to the
tune of Rs. 103.45 crores to Mr. Faulty, who was a proprietor in the firm namely Faulty
Associates.
• However, upon verification of the records of the Company no necessary resolutions /
minutes of meetings or any other statutory record was found for giving such huge amount
to a third party. Upon a further investigation into the records of Faulty Associates and
upon recording the statement of Mr. Faulty on oath it was ascertained that Mr. Faulty was
the relative of one of the directors of the wholly-owned subsidiary of the Company. Mr.
Faulty also admitted to have received the said amount. The statements of Mr. Faulty as
recorded by the team are annexed hereto as Annexure– 5.
• The said amount of Rs. 103.45 crores were transferred through RTGS mode in 17 different
installments. The transfer was made through 13 different banks and the payment was
completed from May, 1994 to August, 1999. However, all the vouchers in respect of the
said transfers could not be obtained from the banks since the same were very old and most
of them were destroyed. The vouchers and bank statements / documents received from
various banks in respect of transfers made from May, 1994 to August, 1999 are collectively
annexed hereto and marked as Annexure – 6.
• Upon a prima facie review of documents available with the Company, it was observed that
the Company had purchased various land parcels in Bangalore, Delhi and Chandigarh.
Thereafter, the team was sent to the patwari and Sub-Registrar’s office for verification of
land details so purchased, whereunder all the details related to the said land parcels were
obtained. It was also observed that the said parcels were brought by the same person
namely Mr. CFG, on behalf of the Company under a power of attorney dated 12.12.1994.
• The copy of the said power of attorney was obtained from the Sub-Registrar’s office and
Mr. CFG was also interviewed and his statement was recorded on oath. Upon investigation,
it was revealed that the power of attorney was fabricated and no authority was ever given

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 to the said person and he did all the said transactions upon receiving instructions from Mr.
XYZ, the promoter director of the Company. Also, no resolution was ever passed by the
Company to acquire any of the land parcels, so acquired on behalf of the Company. The
certified copies of land records obtained from the patwaris of various taluks in Bangalore,
Delhi and Chandigarh are annexed hereto as Annexure – 7 and the certified copies of the
documents obtained from the Sub-Registrar’s offices are annexed as Annexure – 8.
• The team further interviewed all the promoter directors of the Company as well as
directors of its group companies, and the same has revealed a various dubious transaction
for which the directors are liable to be prosecuted under Sections 405, 408, 419 and 420
of the Indian Penal Code, 1860.
[Tip: The relevant sections of Indian Penal Code, 1860 may be quoted.]
• Further, Mr. Faulty and Mr. CFG are also liable to be prosecuted under Section 120B of the
Indian Penal Code, 1860 for criminal conspiracy.
[Tip: The relevant sections of Indian Penal Code, 1860 may be quoted.]
Finding No. 2: Failure on the part of the Company and its other group companies and/or
subsidiary companies in repayment of deposits accepted by them
• Upon investigation, it was observed that all the investors have invested in the
various schemes of the Company on cash basis only, and not a single
investor/depositor has made the payment on non-cash basis or through cheque
or any other mode of payment. Further, the proper details of all the investors
were not available with the Company, and only name and amount invested was
noted in a register. No proper records were maintained by the company. Only
details of few investors who had filed formal complaints with the Courts /
Company Law Board were made available through public records. The copies of
formal complaints filed by depositors as obtained from various courts of law are
annexed hereto as Annexure – 9.
• During the initial phases of investigation, the Company and its officials were
reluctant to give any information in respect of the deposits accepted. Upon
further enquiry, only minimal documents were provided to the team. Further, the
team also contacted Registry of relevant courts and Company Law Board and
obtained information about the depositors who had filed formal cases against the
Company for repayment of deposits. The records provided by the Company in
respect of the depositors of the Company are annexed hereto as Annexure –
10.
• The team thereafter tried contacting each and every depositor whose name and
phone number/ address was mentioned in the register/ record maintained by the
Company. Out of 33,20,198 small depositors, only 26,005 could be contacted.
Upon contacting the said depositors, the statements were recorded on oath
whereunder about 21,540 depositors have stated that they have never deposited
any money with the Company and most of them were not even aware of the name
of the Company. The statements of depositors as recorded on oath is annexed
hereto as Annexure – 11.
• Thus, a formal case for cheating and fraud and siphoning of money of the Company
may be lodged against the Company and its directors for siphoning of money of
the Company in the garb of deposit schemes being floated by the Company.

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Finding No. 3: Non-maintenance of books of accounts and statutory records
• During the entire process of investigation, it was observed and noted by the team that
most of the statutory records were not available with the Company as well as its group
and subsidiary companies.
• It was also noted that name of one of the group companies was struck- off from the
Register of Companies maintained by RoC due to non- filing of statutory documents with
the Registrar for 8 years.
• In view of the prima facie opinion made as per the observations during the investigation,
it is opined that the Company is liable for prosecution by the Registrar of Companies.
• One of the major limitations faced by the team was the time constraint. Various persons
could not be interviewed due to paucity of time for the entire assignment.
• Further, Company and its officials were very reluctant at the first instance to provide the
exact details of such investors / depositors to the team members. However, upon a lot of
persistence and enquiry, the Company provided uncollated and unorganized data of all
the depositors and considering the limited timeline of the entire assignment, the team
could not spend much time and effort on the said document and thus a detailed finding
could not be reached as regards the said data.
• The Company appeared to be quite old, thus all the documents could not be made
available to the team officials.
• Various transactional vouchers could not be made available to the team by the respective
banks since the said vouchers were destroyed by the banks in terms of the rules for
preservation of records.
• The management, especially the ex-management were reluctant to reply to all the
questions being asked by the team and most of the replies given by the management could
not also be corroborated with the documents made available to the team since the
concerned transactions were old and proper records were not maintained.

8 DISCLAIMERS
This Report is based exclusively on the facts and circumstances described during the engagement of the
team for conducting Forensic Audit and is given based on the representations, express or implied, and
based on our interpretation of law, which may differ to another person. Existence of any other factual or
historical background not provided to us might require a conclusion different from the one expressed
herein.
The information contained herein is specific only to the facts of the present case and cannot be used in
any other matter and is not intended to address the circumstances of any particular individual or entity
other than what has been described in the Report. Although we have endeavoured to provide accurate
and timely information, there can be no guarantee that such information is accurate as of the date it is
received or that it will continue to be accurate thereafter. No person should act on such information without
appropriate professional advice based on the circumstances of a particular situation.

FORENSIC AUDIT REPORT | Report on FRAUD COMPANY LIMITED