Margadarsi Chit Fund Financial Irregularities: Show Cause Notice To Be Issued For Forensic Audit

Nov 30, 2022, 13:10 IST

AMARAVATI: Inspector General of Stamps and Registrations and Andhra Pradesh Registrar of Chit Funds V Ramakrishna said that after the state-wide inspections conducted in 35 chit fund companies including Margadarsi Chit Funds Pvt Ltd, in the last three days revealed large-scale financial irregularities.

Addressing the media on Monday, Ramakrishna revealed money collected from depositors by Margadarsi Chit Fund company was diverted to Ushodaya Enterprises, Ushakiran Movies, and other companies promoted by Eenadu group chairman Ch Ramoji Rao. Additional Commissioner of Stamps and Registrations Department Udayabhaskar was also present at a press meeting held at the Secretariat in Velagapudi on Monday. He said that the department will issue a show cause notice and conduct a forensic audit of Margadarsi Chit Funds.

Explaining in length about the irregularities done by the Margadarsi, the IG explained that after the bifurcation of the States, balance records belonging to the State of AP were not maintained properly. He said that the company records were not shown and neither did the guide foremen cooperate with the authorities at the time of inspections.

He also said that they will conduct further inspections at the company's headquarters in Hyderabad and other branches of Margadarsi in the State of Telangana.

The IG explained that the siphoned money was diverted for non-chit fund activities, and they also accepted fixed deposits which were against the Chit Fund Rules. Margadarsi had invested Rs 11.80 crore in Ushakiron Movies Ltd, Rs 0.928 crore in Dolphin Hotels Ltd, Rs 4.11 crore invested in Colorama Printers Private Ltd, Rs 0.50 crore invested in Margadarsi Investment and Leasing Company Pvt Ltd and Rs 13.50 crore in Ushodaya Enterprises.

Ramakrishna explained why it took three days for inspections, especially in Margadarsi. One person was nominated as a foreman for the 37 branches in AP. They were not given any authority or cheque-issuing powers. They don't even know the bank account details of the branches, where the funds were transferred, or any details pertaining to the branch transactions. They did not answer any questions that we asked during inspections, nor did they cooperate with us. When asked about the documents found there, they refused to answer or sign the statements related to them. We had managed to take whatever information made available to us, he stated.

Accepting deposits and offering interest payable

We found a major violation of the Chit Fund Rules where they collected money and accepted deposits in the name of security while offering interest payable. Only one receipt was given to the depositors and the branch foreman was not even aware of that receipt. The receipt mentions 4% interest for 6-12 months and 5% interest for more than 12 months. How can interest be paid on security money when it is not a bank deposit? When questioned about this rule they did not have an answer to this, Ramakrishna said. The foremen were not aware of these transactions or where the security deposit was kept. This is a very serious violation and it is clear that the money was diverted for other activities which are against the rules. We will take strict action against such activities, he said.

" We will take all necessary steps to protect people's money and issue a show cause notice to them within 7 to 10 days and conduct a special forensic audit due to the irregularities conducted by them. Based on their submissions we will take the next course of action. In this special forensic audit, all accounts, transactions and documents will be examined thoroughly, " Ramakrishna stated further.

The Registrar of Chit Funds advised that people should be cautious while investing in chit fund companies and find out all the details of the organisation before investing in their money.

Watch: V Ramakrishna, I.G, Registrations and Stamps Press Meet