Investors can move winding up petition against company: Shyamal Kumar Sen

Interview with Justice

The investigations of Saradha scam, one of the biggest financial frauds involving small depositors, are still on. Justice Shyamal Kumar Sen, who is heading the enquiry commission, hopes the process of paying compensation would begin within a month. In an interview with Probal Basak and Namrata Acharya, Sen says, in spite of loopholes that allow unscrupulous entities to raise public money, there is enough scope for aggrieved investors to seek legal remedies. Excerpts:

What has been the progress on the Saradha probe so far?

We have received 17,31,065 applications seeking compensation. Most of these people had deposited money in Saradha. However, investors of other companies such as Amazon, Suraha Microfinance, Sunmarg, ICore, Rose Valley, Alchemist have also registered complaints with the commission. We are empowered to look into all similar companies, not only Saradha. But our focus is primarily Saradha.

So far, we have provided hearing to 6,500 cases. Data processing is on for the applications, it will take some time. But, roughly 86 to 87 per of the complaints pertained to investments less than Rs 10,000. The highest amount invested by an individual in Saradha was Rs 27 lakh. But it will take some time to get an idea about the total money involved.

Given the slow progress of hearing, when can the investors expect some compensation?

We are trying to categorise the applications some way, so that bulk hearing can be provided for fast completion of the process. We are doing the data processing work for this. In payment of compensation, the poor will be given priority. We are identifying the poor investors, hopefully in a month the process of paying out the compensation would begin.

Do you think Rs 500-crore fund announced by the West Bengal governmentwill be enough to compensate all the investors?

Our priority is to pay the poor investors first and most of the people made investments around Rs 10,000. I cannot say now whether the Rs 500 crore fund would be enough or not to pay compensation. But, investors will surely get their money. We will recommend selling assets of Saradha, we are empowered to do that. We will look into that aspect as well as part of our probe. But, currently, we are doing the data analysis, so that the process of paying compensation can be started as soon as possible.

Why have so called 'chit fund' companies or 'collective investment schemes' flourished in the state? Are there loopholes in the system or there is inadequate laws to protect the investors?

It is not a recent phenomenon. Everyone knows about Sanchayita. And this is not the case with West Bengal only. If you see the profile of affected investors in case of Saradha, there are domestic helps, rag pickers, cab drivers, teenaged working people, etc. they invest despite knowing the high-risk involved, only out of greed. There can be no solution, but to educate them.

There is a central Prize Chits and Money Circulation Schemes (Banning) Act, 1978, which is enforced by states. Many states have their own legislations to curb such companies. But now-a-days the companies pool money under different garbs --in the name of various kind of schemes, real estate business, tourism package etc.

If you talk of the legal loopholes, I still think there is enough scope in the legal system for the affected investors to seek legal remedy. If cheated, they can always move a winding up petition against the concerned company. But people need to be educated for this.

The Sebi Act 1992 has recently got amended by a presidential Ordinance, empowering the capital market regulator in this aspect. How effective will that be?

In recent times, Sebi has taken action in many cases and even passed orders against some companies. But many of the companies have put up a large number of agents as litigants in fighting legal cases against Sebi orders. Many companies successfully manage to continue their business on the basis of stay received from variuos local courts.

I think, this amendment will empower the Sebi in the context that it has given full freedom to decide what constitutes collective investment schemes. This will surely help the regulator to curb such schemes.