SARADHA CHIT FUND SCAM

HEMANT PRAJAPATI-2428
SYBMS(FINANCE)
INTRODUCTION

The Saradha Group financial scandal was a major financial scam

and political scandal caused by the collapse of a Ponzi scheme run
by Saradha group, a association of over 200 private companies that
was believed to be the running collective investment schemes.
The group collected around ₹200 to 300 billion (US$4-6billion) from over 1.7
million depositors before it collapsed in April 2013.
CULPRIT IN THE CASE

Sudipto Sen(Born 30th March 1959) a reclusive man, described by people as

soft spoken person. Some say he is the son of a man called Bhudeb Sen,
who used to run a chit fund called Sanchayani in the 1980s and which went
bust 10 years ago.

Debjani Mukhopadhyay the lady who joined Saradha Group as a receptionist

sometime between 2007 and 2008, became an executive director of the
company that has defrauded lakhs of depositors in West Bengal.
OPERATIONS AND SCAMS
Started in 2006 with promises of astronomical returns in Ponzi Schemes.
Started building brand by buying and selling media channels.

Used nexus of companies for money laundering.

Collected money by using secured debentures and redeemable preferential

bond.

Violation of section 67 of Indian Companies Act.

SEBI challenged them for the first time in 2009.

Creation of more than 300 new companies.

SEBI persisted, in 2010, Saradha’s method of raising funds changed.

Collective Investment schemes like tourism packages, real estate fund launched in
the name of chit fund.

In 2011, SEBI warned west Bengal government about the alleged schemes of the
company as the concept of chit fund is regulated by State Governments and not
by SEBI.

In 2012, SEBI identified that the group operated CIS and not Chit Fund.

Saradha Group started trading in stock market and siphoning off the proceeds.
Saradha Group had several branches in West Bengal, Jharkhand, Assam, Odisha,
Chhattisgarh and other state to get public deposit.
Scam summed up to Rs.2460 crore and about 80% of money still unpaid to depositors.
They used three scheme namely monthly income deposit, fixed deposit and recurring
deposit.
On 7th December 2012, RBI governor stated that the West Bengal government
should initiate suo motu action against companies which were indulging in financial
malpractices.

Sudipto Sen, wrote a confessional letter to CBI in April 2013 and fled. He was later
arrested.

PIL was filed on 22nd April 2013 in Guwahati High Court and Calcutta High Court.

CBI investigation started.

LEGAL IMPLICATIONS AND CURRENT STATUS
22nd April 2013 West Bengal government announced that a four-member judicial
inquiry commission headed by Shyamal Kumar Sen, retired Chief justice of
Allahabad High Court would probe the scam.

On 24th April 2013, Mamata Banerjee announced a controversial Rs500 crore relief
fund for the low income depositors of the Saradha Group.

In the light of the scam, SEBI requested sweeping powers to investigate and
prosecute and fraudulent collective investment schemes.

On 7th May 2013, Calcutta High Court appointed a three member administrator
group to run Tara News and Tara Muzic
CBI INVESTIGATION

As per Supreme Court’s order Bengal SIT handed over all arrested suspects
including Sudipto Sen, Debjani Mukhopadhyay, Kunal Ghosh over to CBI.

CBI arrested West Bengal Transport minister Madan Mitra on the charges of
criminal conspiracy, cheating, misappropriation and deriving undue
financial benefits from the Saradha Group.
PUNISHMENT

A Bidhannagar sub-divisional court magistrate convicted and sentenced

Sen to three years’ rigorous imprisonment and a fine of ₹10,000.

Sen, whose Saradha Group is accused of running Ponzi schemes under

different names, would have to undergo another six months’
imprisonment if the fine is not paid, the court directed.

He was convicted under Section 406 (criminal breach of trust) for not
depositing the provident fund of employees, an offence Sen confessed to
before the court. He was also sentenced to three years’ imprisonment for
’conspiracy’ under Section 120B of the IPC in connection with the PF
default.