Chit fund scam: Margadarsi properties worth Rs 242 Cr attached; total seizure reaches Rs 1035 Cr

Amaravati: Andhra Pradesh Crime Investigation Department (CID) attached movable properties worth Rs 242 crore, of Margadarsi Chit Fund Private Limited (MCFPL).

With this, the total attached properties have reached Rs 1035 crore.

Earlier in May, CID attached movable properties worth Rs 793 Crore of Margadarsi.

On the request of Additional Director General of Police CID N Sanjay, the Andhra Pradesh government issued an ad-interim orders directing the CID to attach the movable properties of Margadarsi Chit Fund Private Limited (MCFPL) worth Rs. 242,03,08,637.91.

The attached financial assets include bank accounts, investments, and other forms of movable properties, connected to ongoing investigations in seven cases registered against MCFPL.

During the investigation, CID noticed that certain movable properties are held in the name of the accused Company, Margadarsi Chit Fund Private Limited.

The government issued an order under section 3 and 8 of the Andhra Pradesh Protection of Depositors of Financial Establishments Act, 1999.

The agency has earlier filed the case for violations against media baron and chairman of MCFPL Ch Ramoji Rao, Managing Director Sailaja Cherukuri, and foremen of various branches. Ramoji Rao was named A1, Sailaja as A2 in the case registered under section 5 of the AP Protection of Depositors of Financial Establishment Act, 1999.

As per the GO, the government has appointed N Sanjay as the case may be, as the "Competent Authority" under sub-section (1) of section 4 of the Andhra Pradesh Protection of Depositors of Financial Establishments Act, 1999 (Andhra Pradesh Act No.17 of 1999) to safeguard the interests of the depositors and to exercise control over the properties attached by the Government under sections 3 and 8 of the said Act.

MCFPL with 37 branches

The MCFPL was established on August 31, 1962, at Hyderabad, and has 37 branches in the State of Andhra Pradesh.

The company operates chit groups ranging between Rs 50,000 to Rs 1,00,00,000, and presently, 1989 active chit groups are operating in Andhra Pradesh, and 2316 active chit groups operating in Telangana State.

"Chairman of MCFPL Ch Ramoji Rao, Managing Director Sailaja Cherukuri Managing Director, Foreman of different branches, auditor of the company have conspired and committed the offences," said N Sanjay.

Violations noticed during inspections

During an inspection conducted by the officials of the Registration and Stamps Department on November 15, 2022, at the branch offices of MCFPL located in Andhra Pradesh, a host of offenses and violations of provisions of the Chit Funds Act, 1982 were noticed under sections 27, 32, 31, 24 and Form-XXI under Rule 28(2) for each chit group.

On analyzing the statements, it is found that:

-The chit fund collections from the branches are being transferred to the Corporate Office.

-The amounts, in turn, being invested in mutual funds.

-The accused company had engaged in criminal activities by creating an ingenious vicious cycle perpetrating fraud, cheating, and criminal breach of trust.

-It was engaged in wrongful enrichment for its gains at the cost of gullible chit subscribers for Non-Payment of the subscription amount.

-Violated to maintain of bank accounts to mask the illegal deposits scheme.

-The company is not in a position to pay the amounts to the subscribers when they demanded.

-The company diverted the funds to other investments illegally, which violates the RBI regulations and the provisions of section 12 of the Chit Fund Act, 1982.

MCFPL has invested Rs 2 crore (amounting to 88.5% of the paid-up capital) in Ushakiron Media Private Limited (not a chit-fund business), against Section (12) of the Chit Funds Act, 1992.

Multiple raids:

On March 11, the teams of the CID launched searches at the premises at the branches of Margadarsi Chit Fund Pvt Ltd in Visakhapatnam, Rajamahendravaram, Eluru, Vijayawada, Guntur, Narasaraopet, and Ananthapuramu branches. The foremen of these branches were questioned about the alleged chit-fund fraud.

Auditor Shravan arrested

In March, CID arrested a chartered accountant Kudaravalli Shravan partner of Brahmayya & Co, for "abandoning due diligence and due process" in certifying the annual financial statements of MCFPL. The auditor had failed to confirm balances in banks.

CID questions Ramoji Rao & Sailaja

On March 28, CID issued notice to Cherukuri Ramoji Rao, the chairman of Margadarsi Chit Fund Private Limited (MCFPL), and his daughter-in-law Cherukuri Sailaja, MD of MCFPL, in the chit fund scam.

On April 4, AP CID questioned Cherukuri Ramoji Rao, at his residence in Jubilee Hills, Hyderabad. Four teams, comprising around 20 officials, headed by SP Amit Bardar questioned him for more than eight hours.

Besides questioning, CID raided 7 branches of Margadarsi and arrested auditors of four branches in Guntur, Rajamahendravaram, and Vijayawada.

On June 6, Sailaja, managing director of MCFPL was questioned at her residence in Hyderabad for more than 10 hours. The CID officials expressed satisfaction with the investigation and said that Sailaja responded properly to the questions they asked.