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Shell companies crackdown: Enforcement Directorate arrests two

Tuesday, Apr 4, 2017,13:20 IST By anju A A A

New Delhi | The Enforcement Directorate has arrested two persons in connection with its crackdown on 500 shell companies suspected to be generating huge amounts of black money.

The agency identified the two as G D Reddy and K Liakath Ali and said they have been arrested under the provisions of the Prevention of Money Laundering Act (PMLA) in separate cases during follow-up action against the shell companies.

The ED had conducted raids on April 1 across 16 states with sleuths swooping down at market places, business centres, residential premises and even houses put up on rent to hunt down allegedly dubious and suspicious firms which the agency believes are the “backbone” of black money in the country.

These teams had visited at least 110 locations in cities like Kolkata, Mumbai, Ahmedabad, Panaji, Kochi, Bengaluru, Hyderabad, Delhi, Lucknow, Patna, Jaipur, Chandigarh, Jalandhar, Srinagar and Indore besides some in Haryana.

The drive was part of a recent PMO directive to check the illegal operations of these companies.

Shell companies are firms set up with nominal paid-up capital, high reserves and surplus on account of receipt of high share premium, investment in unlisted companies and no dividend income or high amount of cash-in-hand.

Such firms also characteristically have private companies as majority shareholders, low turnover and operating income, nominal expenses, nominal statutory payments and stock in trade and minimum fixed assets.