Hyderabad: A press conference was held in the national capital by the Andhra Pradesh CID, ADGP N Sanjay with the sole aim to tarnish the reputation of Margadarsi Chit Fund by detailing a "foisted" case against the group. The CID kept interaction at Andhra Bhavan as off limits for Telugu media, fearing backlash as the latter would expose the entire misinformation exercise.
The questions AP CID did not answer are- How many complaints have been received against the Margadarsi so far? What is the quantum of the purported fraud? Has any subscriber lodged a complaint that they have not received their money on maturity? Have you acted on any such complaints? How many complaints were received against Margadarsi on breaking the rules? What are the rules that the chit has broke according to you? Journalists were repeatedly asked how much the subscribers have lost in real money?
A visibly annoyed Sanjay shot back at national media, saying 'should we wait until the people come to the government crying?' The government is responsible for the welfare of the people. It cannot standby while "scams" are happening. Should we wait until the all the people knock on the doors of the government? In such case, the government will have to dole out as thousands of crores of rupees to the victims as compensation.
New argument- The CID official drew a parallel to the 'Agrigold' scheme. He said it would lead to people's movements seeking relief to investors. Should we sit and wait for all that? Whoever it is? Big or small, should we watch till the company collapses? he asked.
The CID official said the IG of Stamps and Registrations has approached them with a complaint and the case was registered on that basis. He stated that the CID was not aware how much the actual quantum of the alleged fraud till date and we are going ahead to find it out.
Here are the excerpts from the press conference:
We have organised a press conference here to talk about a financial crime and fraud which is unfolding in Andhra Pradesh. It is not limited to AP, but also has bearing in the neighboring states of Telangana, Tamil Nadu, and Karnataka. Hence, we thought it would be apt for us to highlight it in front of the national level.
The Chit Fund Act was introduced in 1982 after irregularities and scams in some chit funds came to light in the 1970s. Margadarsi as an institute precedes the legislation and was instituted in 1962. However, they will have to follow the provisions of the Act of 1982. The law cannot be ignored. In 2008, the relevant laws came into force in AP. But the Margadarsi Chitfund Company is filing balance sheets only as per the Companies Act which is in its favor.
Though Margadarsi has never filed balance sheets as per Chit Fund Act, they are into Chit Fund business at the "field level". They have branches in the said states and have managers managing them. A group of 30-40 people is formed in the branches and money is collected through them. That money should be kept at the branch level. The branch manager should be the custodian of it. The amount collected should not be sent to the head office, which is exactly what is happening with Margadarsi. In the past two years, the Stamps and Registration Department focused on such chit companies in Andhra Pradesh, established clear violations.
After the audit, Margadarsi says that we have enough reserves and enough money to pay their clients. However, the Supreme Court made some comments in the case of Shriram Chits Investments vs. Union of India regarding the Chit Fund. The Chit Fund Act is a social and economic law. It was passed to protect the interests of chit subscribers. It is the responsibility of the government to take measures to prevent fraud.
Andhra Pradesh government does not want to be a silent spectator. The IG of Stamps and Registrations contacted the AP CID in March and shared the details with the CID. It was stated that Rs.500 crores are being collected annually from the people in the form of cash from the 37 Margadarshi branches in Andhra Pradesh. Apart from the two Telugu states, Karnataka and Tamil Nadu have a total of 108 branches. AP has one lakh subscribers. 2,351 chit-groups are operating overall. In the financial year 2021-22, there was a turnover of Rs. 9,677 crores in AP and Telangana alone.
Violations here fall under the purview of Income Tax, CBDT, Serious Fraud Investigation Office, Department of Corporate Affairs, and ED. It is our duty to alert them. So we wrote to them last month. Now, we have explained what is going on in our investigation together with them and want them to act on this.
Q&A session-
Q: Are searches still being conducted at Margadarsi offices?
A:Chit Fund is at the branch level... So if there is a branch-level record we can see it at least. But we can't if they don't maintain any record? We have formed teams to examine the records of 37 branches. They have taken anticipatory bail. Arrest is not our only aim here... The goal is to stop financial crime from continuing.
Q: How much fraud is believed to have taken place. Can you give at least a tentative figure?
A:506 crores are being collected annually(he did not elaborate on it. He himself earlier said the company was collecting about 500 crores as subscription from its clients)
Q:Are you just focused on the Margadarsi? Considering other companies too?
