Saradha Group has nothing to do with chit fund business: Chit Funds Association

Saradha Group has about 160 registered activities including realty and resort but not even one activity was registered as Chit Fund in the state, All India Association of Chit Funds general secretary TS Sivaramakrishnan said

Objecting to the use of word ‘Chit Fund’ in multi-crore Saradha Group financial fraud, industry body CFAI today said none of the entities of the Kolkata-based Group was operating as a registered chit fund.

 

“The failure of some multi-level marketing (MLM) or a Ponzi scheme is explained as failure of a chit fund company. This is totally unfair," All India Association of Chit Funds general secretary TS Sivaramakrishnan said.  

 

Saradha Group has about 160 registered activities including realty and resort but not even one activity was registered as Chit Fund in the state, he said, while addressing a press conference.

 

“Our grievance is failure of some other activity, why is it branded as failure of Chit Fund?,” he added.  

 

The association also demanded that the government come out and clear the air over Chit Funds.

 

There are about 10,000 Chit Funds registered in India with annual subscription of Rs30,000 crore per annum. “We are governed by the Chit Fund Act 1982 and implementations by the respective states. This Act is notified in entire India,” he said.

 

“Principle regulator is the Reserve Bank of India, Act is made by the Central Government and rules are made by respective state governments,” Sivaramakrishnan added.

 

The regulator of chit funds is the Registrar of Chits appointed by respective state governments under Section 61 of Chit Funds Act.

 

Powers of adjudication vest in the Registrar and the state government concerned is the Appellate authority. In case of failure of a chit fund business, the responsibility for winding up such a business also vests with the respective state governments.

 

As per the law, a Chit Fund company is not allowed to accept deposit from the public and can only accept subscription amount from the members.    

 

However, Saradha Group accepted deposits from investors and worked as a Multi-Level Marketing company.

 

Meanwhile, the government has said several of its investigating wings like SEBI, RBI, I-T department and Enforcement Directorate have begun crackdowns on Ponzi schemes and have initiated action against Saradha Group under various laws including the Prevention of Money Laundering Act (PMLA).

  • User

    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.

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    User

    COMMENTS

    Dipakkumar J Shah

    6 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

    CA PRADEEP AGARWAL

    6 years ago

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

    CA PRADEEP AGARWAL

    6 years ago

    Will enquiry be partialor a method to defer a problem.

    CA PRADEEP AGARWAL

    6 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.

    V K JAIN

    6 years ago

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

    Virendra Jain

    V K JAIN

    6 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 .

    REPLY

    Vinay Joshi

    In Reply to V K JAIN 6 years ago

    Dear Mr. Virendra Kumar Jain,

    Noted.Thanx.

    Regards,

    CA PRADEEP AGARWAL

    6 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.

    V K JAIN

    6 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

    REPLY

    Vinay Joshi

    In Reply to V K JAIN 6 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?

    Regards,

    CA PRADEEP AGARWAL

    In Reply to V K JAIN 6 years ago

    ACTUALLY IF YOU SEE IT THE OTHER WAY, THE GOVT. WANTS TO LINGER IT FOR BARGAINING PURPOSES.

    CA PRADEEP AGARWAL

    6 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.

    Investor

    6 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.

    REPLY

    CA PRADEEP AGARWAL

    In Reply to Investor 6 years ago

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

    Sandeep Patel

    6 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

    6 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!!!

    CA PRADEEP AGARWAL

    6 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.

  • User

    COMMENTS

    rajeshpai

    6 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.

    MOHAN

    6 years ago

    Another "GOLD QUEST" scam ?

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