Modi govt has new plan to stop frauds like Nirav Modi, Vijay Mallya leave the country


Prime Minister Narendra Modi-led government is set to roll out a massive verification drive of top company executives in what can be called a move to keep a check on shell firms and prevent those in top management from fleeing the country to escape prosecution.

According to a report in the Economic Times, the Ministry of Corporate Affairs is set to launch a mega drive to do a KYC of company directors–that will at the minimum include passport, PAN number and contact details. All of this information will have to be updated annually by the company secretary or chartered accountant at the time of filing annual financial statements.

Apart from this, there will be another form for the physical address of the company, which again will have to be updated annually by the company secretary. For foreign nationals, there will be a separate form but even they will have to be registered with the ministry.

Ministry of Corporate Affairs Secretary Injeti Srinivas told ET Now that as many as 33 lakh company directors would be registered as part of the KYC programme.

He further said that both these forms — that is the physical address of the company and the other on all requisite information on company directors — would have to be “religiously and diligently” updated by the chartered accountant and/or by the company secretary.

The idea of rolling out mega KYC drive came in the backdrop of infamous PNB scam in which billionaire jewellers Nirav Modi and his uncle Mehul Choksi defrauded the state-run bank through multiple shell firms. The regular KYC drive of top company executives will also help in keeping a check on shell companies.

The government on Friday informed that it has identified over 2.25 lakh companies and 7,191 LLPs which have not filed requisite financial statement for 2015-16 and 2016-17, and they may be struck off during the current financial year.

The Ministry of Corporate Affairs has already struck off over 2.26 lakh companies for non- filing of annual returns for a continuous period of two years or more. Not only this, over three lakh directors were also disqualified for not filing financial statements in last three years.

In a press statement issued on Friday, the Finance Ministry said: “For the second drive to be launched during 2018-19), 2,25,910 companies have been further identified for being struck off under section 248 of the Companies Act, 2013…for non-filing of financial statements for 2015-16 and 2016-17.”

In February 2017, a task force headed by Finance Secretary Hasmukh Adhia and MCA Secretary Injeti Srinivas was set up to check the menace of shell companies through a coordinated, multi-agency approach. The task force compiled a database of shell companies and classified them into three categories– Confirmed list, Derived list and Suspect list.

The Confirmed List has a total of 16,537 confirmed shell companies on the basis of the information received from the various law enforcement agencies of the companies found to be involved in illegal activities. The Derived List has 16,739 companies identified on the basis of 100 per cent common directorships with the confirmed shell companies.

The Suspect List has 80,670 shell companies and has been drawn up by SFIO using certain red flag indicators by the task force.businesstoday