After the Income Tax Interim Settlement Board, a preliminary inquiry by the Registrar of Companies (RoC) has also detected violations by Exalogic Solutions, a company owned by Kerala Chief Minister Pinarayi Vijayan's daughter Veena Vijayan, in its deals with Cochin Minerals and Rutile Limited (CMRL).

The RoC report says Veena should not be condoned and action should be initiated against her for fraud under the Companies Act 2013. It is on the basis of the RoC report that the Ministry of Corporate Affairs ordered a detailed probe against Exalogic Solutions on January 12.

The RoC probe is not based on the findings of the IT board but the investigation team had placed the board's findings before Veena. Her responses to the board's findings, the RoC report says, were "evasive".

The board had found that Veena individually and her company received Rs 5 lakh and Rs 3 lakh a month respectively for three years from 2017. It said that Exalogic had signed an agreement with CMRL to provide marketing consultancy and software services. However, the IT investigation revealed that no such services were rendered.

Can Veena take money personally from CMRL?
The service level agreement between Exalogic and CMRL showed that the software services were to be given only through the company. So how come Veena, the director of Exalogic Solutions Private Limited, received Rs 55 lakh from CMRL in an individual capacity? The RoC said the poser was based on "reports available in the public domain", a euphemism for IT Interim Settlement Board report.

Veena was asked to explain whether she was providing services in an individual capacity other than through Exalogic Solutions. And if so, to provide the purpose and documentation. She was also asked to explain why action should not be initiated against her under section 447 of the Companies Act (punishment for fraud) for diversion of amounts to the personal account of the director.

Veena’s response: She replied that the RoC has merely referred to "reports available in the public domain". Since no specific reports were identified, Veena said she was not in a position to reply. "Should you provide us the reports which are relied upon by you, we shall give our comments, if it is concerning us," she said.
The RoC termed this response "evasive".

Did Veena mask her father's connection?
The RoC wanted to know why Veena failed to disclose that her service deal with CMRL came under the "related party" transaction.

Under Section 188 of the Companies Act, no company should enter into a contract/agreement with a 'related party'. A list of 'related parties' is given in Section 2(76) of the Companies Act. There are nine; from the director of a company who is a close relative to a subsidiary or associate company.

One of the 'related parties' is: "any person on whose advice, directions or instructions a director or manager is accustomed to act". The RoC seems to have pounced on this.

It reasons that the government-run Kerala State Industrial Development Corporation (KSIDC) holds a 13.4 per cent stake in CMRL. Therefore, KSIDC has a "significant influence" in appointing people to key managerial positions in CMRL. And KSIDC, in turn, is "bound to act as per the directions of the Chief Minister".

Veena’s response: She termed this as "factually and legally incorrect". Veena said neither she nor her family members were involved with the functioning of KSIDC. She said none of her family members hold even an ex-officio post in KSIDC.

Did Veena hide facts to remain dormant?
The RoC found that Exalogic filed for 'dormancy status' in November 2022 in a "fraudulent and misleading" manner. (The advantage of being in dormant mode is that a company's compliance burden will be low.)

According to the RoC, it was legally inappropriate for Exalogic to file for dormancy status in November 2022. Under Section 455 of the Companies Act, a firm filing for dormancy should not have conducted any business in the preceding two years. But by Exalogic's own admission and the chartered accountant's certification, it had significant transactions till May 1, 2021. Therefore, Exalogic had to wait for at least five months before filing for dormancy.

Did Veena suppress inquiry against company?
The RoC findings say that Veena had hidden the fact of inquiries against her company while filing for dormancy status.

Rule 3 of Companies (Miscellaneous) Rules 2014 states that a company cannot apply for dormancy if an inspection, inquiry or investigation has been ordered or taken up or carried out against the company.

The RoC probe found that the company and its director were issued notice under Section 206(4) of the Companies Act on January 29, 2021. There were further correspondences, including directions for a personal hearing, dated November 22, 2021.

In fact, Veena had presented herself before the inquiry officer and recorded her statement on July 22, 2022. "Therefore, knowledge of the pending inquiry was definitely there with the director," the RoC report said. But her declaration form said that no inspection, inquiry, or investigation had been ordered or taken up or carried out against the company.

"This was a clear case of suppression of material information from the approving authorities and submitting false declaration, thereby misleading the approving authority to grant dormancy status," the report said.

Did Veena lie about Exalogic's tax dues?
The declaration for dormancy also stated that Exalogic did not have any outstanding statutory taxes, dues or duties payable to the central government.

However, the RoC secured information from the Income Tax authorities that a total demand outstanding of Rs 42.38 lakh with interest is pending against Exalogic under Section 234D and Section 147 for the assessment year 2018-19.

It is on the basis of these findings that the RoC concluded that Veena has made herself liable for penal action under Sections 447 (fraud), 448 (false statement) and 449 (false evidence) of the Companies Act.

However, the findings related to the dormancy application have not been shared with Veena and Exalogic.