The Serious Fraud Investigation Office (SFIO) has found that the Saradha group of companies used to run Ponzi schemes and the promoters and officials of the group would be tried for the same. SFIO completed the probe into 14 companies of the group.
SFIO concluded that the schemes run by the companies were Ponzi, as the primary source of payment to subscribers was the collections made from newly enrolled members rather than from income generated from investments.
“The companies, their promoters, directors and managerial personnel have been found to be guilty on many counts for violation of various provisions of the Companies Act, 1956, including Sections 58A and 628 dealing with illegal collection of deposits and false statements, etc,” said the ministry of corporate affairs in a statement here.
The ministry said the companies of the group, which were declared by Securities and Exchange Board of India (Sebi) to be carrying out unauthorised collective investment schemes (CIS) would be prosecuted for violation of the Sebi Act instead of Companies Act, 1956, as the former carries longer terms of imprisonment.
The scam came to light early last year. Hundreds of thousands of investors in West Bengal and neighbouring states were defrauded of thousands of crores through illegal money pooling activities.
The government has also decided to share the report along with the evidence with Central Bureau of Investigation, as it also found violation of the several provisions of the Indian Penal Code and the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. West Bengal Chief Minister Mamata Banerjee has been receiving flak for her government’s failure to act.
In the wake of public protests, the ministry asked SFIO in April 2013 to probe the case.
The probe agency had questioned many people, including leaders from the Trinamool Congress, while Saradha Group chief Sudipta Sen and some others were put behind the bars. An interim report was submitted by SFIO in September 2013. Sebi had also passed an order against Saradha Realty in April last year, soon after massive protests by investors began in West Bengal.