The Ministry of Corporate Affairs (MCA) has got a breakthrough in its investigation of shell companies depositing large amounts of cash in banks, following demonetisation.
Four Maharashtra-based companies admitted to investigators that were just ‘shell’ entities used as a front to deposit Rs 450 crore in cash. These four companies mainly dealt in items on which no tax, not even GST, had to be paid.
Some of these entities used misleading names to convey the impression that they dealt in stocks or commodities but had no relationship with those businesses. The investigators too admitted they did not know what business these companies were into.
For instance, GreatGains Stock Trading Pvt, which has no relation with the broking or stock advisory business, deposited Rs 99 crore in cash. Jubilant Mechantile Pvt admitted to laundering around Rs 98 crore, Lavender Impex Pvt around Rs 90 crore and StarBright Pvt about Rs 95 crore.
During the investigation, company directors admitted to ‘being on board just for the money’, sources told Moneycontrol.
During the probe, MCA found that over 100 companies had funnelled cash through these firms. Sources said many listed companies are also associated with these four shell companies. The cash was deposited in banks and subsequently withdrawn within a few days, the sources said.
The ministry is confident of proving that at least 68 shell companies have abetted money laundering, sources said. Of these 68 companies, 49 firms deposited less than Rs 100 crore, and the remaining companies deposited cash over Rs 100 crore. The 49 companies are being investigated by Registrar of Companies while firms that accepted cash deposits of more than Rs 100 crore are being investigated by the Serious Fraud Investigation Office.
Sources said the SFIO and Registrar of Companies were in the final stages of completing its investigation. “Officials from RoC's western region have already completed their investigation into these 4 companies. Now it depends on other investigation agency to proceed with these companies,” a source said
A large number of corporate entities that were deregistered following demonetisation have not returned to claim their bank deposits worth Rs 37,500 crore, an official in the Ministry of Corporate Affairs said.
Under Section 248 of the Companies Act, close to 3 lakh companies were deregistered by the government for not complying with regulations. Most of them just existed on paper and were conduits for evading taxes or laundering money. MCA has granted time to these companies to comply with its rules for their status to be restored to active. Till such time, they would not be able to access their deposits.
The Ministry is also planning to strike off an additional 2.25 lakh companies and has already issued notices for the same, sources said.
Moneycontrol tried to contact these companies to verity this story. However, till the time of publishing, we were yet to receive their responses.