Hyderabad: Margadarsi accused the Andhra Pradesh CID of entering into a conspiracy to financially derail Margadarsi Chit Fund by tarnishing its image and levelling allegations which are of untrue nature. On a day when the AP CID chief N Sanjay was addressing media in the national capital, Margadarsi charged that the exercise was aimed fearmongering of the subscribers and threatening the management and staff.
The AP CID ADGP claimed that he was preventing biggest Chit Fund scam in the country and blamed Margadarsi of preying on the unsuspecting and gullible subscribers. The sole focus of the media interaction was Margadarsi Chitfund Company, which is a household name in Andhra Pradesh and Telangana, and has over 2 lakh subscribers in the two Telugu states alone.
Ramoji Rao, who founded the organisation 60 years ago, is also the Founding Editor of the largest circulated Telugu daily 'Eenadu', which is synonymous to fair and unbiased reporting. It criticises the governments when the latter falters. Not withstanding it, the AP government set in motion a campaign in November 2022 to tarnish the image of the Margadarsi Chit Fund. Under the Chit Fund Act, of 1982, the Registrar of Chits started inspection at 17 branches simultaneously on Nov. 15 and took copies of all documents from there.
Disruption of day-to-day affairs - The government also stopped approving applications received for opening new chit groups. It hampered the day-to-day operations of the company. After completion of the chits, the chit security deposits with the Registrar should be refunded. Even after the chits were completed, the Registrars retained the deposits. So far, the non-refunded security deposits by the Registrars amount to Rs.48.81 crores. These Registrars have sought clarifications, alleging violations of the Chit Fund Act. Margadarsi has answered to every question that was raised. However, those answers were ignored.
Based on complaints of jurisdictional Registrars, 7 FIRs were registered under the provisions of the Chit Fund Act, the Indian Penal Code and Andhra Pradesh Protection of Depositors of Financial Establishment Act. Three branch managers were arrested and sent to judicial custody. A partner of a prominent auditing company, Brahmaiah & Co, was arrested and sent to judicial custody. The subscribers who were posting chits were threatened with dire consequences if they did not file a complaint against the company. They were also taught how to lodge a complaint.
Searches were conducted on various premises along with the corporate office in Hyderabad, and copies of information and documents were taken. The CID officials came to the corporate office in Hyderabad and demanded that Ramoji Rao be interrogated for the alleged crimes. Although his health was not good, he agreed and attended the hearing on April 3.
The photo of Ramoji Rao lying on the bed was taken by the CID staff and given to the Sakshi media, which is owned by the AP Chief Minister YS Jagan Mohan Reddy. It was broadcast immediately in the electronic media in violation of Ramoji Rao's personal privacy. The CID also interrogated Ramoji Rao's daughter-in-law Sailaja Kiron, the managing director of the company, on April 6. Right after the interrogation, the CID announced to the media that they want to interrogate Ramoji Rao and Sailaja in Amaravati.
Obstructions continue- The AP CID announced that they were going to Delhi for two days to initiate a money laundering complaint with central agencies and the complaint includes charges of diversion of funds, corporate fraud, benami transactions, and income tax evasion.
Nothing could be worse than this. One thing is clear, the motive behind this entire episode is to financially cripple Margadarsi, threaten the management, and staff and create anxiety among the subscribers. That is why such allegations were made in a media interaction. The charges are fictitious. We will approach the court to protect our interests, Margadarsi said in a statement.
Margadarsi answers to CID charges
Allegation: Cashing out of large amounts of chits in contravention to existing laws falls under money laundering.
Answer: Margadarsi is in the chit-fund business. Accepts subscriptions paid by subscribers as part of business transactions in the form of checks and cash in favor of them. They are also regular taxpayers and therefore abide by the provisions of the Income Tax Act. Hence, it is completely false to term it money laundering.
Allegation: Unlawful receipt of security, pressuring subscribers to keep their money permanently with the company citing security or for interest
Answer: In certain cases where subscribers who are not able to provide necessary government surety for the rest of the chit amount, they will receive the payout of the chit only after making a written undertaking and provisioning the necessary security for the pending instalments. We are considering only the amount related to the future installments as security. We are taking this action keeping in mind the interests of the other subscribers who will receive the the chits in future from the same group. Therefore, the receipt of deposits is not derivative. This allegation is completely false, conspiratorial, and mudslinging. Chit Fund operations are governed by the Chit Fund Act and the Miscellaneous Non-Banking Company Directions issued by the RBI.
Allegation: Inflating cash balances in the name of checks and cash in hand at the branch level
Answer: It is common for chit fund and insurance companies to receive checks in the last few days of the month. Naturally, they will be en-cashed the subsequent month. Although, we have explained this to the Registrars and local police, they are levelling the same allegations without showing any willingness to understand. Of Rs.254.90 crore money shown as checks in hand at the time of search, Rs.211.54 crore worth checks were cashed in the next month. The rest were sent for collection as per the due dates.
Allegation: Balance sheets and accounts were neither filed with the Registrar of Chits at the state level nor at the branch level as per the Chit Fund Act
Answer: This is a blatant lie. The company submits balance sheets regularly every year. We have furnished the audited financial statements containing further information required under the Chit Fund Act. We have also given an explanation, since they started the inspections. It is clear that no complaint was received from any Registrar until they resorted to fresh harassment.
Allegation: Margadarsi group diverts subscribers money into high-risk stock market speculations and mutual funds
Answer: This is completely baseless. In the guise of protecting subscribers, they are spreading canards with malicious intents. The Company is empowered to invest the proceeds, commission and other income generated from its operations as per the provisions contained under Section 14 of the Chit Fund Act-1982.
Allegation: Margadarsi group is indulging in window dressing of balance sheet, fudging its books and accounts with false information
Answer: These are malicious allegations to tarnish the reputation of a 60-year-old company whose practices and business practices are best organised. The company has never indulged in such false and illegal practices in the presentation of its books of account. Everything has been shown transparently over the years as per the accepted accounting principles. Government officials indulge in fabricating a fictitious story on a daily basis with the sole aim of tarnishing the reputation of a company that has been running flawlessly and with perfect financial strength for the past 60 years.
