Empower competent authority to sell property: EOW

CHENNAI July 26. Concerned at the plight of depositors who were cheated mainly by unincorporated non-banking financial establishments (NBFEs), the CB-CID Economic Offences Wing has proposed to the Government a comprehensive amendment to a special Act.

By the amendment to the Tamil Nadu Protection of Interests of Depositors Act, 1997, after absolute attachment, a competent authority, most probably a senior IAS officer, will be empowered to sell the property of the establishments at a public auction, realise the amount and distribute it equitably among the depositors, the special unit suggested.

The proposal assumes significance for even after a special court has awarded conviction in 15 cases, the depositors are yet to get back their money, say EOW sources. In one case, in which 2,159 depositors and Rs.2.38 crores are involved, the court convicted the accused as early as in 1999. However, the establishment property, worth Rs.2.2 crores, is yet to be auctioned to realise the money. ``Legal procedures and administrative reasons'' are cited for the delay.

Fabulous interest rates, incentives offered to depositors and failure of banks, including nationalised ones made people turn to NBFEs. ``Where banks failed, the NBFEs did an exceedingly good service'' to the people, police sources said. However, with copious funds at their disposal, the lifestyle of those managing the affairs of the establishments changed dramatically. Some firms diversified and lost the funds. An unwarranted 40 per cent expenditure was made on company infrastructure alone. There was a gross violation of rules, the Memorandum of Association and the Articles of Association, says K. Shyamsundar, Inspector-General, CB-CID, EOW-II.

Lack of Reserve Bank supervision proved advantageous to the violators. Only in April 1997, did the apex bank lay down that such financial establishments could no longer accept deposits.

As at June-end, the number of cases handled by the special unit is 573, in which 12 lakh depositors, including retired government servants and judges, and Rs.1,945 crores in deposits are involved. Still people continue to invest in firms, which promise high interest rates.

Proactive policing

Though they have virtually no role to play in getting the refund, the police adopt a proactive profile. Without wasting time and considering the elaborate legal proceedings a depositor has to go through, they act as a facilitator between the investors and establishments, for expediting the refund process. Arrest is made only when the police fear that those who manage the establishments may tamper with evidence, threaten depositors or abscond or alienate their property.

``Effecting arrests alone does not solve the problem''.

A good degree of success in proactive policing seems to have been achieved.

In about 110 cases, further action has been dropped at the investigation stage.

The establishments have repaid not only the principal but also bank rate, benefiting 14,122 depositors.

The money involved is Rs.14.95 crores.

Furthermore, 65 cases, involving Rs. 5.32 crores have been settled at the petition stage itself to benefit 2,030 depositors.

An ad interim attachment of property worth Rs.1,545 crores, including that of non-banking financie companies, has already been made.

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