Abhijit Kumar, a post office savings agent, was lured to invest in the debentures of the Pailan group by a post office staff. Unlike Saradha, Pailan has been a known name in West Bengal and has huge presence in the education sector.
The group used to give 15-17 per cent interest on investments in its fixed deposits and monthly income schemes, when banks were offering just half the rate. Now, about 42,000 investors of Pailan collectively face defaults of Rs 343 crore, starting July 2013.
MPS Group’s agro products used to jostle for space in the racks of food marts till a year ago. Apart from food products, MPS had also been pushing its lucrative investment schemes through social media and word-of-mouth for a long time.
Investors claim, MPS has so far defaulted payments of Rs 300 crore, starting May 2013.
Investors of the two companies — Pailan and MPS —are making a beeline to the office of Justice Shyamal Sen Commission. The commission was appointed for looking into the claims of Saradha investors for compensation. Together, the two companies had raised more than Rs 2,000 crore, of which nearly Rs 700 crore has passed the redemption tenure, claim investors.
The commission has so far not promised to pay compensation for the victims from the government treasury, but assured them to persuade the two companies to return the money to them. Interestingly, MPS is still operating its collective investment scheme, while circulating its new KYC norm forms to its investors. Despite Securities and Exchange Board of India (Sebi) mounting pressure on MPS to discontinue its schemes, the company has not stopped its operations. Though CIS is a recognised financial tool, in the past decade, Sebi hasn’t renewed CIS certificates. But companies have been operating through old certificates, claiming time share isn’t within Sebi’s purview. Earlier, Sebi had ordered attachment of its holding in eight group firms for failing to refund Rs 1,520 crore with interest to investors. According to investors, apart from investment schemes, Pailan had been aggressively investing in real estate in rural areas, by buying land at cheap rates and selling them through cooperatives.
Recently, Sebi got powers to crack down on illegal money pooling activities by seizing their properties. While the companies have been scrambling to sell properties, an embargo by the state government has barred them to do so.
Investors are blaming political patronage these companies enjoy. “I have already started receiving threat calls from political outfits, so I prefer not to be named,” says one of the leaders of the All Bengal Small Investors Association. In the last one year, more than a dozen of such forums have been formed in the state.
During the Saradha probe, the Sen commission received about 1.7 million applications. Although most of these people had deposited money in Saradha, investors of other companies such as Amazon, Suraha Microfinance, Sunmarg, ICore, Rose Valley and Alchemist have also registered complaints with the commission. So far Sebi has orders against several companies including, Vibgyor Allied Infrastructure, Prayag Infotech Hi-Rise, Alchemist, MPS Greenery Developers and Rose Valley, to name a few, to wind up collective investment schemes for three years, without much impact.
Most of the state’s deposit companies raised money in the guise of advances for real estate projects, or for booking hotel rooms. The firms offered three options: Fixed deposits, monthly interest schemes and recurring deposits. There was no stated rate of interest, only a promise of double the money in five years. After the Saradha scam, these companies are finding it difficult to meet redemption demands with fresh inflows nearing zero.
Notably, more than a year of the Saradha scam, there seem to be many more skeletons in the closet to be revealed than earlier envisaged. Surely, the Shayamal Sen commission has a long way to go before it winds up.