The Registrar of Companies (ROC) filed four FIRs in January as part of a nationwide crackdown on shell companies with dummy Indian directors and a Chinese connection. Senior government officials said the latest bust is just the tip of the iceberg, and such companies usually have an involvement of Chinese nationals and chartered accountancy (CA) firms.

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According to officials, firms owned by Chinese nationals based in China, Taiwan and Hong Kong register firms in India with the help of visa facilitators. Dummy Indian directors are appointed while a CA firm helps in opening such firms and fulfil the certificate requirements and other documentation needed for registering and running them. After sometime, the dummy directors are either removed or they continue to be on paper while the charge is being taken over by the Chinese nationals. Thus violating the FEMA (Foreign Exchange Management Act) and the RBI guidelines, the money is routed outside India through hawala channels.

In the recent past, several cases have been registered in the country along with four FIRs being registered by ROC Gujarat against dummy firms operating in the state. A senior government official said on the condition of anonymity that law enforcement agencies have information about several firms operating in Gujarat which are under scrutiny. The dummy firms are involved in several types of offences like bank fraud, money laundering, tax evasion and crypto fraud. However, soon action will be taken against them, the official said. In an FIR registered earlier this month, a firm named FCS Machinery with an office in Vasna had an Indian director named Pranav Soni and a CA named Shilpa Makadia, who looked after the documentary work. The company had three Taiwanese nationals as directors who were involved in a fraudulent practice. In another case, a textile firm called Sawariya International Pvt Ltd was registered in Surat in 2012. It had last filed a return in 2015-16 and also had a loan of Rs 8 crore.

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