The Ministry of Corporate Affairs has initiated an investigation into Hero MotoCorp's association with a third-party vendor, reported news agency Reuters citing two government sources. According to the report the case involves allegations of fund diversion. Sources told the news agency that the probe has been ordered in the "public interest" to audit the ownership structure of Hero MotoCorp and whether it controlled the third-party vendor.
The largest motorcycle manufacturer in the country Hero MotoCorp told the news agency that it has not been officially informed by the government regarding the investigation and therefore cannot provide any comments at this time.
"We will provide all information, if and when it is sought from us by any regulatory authority," the spokesperson said.
Two-wheeler major's shares fell over 4.2 per cent on Thursday after the report came out.
According to the news agency sources, the internal government order follows a preliminary inquiry conducted by India's Registrar of Companies. The case was seen fit for a further formal investigation in the "public interest", they said.
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According to a separate report by CNBC TV-18, the ministry has issued investigation orders under Section 210 (1)(c) & 216 of the Companies Act,
The Reuters report said that under legal provisions, the Ministry of Corporate Affairs now possesses the authority to record statements from company officials and request documents as part of the investigation.
It is worth noting that Hero MotoCorp underwent scrutiny by India's income tax authorities last year. The company has said tax inspectors visited its offices and the home of CEO Pawan Munjal as part of a "routine inquiry."
According to the CNBC TV-18 report, the corporate affairs ministry has issued the investigation orders after taking cognisance of the probe conducted by the Income Tax department into certain transactions of Hero Motocorp.