Law to stem chit fund fraud to get more teeth

The state government gave its nod to a string of changes aimed at providing more teeth to the Odisha Protection of Interests of Depositors (in Financial Establishments) Act, 2011.

To cater to the interests of small depositors, a new provision will be added in Section 9 sub-section (7) to enable the designated courts to pass orders for payment to small depositors, if the sale proceeds of the attached properties is not sufficient to make equitable distribution among all distributors. This will enable the poorest and most vulnerable persons among depositors to get back their deposits on priority basis.

"Small depositors would include all such people who have deposited less than Rs 10,000. Even a single depositor duped by a chit fund company can lodge a complaint. Under the amended Act, any case pertaining to financial fraud will be treated as cognizable and non-bailable offence," said additional chief secretary (finance) R Balakrishnan after a meeting of the state cabinet. He said, section 7 of the Act has been proposed to be deleted.

This will remove the inconsistency between the stringent penal provision under section 6 and the provision for compounding in section 7 of the Act, thereby making it one of the strongest legal deterrents in the country against unauthorised collection of public deposits. It has also been proposed to insert a new sub-section 8 in section 9 of the Act to enable the government to recover from the sale proceeds any amount of compensation already paid to any category of depositors.

This will enable the government to have the first charge on the sale proceeds of attached properties deposited in the bank account of competent authority so that any compensation paid already from government account can be recovered from the sale proceeds. The state government has appointed Justice M M Das to probe the multi-crore chit fund scam in Odisha, after the demise of Justice RK Patra in January 2015. The enquiry commission has received over one million petitions.