The Enforcement Directorate (ED) on Wednesday arrested Gautam Kundu, chairman of the Rose Valley group of companies, which, like the Saradha group, raised thousands of crores from small investors through its Collective Investment Scheme (CIS).
“Mr. Kundu was arrested after several hours of questioning,” an ED official told TheHindu . The official said Mr. Kundu was trying to “suppress facts and was not cooperating with the investigation.”
The group allegedly raised about Rs. 15,000 crores from the markets, several times more than the Saradha group collected. However, the Rose Valley group has always maintained that it raised only a few hundred crores.
Under CIS, a consortium of investors in a land parcel is formed. “As the price of the land parcel goes up, so do the returns on investment,” said a real estate analyst on condition of anonymity.
Associates of the Rose Valley group are confident that, unlike Saradha chief Sudipta Sen, it is “impossible” to keep Mr. Kundu behind bars. “There is a key difference between Mr. Sen and Mr. Kundu’s cases,” a former associate of the group told TheHindu . “While Mr. Sen could not return investors’ money and ran away, not one cheque of Rose Valley has bounced till today. Saradha’s cheques have bounced, making it a criminal case.”
However, Rose Valley is one of the largest companies to raise funds from the market without SEBI’s approval through various schemes. It has more than one crore investors and 10 lakh agents, sources said. “Bengal’s economy will collapse if Rose Valley is shut down,” the associate said.
The problems between Rose Valley Group and market regulator Securities and Exchange Board of India (SEBI) first surfaced in 2010, when the group was asked to furnish details of its earnings from its CIS, called Ashirwad. While the group contested the allegations that it raised Rs. 15,000 crores through CIS, it eventually closed down the business of selling land parcels.
The group later floated a business called “Time Share,” under which clients could book a ‘time parcel’ in the hotels it owned. The group collects a “hotel rooms booking” fee and returns the money with interest when the booking is cancelled. Many travel and tourism companies are in this business of ‘time share’ which is said to be illegal.
