The National Democratic Alliance (NDA) alliance led by the Bharatiya Janata Party (BJP) was voted to power in 2014 as it assured to bring back all the black money stashed overseas and along the same lines, the Government in power felt that the fight against black money shall be incomplete without breaking the network of shell companies. The possibility of using such companies for laundering black money cannot be undermined. Over 1.06 lakh directors have been identified for disqualification because of association with shell companies, the government announced.
According to the statement, the new Minister of State for Corporate Affairs P.P. Chaudhary is closely monitoring the situation emerging out of cancellation of registration of the companies and is holding regular meetings with officials of the ministry and various related organizations. These include Serious Fraud Investigation Office (SFIO), ROCs, Department of Financial Services, Indian Banks Association and other departments involved in the crackdown against defaulting companies.
Chaudhary on September 12, 2017 informed that his ministry is identifying the defaulting directors of these shell companies. The officers assured that by the end of this month, they would be ready with the relevant details of all defaulting directors of these shell companies.
He stated that the Ministry of Corporate Affairs has identified 1,06,578 directors for disqualification under Section 164(2)(a) of the Companies Act, 2013 as on September 12, 2017. This follows the recent cancellation of registrations of 2.09 lakh “defaulting” companies that have not been carrying out business activities for a long duration.
As per Section 164 of the Companies Act, a director in a company that has not filed financial statements or annual returns for three financial years continuously will not be eligible for re-appointment in that company or any other firm for five years.
The ministry is further analyzing the data of the 2.09 lakh firms available with the Registrar of Companies (RoCs) to identify the directors and the major beneficial interests behind these entities.
The Corporate Affairs Ministry has also identified professionals, chartered accountants, company secretaries and cost accountants associated with the defaulting companies.
In the case of the North eastern region, there are about 50 odds companies under the scanner, of which about 15 such companies are from Meghalaya. However, according to the investigating officials, most of the companies in Meghalaya are under the benami transaction. Worst so, many directors and elected representatives too are involved in such shell companies for contract works, supplies and tenders.
According to Chaudhary, the government has identified about 11 lakh companies with active status after deregistration of over 2.09 lakh firms. Profiles of directors such as their background, antecedents and their role in the operations or functioning of these companies are also being compiled in collaboration with the enforcement agencies.
Moreover, money laundering activities performed under the aegis of these companies are also being investigated. Besides this, persons involved in illegal activities have been identified in certain cases and the action by professional institutes such as ICAI, ICSI and ICoAI is also being monitored.
Most of the young entrepreneurs have welcomed the move of the Central Government for the crackdown on such companies, which will only open up avenues for them to pick up from where the ministry could crackdown. As of now, the contracts, supplies and also the odd jobs are being reserved by such companies and persons with strong political backing.