New Delhi : The Securities and Exchange Board of India should have vetted the list of 331 alleged shell companies provided by Ministry of Corporate Affairs before taking action, a senior finance ministry official said Monday.
“Most companies in these 331 companies may not be shell companies, bankruptcy and insolvency proceedings may have been filed against them but they are not necessarily shell companies,” the official said.
These companies will be given a chance to explain, the official said, adding that there will be a hearing for the 331 companies which have been restricted from trading. Earlier this month, SEBI restricted trading in shares of the 331 suspected shell companies named by the Ministry of Corporate Affairs. The Securities Appellate Tribunal has since stayed the SEBI’s directive on shares in case of two companies–J. Kumar Infraprojects Ltd and Prakash Industries Ltd. The tribunal asked exchanges to lift restrictions on trading of shares of both the companies.
There is no need to bring separate law on shell companies as the existing rules are sufficient to tackle diversion of funds or non-compliance of tax through such route, Finance Minister Arun Jaitley said last week in response to a question in the Lok Sabha. Jaitley said the term shell company, however, is not defined under the Companies Act.
- The official said most companies out of the 331 companies may not be shell firms
- Earlier this month, SEBI restricted trading in shares of the 331 suspected shell companies named by the Ministry of Corporate Affairs