A delegation of the Left Front of West
Bengal met the Prime Minister Shri Manmohan Singh on May 9, 2013 urging
for a neutral, fair and high level investigation into the massive fraud
of committed by the Saradha Group of companies and also the return of
thousands of crores of rupees to all the affected depositors
immediately. The delegation comprised of five MPs and 6 MLAs and the
former Finance Minister of West Bengal, whose names are appended in the
memorandum. The delegation will also be meeting the President. The copy
of the memorandum presented to the Hon'ble Prime Minister is given
below.
********
Dr. Manmohan Singh
Hon'ble Prime Minister of India
New Delhi.
Hon'ble Prime Minister,
Please refer to the
Memorandum submitted to you on August 22, 2011 by the Left Front
Legislative Party in West Bengal as well as the Memorandum placed before
you on December 19, 2012 by the Left Front Members of Parliament,
drawing your kind attention to the alarming problem of irregularities
being committed by certain financial companies (so-called 'Chit Funds'
in terms of local parlance in West Bengal) and requesting for an urgent
action by the Central Government. Unfortunately, however, no timely
intervention was made by the Central Government and the present State
Government. As a result, a massive fraud has been committed by an
irregular financial company (Saradha Group) by suddenly closing down all
its offices and resulting in a widespread default on repayment to lakhs
and lakhs of depositors, belonging mostly to the poorer sections in
rural and urban areas of West Bengal. Employees in the print and
electronic media owned or controlled by this Saradha Group have also
lost their jobs due to this sudden closing down. There has been, due to
the misdeeds of this company and similar other companies as well as the
Central policy of making small saving schemes less attractive and
commission of the agents reduced, a severe fall in the small savings
collection in the State - from Rs. 8,409 crore of net collection of
small savings in Post Offices of West Bengal in the last financial year
(2010 - 2011) of the Left Front Government to (-) Rs. 987 crore in the
next year (2011 - 2012) and to (-) Rs. 165 crore in 2012-2013 (upto
December), adversely affecting the State as well as the small savings
agents.
You are kindly aware that
among the different types of financial companies, there is one category
of companies which raise deposits from the people, invest the money and
promise returns in terms of interest, etc. These companies are required
to register with the Registrar of Companies (ROC) under the Ministry of
Corporate Affairs of the Central Government, and then also obtain
permission from the Reserve Bank of India (RBI) and function by obeying
the guidelines of RBI. If there is any violation of these guidelines,
then the RBI can take necessary actions, including stoppage of work of
the concerned companies. There is another category of financial
companies which raise funds from the people in terms of
share/debentures, and then invest the money in various ventures,
including real estate, hotels, television channels, newspapers,
entertainment business etc., with promise of returns in terms of lands,
apartments, etc. These companies are again to register first with ROC
and then get approval from the Securities and Exchange Board of India
(SEBI) under the Union Finance Ministry, and obey the guidelines of
SEBI. If the guidelines are flouted, then SEBI can take action in terms
of prohibiting the activities of the concerned companies. The Saradha
Group belongs to this second category. It may be noted in the context
that the State Government does not have any role in giving approval of
these companies.
Grave financial
irregularities are committed by both these two categories of companies
when they violate the guidelines of RBI or SEBI, as the case may be, by
alluring promises in terms of false and unrealizable offers of interest
or returns. There is usually a period after which these returns are to
be paid back to the depositors. In the intervening period, the concerned
companies keep on raising funds and often make very partial payment,
and then suddenly close their activities without any notice, thus
cheating the common people in a large scale as has been the case with
the Saradha Group, as mentioned above.
Under the circumstances,
the State Government, within its limited power, can take action if any
written complaint of being cheated is obtained, by immediately arresting
the proprietors of the concerned companies, attaching all of their
properties and then arranging through the Hon'ble Court, the sale of the
properties for repaying back to the affected depositors. If there is no
written complaint, even then the State Government can conduct enquiry
on its own and submit the findings to the concerned Central Agencies
(SEBI or RBI) for taking necessary action. The State Government can also
pass a Bill in the State Assembly for Presidential assent for
implementing the Act, so as to take necessary action at the very initial
stage of the offence in terms of decentralized administrative and legal
framework in the districts.
The Left Front Government
in West Bengal had, during its tenure, taken all these actions. In
1980- 81, when some large financial companies had started cheating
people, the State Government, on the basis of written complaint, took
exemplary action by arresting the heads of the concerned companies and
then attaching their properties for beginning the process of repayment
through the Hon'ble Court. When again in 1991- 92, several companies had
cheated people, the State Government in the Finance Department and the
Home Department (involving both Kolkata Police and District Police), on
the basis of written complaint, took prompt action by arresting heads of
nearly 96 companies, attaching their properties (both movable and
immovable , including bank accounts) and then starting a Public Interest
Litigation on its own in the Hon'ble Calcutta High Court with a verdict
for selling the attached properties through the Court - appointed
special officer for beginning the process of repayment of money to the
depositors. In the year 2002 - 2003, when about 17 companies had cheated
people, the heads of all of these companies were arrested, again on the
basis of written complaints, and a process of prompt repayment was
undertaken. Along with taking those steps, the Left Front Government had
also introduced in 2003 -2004 a bill (namely, the West Bengal
Protection of Interest of Depositors in Financial Establishments Bill,
2003) for taking early preventive and punishable action against
irregular financial companies with a decentralized framework as
mentioned before. However after repeated exchange of views and urging by
the State Government, when a much delayed Central response (although
for substantially similar bills for several other State Governments,
Presidential assent was accorded with more promptness) was obtained in
August, 2009 with Presidential message for a few changes, these changes
were promptly incorporated and a new bill (The West Bengal Protection of
Interest of Depositors in Financial Establishment Bill, 2009) was
introduced and passed unanimously (with TMC MLAs also present) in the
State Assembly on December 22, 2009. The new Bill was then sent for
Presidential assent. However the Presidential assent, despite reminders,
could not be obtained during the tenure of the Left Front Government.
It needs to be mentioned
that from 2008 - 09, a new feature emerged when several companies within
jurisdiction of SEBI had started operating in a manner which created
apprehension of cheating of people. However, no written complaint of
cheating was received by the State Government. The Left Front
Government, therefore, started enquiry on its own involving jointly the
Finance Department and Home Department (in terms of Kolkata Police and
District Police) and then submitted its findings concerning four
relatively big companies (including Saradha Group) to SEBI for necessary
action. For the Saradha Group, the attention-drawing letter was sent by
the Left Front Government on August 23, 2010. We now find that after
closing down of offices of Saradha Group that SEBI has recently issued
an instruction on April 23, 2013 on the Saradha Group to pay back to the
depositors within a period of three months and with prohibition on
taking any further deposit. Although this is a step in the right
direction, it has been much too delayed.
It is also noted with
serious concern that we still do not know about any follow-up action by
the TMC-led State Government regarding the enquiries started by the Left
Front Government into the affairs of four companies mentioned above. We
do not know because despite our specific queries, no answer was given
in the State Assembly. Moreover, when a discussion on this issue was
proposed on December 11, 2012 two Left Front MLAs (including one lady
tribal MLA) were beaten up. We also do not know what action was taken by
the TMC - led State Government on the 2009 Bill which was unanimously
passed in the Assembly (with TMC MLAs present) for Presidential assent
in the first twenty months of its existence. We now find that on the
basis of a communication from OSD & ED Special Secretary to the
Governor of West Bengal to the Secretary to the West Bengal Legislative
assembly a motion was passed in the Assembly to withdraw the bill. The
aforesaid communication reads: The Ministry of Home Affairs, Government
of India has now returned the aforesaid Bill, considering it to be
withdrawn by the Government of West Bengal as it has been decided to
recast the Bill in order to strengthen it for the purpose of protecting
the interest of the depositors in Financial Establishments. This appears
to be a clear violation of legislative power of the State Assembly,
since prior approval of the Assembly was not taken by the present State
Government before sending its views to the Centre for return of the
bill, 2009. Moreover, in terms of the communication mentioned above, the
following sentence in Sl. No. 6 in the statement of object and reasons
of this new bill seems confusing: It has been advised by the Government
of India to withdraw the said Bill. Then, with only a few changes in the
2009 Bill, the new Bill has been passed in the Assembly and sent for
Presidential assent. We also find that some of these changes were not
necessary and there is also a possibility of further complications and
delay. We suggested a remedial amendment to this new Bill, and a quicker
course of action which was not accepted. After raising our anxiety
about further delay which may be caused by this bill, we did not however
stand on the way of passing of the bill. We want an early action on the
part of Hon'ble President in terms of Article 201 of the Constitution.
Meanwhile, the sufferings of depositors remain unattended. We therefore urge upon you for considering the following actions:
(1) As several states are
involved in this massive fraud of Saradha Group, CBI should immediately
be involved in the investigation of this fraud under supervision of
appropriate Hon'ble Court.
Since SEBI is the nodal
Central agency, and the recent verdict of the Hon'ble Supreme Court
(2012) clearly directs SEBI to be the agency for necessary action, SEBI
should also be instructed in coordination with CBI and SFIO to move into
this Saradha case immediately, for a proper and comprehensive
investigation into the total list of properties (including different
forms of illegal transfers) for immediate attachment and for moving the
Hon'ble Supreme Court as well as Hon'ble Kolkata High Court for selling
of the properties needed for repayment to the depositors without delay,
and also for exemplary punishment for the offending persons.
This entire process of
investigation and attachment should be, for reasons of neutrality and
fairness, under the appropriate supervision of Hon'ble Supreme Court and
Hon'ble Calcutta High Court.
(2) Where there are
reasons for anxiety regarding other financial companies in the State,
joint action as mentioned about, may be undertaken immediately for
correcting the practices of these financial companies for preventing
further damages.
(3) National small saving
schemes should be immediately restored by the Central Government to
their previous status of attractiveness, with simultaneous restoration
of commission of agents by both the Centre and the State Government.
(4) Along with the
highest priority on refund of depositors' money, attention may be given
from the national level for a massive programme of an economic
reconstruction of the lives of affected depositors (small and marginal
farmers, small and tiny entrepreneurs, traders etc.) in terms of soft
loans from the nationalized banks to the willing persons as well as
rejuvenating the movement of Self-Help Groups in the State and
democratically elected co-operatives (now rendered inoperative in the
State) so that this massive loss can be transformed into a programme of
reconstruction for growth of production and employment.
There is also a need for
paying attention to problems of journalists, performers and others
connected with the closing down of newspapers and TV channels in terms
of inducting new entrepreneurs (without any link with irregular
financial companies), or in terms of helping formation of co-operative
of employees through assistance including soft loan.
(5) An all-out democratic
and decentralized campaign should be started immediately among the
affected people for convincing them to stay away from these irregular
financial companies and to keep their savings, among others, specially
in post office small saving schemes, nationalized banks and co-operative
banks.
With regards,
Sd/-
Surjya Kanta Mishra
Leader of the Delegation, Leader of the Opposition in West Bengal Assembly
Sitaram Yechury, MP
Subhahas Naskar, MLA
Barun Mukherjee, MP
Paresh Adhikary, MLA
Manohar Tirkey, MP
Prabodh Chandra Sinha, MLA
Basudev Acharia, MP
Anadamoy Mondal, MLA
Probodh Panda, MP
Chand Mohammed, MLA
Asim Dasgupta, Former Finance Minister, West Bengal
