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Black money window over, ED swoops down on 500 shell companies across 17 states

Officials said the raids are being carried out under the provisions of the Prevention of Money Laundering Act and the Foreign Exchange Management Act to check instances of money laundering and illegal foreign exchange

India TV Business Desk, New Delhi [ Updated: April 01, 2017 22:46 IST ]
Representative image. ED has raided 100 locations with 300
Representative image. ED has raided 100 locations with 300 shell cos on radar

A day after the window offered by the government to declare black money with a penalty under its Garib Kalyan Yojana drew to a close, the Enforcement Directorate today conducted raids at over 100 locations targeting 500 shell companies across 17 states in the country.

The raids began early morning with ED sleuths swooping down at market places, business centres, residential premises and even houses put up on rent to hunt down the allegedly dubious and suspicious firms which the agency believes are the "back bone" of black money in the country.

By the last update, ED teams had visited at least 110 locations in cities like Kolkata, Mumbai, Ahmedabad, Panaji, Kochi, Bengaluru, Hyderabad, Delhi, Lucknow, Patna, Jaipur, Chandigarh, Jalandhar, Srinagar, Indore and some in Haryana.  

The agency said it searched a Mumbai-based operator who was running 700 shell companies with 20 dummy directors and had "converted Rs 46.7 crore for Chaggan Bhujbal", the jailed ex-Maharashtra deputy chief minister. 

ED teams also visited those who are allegedly connected to some of the most prominent corruption and black money cases being probed in the country at present. 

According to sources, companies connected to Y S Jagan Mohan Reddy, Chhagan Bhujbal, Yadav Singh and Mayawati's brother Anand Kumar were targeted in the raids. 

The agency said the action was carried out against those operators allegedly used by ex-Noida Chief Engineer Yadav Singh "to convert his illegal wealth" . 

It also searched those companies allegedly related to Reddy, Rajeshwar Exports and others to unearth their modus operandi. Reddy is facing separate CBI and ED probes in cases of alleged disproportionate assets, corruption and money laundering. 

While authorities conducted raids in Mumbai in connection with Bhujbal case, raids were carried out in Ghaziabad and Kolkata in connection with Yadav Singh and Reddy respectively. 

The central probe agency, which has a total strength of about 800 officers and staff at its various regional and zonal offices in the country, was virtually out on the field to undertake one of the biggest operations in the country against shell firms. The drive was part of a recent PMO directive to check the illegal operations of these companies. 

"The operations are based on various investigations done by the agency and some others as part of their anti-black money crackdown charter," ED Director Karnal Singh told PTI. He said the operations were still on. 

During these raids, the ED has reportedly unearthed around 2300 shell companies, most of them formed after Prime Minister Narendra Modi announced the decision to demonetise Rs 500 and Rs 1000 notes on November 8, 2016. 

In Mumbai and Delhi alone the ED has discovered over 1000 such companies, reports quoting sources said. 

These companies are suspected to have been used in the exchange of old notes for new besides being allegedly involved in money laundering.

They ED action is being carried out under the provisions of the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA) and officials added some arrests and new FIRs could be made once the operations end. 

The action is part of the mandate given to the ED under a Special Task Force (STF) that was recently created by the government on the directions of the Prime Minister’s Office (PMO). The ED is one of the members of the that is co-chaired by the Revenue and Corporate Affairs Secretaries. 

The entire roadmap for the massive crackdown was prepared during a meeting of the Income Tax department, the Financial Intelligence Unit and the Enforcement Directorate in the last week of March.

Links to over 10 lakh shell companies have been monitored under the guidance of the STF, sources told India TV, adding that the government wanted to wait for the March 31 window under the Garib Kalyan Yojana for declaration of black money to end before going ahead with the action.

The agency has recently attached assets worth crores of such firms in the last over a week's time.

Shell companies are defined as those firms which are set up by nominal paid-up capital, high reserves and surplus on account of receipt of high share premium, investment in unlisted companies, no dividend income, high cash in hand, private companies as majority shareholders, low turnover and operating income, nominal expenses, nominal statutory payments and stock in trade and minimum fixed asset.

Agencies involved in the crackdown on black money are of the belief that shell companies and entry operators are the two biggest generators of black money.  

(With agencies)

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