Shell Shocked

Registration Cancellation of Over 2 Lakh Inactive Companies Is a Display of the Government’s Cavalier Attitude

- Dipak Mondal

SANJAY ARORA (name changed) looks hassled by the situation he finds himself in. He's a director in an inactive company whose registration has been cancelled recently by the registrar of companies (RoC). We are sitting in a coffee shop in the bustling office complex of Nehru Place. Arora, between many phone calls, painstakingly refers to relevant sections of the Companies Act, 2013 to explain why the government’s decision to cancel registration of several ‘shell’ companies and disqualify their directors for five years is a travesty of the law of natural justice.

Arora, investor director in an e-commerce company facing the music, is also a director of another company. The government action has led to him being barred from being a director of any other company for five years. Now Arora says he faces an existential crisis. “For an entrepreneur, five years of ‘banishment’ could mean the end of road for his commercial interests,” he says. Visibly distraught, he is already thinking of leaving the country and shifting base to Singapore. “This is no ease of doing business,” he bemoans.

Arora’s (and many others like him) problems arise from the government’s decision to crack the whip on companies which have not filed their returns for three or more years. The registration of 2.17 lakh such companies have been cancelled at one go and as many as 3.2 lakh directors disqualified. The government also restricted the use of bank accounts of these companies by their directors or their authorised representatives. Several companies – such as Gold Sukh Trade India Limited, Shanti Infrastructure and Colonisers Private Limited, Aptive IT Solutions and Swarnalabh Trade Link, among others – had multiple accounts.