35,000 shell firms deposited, withdrew Rs 17,000 crore post-demonetisation

NEW DELHI: The government's crackdown on "shell companies" has shown that around 35,000 of the 2.24 lakh companies, whose names have been struck off, deposited over Rs 17,000 crore post the demonetisation drive, which was later withdrawn, raising suspicion of wrongdoing.

In one case, a company with a negative opening balance on November 8, 2016, when Prime Minister Narendra Modi announced that Rs 500 and Rs 1,000 notes were being junked, deposited and withdrew Rs 2,484 crore post-demonetisation.

In a statement, the finance ministry said a company had as many as 2,134 accounts and data for such entities had been shared with enforcement authorities, including the Central Board of Direct Taxes, Financial Intelligence Unit (FIU), department of financial services and the Reserve Bank of India for further action.

Companies have also been identified for inquiry/inspection/investigation under the Companies Act, 2013 and necessary action is underway, the release said.

The government has so far de-registered over 2 lakh companies that were inactive for two years or more and did not file the statutory reports, while also disqualifying over 3 lakh directors. "Preliminary enquiry has shown that over 3,000 disqualified directors are directors in more than 20 companies each, which is beyond the limit prescribed under the law," the government said.

Separately, banks have been asked to freeze the accounts of these companies and share data with the government. So far, 56 banks have shared information involving 58,000 companies with more information expected to come in the coming months. Data released on Sunday was a continuation of the trend witnessed earlier.

The multi-pronged approach is being driven by a special task force (STF) set up by the PMO, which is co-chaired by revenue secretary Hasmukh Adhia and corporate affairs secretary I Srinivas.

While several corrective measures to tighten regulations have been initiated, the government is also initiating criminal investigation under new provisions of the Companies Act.

"Under Section 447 of the Act, which defines fraud, stringent punishment, including imprisonment up to 10 years, is stipulated. Further, reference has been made to the ministry of finance to include it as a Scheduled Offence under the Prevention of Money Laundering Act," the government said. Action against professionals who assisted these companies is also being pursued.

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