**Executive Summary**
This document is an answer given on February 2, 2026, by the Minister of State in the Ministry of Corporate Affairs to Unstarred Question No. 368 in the Lok Sabha, addressing concerns about shell companies and investment losses in Moradabad, Uttar Pradesh. The response outlines actions taken by the Ministry under the Companies Act, 2013, to address these issues and provides specific data on actions in the Moradabad district over the last five financial years. The focus is on strike-off drives, inquiries, inspections, and prosecutions.
**Key Points / Main Content**
* **Definition of "Shell Company":** The Companies Act, 2013 does not explicitly define "Shell Company."
* **Strike-Off Drives (Section 248(1)):**
* The Ministry has conducted strike-off drives against companies not conducting business for two preceding financial years.
* This includes companies that did not apply for dormant company status (Section 455), and companies that were not compliant with section 10 (A) within 180 days.
* This also includes Subscribers to the memorandum not paying the subscription which they had undertaken to pay at the time of incorporation of a company.
* **Fraudulent Transactions:** Companies involved in fraudulent transactions, such as fund rotation without underlying transactions, are subject to:
* Inquiry/Inspection under Section 206 of the Companies Act.
* Investigation under Sections 210 and 212 of the Companies Act.
* Invocation of penal provisions against defaulting companies and officers to prevent re-emergence.
* **Moradabad District Actions (Last 5 Financial Years):**
* 183 companies struck off under Sections 248(1) and 248(2) of the Companies Act.
* 3 inquiries ordered under Section 206(4).
* 1 inspection ordered under Section 206(5).
* 4 prosecutions filed against 3 companies registered in the district.
**Impact Analysis**
**Cooperative Members, Small Investors, and Traders in Moradabad District**
* **Impact:** The actions taken aim to protect their investments and restore confidence in corporate entities by preventing misuse and fraudulent activities.
* **Action Required:** Remain vigilant and report any suspicious corporate activities to the relevant authorities.
**Companies Operating in Moradabad District**
* **Impact:** Increased scrutiny and potential consequences (strike-off, investigation, prosecution) for non-compliance with the Companies Act and fraudulent activities.
* **Action Required:** Ensure compliance with the Companies Act, avoid fraudulent transactions, and address any outstanding issues related to business operations, dormant company status, or subscription payments.
**Officers of Companies in Moradabad District**
* **Impact:** Increased personal liability and scrutiny, potential prosecution for non-compliance with the Companies Act and fraudulent activities.
* **Action Required:** Ensure compliance with the Companies Act, avoid fraudulent transactions, and address any outstanding issues related to business operations, dormant company status, or subscription payments.
Key Entities Referenced
Companies Act, 2013: The primary law under which the Ministry of Corporate Affairs takes actions against shell companies and regulates company affairs.
Ministry of Corporate Affairs: The ministry responsible for addressing the issue of shell companies and related regulatory actions.
Section 248(1) of the Companies Act: Section of the Companies Act used to strike off companies not carrying on business or operation.
Moradabad: The specific district in Uttar Pradesh where the incidence of shell companies and subsequent regulatory actions are focused.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
LOK SABHA
UNSTARRED QUESTION NO. 368
ANSWERED ON MONDAY, 02ND FEBRUARY 2026
MAGHA 13, 1947 (SAKA)
SHELL COMPANIES IN MORADABAD
368. MRS. RUCHI VIRA:
Will the Minister of Corporate Affairs be pleased to state:
(a) whether the Government has reviewed the increasing incidence of shell
companies, opaque ownership structures and investment losses affecting
cooperative members, small investors and traders in commercial areas like
Katghar and Civil Lines in Moradabad district, Uttar Pradesh;
(b) if so, the details of investigations, forensic audits, prosecutions,
deregistrations, asset freezing actions and compliance reviews conducted by
the Government to prevent misuse of corporate entities and restore investor
confidence in the district; and
(c) if not, the reasons therefor?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF CORPORATE AFFAIRS; MINISTER
OF STATE IN THE MINISTRY OF ROAD TRANSPORT AND HIGHWAYS.
[SHRI HARSH MALHOTRA]
(a) There is no definition of “Shell Company” under the Companies Act, 2013.
However, the Ministry has carried out Strike-off drives under section 248(1) for
striking off such companies which were not carrying on any business or
operation for a period of two immediately preceding financial years and had
not made any application within such period for obtaining the status of a
dormant company under section 455 of the Act or the subscribers to the
memorandum have not paid the subscription which they had undertaken to pay
at the time of incorporation of a company and declaration to this effect has
not been filed within one hundred and eighty days of its incorporation under
sub-section (1) of section 10(A) of the Act. Further, Companies observed to
be indulging in fraudulent transactions such as rotation of funds withoutunderlying transaction are identified during the course of inquiry / inspection
under section 206 of the Companies Act and investigation under sections 210
and 212 of the Companies Act and penal provisions of the Companies Act are
accordingly invoked against the Company and officers in default as deterrence
to prevent their re-emergence.
(b) & (c) In the district of Moradabad during last 05 financial years, 183
companies have been struck off under section 248(1) and 248(2) of the
Companies Act. During same period, 03 Inquiries under section 206(4) and in
01 Inspection under section 206(5) have been ordered under the Companies
Act, 2013. Further, during the same period, 04 prosecutions have been filed
against 03 companies registered in district of Moradabad.
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