1,500 firms under lens for being shell entities

The Centre is trying to weed out more shell companies, after cracking down on more than 200,000 such entities in the first phase.

In the second phase, it has found 1,505 companies with attributes of dabba or shell companies. Sources in the ministry of corporate affairs (MCA) told Business Standard that various Registrars of Companies (ROCs) have been asked to investigate these entities under Section 206 of the Companies Act. Under this section, the ROCs will investigate the books of the companies identified by the ministry.

Action against these companies would be taken once all the RoCs submit their reports to the ministry.

The system is being put in place as the MCA is trying to introduce an early warning system to track and trace shell companies. Another 809 listed companies are also being probed by the MCA. These companies are listed but the Securities Exchange Board of India (Sebi) could not locate them.

Earlier, the markets regulator had restricted trading of shares of 331 companies as part of a crackdown on them in the first phase.

The ministry is simultaneously taking steps to follow up on the first batch of 224,000 shell companies by ensuring that immovable properties they own are not sold. An investigation conducted by the ministry has revealed more than 130,000 of the 224,000 companies struck from the records did not have permanent account numbers (PANs) though these entities transacted in crores of rupees. Only 94,000 companies had PANs.

In the first list of dabba companies, more than 500 listed entities and their directors have been affected. The Serious Fraud Investigation Office has been put on the job to investigate these directors.

About 300,000 directors associated with the struck-off companies have already been disqualified. The number could cross 450,000 as the crackdown intensifies. Around 100 disqualified directors have appealed against the government’s decision in various high courts. Also, 70-odd companies have appealed against being deregistered. The government is asking all directors to link their director identification number with PAN and all companies to link their corporate identification number with their PAN.

Based on the details sent by 13 banks to the MCA, about ~4,500 crore was deposited and withdrawn during demonetisation by 5,840 struck-off companies using 13,150 accounts. These transactions had occurred after demonetisation — November 8, 2016.

Various companies had more than 100 accounts. Some even had 200 or 300 accounts. One company had 2,134 back accounts. Several companies had zero balance in their accounts as of November 8, 2016, but deposited lakhs and crores of rupees during demonetisation. The names of these companies were struck from the records. Even after de-registering, some of these companies had made transactions. Bank accounts of such companies were frozen.

In the first list of dabba companies, more than 500 listed entities and their directors have been affected