‘action on shell companies will unearth black money’
In the last three years, the Income-tax Department has detected 1,155 shell companies that were used as conduits by over 22,000 beneficiaries.
Government officials feel that there will be a substantive decrease in the round tripping of unaccounted for money or black money, with the government striking off more than 2 lakh companies from the Registrar of Companies (RoC) and the name of 3 lakh directors. They are of the belief that this will lead to more black money transactions being unearthed soon.
Earlier this year, 162,618 companies were removed from the RoC. Official sources said that data of close to 3 lakh more companies, who have been found to be “suspicious” and acting as “shell companies” were being scrutinised and similar action was likely to be taken against them.
As per official records, in the last three years, from 2013 to 2016, the Income-tax Department had detected 1,155 shell companies that were used as conduits by over 22,000 beneficiaries. The amount involved in non-genuine transactions of such beneficiaries was more than Rs 13,300 crore. The term “shell companies” is not defined in the Companies Act.
The government, after barring 2 lakh plus companies, further barred 3 lakh directors under Section 164 of the Companies Act, which lays down ground for barring a director. These directors had failed to submit financial statements and other annual statements as directed by law.
“Action against these companies and their directors has been taken under Section 248 of the Companies Act, 2013, under which the RoC can suo-motu or on an application of a company, issue notice to strike off the name of the companies for reasons given under the relevant law. We are in the process of identifying more such companies and are focusing on 3 lakh such companies who exist on paper for suspicious purpose. The directors of these companies too are under scrutiny,” an official source said.
As per the latest data, there were as many as 15.27 lakh registered companies at the end of January, and the majority of them were from the private sector. Out of this, only about 10.76 lakh companies were active.
As a part of the exercise, the banks too have been asked to restrict the directors from using the bank accounts of these companies. “These shell companies are used for artificially inflating the price of shares, used as a parking lot for bribe money or used as a part of ‘layering’ to hide the origin of money and the end user of the money and are one of the most vital element used to hide black money,” the official stated.
Officials said that in February, the Centre had begun the process of creating a database of shell companies and their directors as part of a crackdown on such firms mushrooming across the country. The task force was headed by the Revenue Secretary and the Corporate Affairs Secretary. It was after this that the MCA had sent notices to 3 lakh companies that were not filing annual returns.
Under Section 248 of the Companies Act, a company’s name can be struck off if a company has failed to commence its business within one year of its incorporation or the subscribers to the memorandum have not paid the subscription which they had undertaken to pay within a period of 180 days from the date of incorporation of a company, and a declaration under Section 11(1) to this effect has not been filed within 180 days of its incorporation, or a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company.
The directors of many of these companies, as per of- ficials, were found to be operating more than four to five companies, each dealing with totally different businesses and with each of them existing on paper only.
“These companies, we believe as per the documentary evidence, were brought into existence with the sole intention of acting as a ‘parking lot’ for unaccounted wealth and acting as an agent to turn black money into white. This process is time consuming but it will go on till we are satisfied that we have managed to weed out the majority of such shell companies. We are also pushing for more stringent rules to make sure that multiple checks and balances are in place to discourage people from opening shell companies,” the official said. The National Investigation Agency (NIA) has conducted more than two dozen raids in different places in Kashmir in the past few days to trace the “roots and veins” of hawala money, which is allegedly in circulation among some Kashmiris belonging to various spheres of life. Informed sources told this newspaper that the Central government has decided to go ahead and frame charge-sheets against all separatist leaders including Syed Ali Shah Geelani, Mirwaiz Umar Farooq and Yasin Malik. However, it was not confirmed whether or not these three leaders would be arrested.
J&K DGP S.P. Vaid said that they would allow the three leaders to proceed wherever they want to go when he was asked whether the government would allow the Hurriyat leaders to court arrest at the NIA headquarters.
National Conference patron Farooq Abdullah said that the NIA raids were conducted to harass and scare the Hurriyat leaders. He said the raids were aimed at defaming them in public and create more turbulence in Kashmir. He added that such attitude on part of the Central government proved the Centre was not serious about resolving the Kashmir issue politically.
Many news agencies had earlier reported that the Enforcement Directorate (ED) was likely to register money laundering cases against all Kashmiri separatist leaders on the basis of the findings of the NIA. The ED has arrested Shabir Ahmad Shah in a previous case of money laundering as he was not paying any heed to the court’s summons.
The Hurriyat leaders, who have decided to court arrest at the NIA headquarters in New Delhi, dismissed the findings and investigations of the NIA as bogus and a ploy by the Central government to tar their image.
Informed sources said that the Enforcement Directorate will register money laundering cases against all the separatist leaders and their aides arrested by the NIA. “It is likely that the top leadership of Kashmiri separatists will also be finally in our net,” an NIA sleuth was quoted by a news agency. The ED is likely to invoke Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA) against the separatist leaders.
The NIA on 30 May had filed an FIR against the separatist leaders, slapping charges of criminal conspiracy and waging war against the government under the Indian Penal Code and sections of the Unlawful Activities (Prevention) Act.
The NIA, after its latest raids, has searched the houses of many businessmen who have across-LoC businesses, including prominent Shia leader Agha Syed Hassan of Budgam, who is part of the Syed Ali Shah Geelani’s Hurriyat. The Centre has said that the raids will continue as they are getting more and more leads that the unrest was being funded from across the border.