Andhra Pradesh CID, which is probing alleged financial irregularities by Margadarsi Chit Fund Private Limited (MCFPL), promoted by media baron Ramoji Rao, has requested the central enforcement agencies to probe alleged money laundering, corporate frauds and evasion of income tax by the company.
N. Sanjay, Additional Director General of Police, CID, told mediapersons in Hyderabad on Tuesday that the investigation so far shows that Margadarsi is involved in illegal activities like money-laundering, siphoning of funds, corporate frauds, helping ghost subscribers to indulge in benami transactions and evasion of income tax.
“As these violations pertain to the domain of central enforcement agencies, we have met the concerned agencies in Delhi and Hyderabad and requested them to take timely action against the company,” he said.
The Crime Investigation Department (CID) claims that the violations and fraudulent methods adopted by Margadarsi bear similarities to Satyam Computers, Sahara and Saradha chit fund fraud.
The official said that a deeper probe into the account books of Margadarsi is imperative to put a stop to this blatant exploitation by the Margadarsi group.
The Additional DGP said that instead of cooperating in the investigation, the accused are indulging in defaming and blaming the CID.
Stating that Margadarsi has a history of accepting deposits illegally, the CID alleged that the company through its violation of the Chit Fund Act 1982 is deriving undue benefits from subscriptions of common people by diversion of funds to their associate companies and other unknown investments clandestinely, and laundering money by accepting cash subscriptions in high amounts in violation of various prevailing laws.
It is also forcing the subscribers to retain their money continuously with the company in the name of offering interest and security by accepting deposits illegitimately, it said.
According to the CID, it has been established prima facie that the Margadarsi group is indulging fraudulent accounting practices, inflating cash balances in the name of cheques on hand and cash on hand at the branch level, not filing the mandatory balance sheets and accounts as per the Chit Fund Act, either at the branch level or with the registrar of chit funds at the state level, and not submitting the necessary documents to the regulators who are duty-bound to find out the genuineness of the bloated figures reported upon.
The ADGP said that seven FIRs were registered upon the complaint of the Commissioner and IG, Stamps and Registrations, under different sections of the Indian Penal Code, APPDFE Act 1999, and Chit Funds Act 1982.
In all these FIRs, MCFPL chairman Ramoji Rao, MD Sailaja Kiran, concerned branch managers (called foremen), the MCFPL company, and principal auditor K. Sravan have been cited as accused.
“All the accused were questioned once. However, they gave evasive answers and did not produce the required information or documents either to the chit registrar or to the CID,” Sanjay said.
According to the CID, Margadarsi group has violated many key provisions of the Chit Funds Act.
It diverted subscribers’ money to HUF controlled entities and also into high-risk stock market speculations such as mutual funds, violating the established laws of the land. It is forcibly taking deposits illegally in the guise of receipt against future subscriptions by offering them annual interest rate of 4-5 per cent, the CID said.
“Margadarsi group has not furnished the balance sheet and accounts as required under the Chit Funds Act, 1982. Instead, it is taking the plea that the preparation of financial statements as per the Companies Act is sufficient, which is completely incorrect and wrong,” it said.
The CID said that Margadarsi group has indulged in the fudging of its books and accounts by ‘window dressing’ the balance sheet and by not submitting the required information.
Movable properties of MCFPL worth over Rs 1,035 crore have been attached in the case so far.
The company has 108 branches in four states – Andhra Pradesh, Telangana, Karnataka and Tamil Nadu. It has 37 branches and 1.04 lakh subscribers in Andhra Pradesh. The total number of chit groups is 2,351. The annual turnover of the company for Andhra Pradesh and Telangana during 2021-22 was Rs 9,677 crore.