Govt to make people aware of money-pooling companies

Best thing government can do is to have an omnibus law with regulatory and redressal structure

Alarmed by the plight of investors caused by busting of the Saradha Group, the department of consumer affairs has directed its officials to prepare a report on the steps which could be taken to make people aware of such fraudulent practices.

“We are looking into the Saradha scam from a consumers perspective and have directed our officials to prepare a report and suggest what more can be done to make consumers aware of such practices,” minister of state for consumer affairs, food and public distribution K V Thomas told Business Standard.

Thomas said he had held a discussion with his officials last week and apprised them of the need to look into the issues related to the alleged scam as the interest of large number of consumer is involved.

“We have been spreading awareness among people on what precautions they need to take before investing their money, but those are mostly advisory in nature,” Thomas said.

Pradeep S Mehta, secretary general, Consumer Unity and Trust Society (CUTS), said the best thing that the government can do is to have an omnibus law with regulatory and redressal structure.

"It should have a  financial consumer protection act to protect the rights of the consumer in such situations. There is no legal framework to protect the rights of the consumers in cases like Saradha," he said.

Last week, the Centre ordered the Serious Fraud Investigation Office (SFIO) to probe into suspected misuse of the public money by various money pooling companies in the wake of an alleged fraud involving thousands of crores by Kolkata-based Saradha group.

The probe follows raging public protest against alleged duping of lakhs of investors by Saradha group through their chit-fund and other money-pooling activities in West Bengal.

After being on the run for several days, Saradha Group Chief Sudipta Sen was arrested in Kashmir valley a few days ago and has been brought to Kolkata.

The Corporate Affairs Ministry said that the Task Force will also coordinate with other law enforcement agencies and regulators wherever required, in its investigations.

Capital market regulator SEBI has already passed an order against one group entity, Saradha Realty India, asking it to wind up all collective investment schemes and refund the money collected from investors.

Besides, SEBI is probing at least ten other Saradha entities for raising funds without the regulator’s approval.

Based on information received from Assam Police on registration of four FIRs against Sudipta Sen and others for commission of offences under Section 120B, 406, and 420 of the Indian Penal Code, the Directorate of Enforcement, has on April 25 registered a case under the provisions of Prevention of Money Laundering Act against Saradha Realty India Ltd and others, including Sen.

The Income Tax department has initiated investigation of Saradha Group from the perspective of violation of the Income Tax Act 1961, the finance ministry said in a statement today.

Saradha group has more than 100 firms registered with the RoC (Registrar of Companies) for businesses across sectors including real estate, auto, education and entertainment.

Most of these companies are registered with names starting with ‘Saradha’, while there are also firms with other names. Authorities are already looking into alleged ponzi or multi—level marketing schemes of at least ten Saradha firms.

Majority of the group’s firms are into real estate. These include Saradha Build—Dev, Saradha Realty India, Saradha Infra Properties, Saradha Township, Saradha Villa and Saradha Housing. The group also has registered companies related to education, exports, automobiles, shopping mall, agro development, tour and travels, among others.