The fact that there are 15 lakh registered companies in India, and only 6 lakh out of these companies file their annual returns which categorically implies that colossal number of the companies may be indulging in financial
irregularities and therefore warranted a stringent action against these companies.2Though not defined under the Companies Act, shell companies meet statutory requirements in letter to remain unheeded and unrecognised and have inconsequential business activities that are used in tax evasion, money laundering, and converting black money into white.
The repercussion of demonetization, that an integrative, consultative and inter-regulatory “search and action” initiative has been taken by Modi government to track black money which is being laundered and tripped by using the façade of front companies. Out of approximately 17 lakh (1,720,682) registered companies3, the bank
accounts of around 2.10 lakh shell companies have been iced after they were removed from the Business Register and a total of 1, 06,578 directors were identified by the ministry for disqualification under Section 164(2) (a) of the Companies Act, 2013 as of September 12, 2017 as the government intensifies its campaign
against black money.4It is suspected that above-mentioned firms have been used as shell companies to evade taxes and launder black money. Some of the shell companies include Sundar Pharmaceuticals Private Limited, Udgam Construction Private Limited.5
