In one of the biggest crackdowns on black money, almost the entire Enforcement Directorate (ED) was out on the field on Saturday as it carried out nationwide searches on 500 shell companies, at more than 100 locations across 17 States, including those allegedly linked to the jailed ex-Maharashtra Deputy Chief Minister Chagan Bhujbal, YSR Congress chief YS Jagan Mohan Reddy and ex-Noida chief engineer Yadav Singh.
The raids by the 800-staff-strong ED began early morning with the agency sleuths swooping on 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 “backbone” of black money in the country. The drive was part of a recent PMO directive to check the illegal operations of these companies.
ED teams 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 Rs46.7 crore for Chaggan Bhujbal”.
“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.
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.
The agency said it recovered documents and raided those dubious firms which were “used in the National Rural Health Mission (NRHM) scam to launder proceeds of crime.” Action was carried out against those operators allegedly used by ex-Noida Chief Engineer Yadav Singh “to convert his illegal wealth”.
The agency also searched those companies allegedly related to YS Jagan Mohan Reddy, Rajeshwar Exports and others to unearth their modus operandi. Reddy is facing separate CBI and ED probes into cases of alleged disproportionate assets, corruption and money laundering.
The ED is one of the members of a recently constituted central Special Task Force (STF) on shell firms that is co-chaired by the Revenue and Corporate Affairs Secretaries.
The Income Tax department has identified 1,155 shell companies which were used as conduits to launder money amounting to Rs13,300 crore between 2013-14 and 2015-16. These companies were used as conduits by over 22,000 beneficiaries. A Government statement in February this year had said that “in a small sample analysis” of such companies (shell), it has been found that Rs1,238 crore cash has been deposited in these entities during November-December period (which includes the period of demonetisation).
The ED action is being carried out under the provisions of the Prevention of Money laundering Act (PMlA) and the Foreign Exchange Management Act (FEMA). Officials said some arrests and new FIRs could be made once the operations end.
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 or high cash in hand.
Such firms are also characterised by having private companies as majority shareholders, low turnover and operating income, nominal expenses, nominal statutory payments and stock in trade and minimum fixed asset.