A clip is going viral on social media where PM Modi can be heard stating that after demonetization 3 lakh suspicious companies were identified out of which 2.10L companies were closed. This clip is shared by propaganda lawyer turned activist Prashant Bhushan where he claimed that PM Modi is talking about shutting down 2 lakh companies after the note ban but on the other hand, they have no record of Adani shell companies even after the expose by Hidenburg.
Besides, Prashant Bhushan supported his claim by sharing a news report on the government having no record on off-shore shell companies.
Toolkit-driven Aditya Bhagat who is AlC Committee social media coordinator also posted the same tweet with the same claim.
AICC coordinator Gaurav Pandhi shared the viral video while mentioning that PM Modi claimed that the government has closed 2 lakh shell companies but now they are saying that they have no record and data on shell companies. So, the PM lied that time or protecting his friend now amidst the Adani-Hindenburg crisis.
Furthermore, Former general secretary of the minority community of congress Mohammad Muzammil replying to Gaurav Pandhi said this has led to doubt regarding the credibility of the administration.
Does the claim made by Congress hold veracity or is this another propaganda driven post? Let’s Fact check!
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Fact Check
Let’s first understand what shell companies and offshore shell companies are!
Shell companies are those companies that don’t have any business. According to money control, shell companies are companies without active business operations or significant assets. They can be set up by businesspeople for both legitimate and illegitimate purposes. It may be used for illegal purposes such as money laundering, tax evasion, benami properties, etc.
However, Off-shore shell companies are shell companies that are outside one’s home country. It is incorporated in a foreign jurisdiction.
Coming back to the video, we did a keyword search on YouTube to find the origin of the viral video. We found an entire video on the Bhartiya Janata Party channel, it was uploaded on October 03, 2017. In the address, Prime Minister Narendra Modi talked about how after demonetization more than two lakh shell companies out of three lakh suspicious companies have been de-registered in the biggest move to crack down on black money. In our country, if we close even one single company people start protesting but we closed more than two lakh companies, and no news is there. So, with this context, it can be understood that he was talking about companies registered in India.
We cross-verified the above statement and found a report by Press Information Bureau dated July 27, 2021. As per the report, Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply in Rajya Sabha stated that the Government has identified 238,223 Lakh shell companies between 2018-2021. He further added that the Government has formed a special task force team to look into shell companies’ issues. The minister also listed down state-wise total shell companies which were stuck off.
Further in our research, we searched for data on offshore shell companies. As per the report of Indian Express, the government has no record of Off-shore companies owned by Indians because they are not registered under the Ministry of Finance. Their taxation and registration come under foreign Jurisdiction.
Besides, Minister of State for Finance, Pankaj Chaudhary was asked about the details of off-shore companies whose ownership and benefit are held by Indian nationals. In his reply, he said, “It is submitted that an offshore shell company is not defined in the Acts administered by the Ministry of Finance. Data/details regarding offshore shell companies owned by Indian citizens are not available.” Further, he said that the Government has taken steps to get information on taxation and law of off-shore companies, it can also include information on off-shore shell companies, through which it can be identified.
What is the government doing to crack down on off-shore shell companies?
Dr. John Brittas Member of Parliament asked GOI to provide the details and action taken by Government against offshore shell companies whose Ultimate Beneficial Ownership is held by an Indian Citizen.
Answering the above question in the written reply to Rajya Sabha Minister of State of Finance Ministry Pankaj Chaudhary admitted that they have no record of offshore shell companies. However, they have taken the following steps to identify offshore shell companies whose UBO lies with an Indian citizen.
- The Government has entered into various agreements with foreign jurisdictions which will provide an exchange of information that will be relevant for the administration or enforcing domestic tax law.
- India has implemented an Automatic Exchange of Information. It will provide financial information on Indian taxable residents which operate in other countries.
ED takes necessary action under various relevant acts such as the Foreign Exchange Management Act (FEMA), Prevention of Money Laundering Act (PMLA), and Fugitive Economic Offenders Act, 2018 (FEOA).
So, from the above analysis, it is clear that shell companies and offshore shell companies are two different entities. The Government has identified and de-registered more than 2 lakh shell companies in India which PM Modi was talking about. However, as of now, the Government has no record of offshore shell companies because they fall under foreign jurisdiction.
Hence, the above claim that government has no record and data on shell companies is completely misleading.
| Claim | Government has ‘No’ record on shell companies. |
| Claimed by | Prashant Bhushan, Gaurav Pandhi and Congress Social Media coordinators. |
| Fact Check | Misleading |
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