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Hard days ahead for chit fund companies in Maharashtra

As per Securities Exchange Board of India (SEBI) data, four years ago, 162 bogus chit fund companies had duped the investors in Maharashtra to the tune of Rs 40,000 crore. In such a situation, Modi 2.0 government’s decision of banning of “Unregulated Deposit Schemes” will be a boon for the common man of the state. Innocent people can be saved from fraud by these chit fund companies.

It is worth mentioning that the Union cabinet on Wednesday approved the banning of unregulated deposit Schemes Bill, 2019. It seeks to prevent unregulated entities from collecting deposits and duping the poor and innocent people of their hard earned savings. The bill aims at plugging gaps in existing laws and giving powers to the government to prohibit companies from taking such funds from the public. People running such illicit deposit-taking schemes can face jail terms as well as a stiff penalty if the bill becomes a law. In the 2017-18 budget, former finance minister Arun Jaitley had announced a draft bill to curtail the menace of illicit deposit schemes to protect poor and gullible investors from dubious schemes.

According to the central government, the bill will help tackle the menace of illicit deposit-taking activities in the country, which at the present is exploiting regulatory gaps and the lack of strict administrative measures to dupe poor and innocent people of their hard-earned savings. It will replace the Banning of Unregulated Deposit Schemes Ordinance, 2019. The bill will be introduced in the ongoing Parliament session. The Banning of Unregulated Deposit Schemes Ordinance, 2019 was promulgated on February 21, 2019.

There are three different types of offences — running of unregulated deposit schemes, fraudulent default in regulated deposit schemes, and wrongful inducement — in case of unregulated deposit schemes, according to the bill. The proposed law provides for appointment senior government officials or a ‘competent authority’ that can attach assets or properties and subsequently realise the assets towards repaying depositors, the government said earlier this year. There will also be a provision for creating an online central database to collect and share information on deposit-taking activities in the country.

The proposed law has provisions of punishment as well as repayment of deposits if such schemes raise deposits illegally, the release said. For instance, accepting unregulated deposits will be punishable and can also lead to imprisonment, along with fines ranging between Rs 3 lakh and Rs 5 lakh. Repeat offenders could face imprisonment between 5 and 10 years, along with a fine amounting to Rs 5-10 crore.

Four years ago, in June 2015, BJP leader and former MP Kirit Somaiya had sought stringent action by the Maharashtra government against 162 ‘bogus’ chit fund companies. He claimed that these chit fund companies had duped investors in the state to the tune of Rs 40,000 crore. After submitting a letter to Maharashtra Chief Minister Devendra Fadnavis, he said, “I have a list compiled by Securities Exchange Board of India (SEBI) which states that 162 ‘bogus’ chit fund companies duped investors in the state to the tune of Rs 40,000 crore. In all, these companies collected Rs 1 lakh crore in India, out of which Rs 40,000 crore was collected from investors in Maharashtra.

According to Kirit Somaiya, major companies in the list include Samrudh Jivan, Sai Prasad, Twinkle Group, Citrus Resort Group, Scenic Land Group, and Mirah Pvt Ltd Group, Somaiya said. The SEBI has already banned Samrudh Jivan and Sai Prasad.

It is remarkable that in June 2017, the Enforcement Directorate (ED) had attached assets worth Rs 207 crore, including a helicopter, in connection with a multi-crore Ponzi scheme involving accused Mahesh Motewar and his family. Chairman and managing director of Samruddha Jeewan Group, Motewar has been under arrest for duping investors since 2015. His assets had been attached in four states, indicating the magnitude of the scam. It included a Bel 206 B3 helicopter worth Rs3.43 crore, Hotel Orchard at Apte road in Shivaji Nagar, Pune Hotel Le Royale residency in Hinjewadi, Pune, Orchard resorts at Kalewade on Pune-Satara highway. The ED said that the money from the scheme was passed on to various group companies for expansion of other businesses like construction, media, hospitality, software and for personal comforts.

According to the CID, Pune, Motewar and his two wives had duped more than 20 lakh small investors across India through business schemes like rearing, sale, and purchase of live stocks. They lured people to invest money by falsely promising unreasonably high returns and generated funds more than Rs 3,500 crore. A lot of farmers had invested in the schemes and were cheated.

Motewar floated M/s. Samruddha Jeevan Foods India Ltd. (SJFIL), which purchased these properties. A huge amount was collected as deposits from investors and was never refunded. This was a smokescreen to collect huge funds from lakhs of investors, mainly in cash.

Investigations revealed that the illegal collection and laundering through a web of 34 companies. These properties were purchased in the name of the main company M/s. SJFIL Pune, and many of its associated companies like M/s. Prosperity Agro India Ltd (PAIL), M/s. Samruddha Jeevan Multistate Multipurpose Co-op. Society Ltd (SJMMCSL), M/s. Samruddha Jeevan Constructions Pvt. Ltd., M/s. Jeevan Jyoti Construction Pvt. Ltd., M/s. Samruddha Jeevan Orchard Resort Pvt. Ltd., SJ Hotels and Hospitality Pvt Ltd. Various properties were purchased in the name of Mahesh Motewar and his family members.

In December last year, Maharashtra police have filed cases against six employees of a private firm for allegedly duping investors of Rs 10 crore through a Ponzi scheme.  The racket was unearthed after investors approached the economics offences wing (EOW) of Thane police, claiming they were cheated by ‘Aatharv4U Infra And Agro Limited.  After these investors filed a complaint at the Naupada police station in Thane, an offence was registered against the six persons, including company chairman Shivaji Niphade, managing director Ganesh Hazare and directors Lukman Shaikh, Sachin Gosavi, Mukesh Sudesh and Sulindra Chavan.

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