Govt to use AI to weed out shell firms

Sixty-eight shell firms are being probed, including 19 by the SFIO

The ministry of company affairs (MCA) is planning to scrutinise functioning companies to weed out shell firms. While there will not be any investigation, the registrar of companies will use artificial intelligence to keep a close eye on the numbers companies report.

The ministry has so far identified or taken action against dormant companies, those that have not filed statutory returns.

“We will use artificial intelligence to alert us if any suspicious activity takes place in a company,” a source in the know of the matter said. After the first alert, investigating agencies will be put on the job, officials said. Another official said misappropriation or diversion of funds could be established by tracking the flow of money in a balance sheet.

If this move is executed, thousands of unlisted companies registered with RoCs will be under watch on lines similar to the oversight by the Securities and Exchange Board of India (SEBI) of listed companies.

The ministry has also identified another 225,000 companies that have not filed statutory returns. Notices have been issued to them.

Under the Companies Act, 2013, companies can be struck off the register if they do not file financial returns for a continuous period of three years.

In the first phase, 226,000 companies were struck off the rolls. Of these, bank details of 168,000 firms were received by the ministry and 73,000 companies were found to have deposited ~240 billion in banks in the post demo net is at ion period. Bank details of 58,000 companies have not been revealed yet.

Sixty-eight shell firms are being probed, including 19 by the Serious Fraud Investigation Office (SFIO).

Some of the companies have moved court and have succeeded in getting their names registered again.

The ministry is also probing through its investigating arm the ~130 billion fraud at Punjab National Bank allegedly perpetrated by Nirav Modi and Mehul Choksi group companies.

The SFIO is probing 107 companies and seven limited liability partnerships (LLPs) belonging to Nirav Modi’s Firestar Diamond Group and Choksi’s Gitanjali Group.