More than 30 companies had common directors

For the first time in the history of Hyderabad, a major cache of shell companies has been unearthed. According to sources, top businessmen from Telangana state and Andhra Pradesh are found to be directors on the boards of such shell companies.

The records of several of these companies show business loss of up to `25 crore, even though they are not engaged in proper operational activity.

“We noticed that almost all the transactions are among these companies only, thus circulating money among over 20 entities. Generally, such shell companies own agriculture land and file returns for the sake of the record. But in reality, money circulation circulates among different entities to make it a legitimate source of money at the end,” said an official.

The law that stipulates that a person can be on the board of a maximum of 20 companies was also flouted with more than 30 companies having common directors, mostly family members or close relatives.

Last year also the enforcement directorate (ED) raided 110 locations in 17 cities, including Hyderabad, and identified 500 shell companies. The ED is a specialised financial investigation agency under the department of revenue in the Union finance ministry. The GST and I-T departments exchange details of returns and compile a report that identifies companies with common addresses, directors and business operations history. Hyderabad ranks second in the country after New Delhi in having the most number of shell companies. According to the latest report by the Ministry of Corporate Affairs, Delhi topped the list, with 26,000 shell companies, closely followed by Hyderabad with 25,000 shell companies.