Chit Fund

As many as 87 companies have come under the scanner for irregularities related to chit fund schemes and cash circulation in the garb of multi-level marketing, the government stated today.

The Registrar of Companies (RoC) and its Regional Directors have actually been asked to scrutinise the balance sheets and inspect the books of accounts and other records of these 87 business, Minister of State for Corporate Affairs R P N Singh informed the Rajya Sabha today.

In reply to a query whether the Ministry has actually asked RoC to probe the accounts of chit fund companies and particular Multi – Level Marketing (NETWORK MARKETING) firms, the minister responded in affirmative.

Singh stated the directions have been provided on the basis of certain complaints obtained by the ministry against these companies, which are “alleged to be carrying on the tasks associated with reward chit fund and cash circulation in the garb of multi-level marketing”.

The minister was asked whether complaints have actually been obtained from investors about being ripped off through MLM money circulation schemes.

Singh further said that SFIO (Serious Fraud Investigation Office) has actually recommended setting up of a particular central regulatory agency for the execution of the Prize Chit and Money Circulation Scheme (Banning) Act, 1978.

The Act is administered by the Division of Financial Services (DFS), which has actually made up an Inter-Ministerial Group consisting of representatives from DFS, Ministry of Corporate Affairs (MCA), the Reserve Bank, Securities and Exchange Board of India (Sebi), Division of Consumer Affairs and Central Economic Intelligence Bureau.

The Group will certainly draft model rules on MLM business and on the prohibited schemes under this Act, and additionally frame clarificatory rules on the best ways to distinguish between direct sales from disguised money circulation schemes.

To an additional question on whether the investigations were being described SFIO, instead of being performed by RoCs, Singh said that multi-dimensional economic irregularities and frauds of complex nature are generally assigned to SFIO.

He said that SFIO is a “multi-disciplinary investigative agency including professionals from banking sector, capital market, company law, general law, forensic, analysis, taxation, info modern technology etc.” The minister further said that numerous segments of the Companies Act empowers the central government to designate inspectors for investigation of affairs of a business, but no extra-judicial power is bestowed upon the SFIO.

He said that RoC has powers to require needed info or explanation from any sort of company, based on the documents submitted to its office by the business, and submit a report to the central government.

On the basis of RoC report, the government can easily order investigations into the affairs of the business.

In reply to one more question on whether applications under RTI (Right to Details) Act are piling up in the different offices of the Corporate Affairs Ministry, Singh said that all RTI applications are taken care of on a top priority basis.

Chit Fund