Legislative Gaps Helping Overseas Shell Companies?

Have the legislative gaps provided by the Finance Ministry and SEBI indirectly helped domestic corporates having oveseas shell companies to profiteer?

shell company



Smt Nirmala Sitharaman
Union Finance Minister

Dear Smt Sitharaman,

I had earlier addressed you vide my letter dated 31-1-2023 (https://countercurrents.org/2023/02/overseas-shell-companies-a-shadow-economy-a-threat-t-national-interest/) pointing out how the government failed to define the term “overseas shell companies” in the Companies Act, SEBI Act and other related legislations, despite admitting to the Parliament as early as 6-2-2018 that there was an urgent need for such a consistent definition, a legislative omission that in turn indirectly helped domestic business houses to park their wealth in overseas shell companies and profiteer at the cost of the domestic economy.

In the same letter, I also referred to the Department of Economic Affairs notification GSR 646(E) dated 22-8-2022 which provided yet another legislative loophole for similar exploitation by domestic private companies.

The Expert Committee constituted by the apex court to examine the implications of the Hindenburg report on the Adani Group, in their findings submitted on 6-5-2023, observed, among others, in [Para 23(b) of their report] that “the very requirement to disclose the last natural person above every person owning any economic interest in the FPI was done away with in 2018” by a SEBI notification (apparently in reference to SEBI/LAD-NRO/GN/ 2018/58. 31-12-2018), suggesting that SEBI created a legislative constraint for itself that came in the way of its subsequent attempts to investigate the post-Hindenburg developments.

In other words, between 2018 and now, a series of legislative gaps either created or left uncovered by the Finance Ministry and SEBI, have indirectly contributed to domestic business houses parking their wealth in overseas shell companies and profiteering at the cost of the domestic economy. This is a matter of serious public concern that calls for an independent enquiry.

May I request the Ministry of Finance to institute such an inquiry to clear the air, not only with reference to the Adani matter but also with reference to overseas shell companies set up by other domestic and foreign-listed business houses operating in India?


Yours sincerely,

E A S Sarma
Former Secretary to the Government of India


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