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4 arrested in Margadarsi chit fund fraud case
The CID registered FIRs under Sections 120(B) (criminal conspiracy), 409 (criminal breach of trust), 420 (cheating) and 477(A) read with 34 (falsification of accounts) of the Indian Penal Code, Section 5 of Andhra Pradesh Protection of Depositors in Financial Establishments Act, 1999 and Section 76,79 of Chit Funds Act,1982.
The crime investigation department of Andhra Pradesh police on Monday arrested four people in connection with the alleged irregularities in Margadarsi Chit Funds Private Limited (MCFPL).
Speaking to reporters at Vijayawada along with inspector general of stamps and registrations department V Ramakrishna, CID additional director general N Sanjay said the arrested included: MCFPL Visakhapatnam branch manager G V Ram Prasad, Rajahmundry branch manager Satti Ravishankar, Vijayawada branch manager Bandaru Srinivasa Rao and Guntur branch manager G Sivaramakrishna.
Three of them were remanded to judicial custody. Later, a local court in Guntur rejected Sivaramakrishna’s remand and asked the CID authorities to serve him a notice under Section 41-A of Criminal Procedure Code for questioning, N Sanjay said.
The CID registered FIRs under Sections 120(B) (criminal conspiracy), 409 (criminal breach of trust), 420 (cheating) and 477(A) read with 34 (falsification of accounts) of the Indian Penal Code, Section 5 of Andhra Pradesh Protection of Depositors in Financial Establishments Act, 1999 and Section 76,79 of Chit Funds Act,1982.
The CID chief said multiple teams of the agency launched searches on the premises of Margadarsi Chit Funds in Visakhapatnam, Rajamahendravaram, Eluru, Vijayawada, Guntur, Narasaraopeta and Ananthapuram branches on Saturday and Sunday, following complaints from the assistant registrar of chits and registered the cases.
He said cases were also registered against MCFPL chairman Ch Ramoji Rao and his daughter-in-law and managing director of the company Sailaja Kiran in connection with the alleged irregularities. Rao and Kiran were not available for comments.
During the searches, all the records were examined and incriminating documents were seized, the CID chief said.
The IG of the stamps and registration department said the branches of MCFPL were searched in October and November 2022, along with other chit fund companies.
During the search, the department faced non-cooperation from the foremen and other staff members and several irregularities and violations of rules and regulations were unearthed, he said.
Ramakrishna added that some of the irregularities included non-payment of monthly subscriptions/ instalments in respect of multiple tickets held in the name of the Margadarsi, which were later substituted with new subscribers.
Instead of depositing the future subscription amount into the second account as per the provisions of Section 22, the company was transferring the said amount to the Corporate Office Account and in turn, issuing a “receipt” carrying interest at the rate of 4 to 5% in the name of the subscriber, he said.
The company was also charged with non-disclosure of revenue and expenditure account and statement of assets and liabilities and details of investment as per Rule 28 (read with Section 24 of the Chit Fund Act).
“A search was also conducted at the corporate office of Margadarsi at Hyderabad from December 14 to 16, during which it was observed that the chit fund collections from the branches are being transferred to the Corporate Office and the huge amounts in turn are being invested in mutual funds which are contingent on capital markets’ risks,” he said.
The MCFPL authorities did not react on the charges levelled by the CID officials. A mail sent to the company seeking clarification was not answered.
