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West Bengal dominates list of shell firms under scanner

Press Trust of India  |  New Delhi 

accounts for the largest number of companies on the list of 331 suspected shell firms, referred by department and SFIO to regulator for further action.

Besides, and also account for a large number of such firms, against which the capital market regulator has recommended trading restrictions by the stock exchanges.


The list was referred to by the Corporate Affairs Ministry on suspicion raised by various departments and agencies, as per the documents.

These companies include Parsvnath Developers, J Kumar Infraprojects, Sponge Iron and Steel, Birla Cotsyn, and SQS BFSI Ltd.

While at least 124 companies are believed to be under scanner for alleged evasion, further 175 firms were being investigated by the Serious Investigation Office (SFIO).

An analysis of the list shows that at least 127 West Bengal-based companies are on the list, while there are 50 from and more than 30 from and each.

There are also companies from Odisha, Assam, Karnataka, Andhra Pradesh, Tamil Nadu.

In a communication sent to the BSE, the NSE and the Metropolitan Stock Exchange yesterday, has asked them to keep the 331 shares in stage six of the Graded Surveillance Mechanism (GSM) with immediate effect.

These entities would be subject to independent audit and if required, forensic audits could also be initiated to check their credentials.

Securities coming in stage six are permitted to trade only once a month under trade to trade category.

Further, any upward price movement would not be permitted beyond the last traded price while additional surveillance deposit of 200 per cent of trade value would be collected from the buyers. This amount would be retained by the exchanges for five months.

Apart from initiating a "process of verifying the credentials/ fundamentals of such companies", the exchanges have also been asked to appoint an independent auditor to carry out audit of these entities. If necessary, even forensic audit could be ordered to verify their credentials and fundamentals.

On verification, if the bourses do not find appropriate credentials or fundamentals about existence of these companies, they proceeding for "compulsory delisting" would be started.

Besides, these entities would not be permitted to deal in any security on exchange platform and its holding in any depository account would be frozen till such delisting process is completed.

"The shares held by the promoters and directors in such listed companies shall be allowed to be transferred by depositories only upon verification by concerned exchanges," as per the communication.

They would not be allowed to transact in the security except to buy shares in the particular listed company until verification of credential is completed.

Out of the list of shell companies, if securities of any of the listed company are under suspension, the trading in such securities shall be placed under stage four of the GSM directly on revocation of suspension, has told the exchanges.

Parsvnath Developers, and Prakash Industries, the firms identified by as suspected shell companies, said they are not shell companies and the suspicion of the regulator is uncalled for.

"We are shocked to find our company's name amongst the list of suspected shell companies ... We are not a shell company by any stretch of imagination," said.

"Our company's compliance track record both with the exchanges and Registrar of Companies have been impeccable," said in a regulatory filing to the bourses today.

said that directions issued by are "totally devoid of merit and uncalled for. Besides, there has never been a occasion when our company has indulged in any kind of malpractices in stock market".

SQS BFSI Ltd has expressed shock that it has been placed under the surveillance list even as it has been complying with all the norms under and regulations.

"We therefore find it quite shocking that the company has been placed under the surveillance list and we would provide all the necessary details and extend all assistance to co- operate with the authorities and get the matter resolved quickly," the company said.

As part of efforts to curb the black money menace, the Corporate Affairs Ministry has already cancelled the registration of more than 1.62 lakh companies that have not been carrying out business activities for long. The ministry is implementing the and firms are required to be registered under this law.

While the term 'shell company' is not defined under the Companies Act, Corporate Affairs Minister Arun Jaitley, last month, told the Lok Sabha that many such entities have been found to be indulging in large scale violations.

Last month, Prime Minister Narendra Modi had said 37,000 shell companies indulging in evasion had been detected and more than three lakh firms were under the scanner for suspicious dealings, post demonetisation.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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