In a bid to root out the problem of chit funds from its core, the Serious Fraud Investigation Office (SIFO) will tap former chit fund collection agents or disgruntled employees to identify the pressure points of the erstwhile promoters.
SFIO is the investigation arm of the Union minister of corporate affairs, whose minister of state (Independent Charge) Sachin Pilot recently announced a major crackdown on such dubious chit funds operating under the garb of multi-level marketing (MLM) companies.
According to highly placed SFIO sources, the agency has already started tapping these former agents and employees to accumulate information about the management of such companies. “Some have voluntarily come forward to save their skin from people on whose behalf they have collected deposits for such funds. They introduced us to their fellow agents and colleagues who are suffering similarly,” an SFIO officer, associated with the investigation process, told HT.
The sources added that the agency is basically trying to churn out information about the dubious funds from these unique sources.
“The first is of course basically about the different layers of management, especially the influential people on the board or payroll of such companies. This is especially important since the Union ministry of corporate affairs has decided to make even the director of such companies accountable for any case of cheating the public with promises of abnormal returns,” the official added.
On December 16, Sachin Pilot, during a trip to Kolkata, said that once the new Companies Bill, 2011, is cleared in Parliament, SFIO will be empowered to thoroughly grill the director of such companies and, in necessary, confiscate their properties to refund depositors.
The second piece of information that SFIO is trying to accumulate from such erstwhile collecting agents and employees is about the projects in sectors like hospitality, information technology, electrical, food processing and education, among others, that the promoters claim exist.
“The problem is that many such projects do no exist, so in that case the area of confiscation shrinks. So, we would like to have detailed information about such projects in advance,” the SFIO official said. Just on Sunday, Pilot admitted that confiscation of property might be difficult, especially when the projects that chit fund companies claim to exist, do not.
“This is really a problem. But the union ministry of corporate affairs is trying its best to get full information about such companies and their projects, so that their pressure points can be identified.
The SFIO will work in close coordination with Securities and Exchange Board of India and the Reserve Bank of India for coordinated action.
The role of the individual state government, especially the economic offences wing of the state police departments is extremely important in this regard,” Pilot said.
SFIO sources said that they were focussing on inactive companies in Bengal. “Of the 3.5 lakh companies in Bengal registered with the Registrar of Companies, 25% are inactive and we strongly suspect that many are subsidiaries floated by chit funds,” the SFIO official said.