Exclusive: MCA to intensify action against Chinese companies, finds fraud in a majority of 500 companies investigated

665 Chinese companies in India are under probe by the MCA

The ministry of corporate affairs (MCA) has uncovered fraudulent activities in a majority of the 500 Chinese companies that have had their investigation reports finalised. The MCA is now readying an action plan, including summoning the  directors of these companies, which include those hosting loan apps, and filing charges before the special courts, three government officials said.

MCA investigations into loan apps operating in the country focus on predatory lending practices, fraud or violations of financial regulations. In recent years, there has been growing concern over the proliferation of digital lending apps in India, some of which have been linked to Chinese companies. These apps have been accused of employing aggressive tactics, charging exorbitant interest rates and engaging in unethical practices such as harassment of borrowers.

According to one of the MCA officials, in cases of failure to comply with mandatory filing requirements, the companies will be struck off or removed from the official register of companies and their legal existence ended, they said.

“Investigation on more than 70 percent of the Chinese companies has been already completed out of the total 665 under probe. The reports have been submitted,” a senior government official told Moneycontrol.

These companies came under the MCA scanner for various non-compliance issues and alleged fraudulent activities, including siphoning funds. Entities incorporated under the Companies Act are required to do annual e-filing of documents such as their balance sheets and profit and loss accounts with the Registrar of Companies.

“The investigation report on the majority of Chinese companies is completed. Certain infractions of law have been found, in some cases minor while the rest are of fraud. In many entities, fraudulent activities have been found, and many of these are loan apps. Directors will be summoned. The government will go to special courts with charge sheets of fraud,” the second senior government official told Moneycontrol.

Cases related to corporate affairs and business matters are typically handled by specialised judicial bodies like the National Company Law Tribunal and the National Company Law Appellate Tribunal, as well as regular courts, depending on the nature and complexity of the case.

“In minor offences like non-filing, a penalty is levied. But the government will not be able to retrieve the penalty (in some cases) because the company people have run away. So if there is no fraud and only non-filing (offences), then MCA will strike it off so that at least the company name cannot be used,” the second official said.

The investigations for the remaining Chinese companies are at an advanced stage, a third government official told Moneycontrol.

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Given the geopolitical and trade tensions between India and China in recent years, there has been heightened scrutiny of Chinese investments and business activities in India. The Indian government has taken various measures to ensure transparency and accountability in dealings involving Chinese companies, particularly in sensitive sectors such as technology, infrastructure and finance.