20,488 ghost companies detected in Hyderabad, 3rd-highest in India

Shell company 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, and benami properties.

By Coreena Suares  Published on  1 April 2022 3:11 PM GMT
20,488 ghost companies detected in Hyderabad, 3rd-highest in India

Hyderabad: As many as 20,488 shell companies were detected in Hyderabad and later struck off by the Registrar of Companies during the financial year 2020-2021. This marks another dubious distinction for Hyderabad, as the city stands third for housing shell companies.

With 52,869 Mumbai tops the list, followed by Delhi with 45,595.Shell company 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, and benami properties. The government of India, under the ministry of corporate affairs, has constituted a special task force to look into shell companies. It has inter-alia recommended the use of certain red-flag indicators as alerts for the identification of shell companies.

Case studies: Karvy Stock Broking Pvt Ltd used Shell Companies to divert money.

C. Partha Sarathy Chairman and MD who is currently facing imprisonment, along with CEO of KSBL Mr Rajiv Ranjan Singh( who is incharge for trading and broking) unauthorizedly executed trading in 9 other companies trading accounts from 2014 to 2019. They diverted funds which were raised from banks by pledging client securities as collateral to '9 Shell companies'. This was confessed by Mr C. Partha Sarathy, it was done to show huge turnover and market share of KSBL in Stock Market. C. Partha Sarathy, the chairman and managing director of Karvy Stock Broking Pvt. Ltd is currently failing trial for cheating collegiums of banks. Karvy Stock Broking Pvt. Ltd. had availed credit facilities of Rs. 137 crores by pledging securities and shares without the consent of clients and thereby misusing the power of attorney.

Shell Companies in Delhi exposed the underbelly of four Hyderabad Pharma companies

Vizag GST Commissionerate booked a case against Hyderabad-based Rakshit drugs private limited, Virupaksha Organics Limited, and Thakur chemicals. These three pharma companies purchased 'fake' bills worth crores from the Delhi-based company, to evade paying tax.

During the investigation, the sleuths stumbled upon a web of 'shell companies' across India.

"Input credit means, companies at the time of paying taxes on the output, they can reduce the tax if already paid on inputs. Similarly, the majority of the GST fraud cases, these three companies. To avoid paying the tax portion on the output, they purchased fake Input Tax Credit (ITC) from the Delhi-based company. When in reality, there were no goods purchased," a senior officer told NewsMeter.

Thakur Chemicals purchased Rs 8 Crore worth of fake bills. While Virupaksha labs illegally bought fraudulent bills worth Rs 8 crore and Rakshith Chemicals worth Rs 4-5 Crore.

730 Telangana companies struck off for failing to file financial records

Meanwhile, as many as 730 companies in Telangana were struck off by the Registrar of Companies (ROC) in 2020-21 for failing to file financial records, i.e., annual returns and balance sheets, for a period of two years.At 2,298, Maharashtra has the highest number of companies written off, followed by Delhi with 1,988. The total number of companies struck off across India stands at 12,892 for the financial year ending 2021.

The Registrar of Companies (ROC), which falls under the ministry of corporate affairs, administers the provisions of the Companies Act 2013. If companies fail to file their financial documents, the Registrar has reasonable cause to believe that companies are not carrying on any business or operation for a period of two years. The ROC, after following the due process of law, removes the name of those companies, said the ministry."Many companies have taken a beating due to the pandemic. A few inventors had to shut down due to lack of investments. This is among the several reasons found by the ROC while striking off companies. Many directors only file Income Tax returns but fail to submit annual returns and balance sheets which makes them ineligible to continue," said an ROC official.

100 Hyderabad Companies ordered for Liquidation In 2021

The National Company Law Tribunal (NCLT) had ordered the liquidation of Meena Jewelers Group for its failure to pay the State Bank of India Rs. 254 crore. The NCLT Bench in 2019 had ordered corporate insolvency and it came to pay in 2021.Having three outlets in Hyderabad, Meena Jewelers, which is engaged in trading gold, diamond, silver premium watches, and high-end mobile phones, was booked by the Central Bureau of Investigation (CBI) for defrauding the SBI to the tune of Rs. 364.2 crore.

Meena Jewelers is among the 100 companies in Hyderabad.During the financial year 2020-21, the realisable value in 421 cases that were resolved through a resolution plan as on 30 September 2021 was Rs. 2.55 lakh crore for all creditors, including financial creditors.The liquidation value of these companies was Rs. 1.48 lakh crore.'If no resolution plan is received or no resolution plan is approved by the adjudicating authority, the corporate entity proceeds towards liquidation. Till 30 September 2021, 1,419 CIRPs have yielded orders for liquidation across India, having a liquidation value of Rs. 52,036 crore' a statement of the ministry of Corporate Affairs said.

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