VIJAYAWADA: The Andhra Pradesh Crime Investigation Department (APCID) registered a First Information Report (FIR) against the chairman of Margadarsi Chit Funds Private Limited (MCFPL) Cherukuri Ramoji Rao, his daughter-in-law and managing director of MCFPL Cherukuri Sailaja and branch managers of various branches of the chit fund company for alleged cheating, diversion of deposits into mutual funds, which are contingent on capital markets’ risks and violation of Chit Fund Business Act and Reserve Bank of India (RBI) guidelines.
The move came after CID officials received multiple complaints from assistant registrars of various districts in connection with the Stamp and Registration department raids on the offices of Margadarsi Chit Fund Pvt Ltd during October and November months last year.
A case has been registered under Sections 120(B), 409, 420, 477(A) read with 34 of IPC, section 5 of Andhra Pradesh Protection of Depositors and section 76, 79 of Chit Funds Act (1982), in which Rao has been named as accused number one followed by Sailaja and heads of concerned branches.
CID teams conduct searches at MCFPL offices
It may be recalled that the Stamps and Registration department, the regulating authority of Chit Fund business, had conducted surprise searches on various branches of MCFPL along with other chit fund companies last October. During the searches, the officials had noticed several alleged irregularities such as non-payment of monthly instalments with respect to multiple tickets held in the name of the MCFPL, which were later substituted with new subscribers, non-disclosure of revenue and expenditure account and statement of assets and liabilities and details of investment and other lapses in administration.
Subsequently, searches were conducted at the corporate office of the company in Hyderabad for three days in December. During these searches, it was allegedly found that the chit fund collections from the branches were being transferred to the corporate office and the huge amounts in turn was being invested in mutual funds, which are contingent on capital markets’ risks.
Further, instead of depositing the future subscription amount into the second account as per the provisions of Section 22 of the Chit Fund Act, the Foreman of the branch offices transferred the said amount to the corporate office account. The office, in turn, issued a ‘receipt’ carrying interest at 4%-5% in the name of the subscriber, which partook in the nature of the deposit.
According to sources in the APCID, the officials of the Stamps and Registration department reportedly appointed a chartered accountant to assist registrars in verifying the documents seized from the offices of Margadarsi and financial statements submitted by the company. During the preliminary examination, it was observed that the company invested an amount of Rs 459 crore in mutual funds, government securities, equity instruments, and the company’s subsidiaries and associates.
It was also found that the MCFPL disclosed three subsidiaries as related parties - Margadarsi Chits Private Limited (Chennai), Margadarsi Chits (Karnataka) Private Limited and Ushakiron Media Private Limited (Hyderabad). On examination of the list of shareholders as on March 31, 2022, filed in the MCA portal, CID officials noticed that Ushakiron Media Private Limited alone invested Rs 2 crore, 88.5 percent of the paid-up capital.
However, in the financial statements, the amount invested in subsidiaries was stated to be Rs 1,05,80,000 both as on March 31, 2022, and March 31, 2021.
“While the first two companies were also engaged in the chit-fund business, Ushakiron Media Private Limited in which the company holds 88.5 per cent of the paid-up capital, was not engaged in chit-fund business. According to section 12 of the Chit Fund Act, 1982, except with the general or special permission of the State government, no company carrying on chit business should conduct any other business. Considering the fact that the company holds substantial voting power (88.5 per cent), which makes it a subsidiary, it can be said that the company was carrying on other business through the subsidiary,” the preliminary findings of the CA reportedly found.
With the MCFPL allegedly diverting the subscriber's money to mutual funds for their personal gain and indulging in the commission of offences under various provisions of law, assistant registrars of Chits of Visakhapatnam, Kakinada, Eluru, Vijayawada, Guntur, Palnadu, Kurnool and Anantapur districts lodged complaints with the CID. Following this, an FIR was registered on Friday.
Multiple teams of the CID launched searches on the premises of MCFPLs at Visakhapatnam, Eluru Rajamahendravaram, Vijayawada, Guntur, Narasaropeta and Anantapur branches on Saturday. “Heads of the branches concerned were questioned about the alleged fraud, recorded their statements and seized incriminating documents. Teams formed to nab the absconding heads of Narasaraopeta, Eluru and Anantapur branches,” said sources in CID.
It may be recalled that the management of MCFPL denied irregularities and violations as stated by the Stamps and Registration department officials during their inspections last October. The management also accused CID officials of forcing Margadarsi employees to sign a fabricated document.