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With the revamp in the Companies Act, thousands of shell companies now can face criminal action for depositing unexplained high-value notes during demonetisation or for operating bank accounts after their names were blacklisted.

According to the Times of India, the Ministry of Corporate Affairs (MCA) is planning to invoke provisions of section 447 of the new Companies Act against 2 lakh de-registered companies.

If found guilty, the firm owners can get imprisonment of three to 10 years for fraud. Moreover, a penalty can be levied on the fraudulent firm, which is equal to the value of the offence.

Sources told TOI that the registrar of companies will do a thorough investigation of the de-registered companies to find out the source of funds.

Earlier, the ministry had disqualified two lakh directors for holding posts in the companies that have defaulted loans and have failed to file their financial returns for last three years. The government has also frozen their bank accounts to check any siphoning off of funds.

Sources said that the revenue department and MCA are jointly working to act against "shell companies". The revenue department also believes that many of these companies simply exist to launder funds by routing money through a web of companies.

Earlier this month, the government had announced that it has received 'vital information' from 13 banks on suspicious transactions post-demonetisation. The data provided by banks reveal that suspicious transactions were carried out by 2,09,032 companies, which were already blacklisted by the Registrar of Companies earlier this year.

Quoting sources, the newspaper reported that preliminary data accessed by the tax department revealed that Rs 4,600 crore were routed through bank accounts of less than 6,000 companies.

"While it is not illegal to have several bank accounts, we need to establish that the funds were beyond the known sources of income," a tax officer explained.

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