Hyderabad: For the first time in the history of Hyderabad, a major cache of shell companies has been unearthed. According to sources, top businessmen from Telangana state and Andhra Pradesh are found to be directors on the boards of such shell companies.
The Serious Fraud Investigation Office (SFIO), which comes under the ministry of corporate affairs (MCA), on Wednesday found a large number of shell companies in the city when its officials raided two places in the city.
The officials found entities with the same address or with common directors, and having no proper business operations over the years.
Perusing the RoC, I-T and GST returns, the SFIO found that around 25 companies had a common address or directors. The raids took place at two places in the city and another six may be searched. The SFIO raids were reportedly carried out by 10 officials led by a deputy director for south India.
“It’s a routine check as and when we come across over 30 companies with common address or directors. This report will be submitted to the Centre,” an RoC official told this newspaper.
The operation may be even bigger. Sources in the know revealed that the SFIO has actually found 140 shell companies, mostly belonging to Mr B Ramalinga Raju and his associates. Maytas Hill County was among them.
“We found 140 shell companies with common directors and address. Mr B. Ramalinga Raju, Namburi Rama Raju, Shivalinga Ravi Prasad Raju, and Suryanarayana Raju are directors of several such companies,” the source said.
The 140 companies have one common auditing firm i.e. SRSR Advisory Service, which belongs to Suryanarayana Raju, brother of Ramalinga Raju.
Speaking to this newspaper on condition of anonymity, an official with the SFIO said that “during searches, we found over 110 companies operating from the same address in Jubilee Hills from the same room and studied their records and annual reports whatever available. Over 40 companies were found in a different location in the city.”
The team comprising 10 officials raided the companies with the common address “Third floor of the Fortune Monarch mall.” The records of several of these companies show business loss of up to Rs 25 crore.
The records of several of these companies show business loss of up to Rs 25 crore, even though they are not engaged in proper operational activity.
“We noticed that almost all the transactions are among these companies only, thus circulating money among over 20 entities. Generally, such shell companies own agriculture land and file returns for the sake of the record. But in reality, money circulation circulates among different entities to make it a legitimate source of money at the end,” said an official.
The law that stipulates that a person can be on the board of a maximum of 20 companies was also flouted with more than 30 companies having common directors, mostly family members or close relatives.
Last year also the enforcement directorate (ED) raided 110 locations in 17 cities, including Hyderabad, and identified 500 shell companies. The ED is a specialised financial investigation agency under the department of revenue in the Union finance ministry. The GST and I-T departments exchange details of returns and compile a report that identifies companies with common addresses, directors and business operations history. Hyderabad ranks second in the country after New Delhi in having the most number of shell companies. According to the latest report by the Ministry of Corporate Affairs, Delhi topped the list, with 26,000 shell companies, closely followed by Hyderabad with 25,000 shell companies.