Widespread fraud by Saradha group: probe agency

Prosecution would also be initiated by the state governments for violations of the Prize Chits and Money Circulation Scheme (Banning) Act

Saradha group chief Sudipto Sen

The Serious Fraud Investigation Office (SFIO) probe into 14 companies of the Saradha Group has found alleged violations of various Indian Penal Code sections. The findings would be shared with the Central Bureau of Investigation.

“The SFIO has found evidence of violation of several provisions of the Indian Penal Code such as Sections 07 (Abetment of Crime), 120B (Criminal Conspiracy), 403 (Dishonest misappropriation of property), 406 (Criminal breach of trust), 409 (Criminal breach of trust by public servant), 415 (Cheating), 418 (Cheating with knowledge that wrongful loss will be caused), 419 (Punishment for cheating by personation), and 477A (Falsification of accounts),” said an official.

According to the government, the investigation concluded that the investment schemes run by such companies were “Ponzi schemes”, working under an arrangement where the primary source of payment to subscribers was the collections made from newly enrolled members, rather than from the income generated from investments.

The companies, their promoters, directors and managerial personnel have allegedly been found guilty on many counts for violation of various provisions of the Companies Act dealing with illegal collection of deposits and false statements.

“Companies of the group which were declared by the Securities and Exchange Board of India (SEBI) to be carrying out unauthorised ‘Collective Investment Schemes’ will be prosecuted for violation of the SEBI Act, instead of Section 58A of the Companies Act, 1956, as the former carries longer terms of imprisonment,” said the official.

The SFIO has also found several instances of violation of the Prize Chits and Money Circulation Schemes (Banning) Act. “As prosecution under this law is to be initiated by the State Governments concerned, the report along with the evidence is being shared with the CBI. The report is also being shared with the SEBI for proceedings against the companies which were found to be running unauthorised/ illegal Collective Investment Schemes,” the official said.