Margadarsi Chit Fund: AP to issue show cause to Ramoji Rao's firm, 16 others

Amaravati: Finding large-scale violations, financial mischief, and procedural irregularities in Margadarsi Chit Fund Private Limited, owned by media baron Cherukuri Ramoji Rao, and 16 other chit fund companies, the stamps and registration department of Andhra Pradesh will issue a show cause notice in another 7-10 days.

"A special forensic audit will be made on Margadarsi chit funds to check money trails, accounts, and investments. We will give 45-60 days to get all the documents from the company," said stamps and registration inspector general (IG) Rama Krishna.

The department held a press meet to disclose the details of the recent raids conducted on the chit fund companies. Inspections were carried out from 25 October to 31 November. "We are conducting raids to understand the financial health and check whether the chit funds are working as per rules and regulations. We found a major violation with financial implications. Many chit fund companies are running without registrations, which is very risky to the public. One such is STR Chits & Finance Pvt. Ltd. in Bhimavaram. An FIR has been filed," said Mr. Rama Krishna.

The IG explained that no chit fund company can do any other business besides the chit fund but some companies are involved in doing other business and collecting deposits. Money deposited in one chit fund company should be used by the same company and not diverted to other branches or companies. Also, it should be secured in an approved account, he said, adding, "But we found the money is diverted to other branches or other groups."

Explaining the irregularities by Margadarsi Chit Funds, Mr. Rama Krishna said, "After the state bifurcation, the statutory records of Margadarsi Chit Funds are not maintained. There is no separate balance sheet for Andhra Pradesh accounts, and we are unable to ascertain where the funds are secured and how they manage old and new chit funds. We found that since 2014, their stakes have been invested in Ushodaya Enterprises, Ushakiran Movies, and other movie businesses. The money meant for chit fund companies is used for self-interest and other companies."

Another major complaint the department received is a lapse in prize subscribers' money. It is found that the prize subscribers' money should be given within seven days, but there is no non-payment of the subscription amount under Section 27. Other violations seen in Margadarsi are accepting deposits in the name of security and offering "Interest Payable."

Margadarsi officials clueless about transactions

According to Mr. Rama Krishna, they faced serious problems during the raids at Margadarsi. "Foremen (branch managers) nominated for the branches should be responsible for the financial transactions done in the branch. To our surprise, branch managers/foremen have no powers. They do not know about bank transactions, have no bank details, and do not have any idea about the second account (security account)," he said.

"The foremen said everything is at the headquarters. Even the officials (foremen) refused to sign the documents we found during the raids," he added. The IG said they will soon conduct checks in the headquarters in Hyderabad with the support of IGRS, Hyderabad, in another 10 days.

Mr. Rama Krishna told the media, "This appears like a coloured activity and public money is being collected in the form of security. They are just maintaining one account for all chit tickets and need clarity for any questions we ask. The company is yet to submit complete information on the questions we raised during our raids."

No harassment, no discrimination

After the recent raids, the officials of Margadarsi released a note to the media saying the officials were harassed. Mr. Rama Krishna refuted the allegations and said, "This is a baseless allegation. They have not cooperated with us, which is why we would issue a show cause notice to produce their records and take further action."

On the allegations about the ruling party's role in the raids, Mr. Rama Krishna clarified, "There is no discrimination against the companies. In 2018, we made similar raids on Kapil chit funds, and after finding irregularities, we did not permit new chit funds till 2022. During the same period, the then Registrar issued notice to Margadarsi chit funds to submit their second account details. Until now, they haven't submitted it."

Mr. Rama Krishna said that the department will exercise due diligence while approving new chit funds.