Modi Government Cracks Down on Suspected Shell Companies

The Narendra Modi government will reward penalty of 10 years to company directors who are involved in siphoning black money.

Black money holders disclosed their unrevealed income via the Income Disclosure Scheme that came to effect from June 1, 2016. Last year, PM Modi discussed his plans on curbing black money scams with the President of Swiss Confederation Johann Schneider Ammann in Geneva.

The government on Wednesday announced that directors of companies found guilty of black money fraud will be behind bars for six months to 10 years. The crackdown exercise began post demonetization.

If the fraud involves public interest, the guilty will be slapped with a fine three times the amount involved along with a sentence of more than three years.

The directors who have not filed returns for more than three years will be barred from holding the directorial post in any other company. Around 2-3 lakh directors will be held guilty, the ministry mentioned post a meeting chaired by the Minister of State For Corporate Affairs.

Following Tuesday’s announcement, 2,09,032 firms from the Register of Companies were blacklisted. The department of financial services directed banks to freeze their bank accounts.

Banks should be equally vigilant, the government advised.

The defaulters fall within the domain of Section 248 of the Companies Act. The current guilty signatories are now considered ex-authorized signatories. They need to be legally restored under Section 252 of the Companies Act by an order of the National Company Law Tribunal.

‘Struck off’ companies will be ‘Active’ after the passage of the legal resolution, the government stated.