Margadarsi Chit Fund scam: AP RoC decides to wind up Ramoji Rao–led company's chit groups

Amaravati: Andhra Pradesh Registrar of Chits (RoC) has tentatively decided to wind up chit groups of Margadarsi Chit Fund Pvt Limited (MCFPL).

On July 30, a notice was issued to subscribers of Margadarsi pointing out alleged financial irregularities, criminal violations, and diversion of funds. Later, the Registrar of Chits published advertisements in several newspapers.

According to the Assistant Registrar of Chits, the regulatory authority under the Chit Funds Act, 1982 verified records pertaining to the affairs of the Margadarsi, which is operating the chit fund business in 37 branches in Andhra. He said they detected criminal violations of the Chit Fund Act.

Major violations of the chit fund company were detected. They included the tickets held in the name of MCFPL. Instead of the company, the payment was made by the subscription money paid by the unrelated members of the group (other chits group).

As per the provisions of the Chit Fund Act, tickets held in the name of the company (vacant chits) shall be paid by the company, i.e., Margadarsi Chit Fund Private Limited, out of its own funds.

Instead of paying chit subscriptions from its own funds, the company diverted the money of the subscribers belonging to other groups. It was found that the prized subscribers were being paid with inordinate delays. Payments to prized subscribers were delayed beyond more than four months in some cases.

No amount should be accepted from chit members without obtaining proper permissions before commencing a new chit. However, funds were received from the public arbitrarily flouting all the provisions of the Chit Fund Act.

"Prized Chit subscribers who bid for their financial emergencies were not being paid prize money on time and were coerced in the name of non-provision of sufficient security to the satisfaction of foreman for the release of Prize bid money. They were found to be deducting future liability of the instalments or luring bidders and giving receipts that they will pay interest rates of 4 to 5% on depositing Prize bid amounts,", the notice read.

As per the provisions of the Chit Fund Act, 1982, the foreman shall be responsible for the conduct of the chit groups in that branch. However, the bank operations of Margadarsi Chit Fund Private Limited, instead of being handled by a foreman, are being handled by unauthorized persons from the corporate office. They are resorting to diversion of funds, illegally. The company has been making the defaulting subscribers prized bidders and was illegally diverting chit amounts.

MCFPL violated the Chit Fund Act by non-filing of balance sheet, profit, and loss accounts of the company with the regulatory authorities as per the provisions of Schedule I and 11 of Section 24 and Rule 28 of the Chit Fund Act, 1982.

After considering the reports of the Assistant Registrar of chits, a tentative decision was arrived at to wind up the said chit groups.

In the notice, it is said that if the members of the Chit group have any objections/concerns, the Chit Subscribers of the above groups are required to send them in writing to the Deputy Registrar of Chits within 15 days from the date of publication of the notice.

Andhra Pradesh Crime Investigation Department (CID) had already filed chargesheets against 15 individuals, including chairman Ramoji Rao, Managing Director Cherukuri Sailaja Kiran, branch managers, and MCFPL. The charges leveled against the accused include serious offences, such as criminal conspiracy (120-B IPC), cheating (420 IPC), misappropriation of funds (403 IPC), criminal breach of trust (409 IPC), falsification of accounts (477 (A) V), and violations of Section 5 of the Andhra Pradesh Depositors of Financial Establishment Act and under the Chit Fund Act.

On July 28, the AP CID had attached properties worth Rs 15.81 crore of Margadarsi in the alleged chit fund scam.

The MCFPL, established on August 31, 1962, in Hyderabad, has a total of 108 branches in four states - Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu. They have 37 branches in Andhra with 2,351 chit groups and 1.04 lakh subscribers. For the fiscal year 2021-22, their annual turnover in Andhra and Telangana states was Rs 9,677 crores.

Margadarsi responds to the notice

Responding to the notice, Margadarsi in a media statement said: "Pursuing their vendetta against the Ramoji Group and Eenadu, the largest Telugu circulated daily, the Government of Andhra Pradesh has initiated a direct attack through constant persecution and witch hunting against Margadarsi Chit fund belonging to Ramoji Group by levelling baseless and non-existing allegations of financial irregularities,"

"In continuation of their malicious agenda, the Government through its Registrars now have issued an advertisement in the print media in the form of notice to subscribers leveling the same imaginary, arbitrary and perverse allegations. The Registrars have made these allegations when the subject matter is still subjudice in Courts, and they have not filed any counters to writ petitions filed by the company." the Chit Fund group said.