Bengal govt in dilemma to tackle chit fund companies

This, as large number of Bengali channels in the state have their roots in chit funds

After around 1,200 scribes lost their jobs as chit fund-funded media group Saradha Group shut all its media outfits (a mix of news dailies and TV channels), West Bengal government is now in a dilemma of whether to crack the whip on the group and other such chit fund companies.

While there is a buzz that an arrest order has been issued in the name of Sudipta Sen, CMD of Saradha group, TMC MP Sougata Roy said state government cannot do enough in these issues.

"We don't have much to do in this issue. It is the duty of Sebi, RBI and ministry of corporate affairs to crack a whip on these companies and stop them,” he said.

Roy suggested enough laws are in place and the regulators should jointly address this issue rather than expecting the state to do everything.

In 2010, when national media environment was still reeling under recessionary tendencies, the West Bengal media landscape saw a sudden boom. A hitherto unknown name in media circles, Saradha Group, stepped into the fray.The company invigorated the sleepy media market in West Bengal by launching new media entities - Channel 10 (now Rice group), Bengal Post, Sakalbela, Azad Hind, Prabhat Varta, Parama and the Seven Sisters Post.

A large number of Bengali channels in the state have their roots in chit funds. The regulatory clampdown on these funds has taken a toll on these media operations.

State industries minister Partha Chatterjee said that while efforts are on to nab the culprits, but after a point state can not do much about it.

“We will look into such companies with respect to the laws of Sebi and RBI. If irregularitries are detected we will take action but we can not go on an arrest spree in a hurry,” he added.

On arrest of absconding Sen, Chatterjee said it is under consideration but no such order has been passed so far.

Sebi has begun a clampdown on collective investment schemes. In May 2012, it had issued an order against a Kolkata-based company, directing it not to raise money from the public. In December 2012, it issued another order against the company, stating its intention to prosecute the firm for continuing to raise deposits. On April 10, Sebi issued another order, cautioning investors against another instrument, potato bonds, floated by a West Bengal-based company.

Companies such as the Saradha Group have been raising money from the public as advances. According to Companies (Acceptance of Deposits) Rules, 1975, though companies can raise deposits as advances, the repayment period has to be six-36 months.

According to an RBI official, most multi-level marketing companies have been resorting to this clause to raise funds from the public. Not many, however, stick to the repayment timeline clause, he adds.

"Also, such companies prefer to drag the matter to court so that they can continue raising funds until a judgment is arrived at," the official said.