VIJAYAWADA: Sleuths of the Andhra Pradesh Crime Investigation Department (APCID) on Sunday arrested four foremen of Margadarsi Chit Fund Pvt Ltd (MCFPL) while probing a case registered against MCFPL and their authorised foremen in seven branches following a complaint by the Assistant Registrar of Chits.
The Assistant Registrar of Chits had earlier lodged a complaint against foremen of MCFPL branches located at Visakhapatnam (Seethammadhara), Rajahmundry,Eluru, Vijayawada (Labbipeta), Guntur, Narasaraopeta and Anantapuram.
The arrested were identified as Kamineni Rama Krishna (Visakhapatnam branch), Satti Ravishankar (Rajahmundry branch), B Srinivasa Rao (Vijayawada branch), and Gorijavolu Siva Rama Krishna (Guntur branch).
During investigation, the CID reportedly noticed that the company was resorting to non-payment of subscription amount into the chit account which it was supposed to pay on par with the subscribers in each chit, violation in maintaining bank accounts to mask the fraudulent activities such diversion of funds for other investments and running illegal deposits scheme.
According to official sources, the firm was subscribing for a minimum of one ticket to maximum of 50% of the tickets on the date of obtaining the certificate of commencement of chit.Later, the tickets in excess of one were replaced with new subscribers. However, in neither of the situations was MCFPL paying the chit subscription which had to be paid on par with other subscribers. “They were not even maintaining statutory ledgers. There were no credit entries for the amounts to be paid by MCFPL into Account No 1 (as deposed by the authorised foreman),” CID sources said.
The sleuths reportedly found that the deficit amount was managed with the amount received from subscribers of one or more chit groups to pay the prized subscriber of another group. Eventually, the foreman was not paying the chit subscription as stipulated under Section 27 and Section 32 of Chit Fund Act.
Citing an example, the officials explained, “If in Guntur branch, there are 2,040 tickets in 45 chit groups, 858 were declared as subscribed by MCFPL. Later, they were partly replaced with new subscribers. The amount payable by MCFPL towards these 858 tickets till substitution by new subscribers amounted to Rs 16.96 crore. As confirmed by the foremen, the firm did not pay a single rupee towards this liability, but benefited out of the operations of the chit groups and managed the deficit in the subscription amounts by juggling funds from one chit group to another.”
CID also reportedly found that the authorised foreman of the branch had no power in issuing cheques or making online transactions through the accounts maintained by the branches into which chit subscribers were paying their subscriptions.
“Instead, employees of corporate offices are vested with the power to issue cheques or online transactions to debit account, though they are not the authorised foremen. Thus, the foreman at the branch level is a mute spectator and has failed to discharge duties. The authorised foreman hands over the cheque books from the bank to corporate officers. This control over the signatory authority over the branch accounts enabled the corporate office to divert funds to other investments in contravention of the law,” sources said, adding the subscribers did not have any information on the profits earned through such investments, though it was their money which was being subjected to market risks. Sources pointed out, “The foremen failed to prepare and submit balance sheets in Part I and II as stipulated under Section 24 of the Chit Funds Act. Further, MCFPL was not submitting Form XXI for each chit group as stipulated under the Act.”
It may be recalled that the economic offences wing of the APCID had registered multiple cases against MCFPL chairman Cherukuri Ramoji Rao, his daughter-in-law Cherukuri Sailaja and foremen in various branches of the State for carrying out chit fund business operations without statutory approval from the RBI and for indulging in irregularities such as routing the public money to mutual funds for personal gains and others.
Cases were booked against them under IPC Sections 120 (B), 409, 420, 477 (A) read with 34, Section 5 of AP Protection of Depositors in Financial Establishments Act (1999) and Sections 76, 79 of the Chit Funds Act (1982).
Foremen mute spectators
Sources said employees of corporate offices are vested with the power to issue cheques or online transactions, though they are not the authorised foremen. Thus, foreman at the branch level is a mute spectator and has failed to discharge duties