Companies petition bourses against shell firm tag

Several companies on Tuesday petitioned the stock exchanges against being tagged as 'suspected shell companies', a day after regulator Sebi asked the bourses to restrict trading in shares of 331 firms following a reference from the government.

Many of these companies tagged along their annual reports and other financials to press upon the exchanges that they are not shell companies and are in compliance with all regulations, while many were contemplating approaching Sebi directly or even file appeal with the Securities Appellate Tribunal, among other legal options.

Sebi has asked the exchanges to restrict trading in shares of 331 such companies, some of which have investments by several well-known domestic and foreign investors. The move spooked overall market sentiments on fears about possible action against more such firms. The benchmark Sensex slumped 260 points while the Nifty cracked below the crucial 10,000-mark.

The term 'shell company' is not defined under the Companies Act but recently, Corporate Affairs Minister Arun Jaitley, had told the Lok Sabha that many such entities have been found to be indulging in large scale tax violations.

Contrary to general perception, shell companies are apparently being referenced here for those suspected to have indulged in abetment of tax evasion and money laundering activities, regulatory sources said.

In a 217-page filing to the exchanges, Tamil Nadu-based Lotus Eye Hospital and Institute Ltd said it was shocked to learn that the firm has been included in the list of shell companies and trading has been suspended.