The Ministry of Corporate Affairs (MCA) is planning to ask the promoters and directors of all companies to register their passport details with the registrar of companies (RoCs).
The move is aimed at preventing those with charges against them from fleeing the country.
“We are planning a move to ask for passport details,” a key ministry official said. The plan comes after diamond merchant Nirav Modi left the country when cases against him and his companies are pending. Earlier, Vijay Mallya, an industrialist in the liquor business, fled even as cases against him are on in India.
There is a law empowering the government to confiscate properties of economic offenders who have fled the country. Meanwhile, the ministry’s plan to come up with an early warning system (by using artificial intelligence) for detecting fraud in companies has been delayed owing to a lack of funds.
The ministry had estimated a cost of Rs 1.2 billion to set it up. However, even the lowest bid it received was twice that.
The ministry had envisaged the system to spot wrongdoing in shell companies. The software will track companies and alert RoCs if it finds anything unusual. Apart from this, the MCA is revamping its website to include details of companies that are undergoing resolution under the Insolvency and Bankruptcy Code. A separate section in MCA 21 is being developed for this.
The Task Force on Shell Companies has de-registered more than 226,000 of them in 2017-18. The Serious Fraud Investigation Office (SFIO) has compiled a database of shell firms.
It has three lists — the confirmed list, derived list, and suspect list. The confirmed list has 16,537 entities, gathered on the basis of information received from law enforcement agencies, which found them involved in illegal activities. The derived list has 16,739 companies, all of whose directors are those on the boards of the confirmed shell companies. The suspect list has 80,670 outfits and has been drawn up by the SFIO using red-flag indicators.
The crackdown began after the government observed unusual activities, including not filing audits, in these companies. The exercise began after demonetisation. The ministry is collecting transaction details of many of these firms from banks.