The ministry of corporate affairs has asked the Serious Fraud Investigation Office (SFIO) to probe 57 suspected shell companies on the basis of reports by regional directors of the office of the Registrar of Companies (RoCs).
Sources say 18 of these entities deposited above Rs 1 billion each and the other 39 deposited between Rs 250 million and Rs 1 billion each in the post-demonetisation period.
A senior official from the ministry told Business Standard, "This investigation has been ordered as per Section 216 of the Companies Act, wherein the government can order an investigation to find out who would benefit by financial transactions of a company."
The official stated they had sought more details of deposits by all suspected shell companies from banks. "All banks have not provided us the details. These include cooperative and rural banks," he added.
According to the information given by 13 banks, Rs 45 billion was deposited and withdrawn between November 8, when demonetisation was announced, and December 31 of 2016. Many of the companies in question had over 300 accounts; some had up to 2,000.
Separately, the ministry had referred 1,505 firms with attributes of shell companies to various RoCs to investigate their accounts under Section 206 of the Companies Act. After the primary investigation, matters might be referred to the SFIO.
Apart from these entities, 331 others were the subject of an alert by the Securities and Exchange Board of India (Sebi).
The MCA had also found 809 listed companies that were not traceable and referred these to Sebi for investigation regarding their offices and directors.
As many as 300,000 directors have already been identified for disqualification by the government for allegedly working in league with shell entities. The MCA has asked state governments to identify properties owned by such companies and put these in the custody of district collectors.
The crackdown on shell companies started after the government found unusual transactions after demonetisation, with irregular filing of audit reports. It has said at least 300,000 companies were struck off the roster by various RoCs.
Typically, shell companies are corporate entities that do not have active business operations or significant assets. The government feels they could be used for money laundering, tax evasion, and other illegal activities.