SFIO arrests “Mastermind” who set up Shell Companies linked to China.

The arrest was a part of a campaign against Chinese shell businesses that are allegedly involved in serious financial crimes in India.

The Serious Fraud Investigation Office (SFIO) has detained a man who was behind the incorporation of numerous shell companies with ties to China and who set up fictitious directors to serve on the boards of those companies to run the fraudulent enterprises. The arrest was a part of a campaign against Chinese shell businesses that are allegedly involved in serious financial crimes in India.

According to the agency, it raided numerous locations to find the scam and detained a man named Dortse, who served on the board of Jillian India Ltd, a wholly-owned subsidiary of Jillian Hong Kong Ltd.

This happened after the Ministry of Corporate Affairs (MCA) simultaneously conducted search and seizure operations on September 8 at the Gurgaon offices of Jillian Consultants India Pvt Ltd, a wholly-owned subsidiary of Jilian Hong Kong Ltd, as well as Fininty Pvt Ltd in Bangalore and Husys Consulting Ltd in Hyderabad.

Massive crackdown on Chinese shell companies in India, mastermind arrested by SFIO - BusinessToday

The member of the board of Jillian India is Dortse. He has come to light as the mastermind behind the scheme to incorporate numerous shell companies with connections to China in India and appoint fictitious directors to the boards of those companies. According to documents submitted to the Registrar of Companies (RoC), the arrested person Dortse had demonstrated himself to be a resident of Mandi in Himachal Pradesh, the ministry said in a statement.

According to the MCA, evidence gathered during the investigation by RoC Delhi and the concurrent search operations indicated that Jilian India Ltd had paid fictitious directors to act as fictitious directors in a number of shell companies.

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From the scene, boxes containing fake director signatures and company seals were discovered. The Chinese and Indian employees communicated with one another via a Chinese instant messaging app. Additionally, it was discovered that Husys Ltd was representing Jillian India Ltd.

Initial findings indicate that Husys and Jilian Hong Kong had a deal. Investigations to date have shown that these shell companies may have been involved in serious financial crimes that threatened the nation’s financial security.

On September 9, 2022, the government tasked SFIO with looking into Jillian Consultants India Pvt Ltd and 32 other businesses.

Jilian Consultants India Pvt Ltd has two directors, one of whom is Danish and the other Chinese. According to information received and the results of the investigations, Dortse fled the Delhi-NCR area for a remote location in Bihar and was attempting to leave the country by road. On September 10, Dortse was detained by the SFIO.

Official Escape Route Through Bihar

“With his help, more than 35 businesses were recovered in different cities. Throughout the search operations, he was called in for questioning. He attempted to flee instead of cooperating with the investigation, which led to his arrest under the provisions of the Companies Act,” the top government official said.

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This is likely the first time the ministry has conducted a coordinated pan-Indian search operation to target organizations with Chinese board members. They were conducted in accordance with the provisions of Section 209 of the Companies Act, which gives ministry of corporate affairs (MCA) employees the authority to conduct search and seizure operations.

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One of the individuals cited above stated, “Cases have been handed over to the SFIO because, in many cases, a detailed investigation is required to lift the corporate veil and even the origin and ultimate advantages of the funds routed through these entities. SFIO is the investigation unit of the MCA. The Companies Act’s Section 447 grants the SFIO the authority to make arrests.

In April, the MCA filed more than 700 cases against businesses that employed Chinese nationals as directors and promoters. Vivo, Xiaomi, Oppo, and various Alibaba subsidiaries in India were among them. This was a result of information from the home ministry that firms were being used improperly for a variety of things, including tax evasion and money laundering, according to sources.

Illegal Behavior

The majority of these Chinese-connected entities used a similar strategy, according to the ministry’s investigation, they claimed. Chartered accountants incorporate local businesses by filing false paperwork and registering fictitious businesses. Another official claimed that these companies were later transferred to the Chinese partners by defrauding the Registrar of Companies (RoC).

What is SFIO?

According to the Companies Act of 2013, the Serious Fraud Investigation Office (SFIO) was established as a fraud investigation organization to address serious, complex frauds. This statutory organization was established to address fraud in the central services and other areas.

The statutory was established in 2003 as a result of a decision made by the Ministry of Corporate Affairs to address frauds under the 2003 Companies Act. Together with the Income Tax Department and the Central Bureau of Investigation, the specialists at the SFIO are in charge of identifying and resolving crimes. The Office was established in the wake of the stock market frauds that occurred from the 1990s to the 2000s, costing both the public and the government money and forcing the closure of numerous small and emerging companies.

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SFIO arrests mastermind of shell companies with China links | Indiablooms - First Portal on Digital News Management

The SFIO assisted in bringing order to the non-banking financial sector, which also played a negligent role. The Naresh Chandra Committee on Corporate Governance recommended that the Vajpayee Administration create SFIO in order to combat these white-collar crimes.

Experts in forensic auditing, technology and IT, law and corporate law, taxation, capital markets, accounting, and other fields are all part of the multidisciplinary SFIO. The Office’s Director is on par with a Joint Secretary of the GOI in terms of rank. The SFIO investigates whether the Board is fair and that the minority shareholders are not being oppressed, even when there is no obvious fraud in the company.

By its very nature, SFIO cannot take on a case. The organization only carries out orders from the Union Government. The investigation is rigorous and vicious when the SFIO is involved in the case. Although they are only applicable to the Director, Additional Director, and Assistant Director, SFIO also has the authority to detain those connected to and complicit in the fraud. The Satyam Scam and Deccan Chronicle Holding Ltd. are two of the major cases that SFIO has handled (DCHL).

The agency’s main office is in New Delhi, the capital of India, and field offices are spread out across the country’s major cities. Most of the officers for the SFIO come from the ICLS, IAS, IPS, IRS, banks, and other central services. Keshav Chandra is the SFIO’s director at the moment (IAS). The parent cadre of the ministry, Indian Corporate Law Service, contains a large number of Additional, Joint, and deputy director level officers. The organization has four regional offices located in Chennai, Mumbai, Kolkata, and Hyderabad.

Edited by Prakriti Arora

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