Unauthorised use of bank accounts may attract up to 10 yrs in jail

The government also said that if the siphoning off of funds has been done before the bank accounts of these delisted companies were restricted, then “strict action” will be taken against them. “Consequent to instructions issued by Department of Financial Services to all the banks on September 5, 2017, the Directors (ex-) or their authorised signatories had been restricted from operating the Bank accounts of such companies and they cannot siphon off money from the accounts of these “struck off” companies. However, even prior to such action, if they have siphoned off any money, strict action would still be taken against them,” the release said.

The decision came after Minister of State for Corporate Affairs P P Chaudhary chaired a review meeting on Wednesday, where it was decided that the directors of such shell companies who have not filed returns for three or more years, will be disqualified from being appointed in any other company as Director or from being reappointed as Director in any of the companies where they had been Directors, thereby, compelling them to vacate office. It is expected that as a result of this exercise, at least 2-3 lakh of such disqualified Directors shall get debarred.

The government is also monitoring the action of chartered accountants/company secretaries and role of professional bodies such as ICAI, ICSI. “All efforts are also being made to identify the actual beneficiaries and persons behind such shell companies. Profiles of directors such as their background, antecedents and their role in the operations/functioning of these companies are being compiled in collaboration with enforcement agencies. Identification of more shell companies is also in progress. The professionals, chartered accountants/ company secretaries/ cost accountants associated with such shell companies and involved in illegal activities have been identified in certain cases and the action by professional institutes such as ICAI, ICSI and ICAoI are being monitored,” the release said.

Chaudhary said that as a result of the exercise of weeding out shell companies, the menace of black money will be checked and ‘Ease of Doing Business’ shall be promoted. “The financial status of the companies would be reflected in a true and fair manner which would minimise the possibility of frauds and tax evasion. Further, the availability of funds for illegal purposes will also be choked,” the release quoted the minister as saying.
On Tuesday, pursuant to removal/striking-off and consequent cancellation of the registration of around 2,09,032 shell companies by the Ministry of Corporate Affairs, the Department of Financial Services had directed all the banks to restrict operations of bank accounts of such companies by the Directors of such companies or their authorised representatives. The decision to restrict the operation of the bank accounts of such shell companies was also taken in a review meeting held by the Minister of State for Corporate Affairs, immediately after taking over the charge of the ministry.

In his Independence Day speech, Prime Minister Narendra Modi had said that data mining after demonetisation has revealed 3 lakh shell companies, out of which registration of 1.75 lakh companies have been cancelled. “Post-demonetization, the reports from data mining astonishingly revealed that there are 3 lakh shell companies dealing in Hawala transactions. Can anyone imagine? Out of these 3 lakh shell companies, registration of 1.75 lakh companies were cancelled,” Modi had said.