CBI registered 30 cases against 108 shell companies in India between 2015 and 2018

Hyderabad: Central Bureau of Investigation (CBI) has registered 30 cases against 108 shell companies in India between 2015 and 2018. The investigative agency also detected 849 shell companies for irregularities such as criminal conspiracy, falsification of financial statement, bank fraud, cheating, diversion of funds, impersonation, abuse of official position, and criminal misconduct.

According to the Ministry of Finance and Corporate Affairs, during 2017-18, 226,166 shell companies were de-registered by the government for fraud plays. This is a big jump from the previous year. In 2016-17, the number of shell companies de-registered was just 1,986. Meanwhile during 2018- 19, 112,797 of them were de-registered.

AP and Telangana together had 18,322 shell companies de-registered during 2018-19, while the number was 38,580 the previous year.

The country’s economic capital, Mumbai, has the highest number of de-registered shell companies. In 2018-19, the number was 24,384, whereas it was 49,964 during 2017-18.

What is a Shell Company?

There is no definition for ‘Shell Company’ in the Companies Act. The term generally refers to a company without active business operation or significant assets, which in some cases are used for illegal purposes such as tax evasion, money laundering, obscuring ownership, benami properties, etc.

The Special Task Force set up by the government to look into the issue of shell companies has inter-alia recommended the use of specific red-flag indicators as alerts for identification of shell companies.

Meanwhile, among the 108 cases registered by the CBI against shell companies from 2015 to 2018, sanction for prosecution was awarded only in two cases.