A few of the companies have been found to have more than 100 accounts in their names. One company had as many as 2,134 accounts. Photo: Mint (Mint)
A few of the companies have been found to have more than 100 accounts in their names. One company had as many as 2,134 accounts. Photo: Mint (Mint)

Shell companies: 5,800 firms being probed for money laundering after demonetisation

The number is based on data submitted by 13 banks on post-demonetisation transactions by some of the more than 200,000 companies struck off the records of the Registrar of Companies earlier this year

New Delhi: The government has zeroed in on 5,800 companies suspected to have laundered money after demonetisation, a government statement said on Friday, calling it the “tip of the iceberg" of corruption.

The number was based on data submitted by 13 banks on post-demonetisation transactions by some of the more than 200,000 companies struck off the records of the Registrar of Companies earlier this year.

“Data received from them (13 banks) pertains to merely about 5,800 companies (out of more than 2 lakh that were struck off) involving 13,140 accounts," said the statement by the ministry of corporate affairs.

Earlier, these banks had been asked to restrict operation of the bank accounts of such companies by their directors.

A few of the companies have been found to have more than 100 accounts in their names. One company had as many as 2,134 accounts.

“It needs to be re-emphasized that this data is only about 2.5% of the total number of suspected companies that have been struck off by the government. The huge money game played by these companies may well be the tip of an iceberg of corruption, black money and black deeds of these and many more of their brethren," the statement added.

The government also said that it had instructed investigative agencies to complete their probe of suspected wrongdoing within a given time frame.

“As part of the crackdown exercise, it looks like the first step could be bank account details of the struck-off companies; these details will be verified and cross-checked with the financial statements submitted by the companies to the ministry of corporate affairs or Registrar of Companies," said Samir Paranjape, a partner at consulting firm Grant Thornton India LLP.

Once these companies have been identified, it will be the government’s prerogative whether to penalize or prosecute them. But it will definitely give the government a vast treasure of information to pursue the push against black money, Paranjape added.

On 12 September, the ministry of corporate affairs stated that it had identified 106,000 directors of companies who did not file their financial statements or annual returns for three straight years, violating provisions of the Companies Act, 2013.

Shell firms, though not defined under the Companies Act, are those that have negligible business activity and are used as an front for money laundering and tax evasion. Often, these firms meet statutory requirements in letter to remain unnoticed.

The MCA’s statement on Friday said these companies had multiple accounts with negative or low balance prior to 8 November, when Prime Minister Narendra Modi announced the invalidation of high-value banknotes. The account balances, however, reflected transactions worth several crore rupees post-demonetisation and continued until the companies were struck off the Registrar of Companies’s records.

In some cases, transactions have been recorded even after the company was struck off, the government said.

“It is informed that, after separating the loan accounts, these companies were having a meagre balance of Rs22.05 crore to their credit on 8th November, 2016. However, from 9th November, 2016 i.e. after the announcement of demonetisation, till the date of their being struck off, these companies have altogether deposited a huge amount of Rs4,573.87 crore in their accounts and withdrawn an equally large amount of Rs4,552 crore. With loan accounts there was a negative opening balance of Rs80.79 crore," the statement added.

Close