The government has referred 18 "shell companies" to the Serious Frauds Investigation Office (SFIO) for depositing and withdrawing large sums during demonetisation in what appeared to be entities that existed largely on paper. At the same time, the ministry of corporate affairs has ordered the regional directors to scan the records of other companies, many of which operated thousands of bank accounts, which had smaller deposits.

"All entities that had dealings of over Rs 100 crore have been referred to the SFIO. Depending on the investigations, the government will take further action," a source in the government told TOI. Separately, other agencies such as the income tax department and the Enforcement Directorate are also probing companies for violation of other laws.

Based on the report from SFIO and the regional directors, the government will decide if it will initiate criminal action under the Companies Act, something that has not been done in the past. As reported first by TOI on October 23, the ministry is looking at the possibility of invoking provisions of section 447 of the new Companies Act, which relate to fraud, citing public interest. The law provides for imprisonment of three to 10 years in case of fraud and can come with a penalty that is equal to the value of the offence. A "fraud" has been defined to include acts of omission and concealment.

MCA has already asked companies to share details of deposits of old currency notes during the demonetisation period. That exercise is in addition to the focus on over 2.24 lakh companies that have been de-registered for not filing the requisite returns under the Companies Act for three years. While over three lakh directors have also been barred from taking up board positions, banks have also been asked to scan the records to examine if large deposits and withdrawals were made during demonetisation or after de-registration. The bank accounts of these companies are also being frozen.

A scan of just 35,000 companies showed that they deposited over Rs 17,000 crore post the demonetisation drive, which was later withdrawn, raising suspicion of wrongdoing, latest data released by the government showed.

* Ministry of corporate affairs has ordered the regional directors to sign the records of other companies, many of which operated thousands of bank accounts, which had smaller deposits

* Other agencies such as I-T department and ED are also probing companies for violation of other laws

* "All entities that had dealings of over Rs 100 crores have been referred to the SFIO. Depending on the investigations, the government will take further action," said a source #casansaar (Source - Times of India)