Hundreds of “shell companies” which deposited unexplained high-value notes during demonetization or operated bank accounts after their names were struck off could be the first set of entities to face criminal action under the revamped Companies Act as part of the latest government crackdown against those routing funds through a web of firms.
The ministry of corporate affairs (MCA), which initiated action to de-register over 2 lakh companies that had not filed returns+ , is planning to invoke provisions of section 447 of the new Companies Act which relates to fraud, citing public interest, sources told TOI. The law provides for imprisonment of three to 10 years in case of fraud and can come with a penalty that is equal to the value of the offence. A “fraud” has been defined to include acts of omission and concealment.
Sources said that the registrar of companies, which had de-registered the firms, will look into the issue and also examine the source of funds through a thorough investigation of the companies. The move follows a ban on directors, some of whom are also on the board of top listed companies, as well as a move to freeze the bank accounts of these entities.