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Speedy steps are being taken against shell companies and as many as 1.78 lakh firms that have not been carrying out business activities for long have been deregistered, Corporate Affairs Minister Arun Jaitley said today.
He also emphasised that balance needs to be maintained between the ease of doing business and ensuring that the firms are not misused.
Jaitley, who also holds the Finance and Defence portfolios, told the Lok Sabha that there is no definition for shell companies under the Companies Act but such entities are used for round tripping of money.
The real owners behind such entities need to be identified and expeditious steps are being taken under the benami and Income Tax laws, he said during the Question Hour.
As many as 1.78 lakh companies have been deregistered in recent times, he added.
In a written reply to the Lok Sabha, Minister of State for Corporate Affairs Arjun Ram Meghwal said the Registrars of Companies (RoCs) have removed 1,62,618 companies from the register of the companies as of July 12, 2017.
Replying to supplementaries, Jaitley mentioned about markets regulator Sebi's action against suspected shell companies on the stock exchanges, saying "baazaar mein thoda uthal puthal hua (there was some turmoil in the markets)".
On August 7, Sebi had asked the stock exchanges to take action against 331 suspected shell companies which were referred to it by the corporate affairs ministry.
While noting that a company can be registered in two days, Jaitley said a balance should be there in terms of ease of doing business and ensuring that the companies being set up are not misused. With technology, it is not difficult, he added.
Responding to a supplementary question by Congress member Shashi Tharoor, the minister said there is a distinction between dormant and shell companies.
There is potential for dormant companies being misused as shell companies but there is an additional instrument to deal with such entities, Jaitley said.
If business is being done under a fake name, then the benami law would be applicable, he added.
On whether there is a need to amend the Companies Act and strengthen the inspection and oversight mechanisms to prevent formation of shell companies, Jaitley said, "there is no such proposal under consideration".
He also emphasised that the existing provisions of the Act were sufficient to ensure that the individuals forming the companies are identifiable and traceable for the purpose of initiating penal actions.
To a question on whether in the recent past many shell companies have reportedly been set up to launder black money and hold benami property or companies, the minister replied in the negative.
"The term 'shell company' is not defined under the Companies Act, 2013. The Act requires that a company may be set up for any lawful purpose only.
"Subsequent to incorporation, if a company is found to be formed for fraudulent or unlawful purpose, it is liable for penal action, including for winding up under Section 271 of the Act," Jaitley said in a written reply.
The questions were asked by BJP member and former Home Secretary R K Singh.
BJD's Baijayant Panda wanted to know whether the government would look at using biometric to weed out people behind shell companies. In response, Jaitley said the suggestion would be taken into consideration.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)