MCA Initiates Probe into Hero MotoCorp for Fund Diversion Case

16 Jun 2023 , 10:45 AM

As per the reports of Economic Times, the Ministry of Corporate affairs (MCA) has ordered probe against Hero Motocorp regarding potential corporate governance concerns.

The sources cited by ET said that the probe will be initiated under the public interest and will help in investigating the ownership of linked companies. Other than the investigation in Hero Motocorp, MCA will also conduct investigation at Salt Experiences and Management Private Limited (SEMPL) which it suspects to be a ‘linked entity’ with the former.

The inquiry will find the income tax and custom department defaults against the two firms while dealing with corporate governance issues. MCA has the power to strike off a company if found to be a shell or a dormant entity.

In March 2022, Hero MotoCorp faced a raid by the IT department on suspicion of tax evasion. The searches conducted by the department even extended to the residence of Pawan Munjal, who serves as the Chairman, Chief Executive Officer, and Managing Director of Hero MotoCorp Limited. 

In a statement issued by the CBDT, the parent department, without explicitly mentioning the company, it was revealed that alleged illegal business expenses exceeding Rs 800 crore were discovered.

The government has initiated an investigation into Hero MotoCorp Limited under sections 210(1)(c) and 216 of the Companies Act. Section 210(1)(c) enables the investigation of a company’s affairs in the ‘public interest,’ while section 216 allows for the investigation of a company’s ownership.