Cracking down on shell company operations, the Enforcement Directorate has arrested two Delhi-based businessman in connection with its probe in a ₹8,000 crore money laundering and black money racket.
The agency said it has arrested Surendra Kumar Jain and Virendra Jain on Monday. They were produced in a court which has sent them to 10 days custody.
At least 90 shell firms are under the scanner of the agency. It has identified 26 of them for allegedly laundering about ₹62.20 crore funds.
The case emerged after the ED filed a criminal complaint last month under the Prevention of Money Laundering Act (PMLA) based on a charge sheet filed by the Serious Fraud Investigation Office against certain individuals and firms “for providing accommodation entries by accepting funds from their beneficiaries through mediators and converting the same into share premium transactions in the beneficiary company.”
The ED had also recently attached assets worth ₹64.70 crore of a firm based in New Delhi and this investment, it said, is “managed by” Radisson Blu, a luxury hotel in the national capital.
It suspects the entire racket to be worth about ₹8,000 crore of slush funds and has detected about half of it as per its latest probe.
“The modus operandi of Jain brothers was to launder the unaccounted money through the process of placement of funds, layering of transactions and the final integration of laundering money into the banking channel camouflaged as legitimate share premium transactions.
“Funds were brought in by the mediators on behalf of the beneficiaries through the mediators. Jain Brothers were providing accommodation entries by accepting funds from their beneficiaries through mediators and converting the same into share premium transactions in the beneficiary company. In this process Jain Brothers earned money as a certain percentage of the unaccounted money converted into share premium,” the ED said in a statement.
It added during probe of some other firms “controlled” by these brothers, it has emerged that during a “short period of three months between the opening and closing of the accounts of these companies, there was credit and debit summations to the tune of ₹8,000 crore.”
“It was an attempt to merge these companies’ sized up balance sheets with the listed Non-Banking Financial Companies so as to give accommodation entries to prospective beneficiaries on future dates,” it said.
The ED’s action is part of its crackdown against shell or bogus companies active across the country to launder money and generate black money.
The Central government had sometime back created a special task force of investigative agencies like ED, Income Tax department, SFIO, Directorate of Revenue Intelligence and others, in this regard.
The task force is headed by the two Secretaries of the Department of Revenue and Corporate Affairs under the Union Finance Ministry.
Shell companies can be defined as those entities which are characterised by nominal paid-up capital, high reserves and surplus on account of receipt of high share premium, investment in unlisted companies and no dividend income.
Also, shell companies are identified as those with 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.
