MLM / Chain Money
Finally, MCA sets up special task force under SFIO to probe MLM menace

After keeping mum for all these years the MCA has finally decided to hand over the probe of chit-fund, MLM, Ponzi and pyramid schemes to a special task force under the SFIO

After the collapse of Saradha group, the ministry of corporate affairs (MCA) in a face saving measure has decided to hand over probe of such chit-fund, MLM, Ponzi and pyramid scheme operators to Serious Fraud Investigations Office (SFIO).


“…in view of the larger public interest involved in these cases, and concerns regarding misuse/ laundering by such companies of the ill-gotten wealth, and the possibility that the promoters of these companies may strip these companies, it has been decided by the MCA to set up a Special Task Force in the SFIO to investigate the affairs of such companies. Accordingly, all investigations into such companies are being entrusted to SFIO with immediate effect,” the ministry said in a release.


The ministry said the probe has been ordered in view of a larger public interest involved in the issues, although the state governments are the appropriate authorities for regulation of such chit fund companies and schemes under the Chit Fund Act, 1982.


Moneylife has been continuously writing about the inaction by government and regulators regarding MLM companies, money circulation schemes, pyramid-marketing schemes and other similar companies that swindle the unwary public by offering them misleading inducements and depriving them of their hard-earned savings.


Here are some of the important stories written and representations made by Moneylife over the years…


Moneylife Foundation’s representation to PM, FM and RBI on MLM schemes

In May 2011, following the exposé by Moneylife on Speak Asia Online Pte Ltd and its MLM scheme, Moneylife Foundation sent a representation to prime minister Dr Manmohan Singh, (the then) finance minister Pranab Mukherjee, finance secretary Sushama Nath and Reserve Bank of India (RBI) governor D Subbarao urging them to ban all MLM companies and their schemes in the country, or to bring all MLM companies under the regulation of either the RBI or the Securities and Exchange Board of India (SEBI), to stop them ensnaring gullible people.


West Bengal’s ‘chit fund’ mess and inaction of MCA

The massive money, which is raised surely shows somewhere on the balance sheet of the company, filed regularly with the MCA. The primary recipient of the information about these companies is the MCA, and surprisingly the MCA is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish.


Chain Game

Dubious pyramid schemes or money-circulation schemes are looting Indians across economic strata, finds Sucheta Dalal. This will continue since Central and state governments seem unconcerned.


Pyramid schemes: Daylight robbery

Pyramid marketing companies are looting the public easily, while the government watches. Many countries have banned them outright.


Ponzi Scheme: Is RBI Passing the Buck?

A strange deposit scheme that is proliferating in the states of Orissa, Chhattisgarh, Karnataka and Maharashtra has already collected almost Rs1,000 crore and is expanding virtually unchecked. The scam has elements of money-laundering and possibly the use of fake and forged currency as well; however, the banking regulator would like to pass off the investigation to the respective state governments for investigation under the antiquated Prize Chits and Money Circulation Schemes (Banning) Act.


Coin Game

An international network marketing scheme hawking expensive limited edition coins is attracting a huge following. Sucheta Dalal examines this strange quest.


Ponzi schemes: Free for all

Moneylife readers know how MLM schemes ensnare lakhs of people by promising extraordinary returns. We learn from the ministry of consumer affairs that the government is now waking up to the need for better regulation of MLMs and ponzis. At the same time, the powerful Direct Selling Association of the US is lobbying hard for an amendment.


‘Beware of deception by pyramid schemes, MLMs trying to lure people with promise of high returns’

Pyramids are pure fraud. Their business is unsustainable-they promise payment for goods or services of dubious value. The hallmark of these schemes is the promise of sky-high returns in a short period of time, for doing nothing other than simply handing over your money to them, and getting others to do the same.


Ponzi schemes: The fraudulent art of chain game

Even as India bans pyramid schemes under a statute called the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, the country continues to be a happy hunting ground for pyramids because our legislation is deliberately unworkable.


Dubious Ponzi & MLM Schemes

Investors losing money, or falling for dubious Ponzi schemes, is not a recent phenomenon; this has been happening for decades and it is not restricted only to India. Why is it that people repeatedly fall prey to such schemes in spite of being aware of the frauds perpetrated by conmen under different guises?


Set up inter-departmental group to curb MLMs

EAS Sarma, former power and finance secretary, said the ministry of finance, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and the investigating agencies should collectively tackle this problem without any delay, as every day of procrastination will only result in thousands of hapless families cheated by the promoters of these schemes.


How MLMs wave an annulled letter to claim legitimacy of their operations and con people

Spokespersons and dealers of multi-level marketing (MLM) schemes or network marketing schemes respond to questions about their legitimacy by brandishing a 2003 letter issued by the then secretary, ministry of corporate affairs (MCA). What they omit to mention is that the letter was subsequently annulled following complaints about its misuse. This means, the letter used by these scamsters is no more valid.


Pyramid and MLM schemes are scourge on people

While there are existing laws such as Indian Penal Code (IPC), the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCS Act) and others under which concerned agencies could prosecute the culprits, there is no effective mechanism in place to ensure a coordinated approach to identify the fraudulent operators in advance and book them well before they destroy the livelihoods of thousands of households and launder the ill-gotten funds to unknown destinations.


MLMs now want to ‘invest’ money in India, really?

A set of powerful MLMs, which are part of an exclusive closed club, called the Indian Direct Selling Association or IDSA (on the lines of the Direct Selling Association of the US) has been lobbying hard to make a distinction between their operations and those of others, who they call, fly-by-night operators such as SpeakAsia and Ad Magnet.


QNet, the MLM company, has no answers to Moneylife’s simple questions

QNet, the controversial Hong Kong-based multi-level marketing (MLM) operator with multiple names (GoldQuest, QuestNet, QNet, QI Ltd and QI group are the better known names) refused to answer simple questions like how much money their independent representative (IR) earns on an average every month and why their products are priced so highly. Instead, it sent us a threatening and defamatory mail that raises more questions as to their real motive.


2011: A year dedicated to MLM and Ponzi scheme frauds

If 2010 was the year of great Indian scams, 2011 was rather of ponzi and multi-level marketing (MLM) frauds. SpeakAsia managed to top the chart, but soon many others joined the bandwagon, duping gullible investors for several thousand crores.


How to avoid 'get-rich-quick' schemes and scams

Nothing comes free in this world, especially money. The universal truth is you need to earn your money by hard labour all the time and there are no shortcuts to double it in the shortest span of time. Therefore, even if your near and dear ones tell you he/she will double, triple, quadruple your money within a few days/months, politely reply to them that it is not possible and what they are advocating is a pure 'get-rich-quick' type of scam.


Herbalife is a pyramid scheme worth zero dollars: Bill Ackman

Herbalife, a global MLM scheme also prevalent in India, is believed to be worthless according to hedge fund manager Bill Ackman, who made a detailed presentation on why consumers should avoid buying the company’s products and stay away from the MLM.



Dipakkumar J Shah

4 years ago

MCA search for MLM and all Chit Fund now. But fails to inquire in to a case where illegal provisions of profit entry in books of account , mere book entry of profit and paid dividend out of this profit. For last 18 years have been passed but no action in any part on any Directors ?? In tax Audit Report the same auditor as Tax Auditor excluded the same mere book entry of profit . This document is on record of Regional Director, M C A , Registrar of Companies , Official Liquidator!!! What kind of action they may take is very apparent and clear from all scams!! It is very well known to all How MCA department is working for compliance ? How the accounts are scrutinized by R O C ?
Shah D J


4 years ago

Congress is an artist in deferring problems and minting money out of the same.


4 years ago

Will enquiry be partialor a method to defer a problem.


4 years ago

MR VKJ, Mr Virendra Jain, Mr Vinay Joshi etc. this is forum not to slug out but give your independent
opinion on topics being discussed.


4 years ago

Sorry. My mail is addressed to Mr. Vinay Joshi and erroneously addressed to Mr.Pai.Inconvenience is regretted.

Virendra Jain


4 years ago

Mr.Pai , it appears you are confused regarding Midas Touch Investors Association, its voluntary status and working and my association with it. It is a non-profit organisation, having its R.O. at Kanpur since inception, of which I am one of the founder and currently President also. My full name is Virendra Kumar Jain. The photograph you are referring to is of “Investor Helpline” office at New Delhi which was closed on completion of the project someimes during 2011. I fail to understand import of your statements in this regard.
I stand by my comments posted earlier regarding SFIO and do not wish to debate with you regarding their track-record or accountability/conduct of any of the ministries. Midas Touch takes up issues which it considers important and has the resources to do it. The rest does not relate to us. Frankly, i find such mails and their content a waste of time and big deterrent in participation in discussions.

Virendra Jain .


Vinay Joshi

In Reply to V K JAIN 4 years ago

Dear Mr. Virendra Kumar Jain,




4 years ago

Actually the Govt. and its institutions have lost all confidence the public had in them. So they have to find out a way to bridge the gap.


4 years ago

SFIO is merely an investigative department which can recommend action since it has no powers to take action on its own.
For expeditious action, post investigation by SFIO, it may be desirable to put a detailed action plan well in advance so that precious months/years are not wasted after the SFIO submits its report to the ministry/appropriate authorities.

Virendra Jain


Vinay Joshi

In Reply to V K JAIN 4 years ago

Virendra K Jain.

I was closely associated with Mr.T. A Pai, if you know who he was & what he stood for.

You write as VKJ, Prez, the site shows different VJ with his photograph on PC, of Delhi, you were empanelled in Arnab's telecast as from Mumbai Prez.

Kindly clarify the same & as well answer why you've not answered my earlier posts to you.If not answered it amounts to no answers. No must! you can trash it including this.

The fundamental aspect you miss is that SFIO is under which ministry? What teeth can it have? Which ministry can initiate action under financial scam?

You're investors association Prez, [no idea of Delhi or Bombay - Midas!] CAN YOU NAME ONE SINGLE SFIO case who has got culprits to book? Even if, monies evaporated apart from foot soldiers no one hanged.

Center has no role to play, it's the states subject, with sufficient legal provisions to monitor the schemes.

When the state politicians with their clout bless the swindlers why you can't highlight it? You only come to know when swindled & then say 'the swindlers had political backing'!? What you & the administration was doing?

You have never ever raised your voice about 'credit societies'duping in Maharashtra. Have you? Have you got relief for them?

With more than 20/30kCR at stake, the WB proposed laws [Bill to be introduced on 30th]will have positive impact, if model a law other states should also immdly enact the same. The 2009 aborted bill is now retrieved. The new provisions will encompass MCA aspects also. Further it will be with retrospective effect.

Now the center can't be just a spectator.

On Friday, the finance ministry in its reply stated that 27 co's were probed from the real estate sector across the country.SEBI found nine entities not involved in CIS, 2 are probed, other being probed by different agencies. It has not stated the amount lost & people duped in numbers!

Await your reply if any?



In Reply to V K JAIN 4 years ago



4 years ago

ek chor ne doosre chor ko baton pakadaya, PUBLIC ACTUALLY HAVE LOST ALL CONFIDENCE IN THESE SO CALLED PROTECTORS, were they blind when these things were happening/going on-(What about AP in which MR NARAYAN MURTHY is involved) they have got so called local intelligence unit, what were they doing.


4 years ago

Fraudulent companies/ so called I'll and sick business group like rosevally,shardha and sahara, trying their best not to get new company bill passed in parliament by pocketing members of standing committee.

Not only this now shifted operations to multi state cooperative society to continue to loot people and promote money laundering together.

Proposed ammendment in multistage cooperative society act is also isn't to cold storage by standing committe on agriculture headed by Acharya,all visible how all are participating to allow loot in the country.

Did registrar multi state cooperatives had taken any survey or study or investigation on the model on which multistage cooperative society are registered recently in last three years and their financial results are with registrar office.

By making member of multi state cooperative society money laundering and loot should not be allowed.

Money life may take lead to expose such societies to stop loot and money laundering.



In Reply to Investor 4 years ago

I DO AGREE MLF should certainly come forward, desh mein bahut loot maari ho chuki, now it should stop.

Sandeep Patel

4 years ago

This is super duper news !!! Hopefully now some action will be taken against Qnet representatives ... and the company as well ... finally some light at the end of the tunnel hopefully !!!

Dipakkumar J Shah

4 years ago

There is one case , a case of dividend paid out of capital, illegal payment of capital, by mere book entry of profit, not leaglly received from any body, contravening the provisions of the Companies Act reported in 1994/1998. On record they have all the information . In action for all these years. R O C and other offices defending , hid many facts. What is the Law abiding. Ordinary persons are prosecuted for nothing!!!


4 years ago

What about pygmy schemes in AP, where farmer's committed suicide

Saradha chit fund scam: W Bengal govt to set up Rs500 crore fund for duped investors

Expressing regret over the turn of the events which unfolded since the collapse the Saradha Group, Mamata Banerjee urged the affected people to stay calm while the government made efforts to help them

The West Bengal government on Wednesday said that it would set up a Rs500 crore relief fund for the investors allegedly duped by the Saradha group and that none including Trinamool Congress MPs would be spared if found guilty.


“The government will set up a Rs500 crore relief fund for the affected small and medium investors of Saradha group. Their names will be recommended by the commission of inquiry which has been set up,” chief minister Mamata Banerjee told media persons.


The chief minister also said that none of players involved in the incident including Trinamool MPs would be spared if found guilty.


Obliquely referring to TMC MPs Kunal Ghosh who had recently resigned as the CEO of the Saradha Media group, which had owned a TV news channel and party MP Srinjoy Bose, editor of a Bengali daily, Banerjee said, “One journalist is being targeted... There are so many journalists ... there is no use of identifying one channel and one newspaper.


“If any MP of Trinamool Congress has committed an offence, the law will take its own course,” she said, accusing the CPM of politicking over a people’s issue.


“How many CPM MPs have stashed their money and with how much did they run their party? And, a news channel identifying others will be exposed.


“Iswar and Allah know who has kept money for how many days. The government has no data,” she said.


Banerjee said, out of Rs500 crore, Rs150 crore would be raised by imposing tax on tobacco products. The balance would be garnered without burdening the people.


She said that the affected investors were also urged to give the details of their investments to the commission to be headed by former CJ of the Allahabad High Court Shyamal Sen.


Expressing regret over the turn of the events which unfolded since the collapse the Saradha Group, the chief minister urged the affected people to stay calm while the government made efforts to help them.


“Forget that it is your problem or my problem, it is the people’s problem,” she added.




4 years ago

If people were greedy and put money in dubious money making schemes why should the government penalise everybody and levy a tax to bail out.
Will this not give a wrong signal and encourage more dubious promoters to take people for a ride.
The people should be vigilant and not hope for government to bail them for their GREED.


4 years ago

Another "GOLD QUEST" scam ?

Economy & Nation Exclusive
West Bengal’s ‘chit fund’ mess and inaction of MCA

The massive money, which is raised surely shows somewhere on the balance sheet of the company, filed regularly with the MCA. The primary recipient of the information about these companies is the MCA, and surprisingly the MCA is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish

As the bottom-of-the-pyramid population continues to fret about having lost one’s life savings in the West Bengal “chit funds”, it is interesting to find politicians promising new stringent laws against such funds. In fact, law-making is the least of the reasons for such schemes to have flourished in the state. However, as political connections of one of many that have gone bad are exposed, the easy face-wash for the politicians is in law-making, to cover-up what is quintessentially an implementation issue. The reality is that we are not short of such laws—in fact, we have a plenty of laws that prohibit such schemes and impose sternest penalties for the perpetrators of such scams. But if a Rs22,000-crore scheme questions the very institutions that define our system—Supreme Court, SEBI, or whoever else—there is little surprise that the only succour for political face-saving is in law-making. And this is what we have done over the decades—as the write up below shows.

This article gives a quick overview of the laws regarding “chit funds” or devices of sourcing public deposits.

First of all, the West Bengal “chit funds” are not chit funds at all. Chit funds are a different structure altogether. Chit funds are mutual credit groups where money circulates among the group members, and the monthly contributions of the chit members are received circularly by one of the members who bids for the same at the highest interest rate or lowest “net present value”. Chit funds are perfectly legal, if they are registered under the Chit Funds Act, 1982, and run under the provisions of the law. The several names that keep popping up in West Bengal are not chit funds—these are collective investment schemes  or public deposit schemes which on the face of it do not fall under any law, as they are structured so as to be neither a “public deposit” nor a “collective investment scheme”. But that facial structure is so gullible that any regulatory investigation may easily expose that these schemes were effectively nothing but public deposit schemes.

The evolution of regulatory structure in India is a rare case of human learning—we have burnt our fingers every time to learn that the fire is too hot to handle. So, every scam brought a law; in essence, the law is the edifice built on scams and not on intuition.

  • Deposit regulation: These rules were inserted in the Companies Act in 1975 after several cotton mills in Gujarat and Maharasthra burnt public savings.  In fact, India is one of the few countries in the world which allows non-banking companies to raise deposits from the public. World-over, access to public deposits is allowed only to banks. In India, companies may raise pubic deposits—however, subject to provisions of Section 58A of the Companies Act. This allows only deposits to the extent of 25% of the net worth of the company, places restrictions on interest rates, brokerage, etc.
  • Chit fund laws and money circulation scheme laws: Money circulation schemes were banned by a law in 1978, after Sanchayita Investments went down with money pooled from a few lakh investors in West Bengal. Soon after, chit funds became a hot political issue, leading to chit fund law in 1982.
  • NBFC Regulations: Non-banking financial companies (NBFCs) are allowed to raise deposits up to 10 times their net worth, but this privilege is granted only to so-called “depository NBFCs”. This is a fairly well-regulated institution coming under the RBI, and the regulations have been toned after hard lessons were learnt with the CRB scam of 1997. Accordingly, NBFC Directions were framed in 1998 after few hundreds of NBFCs had gone down with public savings.
  • Private placement scams: Several hundred companies raised money by way of “private placement” of shares taking advantage of a Companies Act provision whereby only “public offers” required regulation by the securities regulators (now Securities and Exchange Board of India—SEBI, earlier Controller of Capital Issues). This resulted into a “deeming rule” in Section 67 of the Companies Act, inserted in 2000, whereby any offer of securities to 50 or more persons was deemed to be a public offer.
  • Collective investment scheme regulations: Plantation companies with schemes such as “money grows on trees” continues to raise public money against collective investment schemes, and it took SEBI several years before the Collective Investment Scheme Regulations were framed in 1999. A collective investment scheme is one where public money is raised for investment in any asset or scheme, other than by way of shares, deposits, mutual funds, etc.
  • Alternative investment funds: This is a new a regulatory instrument under SEBI, to regulate privately pooled vehicles for collective investments. This became effective in 2012. This is by far the only regulation which is not “reactive”.

So, with all these laws, how to scamsters still end up raising several thousands of crores? Obviously, so much money is neither raised overnight, nor raised silently enough, as there is a massive machinery of agents who raise the money from the very bottom of the population pyramid. Each scamster innovates an ingenious device, but none of these devices are not iron-clad to avoid regulatory action, provided there was a will power.

Here is an inclusive inventory of the schemes currently in use:

  • Debentures: Sahara used the argument that (a) Sahara was issuing optionally convertible debentures which were not ‘securities’ under securities laws, and hence, were free from the securities regulations, and were not ‘deposits’ under the deposit regulations, and therefore, to be regulated by none. The Supreme Court ruling has rubbished the first argument.
  • NBFC companies: The Companies Act rule restricting issue of  securities to less than 50 in order to escape the “deemed public offer” rule does not apply to NBFCs—hence, several of the “chit funds” use an NBFC to raise instruments such as debentures not regulated under public deposit rules.
  • Preference shares: Some of the entities issue preference shares to the depositors. A preference share is essentially the capital of the company, and not a deposit.
  • Land deals: Some companies contend as if the so-called depositor places order for purchase of land by the promoter. Later on, the land deal is cancelled, and money is returned with interest.
  • Advances for purchase of goods: Some operators show as if the ‘deposit’ had actually placed an advance for purchase of goods. The order is later cancelled and money is refunded with interest.

No matter what is the device used, the common thread in each of these schemes is that the flow of new ‘depositors’ must keep coming in, because the only source from which maturing deposits could be serviced is by inflows from new depositors. Money is initially raised at hefty interest rates, and with attractive periodic prizes, gifts, gala parties, and so on. The agents who mobilise the deposits are given hefty commissions, because the structure essentially relies on a highly incentivised structure of brokers or agents, who reach right to the doors of the depositors to collect deposits. The cost of interest, plus the agency commissions, the luxurious spendings on so-called depositor prizes, and add to all this the lavish remunerations of the promoters themselves—all adds to a huge cost of interest, say, about 25% to 30%, which no lawful business may produce. It is not that these promoters are blue-eyed investors who know tricks of investing—so, they end up investing money in illiquid properties, resorts or hotels.

Now, the only way to keep servicing investors is that new depositors must flow in, so that old depositors can be repaid. That is, the base of the depositor pyramid has to continue to expand so that those up in pyramid can be paid—this is what Ponzi schemes are all about.  This is what we call “tiger riding”.

Soon, the ride comes to and, and guess what happens at the end of any tiger ride! In the process, thousands of gullible investors have lost their life savings.

As hundreds of crores are raised though tens of thousands of agents, surely enough the exercise is not invisible to the regulatory eye. The massive money which is raised, irrespective of the label, surely shows somewhere on the balance sheet of the company, which is filed regularly with the MCA (ministry of corporate affairs). The primary recipient of the information about these companies is the MCA, and surprisingly, it is the MCA which is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish.

No, it certainly is not the lack of laws that allows these scamsters to rob people of hard-earned money. It is clearly an implementation issue.

(The author is a noted expert in financial laws. A lots of author’s writings appear at and



Amit Trivedi

4 years ago

Wonderful article. Very insightful.


4 years ago

I don't know how many of you know how WASTE Bengal runs? In every aspect of life, the person who breaks the law is the king. Its sheer muscle and political power. They could make MCA go round in circles for years. It is better to stop this blame game when as human beings we have ruined our country. Let us stop blaming politicians for the mess all around and look at our reflections at times

shanti Patel

4 years ago

This is the country of paper laws.
Laws are implemented after the tragedy happens!
Take the house crash at Mumbra where more than 75 people died.
Government admitted that more large portion of buildings constructed were illegal. THere is no accountability. Every law that is enacted leads to source of HAFTA for government BABUS.
Thanks to MEDIA and our COURTS without which god only help india!

Shanti Patel


Dayananda Kamath k

In Reply to shanti Patel 4 years ago

don't you think media also playing into the hands of politicians and burocrats. instead of pressing for proper implimentation of existing law they clamour for fresh stringent laws. which gives scope for politicians and burocrates new avenues to harass the common man and a new source for corruption.punishment should be based on the crime and not on the basis of who has done it. the special laws being enacted are actually violation of basic principle of constitution of equality. and every special law has been abused.

Dayananda Kamath k

4 years ago

as long as sri b.p.bimal is undersecretary in mca you can not hope for any improvement. once i sent a complaint with the heading a satyam in nationalised bank regarding fudging of accounts. and he has the audacity to inform me that there is no provision under the law to refund money from investor protection fund. then i asked him from whe interest charged to loan accounts are being credited to investor protection fund. and again with a different ref no. and date he sends the same reply. this matter brought to the notice of salman khurshid and then to veerappa moily and recently to sachin pilot. when they are incharge of ministry of corporate affairs. but no reply no action so far.


4 years ago

Mr. Khotari, Thnaks for the piece written here. every body in the Professional world knows you in Kolkata. May i ask you why don't you take up the matter with the Regional Director(Eastern Region) or the MCA officials in this matter.

You being a professional know this very clearly why MCA is the least proactive in this case. These people takes money for everything they do, whether it is incorporation, commencement of business or granting approval under the Companies Act, 1956.

You pay them and can get any approval, be it approval under Section 295 or 297 or any other sections of the Companies Act. It is us professionals that have created an atmosphere which is now maligning the image of our country and destroying the people of our country.

Its high time that as a professional you being a senior take this matter with the authorities.


4 years ago

Is MCA above the CM of West Bengal? How many have of the depositors have moved SEBI/ MCA or RBI? They are thumping their chests in front of her house. She is their God. Good they lost their. Why does not any RTI activist ask for as to who bought her painting for such a huge amount?


4 years ago

As very rightly pointed out, for the first time ever, these so called chit funds of West Bengal are NOT really chit funds within the meaning of the term and that is why the people have been cheated and thestate government e has overlooked the real aspects and allowed these operators to carry on their business. It is strange that the print media in Bengal, the vernacular medias in particular, has ignored the most crucial aspects as brought out in this article.


4 years ago

As very rightly pointed out, for the first time ever, these so called chit funds of West Bengal are NOT really chit funds within the meaning of the term and that is why the people have been cheated and thestate government e has overlooked the real aspects and allowed these operators to carry on their business. It is strange that the print media in Bengal, the vernacular medias in particular, has ignored the most crucial aspects as brought out in this article.


4 years ago

while CHIT-FUNDS are banned,how can biglike this can organies? it must be effileted some big political hand.


4 years ago

Chit Funds are imitating Government in the grandeur of their larceny. Did they, too,like LIC and UTI, invest in ONGC? But, Chit Funds must learntheir limitations. They cannot pass retrospective laws, and, unlike the Governments of China, Pakistan and India, they cannot print authentic Indian currency notes.


4 years ago

I find Shri Kothari’s view naïve, when he states that: “surprisingly, it is the MCA which is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish.” MCA (or its subordinate offices of RoCs and RDs) rarely act on the basis of investor complaints or financial information filed by companies. In fact, any credible action on their part, is an exception. To cut it short, I’ll give an illustration:

1. In 1999 we filed a list of 148 companies, alongwith investor grievances that these companies have disappeared after coming out with an IPO, with MCA and SEBI for examination and inclusion in “Vanishing Companies” list. Further action was to be taken, by MCA and SEBI, as directed by Allahabad High Court in our PIL in 1999.
These Investor grievances were received by us in hardcopy in response to a hard-hitting column written by Sucheta Dalal in Indian Express giving Midas Touch and two other organisations postal address where investors could mail their grievances. The examination of the list was taken up in 2006 and is perhaps still on with MCA!

2. Similarly, we submitted a list of 604 companies to MCA in 2003 which were not available at their offices according to BSE. MCA started examination sometimes in 2006 and to the best of our knowledge, still going us. No company from this list was declared as vanishing company though MCA had confirmed- sometimes around 2007- that about 40 of them have vanished! For details you may see Minutes of CMC meetings on mca website under “Vanishing Companies”. All this happened or is taking place despite High Courts orders. It depicts the state of affairs where regulating companies is under their specific jurisdiction unlike the Sarada group of companies. There is absence of accountability and investor empowerment.

Virendra Jain
President, Midas Touch Investors Association


Vinay Joshi

In Reply to V K JAIN 4 years ago

Mr.Virendra Jain,

It's of no use being empanelled in debate, neither you can make a point nor any outcome can be there - only hear the 'barking' of others.

Your valid point was appreciated by me but Arnab always wants to draw out his own theme to extract answers. He is greatest. I've no second opinion of him. Last two days TMC has not come, tho' Derek scouting elsewhere.

Were you in a position to put that delisted co's fraud is nearly or more than a trillion rupees!? Where are those 2/2.5K co's?

Is MCA a sleeping giant?

As per 2004 amended act, the non compliance responsibility on delisting rests with not only compliance officers [CS] but also with directors & promoters, the fines / penalties can be up to 25CR, further if convicted by SEBI or the stock exchange imprisonment up to 10 yrs!

So, a simple explanation, one trillion evaporated, none of those thousands could be traced, SO WHAT? Nothing!

As per modified electricity Act of 2003, if you do not get electrical power for one hour, the service provider be it SEC has to compensate you Rs 50/- per hr!
What happens?

Absolving her Govt. & members of any wrong doing thereby blaming the center she has raised taxes on tobacco products, further asking to consume more, forget what doctors say.

Her idiotic aspect will result into rampant smuggling of the products from the neighbouring states.

Irrespective, why tax the taxpayers to bail out swindlers?

No Virendra, you don't understand they are doing it for the poor hapless, helpless & see that no one suffers with this 500CR balm of the 20KCR amount lost by [investors] sufferers!?

What do you make of the three letters as read out?

Was Lord Meghnad not upright like me stating this is a 'zero sum game'?

I've to per se draw respected Mr. Vinod Kothari, in this dialogue, simply asking him the CSE fraud of 2001. What did MCA or any other agencies do?

A JPC was [similar to today's 2G, etc] probing into it - the culprit was 'software bug' which extended the brokers financial risk w/o margins. Fine, then why brokerages from Bombay traded max in CSE?


Vinay Joshi

In Reply to V K JAIN 4 years ago

Dear Mr.Virendra,

Had Mr.Vinod Kothari, who professes to be financial an expert would never ever had commented & put up the write up w/o MCA & in generality it was info. Read my post to him. [Neither Ms.Sucheta was wrong to post the aspects, more talented she is. She has to delve with an array of wide spectrum & her opionation always unquestioned. ]

Mr.Virendra, Mr. Vinod, financial an expert does not have in his ambit IT, neither does he seeks data to comment instead of focusing on MCA, wherein he may have not known the regulations.

Today the vanishing cos list may not even be 70/80 with MCA nor the duped amount available with the bourses & list of cos.

Mr.Vinod talks about MCA!? When Chit fund Association states that they have 30KCR AUM’s, MCA does not have a list of all cos with tally to claim. Saradha is unlisted!

However my point is where do we catch the fraudsters? Everything evaporated!

As are the bourses w/o any info? MCA accepts out of hundreds or thousands only 40 vanished, then WHAT ARE THEY DOING WITH THE OTHERS? I think Mr.Vinod will be in a better position to answer.

Mr.Virendra, when Sahara is reprimanded by the apex court [hope you’ve read my earlier posts on the subject] & Saradha is state subject what can be talked?

That is the reason I profess FSLRC to be implemented w/o fuss, get grass root people in the ambit of banking, Nilekani’s AADHAR is another a scam as there is a tussle between two ministries. My respected Nilekani is drawing flak, he should straight resign.


Vinod Kothari

4 years ago

Happy to see readers' comments, but there are some important points I would like to highlight. First, this particular case has been blown up due to political connections. However, my subject matter is politicking here. My subject matter is the loss of money of hundreds of thousands. None of them will get to read either this article or these comments, as many of them cannot even read - let alone being net savvy. The investors in these schemes are maid servants, day workers, widows, the elderly and so on. They have burnt their life savings.

What are are forgetting is that Sharada is one case that has been blown up. Is that the only one? No, there are hundred such companies, some of them were picking up monthly collections till last week. Do all of them have political connections? That is hard to believe. Political nexus has given a different shade to the episode. The real issue is that annual filings with the MCA clearly show issue of preference shares, debentures, or current liabilities, piling up in companies with very little capital. Isn't that enough of a trigger to cause an inspection? I have reasons to believe that some of these companies have even been inspected, and got a clean chit as well.

So, as for bolting of stable door - many doors are yet to be bolted. If the system acts in good time, lot of money can still be saved from being burnt.


Vinay Joshi

In Reply to Vinod Kothari 4 years ago

Dear Mr. Vinod Kothari,

In true spirit you have put up as a professional with your financial expertise.

If you’re a professional & financial an expert i hereby request you to answer this post.

Why you didn’t answer my earlier post. YOU WERE HAPPY WITH THE COMMENTS!? I’ll answer Mr. V.K Jain later.

Do you know Mr.Harshad Mehta was to be made an ‘Economic Minister’!? Several people were involved in the scam. Read the relevant books to understand it.

Now you’re taking a position as ‘political fall out’, INSTEAD OF STICKING TO FINANCIAL - SCAM ANALYSIS!?

FYI, no scheme can start w/o backing. The people involved are fronts. How sad you can’t get it!?
[was it not explicit in my earlier post?]

If as per your say Saradha is blown up THEN what you have to state on SAHARA ?
You’re financial an expert.

The Saradha ‘CHITGATE’, can be whooping 20KCR by conservative estimates.

Mr.Vinod Kothari, what has MCA to do with B/S filing? As financial an expert you profess they should venture into the business domain! Is this your financial expertise?
In which manner? Don’t profess wrong things to your students!

Neither Harshad Mehta nor 2G or ‘Coalgate’, would have happened? As you say i’m also not getting in between scams. Mr. Vinod Kothari, issuance of shares is of what relevance?

Fine a co. in debt with 100K times its paid up capital, CAN MCA INITIATE ANY ACTION?
WHY RESIDENTIAL PROPERTIES WORTH OVER 400/700L ARE OWNED BY CO’s WITH a miniscule capital of 100/300K?! ON THE SALE OF THE PREMISES WHAT IS TRANSFERRED? THE CO!? Are you naïve to understand MCA? A financial an expert.

YOU STATE ROC/MCA HAD INSPECTED but fail to state the ambit of inspection & their wrongdoing. Were they struck off?

Re, Saradha I’ve no idea if you know the April 6, explosive letter written by Sen to CBI.

However Mr.Vinod Kothari, with due respect to you, as financial an expert you should have enumerated how to avoid institutional scams which hurts in real time.

Yes I agree with you that gullible can’t read. What can central regulations do when state regulations fail? How? Banning all is easy, what outcome?

As a financial an expert do you have estimate/guesstimate of non banking channels the depositors use?

The Chit fund association claims/ estimates that registered funds have 30KCR & unregistered can be 30 trillion. Total bank deposits may amount 15 odd trillion.
However the poor are credit worthy as per micro-finance, their interest rate should also reduce.

You should have opened a dialogue stating that when ‘money seeks financial products’, the substrata of lower income group can’t access it. [FSLRC financial inclusion & my narration earlier post – hardly 50% Americans are banking.]

So as a financial an expert you should understand that when there’s money at the bottom of the pyramid the wolves will be around in the concrete jungle with maze of laws.

Today AMFI proudly states that in the last decade & a half or so, investors protected.
[I’m not eulogizing AMFI in respect of returns, major funds have performed no doubt.]


Ubaldo C DSouza

4 years ago

If those who are concerned about this are doing nothing about it, some treasuries are being replenished with these funds, ripe for looting. And as Vaibhav Dhoka says, the "blessings" of the politicians, police and who-have-you have not been effectively and sufficiently distributed. The stable will be locked after the horse has bolted! And it seems those in authority and governance are adopting the creed "if you can't beat them, join them."

Vinay Joshi

4 years ago

Mr. Vinod Kothari,

As a financial an expert bring out a 'white paper', publish it in the media & 'openly take position', to nail the culprits & laxity of the state governments in regulations.

This eve, 23rd, conclave hosted by CRISIL & S&P, Dy.Guv,RBI, K.C Chakravarty, was talking on confusion 'in financial inclusion'; narrated all the aspects with a question answer session.

Yes there has been sufficient progress, much has to be achieved, i admit.

In US 25% of the people do not have bank a/cs, high costs deters another 20%.

So our gullible people fall in the trap of conman promises of all sorts.

Sahara is only money laundering.
Forget it.

Saradha aspects are clear cut indications. Bill was to be modified, CM spoke on Sunday 21st, to the Prez, asking the earlier bill to be sent back in 24hrs!? [CAN THE CM SPEAK IN SUCH A MANNER?!]

Kunal Ghosh, MP, executive editor of the Saradha print publications, denies any wrong doing.

If so return the money instead of the CM stating 'what has gone, is gone'.!?

The deposit seeking co's flourished in the last twenty two months. [in WB]

What about WB govt.agencies being openly defrauded by deposit authorization scams?

Mr. Vinod Kothari, i've no idea about your financial expertise & reading but make it known & make no mistake in understanding that no scam can be perpetrated w/o the blessings of the higher ups.

With your financial expertise why don't you decipher 'Sahara', scam?

Dear Mr. Vinod Kothari, this is in no way intended to disparage you whatsoever [do not have the slightest feeling about it.]In fact you've given valued inputs.

Before signing off, i state that your write up put by ML is true & worthy a debate,appreciated, insight of certain aspects but not nailing the flaws for hanging.

Ms.Sucheta has always highlighted con aspects.



4 years ago


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