Speedy Ac­tion be­ing Taken Against Shell Cos: Jait­ley

FI­NANCE MIN­IS­TER, how­ever, stresses the need for main­tain­ing a bal­ance be­tween ease of do­ing busi­ness and en­sur­ing that wrong­do­ing is stamped out

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New Delhi: The gov­ern­ment on Fri­day said speedy steps are be­ing taken against shell com­pa­nies, but a bal­ance needed to be main­tained be­tween ease of do­ing busi­ness and en­sur­ing that wrong­do­ing is stamped out.

Fi­nance min­is­ter Arun Jait­ley told the Lok Sabha that there is no def­i­ni­tion for shell com­pa­nies un­der the Com­pa­nies Act but such en­ti­ties are used for roundtrip­ping of money. The real own­ers be­hind such en­ti­ties need to be iden­ti­fied and steps are be­ing taken un­der the be­nami and in­come tax laws, said Jait­ley, who’s also the cor­po­rate af­fairs min­is­ter, dur­ing Ques­tion Hour in Par­lia­ment.

Re­ply­ing to sup­ple­men­taries, Jait­ley men­tioned the re­cent Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) ac­tion against sus­pected shell com­pa­nies that had rocked the bourses, say­ing “Baazaar mein thoda uthal puthal hua (there was some tur­moil in the mar­kets).”

On Au­gust 7, Sebi asked the stock ex­changes to take ac­tion against 331 sus­pected shell com­pa­nies that had been re­ferred to it by the cor­po­rate af­fairs min­istry. He noted that a com­pany can be reg­is­tered in two days. Tech­nol­ogy makes the process eas­ier, he added.

Re­spond­ing to a sup­ple­men­tary ques­tion by Congress law­maker Shashi Tha­roor, the min­is­ter said there was a dis­tinc­tion be­tween dor­mant and shell com­pa­nies. There is po­ten­tial for dor­mant com­pa­nies be­ing mis­used as shell com­pa­nies but there is an ad­di­tional in­stru­ment to deal with such en­ti­ties, Jait­ley said.

If busi­ness is be­ing done un­der a fake name, then the be­nami law would be ap­pli­ca­ble, he said. On whether there was a need to amend the Com­pa­nies Act and strengthen the in­spec­tion and over­sight mech­a­nisms to pre- vent for­ma­tion of shell com­pa­nies, Jait­ley said, “There is no such pro­posal un­der con­sid­er­a­tion.”

He also em­pha­sised that the ex­ist­ing pro­vi­sions of the Act were suf­fi­cient to en­sure that in­di­vid­u­als form­ing the com­pa­nies are iden­ti­fi­able and trace­able for the pur­pose of ini­ti­at­ing pe­nal ac­tion. To a ques­tion on whether many shell com­pa­nies had been set up in the re­cent past to laun­der black money and hold be­nami prop­erty or com­pa­nies, the min­is­ter replied in the neg­a­tive.

“The term 'shell com­pany' is not de­fined un­der the Com­pa­nies Act, 2013. The Act re­quires that a com­pany may be set up for any law­ful pur­pose only,” he said. “Sub­se­quent to in­cor­po­ra­tion, if a com­pany is found to be formed for fraud­u­lent or un­law­ful pur­pose, it is li­able for pe­nal ac­tion, in­clud­ing for wind­ing up un­der Sec­tion 271 of the Act,” Jait­ley said in a writ­ten re­ply. The ques­tions were asked by BJP mem­ber and for­mer home sec­re­tary R K Singh.

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