MCA searched 300 entities with Chinese Nationals on Board of Companies

The Ministry of Corporate Affairs (MCA) carried out search operation on 300 entities having Chinese nationals on board conducting preliminary research and determining that these firms were involved in “dubious practices”.

After the MCA’s investigation determined that many of them were “shell firms” founded by fabricating credentials and later had Chinese nationals on board who controlled the business of the companies, searches were conducted at several sites, including in Delhi, Hyderabad, and Bengaluru.

This is possibly the first time the ministry has conducted a concerted pan-Indian search operation to target vehicles with Chinese people on board.

Over 700 lawsuits against businesses with Chinese nationals as promoters and directors had been filed by the MCA in April across the nation. Vivo, Xiaomi, Oppo, and several Alibaba India subsidiaries are among the companies being investigated. “The Company Act empowers the Registrar of Companies (RoC) or the inspector (of MCA) to carry out search and seizure operations. This is done once the preliminary investigation indicates there are reasons to believe that companies are violating the provisions of the Act,” said an officer with knowledge of the development.

According to these sources, the MCA investigation discovered that the majority of these businesses follow a similar business model, which involves incorporating local businesses using fictitious paperwork and registering them even if the businesses don’t exist. By defrauding the RoC, these enterprises are eventually transferred to the Chinese partners, according to another officer.

Since this was revealed by the preliminary investigation, searches were required to acquire proof. They have frequently been identified in shady enterprises, such as providing instant loans via mobile applications and then intimidating or blackmailing the customers into paying twice as much as they originally borrowed, or in some cases, they are being used as a means of money laundering, the official continued.