In one of its biggest crackdowns on shell companies, the Enforcement Directorate (ED) on Saturday conducted simultaneous countrywide raids on around 110 premises and 300 shell companies that were suspected to be involved in dubious and illegal transactions during demonetisation, officials said.
The operation was carried out across 16 states with multiple teams of the agency raiding the premises of about 300 shell firms in prominent places like Delhi, Chennai, Kolkata, Chandigarh, Patna, Ranchi, Ahmedabad, Bhubaneswar and Bengaluru among others.
"Several top business houses were searched in various cities such as Mumbai, Delhi, Chennai, Bengaluru and Kolkata," the official told IANS.
The raids were carried out under the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA) to investigate instances of money laundering and illegal foreign exchange transactions.
"Investigations had revealed that certain entry operators and fraudsters were using a network of companies, some of which have been used repeatedly while some others were discarded after use or kept dormant for a long period," an Enforcement Directorate official told IANS.
The official said that some of the companies were involved in major money laundering cases related to Maharashtra-based politician Chhagan Bhujbal, YSR Congress chief Y.S. Jagan Mohan Reddy, former chief engineer of Noida Yadav Singh, National Rural Health Mission, AGS Infotech, Rajeshwar Exports and others.
He said that some other entities were found to have been used for laundering demonetised currency after the November 8 banning of Rs 500 and Rs 1,000 notes. The official said that certain shell companies remitted huge amounts to other countries for imports but no imports had been made, thus causing loss of foreign exchange.
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"These companies had either produced forged bill of entry or not submitted any bill of entry. A sum of Rs 20 crore was found available in bank account of one entity and the same will be considered for attachment."
In a case relating to Kolkata, the official said more than 50 companies had the same registered address which on verification was found to be vacant residential premises.
"The landlord of the premises has stated that he had let out his home to a private individual around three years back who disappeared in three months. He had then subsequently received loan recovery letters against two companies registered on the address.
"These two companies are already under investigation," the official said.
During investigation, the Enforcement Directorate said it arrested one person named Jagdish Prasad Purohit who has admitted to having formed around 700 shell companies using 20 dummy directors, and 130 of the companies are still in existence.
"He had also provided accommodation entry to the tune of Rs 46.7 crore to Chhagan Bhujbal," the official said.
The official said the agency officials recovered the photograph of a fake ID card of a special agent in the anti-terrorism division, Interpol, in the name of one Chetan Shah during a raid at a house in Mumbai.
"The entry operator connected to Rajeshwar Exports company was also searched. The company had made remittances to the tune of Rs 1,476 crore for import of diamonds, which were grossly overvalued," the official said.
The official said a chartered accountant at Barakhamba Road in Delhi had formed more than 200 shell companies and had given accommodation entries to a number of persons in Uttar Pradesh.
"He was also found to be involved in conversion of black money into white for some of the sand mafias of Uttar Pradesh."
In another case, the Enforcement Directorate investigators found a shell company which has exported carpets to its sister concern incorporated outside India.
"The export proceeds were never realised and the person behind these companies had applied to RBI (Reserve Bank of India) for write off of the outstanding export proceeds," the official added.
Official sources said the action is part of the mandate given to the ED under a Special Task Force created by the government last month on the directions of the Prime Minister's Office.
The task force was created under the co-chairmanship of the Revenue Secretary and Corporate Affairs Secretary to monitor the actions taken against shell companies by various agencies from regulatory ministries and Enforcement Agencies.
In a statement, the Finance Ministry said last month that harsh punitive action will be taken against shell companies, including freezing of bank accounts, striking off of names of dormant companies and invoking Benami Transactions (Prohibition) Amendment Act, 2016.
Shell companies are companies that exist only on paper, and can be used for money laundering.
The statement said there were about 15 lakh registered companies in India and only six lakh of these file their annual returns.
--IANS
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