Case Against Hero MotoCorp
In a case involving alleged fund misappropriation, the Ministry of Corporate Affairs has requested an investigation to evaluate Hero MotoCorp’s relationship with a third-party vendor. The “public interest” has ordered the investigation to look into Hero MotoCorp’s ownership structure and whether it had any influence over the third-party vendor.
MCA Orders Investigation for Hero MotoCorp case
According to people with knowledge of the matter, the Ministry of Corporate Affairs (MCA) has mandated a probe into Hero MotoCorp Limited due to potential problems with corporate governance.
The ‘public interest investigation will look into the real owners of a few connected businesses. In addition to looking into Hero MotoCorp, the MCA will also look into Salt Experiences and Management Private Limited (SEMPL), which it believes to be a “linked entity” of Hero MotoCorp, according to the sources.
“Hero MotoCorp has allegedly floated shell businesses,” according to claims. The Registrar of Companies’ examination also came to the conclusion that the company’s and its affiliated entities’ business activities required a thorough investigation. The same was looked into by the government, which, in accordance with sections 210 (1) (c) and 216 of the Companies Act, has mandated a probe into the business dealings of Hero MotoCorp and SEMPL.
Section 210 (1) (c) permits an examination into a company’s operations if it is in the “public interest,” but section 216 permits an investigation into a company’s ownership.
Hero MotoCorp Response to the probe
Hero MotoCorp did not reply to an email sent to them on Wednesday till the time of publication.
According to sources, the investigation will also look into the conclusions of the income tax and customs departments against the two companies while addressing issues with corporate governance. If a corporation is discovered to be a command-line interface or a dormant entity, MCA has the authority to strike it off.
The income tax division conducted a raid on Hero MotoCorp in March 2022 due to suspicions of tax cheating. While executing the searches, the IT team even searched Pawan Munjal’s home, Chairman, Chief Executive Officer, and Managing Director of Hero MotoCorp Limited. In a statement, the CBDT, the department’s parent, said that it had discovered alleged illicit business expenses totaling more than Rs 800 crore.
Additionally, it claimed to have discovered that a few different businesses had been used to buy 10 acres of property in Delhi. According to the document, “unaccounted” cash components totaling more than Rs 60 crore were allegedly engaged in such transactions.” The statement went on to say that “expenditure totaling over INR 800 crore has been filed in the name of acquisition of services from a certain event management business.
In August 2018, a passenger named Amit Bali was boarded at the Indira Gandhi International Airport in New Delhi after it was discovered that he was carrying asserted foreign currencies worth Rs 81 lakhs in his personal carry-on luggage by CISF officials. Amit Bali is the Chairman, Chief Executive Officer, and Managing Director of Hero MotoCorp Limited. Later, Bali explained to the representative of the Customs department that he was transporting the foreign currency in the name of SEMPL and that it corresponded to Munjal.
In the wake of the interception, the Customs department accused Munjal of being the “beneficial owner” of goods—in this case, foreign exchange—that Amit Bali had repeatedly attempted to export from the nation.
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Bali was allegedly the “lynchpin” of the case, carrying more foreign currency than was allowed on multiple prior occasions while failing to declare it to customs on each occasion, according to the Customs Service.
According to the investigation, SEMPL had a yearly revenue of Rs. 200 crores and, between 2014 and 2018, it did business with HMC for Rs. 785.96 crores, all without a formal contract. However, HMC had argued that it was merely a client of M/s SEMPL and merely a consumer of services offered by SEMPL. According to HMC, all invoices raised by M/s SEMPL are settled in INR in India.
There is no proof that HMC has any financial or ownership stake in M/s SEMPL or that it has effective control over the company. As the CEO and Chairman of HMC, to whom M/s SEMPL supplied the service, Noticee No. 5 (Munjal) cannot be regarded as the “helpful owner” of M/s SEMPL in any manner.
“We haven’t gotten any correspondence in this area, thus we are unable to comment on the specifics of your inquiries,” the spokesman wrote in an email response. According to their statement, “We will offer every piece of data if and when it is requested from us by any governing authority.”
The largest motorbike and scooter manufacturer in the world, Hero MotoCorp, is a responsible, law-abiding Indian multinational that is well-known for upholding international best governance practices, it was noted.
