NEW DELHI: The Securities and Exchange Board of India (Sebi) has begun sending show-cause notices to the 331 listed entities it recently tagged as ‘shell companies’. Action has also begun against 100 unlisted entities suspected to have traded in stocks with laundered money.
On August 7, the markets regulator had asked stock exchanges to restrict trading in shares of these 331 firms, some of which have several well- known domestic and foreign investors. Of the 331 entities on the list, over 160 are actively traded on the exchanges.
Some of these firms have got the Securities Appellate Tribunal to reverse the market regulator’s decision to restrict share trading. These include Parsvnath, Kavit Industries, Pincon Spirit, Signet Industries, SQS India BFSI and Kalpana Industries. SAT, however, said Sebi can still go ahead with its probe against these companies as well as others who could have violated securities laws.
Many of these companies have gone public to deny any wrongdoing and say they are not ‘shell companies’. According to experts, even established firms can act as ‘shell companies’ by providing a platform for money laundering and converting black money into white.
Sources said several small brokers are already in the list of ‘suspected shell firms’ and their links to bigger brokerage groups are being probed by Sebi.
As Sebi continues its probe, the affairs of these companies are also being looked into by agencies such as I-T Department, Enforcement Directorate, and Serious Fraud Investigation Office to unearth black money.
Many of these firms are also suspected to have indulged in huge cash dealings in the aftermath of demonetisation.
While 500-odd entities (both listed and unlisted) are reportedly under the lens, some of the names of the companies have not been made public yet due to the sensitivity of the matter and to safeguard the investigation process.