Business Standard, May 04, 2013

The Department of Consumer Affairs directs its officials to prepare report on how to make people aware of fraudulent practices

Alarmed by the plight of investors in the wake of the Saradha Group going bust, the Department of Consumer Affairs has directed its officials to prepare a report on how to make people aware of such fraudulent practices.

“We are looking into the Saradha scam from a consumer’s perspective and have directed our officials to prepare a report and suggest what more can be done to make consumers aware of such practices,” K V Thomas, minister of state for consumer affairs, food and public distribution, told Business Standard.

Thomas said he had held a discussion with his officials recently and apprised them of the need to look into the issues related to the alleged scam as the interest of large number of consumer is involved.

“We have been spreading awareness among people on what precautions they need to take before investing their money, but those are mostly advisory in nature,” said Thomas.

Pradeep S Mehta, secretary-general, Consumer Unity and Trust Society (CUTS), said the best thing the government can do is have an omnibus law with regulatory and redressal structure.

“It should have a financial consumer protection Act to protect the rights of the consumer in such situations. There is no legal framework to protect the rights of the consumers in cases like Saradha,” he added.

Last week, the Centre ordered the Serious Fraud Investigation Office (SFIO) to probe the suspected misuse of the public money by various money pooling companies following the alleged fraud involving thousands of crores by Kolkata-based Saradha group.

The probe was ordered after public protests erupted against alleged duping of hundreds of thousands of investors by the Saradha group through their chit-fund and other money-pooling activities in West Bengal. After being on the run for several days, Saradha Group chairman Sudipta Sen was arrested from Jammu & Kashmir a few days ago and brought to Kolkata.

The corporate affairs ministry said SFIO will also coordinate with other law enforcement agencies and regulators, wherever required, in its investigations.

Capital market regulator Securities and Exchange Board of India (Sebi) has already passed an order against one group entity, Saradha Realty India, asking it to wind up all collective investment schemes and refund the money collected from investors.

Besides, Sebi is probing at least 10 other Saradha entities for raising funds without the regulator’s approval.

Based on information received from the Assam Police on four first information reports (FIRs) against Sen and others for offences under Section 120B, 406, and 420 of the Indian Penal Code, the Directorate of Enforcement on April 25 registered a case under Prevention of Money Laundering Act against Saradha Realty India Ltd and others, including Sen.

The Income Tax department has already initiated investigation of Saradha Group from the perspective of violation of the Income Tax Act 1961.

Saradha group has got more than 100 firms registered with the Registrar of Companies for businesses across sectors including real estate, auto, education and entertainment.

Most of these companies are registered with names starting with ‘Saradha’, while there are also firms with other names. Authorities are already looking into alleged ponzi or multi-level marketing schemes of at least 10 Saradha firms.

A majority of the group’s firms are into real estate. These include Saradha Build – Dev, Saradha Realty India, Saradha Infra Properties, Saradha Township, Saradha Villa and Saradha Housing.

The group also has registered companies related to education, exports, automobiles, shopping mall, agro development, tour and travels, among others.

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