AP CID seeks help of ED, I-T to probe alleged irregularities in Margadarsi chit funds

HYDERABAD: Andhra Pradesh Crime Investigation Department (CID), which is probing alleged irregularities in Margadarsi chit fund, found illegal activities such as money laundering and siphoning of funds, apart from indulging in corporate frauds and helping ghost subscribers to indulge in benami transactions and resorting to evasion of income tax.

“As these violations pertain to domain of central enforcement agencies, we have met the agencies concerned in Delhi in the last two days and requested them to take timely action against the company,” said Additional Director-General of Police of CID N Sanjay.

The violations and fraudulent methods adopted by Margadarsi were similarities to the ones in Satyam Computers, Sahara and Sarada chits fraud, he said.

According to him, a deeper probe into the account books of Margadarsi was imperative to put a stop to this blatant exploitation by the Margadarsi group.

Investigation was continuing in this direction and further developments would be informed to the public in due course.

In the preliminary findings of the investigation till now, the CID found

Margadarsi group had violated many key provisions of the Chit Fund Act and diverted subscribers money to Hindu Undivided Family (HUF)-controlled entities and also into high risk stock market speculation such as mutual funds violating established laws of the land.

Margadarsi group is forcibly taking deposits illegally in the guise of ‘receipt against future subscriptions’ by offering them annual interest rate of four to five per cent. It had not furnished the balance sheet and accounts as required under the Chit Fund Act, 1982.

Instead, the company was taking the plea that the preparation of financial statements as per the Companies Act would suffice which was completely incorrect and wrong. The group indulged in fudging of its books and accounts by ‘window dressing’ the balance sheet and by not submitting the required information.

Instead of cooperating in the investigation process, the accused were indulging in defaming and blaming the CID in various fora and by various means.

According to the CID, the Margadarsi chit group, which had a history of accepting deposits illegally, was currently through its violation of Chit fund Act 1982, deriving undue benefits from subscriptions of common people. The company was doing so by way of: diversion of funds to their associate companies and other unknown investments clandestinely.

It indulging in money laundering by accepting cash subscriptions in high amounts in violation of various prevailing laws and forcing subscribers to retain their money continuously with the company in the name of offering interest and security by accepting deposits irregularly.

It had been established prima facie that the Margadarsi group was committing these violations by fraudulent accounting practices such as inflating cash balances in the name of ‘cheques on hand’ and ‘cash on hand’ at the branch level.

It was not filing the mandatory balance sheets and accounts as per the Chit Fund Act either at the branch level or with the Registrar of Chits at State level. The company was not submitting the necessary documents to the regulators who were duty bound to find out the genuineness of the bloated figures reported.

The CID, so far, registered seven FIRs upon the complaint of the Commissioner and IG, Stamps and Registrations, AP under Section 420, 409, 120(B), 477(A) read with 34 IPC and Section 5 of APPDFE Act-1999 and Section 76, 79 of Chit Funds Act1982 of CID PS, AP, Mangalagiri.

In all these FIRs, Ramoji Rao (A1) Chairman of the company (MCFPL),

Sailaja Kiran (A2) MD of MCFPL, branch managers concerned (called as foremen) (A3), the MCFPL Company (A4) and Principal Auditor K Sravan (A5) had been named as accused so far.

All the accused from A1 to A5 were questioned once. However, they were giving evasive answers and not producing required information or documents either to the chit registrar or to the CID. The severity of the issue could be understood with the operational details of the Margadarsi group.