The Enforcement Directorate (ED) will be roped in to probe if companies deregistered recently have been involved in money laundering, official sources said in the wake of Prime Minister Narendra Modi’s statement on Saturday that over one lakh companies had been struck off at one go.
“The fate of one lakh companies has been locked with one stroke of a pen in one minute. The Registrar of Companies (ROC) has removed these one lakh companies. More will be found and even tougher action can be expected against shell companies,” Mr. Modi had said, addressing chartered accountants in the national capital on Saturday.
Meanwhile, the Ministry of Corporate Affairs (MCA) is preparing to send show-cause notices to over three lakh more firms for striking off their names from the ‘register of companies’, government sources told The Hindu.
Tax consultants and government sources pointed out that while action against companies are initiated under the Companies Act, the scrutiny was stepped up in the wake of demonetisation and as part of the action against black money.
Sources said the ED, which deals with Prevention of Money Laundering Act (PMLA) provisions, will soon be called in to look at the companies recently struck off the register. The ED is empowered “to take actions of attachment and confiscation of property if the same is determined to be proceeds of crime derived from a Scheduled Offence under PMLA.” The ED can also launch prosecution against those involved in money laundering.
These measures followed an operation that was launched post-demonetisation to expedite action against companies that failed to start business within one year of incorporation or were not carrying on any business for two immediately preceding financial years or not applied for dormant status.
It gained momentum in April, when the Registrar of Companies (RoC) in several States/Union Territories issued show cause notices to over two lakh companies for striking off their names. The firms are given 30 days to submit their response. If the reply is found unsatisfactory, the corporate entity’s name can be removed.
However, referring to Section 252 of the Companies Act, officials pointed out that persons aggrieved by the RoC order — notifying a company as dissolved under Section 248 of the Act — may file an appeal to the National Company Law Tribunal (NCLT) within three years from the RoC’s order. If the NCLT finds that the removal of the company’s name was unjustified, it may order its restoration in the register.
According to the MCA, the total companies registered in India as on May 31, 2017, were 1,659,965, of which 1,322,175 were active.
There were 305,386 closed companies, of which about 10,336 were liquidated/dissolved, while 265,096 were defunct (and hence struck off). In addition, 25,562 companies were in the process of being struck off and 123 in the process of being re-activated.
The trend of registration of companies (month-wise) showed that after a high of 10,000 in May 2016, it had gradually fallen to about 6,000 in November 2016 — the month when demonetisation was announced — and then started shooting up to touch around 11,500 in March 2017 (barring a fall in January, the new registrations had surged).
The new registrations fell in April to around 9,000, but then rose to 9,673 in May.