Margadarsi chit fund scam: CID questions Eenadu chairman Ramoji Rao, Cherukuri Sailaja

Hyderabad: The sleuths of Crime Investigation Department - Andhra Pradesh began questioning of Eenadu Chairman Cherukuri Ramoji Rao and his daughter in law Cherukuri Sailaja at her residence in Hyderabad. On April 3rd, as part of the investigation related to the irregularities in the Margadarsi Chit Fund Pvt Ltd,a team of 30 members in four vehicles arrived at the residence in the morning hours.

Besides the questioning, CID raids 7 Margadarsi branches in state this morning at 10 AM. Earlier, the sleuths of AP CID has arrested managers and the auditors of four branches from Guntur, Rajahmundry, Vijayawada.

The case against Ramoji Rao was filed under Sections 120B, 409, 420, 477(A) read along with Section 34 of IPC. The case was registered under Section 5 of the AP Protection of Depositors of Financial Establishments Act, 1999. The CID has named Cherukuri Ramoji Rao as accused number 1 (A1) and Cherukuri Sailaja as accused number 2 (A2) while the respective bank manager is A3.

How it all started?

Andhra Pradesh Crime Investigation Department (CID) received complaints from seven assistant registrars of Visakhapatnam, Kakinada, Eluru, Vijayawada, Guntur, Palnadu, Kurnool, and Anantapur, about alleged irregularities in the Margadarsi Chit Fund Pvt Ltd (MCFPL).

Following which, sleuths of the CID registered multiple FIRs against media baron Ramoji Rao, chairman of Margadarsi Chit Fund Pvt. Ltd. (MCFPL), his daughter-in-law and MD of MCFPL, Sailaja, and foremen (branch managers). FIRs were registered under sections 120(B), 409, 420, 477(A), read with Section 34 of the Indian Penal Code; section 5 of the Andhra Pradesh Protection of Depositors in Financial Establishments Act 1999; and sections 76 and 79 of the Chit Funds Act 1982.

Stamps and Registration department Inspector General V Ramakrishna in a joint press conference said, "Many irregularities have been noticed in the MCFPL, and the government would go to any extent to take stringent action against the violations proved in the alleged chit-fund scam. After investigating the foremen of Visakhapatnam, Vijayawada, Rajahmundry, and Guntur, they were produced in the local court. During the investigation, it was found that the money of the subscribers was diverted to other states and companies.

The stamps and registration department, the regulating authority of the chit fund business, conducted inspections/searches on 37 branches of Margadarsi Chit Fund Private Limited during October/November 2022. During the inspections, the branch managers, who were legally called foremen, failed to provide any data about their chits and transactions of chit amount.

It was observed that the chit-fund collections from the branches were being transferred to the corporate office. A huge money was being invested in mutual funds, which are contingent on capital markets' risks. Employees told the investigators that the subscriber's money was being diverted to MCPL in Chennai, Margadarshi Chit in Bengaluru, and Ushakiron Media Private Limited in Hyderabad.

"Foremen (branch managers) nominated for the branches should be responsible for the financial transactions done in the branch. But the foremen have no powers. They do not know about bank transactions and have no bank details. foremen said everything is at the headquarters in Hyderabad, and when checks were conducted at Hyderabad, there was no authorized person at the corporate office, said Ramakrishna.

During the search operations, the staff of MCFPL needed to provide the necessary documents, but it is found that the company was operating without giving cheque powers to foremen. "During the search, the non-cooperation of the foremen and their staff was noticed, and several irregularities and violations of rules and regulations were unearthed. The inspection teams found financial irregularities such as non-payment of monthly subscriptions/installments in respect of multiple tickets held in the name of MCFPL, non-disclosure of the revenue and expenditure account, diverting chit fund amount, mismanagement of crore of rupees belonging to chit subscribers", CID official N Sanjay said.

According to Section (12) of the Chit Funds Act, 1992, chit fund companies should not invest client money in mutual funds and equities, but it is found that the company has made violations. "Chit-fund companies should not invest public money into other companies, especially as mutual funds. However, Margadarsi chit fund company invested Rs 2 crore (amounting to 88.5% of the paid-up capital) in Ushakiron Media Private Limited, which is not a chit-fund business.