DNA Investigation: 800 firms were registered at 2 vacant Delhi addresses

More than 800 companies were registered at two addresses in two of Delhi's most congested areas. Fifty per cent of these firms were related to two big corporate houses engaged in real estate, power and finance - and are now under the scanner of the Income Tax Department.

PM Narendra Modi had said in his recent Independence Day address: "You will be surprised to know that there are some shell companies operating from a single address. As many as 400 companies have been found to be operating from one address. There was no one to question them. There was a total collusion".

Taking a cue from that, investigations carried out by DNA have revealed that more than 400 companies had been registered at a single address in 1-E Jhandewalan Extension, New Delhi, an old dilapidated building. "No one is here, all have left," said an old man, the only living soul in the three-story building. The corporate group owning the address, which had close links with the UPA government, had accommodated hundreds of companies in this crumbling building (also known as Naaz Cinema complex).

"Most of the companies left this building around demonetisation," said an insider, not wanting to be named. All enquiries (including those by IT agencies) are fielded by security guards, who now accept mail for only 63 of the over 400 companies that were registered. A board shows a listing of the companies, some blacked out.

Ministry of Corporate Affairs (MCA) master-data reveals that in 2015, a total of 468 companies were registered at the 1-E Jhandewalan address. Most of these were created in 2007. But after demonetisation, the number came down to 245 (MCA data as on December 31, 2016). Interestingly, 111 out of the 245 companies shared a single email address too. One of the more prominent ones (in terms of paid-up capital), Caraf Builders & Construction, has now shifted to another location and has assumed a new Corporate Identification Number (CIN).

A source who has worked in the finance department of the real estate major which owned most of the companies registered at Jhandewalan told DNA that the entities had been created for land-pooling or for land-transfer purposes – the objective being to avoid paying stamp duty. In normal course, if they transfer the land parcel to any other company or person they must have to pay stamp duty as per state law. To avoid such stamp duty, they created shell companies and transferred the ownership instead of land.

Like in Jhandewalan, DNA found a 20-by-20 feet room on the first floor of 62/63 M Block market, Connaught Place as a registered address for 405 companies, as on March 2015.

After demonetisation, the number of companies shrunk to 191, as per MCA data of December 2016. Most of these companies have similar email IDs, and directors were found to be related - a classic feature of shell companies. The mother firm is a real estate major with head office in Gurgaon, and corporate HQ in Mumbai.

A list of companies (as on December 31, 2016) have been passed on by MCA to the IT department. These are now under scrutiny along various parameters – including unusual concentration in a single address.

Shell companies are firms created on paper for the sole purpose of tax avoidance, said Sanjay Sharma, MD, Qubrex, a real estate exchange company. "In some cases, the proprietor inflicts losses on clients for personal profit by entering into unfavourable deals with companies which are effectively his own subsidiaries," he added.

Hitender Mehta, a corporate law expert, said 400 companies registered in just one address is illogical by itself. "Formation is not the issue, but under the law there is a certain legal requirement with respect to verification of registered office. Every company is a separate legal entity, and it has to have a registered office, either on-lease or purchased. In such cases, they have to have separate lease deeds or rent agreements."

In MCA data of 2015, the Registrar of Companies, Delhi, shows a total 2,72,369 companies. Out of these, 1,718 companies have registered addresses as vague as 'Delhi, India.' Recently, a government financial watchdog agency has raised an alert on 16,794 shell companies. The list had been prepared by different law enforcement and investigating agencies like the CBI, Income Tax department, Enforcement Directorate and the Serious Fraud Investigation Office.