Margadarsi Chit Fund: Jagan govt reopens Rs 2600 Cr scam; raids 18 locations of Eenadu group

Former congress MP Undavalli Arun Kumar demanded that the state government allow him to go through the documents seized from Margadarsi chit funds to prove the violation of the RBI Act.

By Sri Lakshmi Muttevi  Published on  23 Nov 2022 9:55 AM GMT
Margadarsi Chit Fund: Jagan govt reopens Rs 2600 Cr scam; raids 18 locations of Eenadu group

Amaravati: A week ahead of the Margadarsi case hearing, former Congress MP Undavalli Arun Kumar, who has filed the petition in Andhra Pradesh High Court, has raised questions on the actual money collected from the depositors and other irregularities in the chit-fund company.

The court will hear the case on December 2. Media baron Cherukuri Ramoji Rao of the Eenadu group owns the chit fund company. A week ago, the Stamps and Registration department of Andhra Pradesh conducted searches at several offices of the company.

What is the Margarsari scam?

In 2006, a petition was filed by former Congress MP Vundavalli Arun Kumar in the high court alleging a big chit fund scam. He presented the balance sheet of Margadarsi Chit Funds for the year 2021-22 and said Ramoji Rao had signed the document as the company's chairman.

He alleged that the collection of deposits by Hyderabad-based Margadarsi Financiers, a group dealing with Margadarsi Chit Funds, violated the Reserve Bank of India Act. Margadarsi Financiers is a Hindu Undivided Family (HUF) company promoted by Ramoji Rao. Under RBI rules, it cannot collect deposits from the public. However, the company had mobilized Rs 2,600 crore from people in the form of deposits. In 2014, the high court dismissed the case after Ramoji Rao claimed that he was not part of HUF.

The case opened again in 2020:

In 2020, Undavalli Arun Kumar challenged the high court verdict in the Supreme Court. On August 20, 2022, the Andhra Pradesh government impleaded the case by filing a special leave petition in the Supreme Court. Further, the Supreme Court served notices on Margadarsi Financiers and allowed the Reserve Bank of India (RBI) and others to lead the case.

It is to be noted that in August 2022, Ramoji Rao had a meeting with Union Minister Amit Shah, which triggered a thought that the media baron could have proposed an alliance between the TDP and the BJP ahead of the 2024 Assembly elections in Andhra Pradesh.

Searches conducted

After allegations were posed by Undavalli Arun Kumar, the Stamps and Registration Department carried out searches at 18 locations and offices of Margadarsi chit fund on November 15. During the searches, officials seized records and materials relevant to proceedings under the Chit Funds Act 1982.

"Evidence of diversion of funds, non-payment of GST, and not giving security under section 31 (of Chit Funds Act) were collected. Given the above, all the Deputy Registrars of Chits in the state are directed to take necessary action, including penal action on the above-noticed irregularities, and submit compliance," said a statement by the department.

Former MP demands judicial probe.

Former MP Undavalli Arun Kumar demanded an inquiry by a retired judge of the Supreme Court into the financial irregularities of Margadarsi Chit Fund. Addressing the media, the former MP said, "In 2006, Ramoji Rao had stated that Margadarsi had stopped collecting deposits. He filed an affidavit in the high court and Supreme Court that the deposits would be repaid. However, the deposits were still being collected in the name of receipts in Margadarsi chit fund".

Former MP alleged that the Margadarsi financiers had a bank balance of ₹1,688 crores till August 20, 2012, but Ramoji Rao had not revealed where the company got such a huge sum of money.

Arun Kumar demanded that the state government allow him to go through the documents seized from Margadarsi chit funds to prove the violation of the RBI Act. He also sent a letter to the Inspector General of the Stamps and Registration Department seeking permission to scrutinize the documents under the RTI Act.

What do the Margadarsi officials say?

Margadarsi Chit Fund Private Limited has called the investigation an 'attempt of conspiracy' by the YS Jagan Mohan Reddy-led government. The company officials alleged that Margadarsi had been accused of being involved in Rs 2,600 crore scam.

In a statement, the chit-fund company said that the authorities abused their office's power by trying to create false evidence of violations after failing to find any irregularities. Margarsari said that the three-day inspections found no evidence of any wrongdoing, so they created a document containing fictitious violations and faults and kept pressuring managers to sign it.

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