Frauds and Scams in India

September 5, 2014 `
VOL. 8, ISSUE 6
gfilesindia.com
MG DEVASAHAYAM: MODI NEEDS TO FOLLOW JP’S INCLUSIVE GOVERNANCE MODEL p32
JIGNESH SHAH AGAIN COCKS A SNOOK AT THE SYSTEM p28
M
K
KAW
THE
STATE
OF
KASHM
IRIPANDITS
p38
Nagarwala, Harshad Mehta, CR Bhansali, Ketan
Parekh, Jignesh Shah—the list of financial scamsters
in India is long. Now a new breed of such swindlers—
who play with the system with impunity—is emerging.
They cover up their misdeeds by venturing into media,
health and hospitality. Sudipta Sen, Nirmal Singh
Bhangoo and their ilk are new additions to the roll-
call. They hog the headlines when exposed. Nothing
happens on the ground to curb this menace. The
scamsters make hay; the authorities wake up only
after lakhs of people have been duped.
FIRST STIRRINGS
RASHEDA HUSSAIN
p42

COVER STORY
scam chit funds
www.gfilesindia.com10 gfiles inside the government
vol. 8, issue 6 | September 2014
Cheat funds
Financial scams and scandals rock the country on
a regular basis. Promising quick money to
gullible small investors, these scamsters make a
killing and then vanish into thin air. And what
does the system do—it is caught napping each
and every time. Still, no efforts are made to plug
the loopholes and strengthen prevention efforts.
Neeraj Mahajan reports

11www.indianbuzz.com
gfiles inside the government
S
UNANDA, the wife of a peon in
an advertising agency, secretly
invested Rs 1,000 every month
in a ‘chit fund’ which promised to
pay her double the amount after one
year with interest. She deposited the
money for 10 months in lieu of a plain
paper receipt, before the bubble burst.
She found a double lock on the door of
the chit fund office. She was one of the
many investors whose dreams were
shattered by unscrupulous and dubi-
ous operators in the financial market.
Two chit fund companies—
SunmargWelfareSocietyandAmazon
Capital— were rapped by the Reserve
Bank of India (RBI) for misusing
its name while soliciting depos-
its from the public. Kolkata-based
MPS Greenery Developers Ltd col-
lected `1,520 crore from investors
without any valid registration. MPS
not only flouted the guidelines laid
down in 2009 but also ignored the
specific prohibition by the Securities
and Exchange Board of India (SEBI)
not to raise money in any new or
existing schemes.
Tarun Trikha, the promoter
of TVI Express (Travel Ventures
International) was arrested at Delhi’s
IGIAirportwhiletryingtofleetoNepal
after allegedly robbing more than one
lakh people in India and some 70 lakh
people across the globe, promising
them attractive holiday packages and
incentives like luxury cars and jets.
None of those who joined his online
venture ever got their money back.
In 2010, when Mercedes
launched its SUV in India, the first
person to buy it was Anukul Maiti,
chairman and managing director of
iCore group. His prized possessions
included a Mercedes GL 350 CDI, a
BMW 7 series sedan, a Toyota Land
Cruiser Prado, a Tata Safari, a Maruti
Swift and a Tata Indigo. Starting off
as a manufacturer of FMCG products
like paints, toothpastes and tooth-
brushes, he branched off into finan-
cial markets. His group companies
included iCore E Services, iCore Gems
& Jewellery, Durgapur Cement, Riju
Cement, iCore Planet, iCore Iron and
Steel, iCore Paints, iCore Housing
Finance Corporation, iCore Apparel,
Mega Mould India and iCore Super
Cement. The flamboyant Maiti also
leveragedhisfriendshipswithfilmand
sports personalities like Jaya Prada,
Mahima Chaudhry, Karisma Kapoor,
Bhaichung Bhutia and Harbhajan
Singh for endorsment of his brands.
A former vice-president of Mohun
Bagan, Maiti is being investigated by
the Serious Fraud Investigation Office
(SFIO) for allegedly duping investors
with money-pooling schemes. Maiti
has reportedly gone underground.
Chand Mohammed, a
Trinamool Congress MLA, and his
personal assistant were accused of
threatening depositors who wanted
their money back after their chit
fund company, Peace Valley Agro-
projects and Industries Limited,
failed. But the local police refused
to register complaints against the
MLA and others associated with the
fraudulent company.
Unscrupulous and fraudulent
companies are known to cheat
investors and raise money through
various floating ponzi schemes
prohibited under the Prize Chits
and Money Circulation Schemes
(Banning) Act, 1978. The investment
plans include daily deposit, monthly
instalments and lump-sum invest-
ment.Afterraisingthemoneythrough
public offers like illegally collecting
deposits in violation of the Companies
Act, floating sham collective invest-
ment schemes (CIS) in violation of the
SEBI Act; and collecting money from
the public by posing as Non-Banking
Financial Companies (NBFCs) in vio-
lation of the RBI Act, many of these
companies “vanish”.
Most of these unregistered NBFCs
and Section 25 companies claim to
be registered with the RBI and offer
high returns ranging from 25 per cent
to 30 per cent on deposits—well above
the RBI’s upper limit. The smooth
operators managing these companies
manage to camouflage their activi-
ties by operating in the twilight zone
between equities and listed debt to
escape financial sector regulatory
controls. Many of the companies
operating chit fund businesses are not
chit fund companies in the eyes of the
law and are simply misusing public
money. Most of them, like Saradha,
were formed under the Companies
Act, 1956, and registered with the
Ministry of Corporate Affairs. They
are thus violating the provisions of
the Companies Act.
Kirit Somaiya, a BJP MP, informed
the Lok Sabha during Zero Hour
that unregulated chit fund compa-
nies in Maharashtra have allegedly
duped around 10 lakh small inves-
tors of `10,000 crore. A number of
such small investors spread across
Maharashtra committed suicide after
being taken in by these fly-by-night
chit fund companies. Many chit fund
companies operating in West Bengal,
Odisha, Bihar and Assam are not even
registered as chit funds—their activi-
ties are more in the nature of multi-
Many of the companies
operating chit fund
businesses are not chit
fund companies in the eyes
of the law and are simply
misusing public money.
Most of them are violating
the Companies Act, 1956.

COVER STORY
scam chit funds
level marketing, collective invest-
ments or other money-circulation
schemes which are broadly known as
‘ponzi’ schemes.
T
HE Ministry of Corporate
Affairs released a list of 89 chit
fund companies, including the
Kolkata-based Rose Valley Group,
Saradha Group, Prayag Group,
Seashore and Artha Tatwa Group,
against whom several complaints had
been received. Many of these com-
panies, including Rose Valley Real
Estate & Construction, MPS Greenery
Developers, Osian’s Connoisseurs
of Art Pvt Ltd and Saradha Realty,
have had strictures passed against
them. Faced with intense regulatory
pressure, several Multi-State Credit
Cooperative Societies (MSCCSs),
including Artha Tatwa, Rajiv Gandhi
Memorial, Utkal, SBL, Sai Kishore
and Mideast, put a lock on their offic-
es and were not traceable. Subsequent
threatsbytheRegistrarofCooperative
Societies (RCS) of Odisha to liquidate
these societies and cancel their reg-
istrations also proved futile as these
MSCCSs continued to receive depos-
its from the public. More than 500
such entities are at present under the
regulatory scanner. Many more of
them are running illegal schemes in
different parts of the country. Those
running these schemes typically
I
T is no joke how the cash-rich and well-connected chit
fund operators make a mockery of the law and manage
to browbeat regulators. With a staff strength of just 16,
the SEBI's regional office in Kolkata hardly has the strength
to stand up against big money and political connections.
Also, there is lack of clarity about roles of different agencies
like MCA, SEBI, RBI, State governments and registered
co-operative societies. The result is that individuals and
companies take advantage of the loopholes in legal
provisions to raise money from gullible investors.
Some of the exemptions provided under Section 11 (AA)
of the SEBI Act, 1992, leave scope for people to take a stand
that their scheme is not a collective investment scheme
(CIS) and that they have got relevant licences/approvals
from the competent authorities. Despite a clear definition
that no entity is allowed to run a CIS scheme without obtain-
ing the Certificate of Registration from SEBI, out of 552 pros-
ecutions launched, SEBI managed to get judgments in only
156—28 per cent—cases till March 31, 2011. These include
85 convictions, 36 cases where the accused was declared
proclaimed offender, 21 cases in which accused was dis-
charged, seven compounded (fully), five compounded
(partly) and two withdrawn by SEBI. The remaining 396—
almost 72 per cent—cases are pending in various courts.
The solution lies in either bringing everything under one
principal regulator or completely removing or pruning the
exemptions under Section 11 (AA). Till that happens, it is
going to be an unequal battle all the way—a battle being
fought with hands tied behind the back.
Round #1, SEBI vs Saradha Group: An interesting cat and
mouse game went on between SEBI and the Saradha Group.
Since the day it started, Saradha Group’s two-pronged strat-
egy was to stay ahead of the regulators and focus on keep-
ing the local commission agents happy by offering them
attractive gifts and 25–40 per cent commission on deposits.
In hindsight, the Group’s biggest mistake was to try and
bypass the legal requirements under the Indian Companies
Act, 1956, which categorically states that a company cannot
raise capital from more than 50 people without the permis-
sion of SEBI. This formed the backdrop for the Group’s first
encounter with SEBI in 2009. The Group tried to checkmate
SEBI by opening 200 new companies to create a complex
multi-layered corporate structure. SEBI was not impressed
and pursued the investigations in 2010. The Saradha Group
then decided to change its modus operandi and branch off
into CIS—tour packages, forward travel, hotel bookings,
timeshare, real estate and infrastructure finance—in West
Bengal, Jharkhand, Assam and Chhattisgarh. The investors
were told that they would get high returns after a fixed peri-
od and the funds collected were fraudulently diverted into
chit funds to keep them away from SEBI scrutiny. When SEBI
CAT AND MOUSE GAMES SEBI PLAYED
promise huge returns to investors and
tend to run away after amassing large
amounts of money.
Investors have lost `236 crore in
ponzi schemes and fraudulent chit
fund companies that downed their
shutters overnight in Andhra Pradesh

triedtowarntheWestBengalGovernmentabouttheGroup's
activities in 2011, the Group changed course once again by
buying and selling shares in listed companies and siphon-
ing off the proceeds to unidentified accounts. In 2012, SEBI
finally declared that the Group's activities were CIS, not chit
fund, and asked it to stop all investment schemes. But the
Group continued its operations till it collapsed in April 2013.
Round #2, SEBI vs Pearls Group: In what is touted as
the biggest ever crackdown in India, SEBI questioned the
legality of Pearls Agrotech Corporation Ltd (PACL) running a
CIS scheme in the garb of a real estate company and ordered
immediate closure of the unauthorised CIS. “Investment
Schemes of PACL Limited are wound up and all the monies
mobilisedthroughsuchschemesarerefundedtoitsinvestors
with returns which are due to them," SEBI’s 92-page order
said. SEBI also requested the Ministry of Corporate Affairs
to initiate the process of winding up PACL Limited, which,
among others, was constructing a mega 250-acre residential
township in Bathinda, the parliamentary constituency of
Sukhbir Singh Badal’s wife and Union Food Processing
Minister Harsimrat Kaur. Nirmal Singh Bhangoo, the Group
head, allegedly cheated over 5.85 crore investors of `45,000
crore after getting them to invest in a scheme, under which
they were promised agricultural land that did not exist. The
SEBI Chairman, vide his order dated February 20, 2002, held
that Pearls Golden Forest Ltd (PGFL), another Pearl Group
company, was conducting CIS activities in violation of CIS
regulations. PGFL challenged the order before the Punjab
and Haryana High Court which upheld SEBI's order and
stated that PGFL was liable to repay investors. The matter
is pending before the Supreme Court. In a parallel order,
the Rajasthan High Court on November 28, 2003, held that
PACL’s schemes did not fall within the definition of CIS.
SEBI challenged this order. It is also pending before the
Supreme Court.
Round #3, SEBI vs Rose Valley Group: A team of SEBI
officials on an inspection visit to the Rose Valley Group’s
office was not allowed to even enter the premises. Similarly,
a team of KPMG auditors, commissioned by SEBI to conduct
‘forensic audit’, was not allowed to flip through the
company's books of accounts. The Rose Valley Group and
other chit fund companies engaged Trinamool Congress
MP Kalyan Banerjee to file multiple cases in Calcutta High
Court and over a dozen district civil courts. Banerjee also
appeared for Sumangal Industries that floated 'potato
bonds' promising 20-100 per cent returns in 15 months,
while Pratap Chatterjee, son of former Lok Sabha speaker
Somnath Chatterjee, took up the cudgels on behalf of MPS
Greenery. The result is that, despite complaints against
companies like Rose Valley, MPS Group, Sun Plant Group
and Sumangal Industries, SEBI and other agencies haven’t
been able to initiate criminal prosecution proceedings
or effectively prevent them from raising money in an
"unauthorised manner".
companies. At least 27 of them are
registered in Kolkata alone. West
Bengal and the North-Eastern states
are the favourite hunting grounds for
illegal money collection activities. At
least 62 dubious chit fund companies
are known to have amassed close to
`15,000 crore from unsuspecting
depositors in West Bengal. Countless
small and unregistered money
laundering firms are known to
be operating in North and South
24-Parganas, Malda and Birbhum
districts of West Bengal. Many of
these agro and chit fund companies
directly own or indirectly control the
media. Most of these companies raise
money from the public through shady
deals but manage to buy political and
police protection using the media as a
protective shield.
T
HE Saradha Group, which went
bust, had interests in realty,
cement, agro and education
sectors but also ran The Bengal Post
(English), Sokalbela daily (Bengali)
and Channel 10 TV news channel. The
group’s flagship company, Saradha
Realty India launched in 2008, has
a consortium of nearly 100 compa-
nies, including Saradha Properties,
Saradha Biogas Production, Saradha
There were widespread protests against
the Saradha Group in West Bengal
since 2007. Such cases include names
like Abhaya Gold, Omkar Jewellers,
Dasara Chit Fund, Redamma scam
and Apple Tree Chits.
According to the Ministry of
Corporate Affairs, West Bengal has
the highest number of chit fund

COVER STORY
scam chit funds
T
HE issue of frauds by compa-
nies figured in the Lok Sabha
on March 14, 2013. Two MPs, DB
Chandregowda from Karnataka and
Adhi Sankar from Tamil Nadu, raised
the issue in Question Hour, asking the
Ministry of Corporate Affairs to reply
whether the government had any re-
cords of the number of dubious com-
panies, including fly-by-night opera-
tors, who had duped investors and the
number of investors who have been
cheated into making investments in
these companies. They sought details
of such cases alongwith the estimat-
ed amount of investments involved
therein and the action taken against
such companies.
The then Minister of State (Inde-
Multipurpose Himghar, Saradha
Livestock Breeding and Saradha
Ad Agency.
But Sudipta Sen, the smooth talk-
ing owner of the Saradha Group,
offers a perfect example of how the
media can be used to build bridges
with all sorts of investors and politi-
cians. He had Trinamool MP Satabdi
Roy acting as his brand ambassador.
Chief Minister Mamata Banerjee,
who reportedly sold her paintings to
the Group for `1.8 crore, used to grace
his functions, while her Transport
Minister, Madan Mitra, headed
the employees’ union and publicly
encouraged people to invest in the
company. A former Naxalite whose
real name was Shankaraditya Sen,
the Group owner reportedly went to
jail before resurfacing with a changed
name and identity as Sudipta Sen. He
started working as a real estate broker
in Kolkata before switching to money-
circulating schemes in mid-2000.
G
AUTAM Kundu, the owner
of the Rose Valley Group of
companies, started off as an
LIC agent before expanding into
hotels, tourism, food, entertainment
and offering an amalgam of insur-
ance and small savings schemes. The
Group’s media division owns four
television channels. Brand Value
Communications, a Group company,
owns News Time Bangla, News Time
Assam, News Time Orissa and Rupasi
Bangla TV channels besides Dhoom
MusicandDhoomBangla.RoseValley
Patrika brings out a broadsheet daily
called Khabar 365 Din and Cinema
Ebong, a film magazine. Kundu’s
investments in Kolkata Knight Riders
(KKR) IPL team (Seasons V and VI)
made Shah Rukh Khan, Gautam
Gambhir and Brendon McCullum
agree to shoot for Rose Valley’s ad
films. As the owner of a handful of
An eye on fraudsters
pendent charge) in the Corporate Af-
fairs Ministry, Sachin Pilot put on re-
cord that action had been taken against
“certain companies which have raised
funds through initial public offer but
thereafter are not traceable. The Minis-
try has also taken action against certain
companies which have failed to repay
deposits to public violating Section 58A
of the Companies Act, 1956.”
He further said that “complaints of
cheating by companies which prom-
ised high rates of interests to investors
have been received in 87 cases... In
these cases, inspection under Section
209A and investigation under Section
234 of the Companies Act, 1956, has
been ordered.” The reply mentioned
that 669 companies came to the notice
newspapers and TV channels, he was
at one point of time paying monthly
salaries to around 1,200 journalists
and technicians—all of whom had
to sing his praises and promote his
business or lose their jobs.
One of the chit fund companies
under the SEBI’s scrutiny had inter-
ests in poultry and real estate but also
managed to get itself listed with both
BSE and NSE, leveraging the strength
of its TV channel in Durgapur.
Similarly, Rice Group, active in the
field of education, launched the
Swabhumi newspaper.
LAW UNTO THEMSELVES
In its heydays, the Saradha Group
was promising allotment of plots
or flats with an attractive ‘money
back’ option for investors who chose
to cancel the booking and wanted
their money back with compound
interest ranging from 12 per cent to
14 per cent. In a detailed letter, Sen
describes how the idea to siphon off
such large amounts of money and
starting a chit fund company was sold
to him by Shib Narayan Das in 2008.
Das was introduced to him by his
drivers Ratan and Dipu. As part of the
deal, Das and his team would retain
30 per cent while Sen could invest
the rest, which had to be returned
to depositors after 10-12 years at the
rate of 12 per cent per annum. Sen
found the idea attractive and so, on
July 8, 2008, he started Saradha
Realty India Ltd and appointed
Das as its director and shareholder.
“Truly, I did not know that money
from the people is in violation of the
regulating authorities like SEBI and
RBI,” he wrote. According to him,
by the time he realised all this, it was
too late and a number of powerful
politicians in West Bengal, Assam,
Odisha and Jharkhand started
demanding money, “using him” and
“backstabbing” him.

vol. 8, issue 6 | September 2014 15www.indianbuzz.com
of Corporate Affairs conducts Inves-
tor Awareness Programmes (IAPs) for
making the public aware of the various
instruments of investments available
to them. Similarly, RBI issues notice
in newspapers regularly to caution the
public against the design of entities in
collection of deposits illegally. SEBI
also conducts IAPs across the coun-
try and has recently launched public-
ity campaigns through electronic and
print media. Editors of newspapers are
also sensitised to exercise caution for
accepting advertisements pertaining
to acceptance of deposits by un-incor-
porated bodies.” He further added,
“the RBI is in the process of undertak-
ing a comprehensive campaign aimed
at alerting the public against falling
prey to the ponzi schemes and other
monetary malpractices.”
of SEBI for conducting operations in
violation of SEBI (Collective Investment
Schemes) Regulations, 1999. “The
amount collected by these companies
was Rs 7,435 crore. Out of these com-
panies, 75 have been wound up and the
money refunded to the investors. Also,
552 companies were prosecuted and
convictions were secured in 124 cases.”
Pilot said, “There are certain compa-
nies which have floated fraudulent in-
vestment deposits mobilizing schemes
(also called ponzi schemes) under
various guises and are liable for action
under the Prize Chits and Money Cir-
culation Schemes (Banning) Act, 1978.
This Act is administered by the Ministry
of Finance (Department of Financial
Services) through the State govern-
ments and figures of prosecution etc.
are not being maintained centrally.”
On being asked whether the govern-
ment proposed to develop a fraud pre-
diction model that would forewarn law
enforcement agencies about any suspi-
cious movement of money in the mar-
ket and strengthen its market research
and analysis, the Minister replied that,
“a Steering Committee had been con-
stituted to develop a ‘Fraud Prediction
Model’ aimed at generating alerts for
prevention of fraud and malfeasance.
It is also proposed to revamp the exist-
ing Market Research & Analysis Unit
(MRAU) in the Serious Fraud Investiga-
tion Office (SFIO) to enable it to func-
tion as an intelligence unit.
On the measures taken by the gov-
ernment to sensitise the people about
investment scenario in the country and
to address the problem, Pilot enumer-
ated a number of steps. “The Ministry
Documents seized during the
searches revealed that the company
had collected `2,100 crore from the
people. Out of this, `400 crore was
spent on political payments and more
than `550 crore was spent on 35 per
cent commissions to agents. After
deducting other expenses, `850 crore
was left to pay the investors. But, in
a clear case of shuttering the stable
after the horses had bolted, the West
Bengal government proposed to levy
additional tax on cigarettes to com-
pensate the victims of the Saradha
chit fund scam.
A
NOTHER kingpin in the chit
fund business, the Pune-based
Sai Prasad Group owned
by Balasaheb Bhapkar, Vandana
Bhapkar and Shashank Bhapkar
and its two companies, M/s Sai
Prasad Foods Limited and Sai Prasad
Properties Limited, has a case against
it in the Madhya Pradesh High Court,
two SEBI orders and seven FIRs
against it in Rajasthan, Odisha and
UP. But despite these orders and
investigations, the Sai Prasad Group
continued to run illegal chit fund
schemes. The Group’s strategy was to
offer heavy incentives to make inves-
tors plough their money into fake
and bogus entities. They were ille-
gally running Collective Investment
Schemes without permission from
SEBI, violating the provisions of the
SEBIAct,1992,PrizeChitsandMoney
Circulation Schemes (Banning) Act,
1978, Maharashtra Protection of
Interests of Depositors (In Financial
Establishments) Act, 1999, and the
Indian Penal Code, Companies Act,
1956 and Reserve Bank of India
Act, 1934. The Sai Prasad Group
recruited about 12 lakh agents to lure
the investors.
A CBI inquiry against the Group,
ordered by the Madhya Pradesh High
Court in 2012, indicted the compa-
nies with illegally receiving deposits
by floating instalment and lump-
Rose Valley chit fund operator managed to
mop up over Rs 4,000 crore from the
public before its collapse

COVER STORY
scam chit funds
COVER STORY
THE STARRED QUESTION NO. 244 FOR ANSWER IN LOK SABHA ON 14-03-2013
State-wise list of Vanishing Companies
S.No. Name of the Vanishing Company State
1 Aashi Industries Ltd (Formerly
known as Aashi Pharmachem Ltd.)
Gujarat
2 Bhavna Steel Cast Ltd. Gujarat
3 Citizen Yarns Ltd. Gujarat
4 Cromakem Ltd. Gujarat
5 Frontline Financial Services Ltd. Gujarat
6 Genuine Commodities
Development Co. Ltd.
Gujarat
7 Girish Hotels Resorts and Health
Farms Ltd.
Gujarat
8 Growth AgroIndustries Ltd. Gujarat
9 Kesar Greenfield International Ltd Gujarat
10 Lyons Industrial Estate
Enterprises Ltd (formerly known
as Lyons Range Finance Ltd.)
Gujarat
11 Manav Pharma Ltd. Gujarat
12 Marine Cargo Company Ltd. Gujarat
13 Naisargik Agritech (India) Ltd. Gujarat
14 Naturo Pest Ltd. Gujarat
15 Nishu Fincap Ltd. (Formerly
known as Medha Finance &
Securities Ltd.)
Gujarat
16 Pur Opale Creations Ltd (formerly
known as Nuline Glassware
(India) Ltd.)
Gujarat
17 Protech Circuit Breakers Ltd. Gujarat
18 Protech Switchgears Ltd. Gujarat
19 Shree Yaax Pharma & Cosmetics
Ltd.
Gujarat
20 Shreeji Dyechem Ltd. Gujarat
21 Shri Mahalaxmi Agricultural
Developments Co. Ltd.
Gujarat
22 Spil Finance Ltd. Gujarat
23 Super Domestic Machines Ltd. Gujarat
24 Sushil Packagings (India) Ltd. Gujarat
25 Tirth Plastics Ltd. Gujarat
26 Topline Shoes Ltd Gujarat
27 Aditya Alkaloids Ltd. Andhra Pradesh
28 Canara Credit Ltd. Andhra Pradesh
29 Daisy Systems Limited Andhra Pradesh
30 Imap Technologies Limited Andhra Pradesh
31 Kamakshi Housing Finance Ltd.
(Presently known as Kisha Impex
Ltd.
Andhra Pradesh
32 Deccan Petroleum Ltd. Andhra Pradesh
33 Orpine Systems Limited Andhra Pradesh
34 Chhakri Tyres & Tubes Ltd. or
Rhino Tyres Ltd. (Presently known
as Raam Tyres Ltd.)
Andhra Pradesh
35 Sequel Soft India Limited Andhra Pradesh
36 Sibar Media & Entertainment
Limited
Andhra Pradesh
37 Sibar software services India) Ltd Andhra Pradesh
38
Swal Computers Ltd Andhra Pradesh
39 Visie Cyber Tech Ltd. Andhra Pradesh
40 Ambuja Zinc Ltd. Bihar
41 Bodh Gaya Ceramics Ltd. Bihar
42 Cilson Organics Ltd. Bihar
43 Shree Vaishnavi Printing and
Dyeing Ltd.
Bihar
44 Carewell Hygiene Products Ltd Chandigarh
45 Sukhchain Cements Ltd. (formerly
known as Ganapati Cements Pvt.
Ltd.)
Chandigarh
46 Kedia Infotech Ltd (formerly
known as Grives Hotels Ltd.)
Delhi
47 Hoffland Investments Ltd.
(formerly known as Vadra
Investments Ltd.)
Delhi
48 Simplex Holdings Ltd Delhi
49 Star Electronics Ltd. Delhi
50 Zed Investments Ltd. Delhi
51 Flora Wall Coverings Ltd. Karnataka
scam chit funds

vol. 8, issue 6 | September 2014 17www.indianbuzz.com
52 Ocean Knits Limited Karnataka
53 Hi-Tech Drugs Ltd Madhya Pradesh
54 Madhyavart Exxoil Ltd Madhya Pradesh
55 Rajadhiraj Industries Ltd. Madhya Pradesh
56 South Asian Mushrooms Ltd. Madhya Pradesh
57 Sterling Kalk Sand Bricks Ltd. Madhya Pradesh
58 Caldyn Aircon Ltd Maharashtra
59 Gobal Exhibitions Ltd. (Formerly
known as Global Network Ltd.)
Maharashtra
60 Hitesh Textile Mills Ltd. Maharashtra
61 Ichakalanji Soya Ltd. Maharashtra
62 Pashupati Cables Ltd. Maharashtra
63 Realtime Finlease Ltd. Maharashtra
64 Rusoday & Company Ltd. Maharashtra
65 Sparkle Foods Ltd. Maharashtra
66 Vipul Securities Ltd. Maharashtra
67 Universal Vita Alimentare Ltd. Orissa
68 Hallmark Drugs and Chemicals
Ltd. (formerly known as Lifeline
Drugs Ltd.)
Punjab
69 Amigo Exports Ltd. Tamil Nadu
70 Crestworld Marines Ltd. Tamil Nadu
71 Ma Capital Market Services Ltd. Tamil Nadu
72 Nagarjuna Jiyo Industries Ltd. Tamil Nadu
73 PK Vaduvammal Finance &
Investments Ltd.( Presently
known as Novel Finance (I) Ltd.
Tamil Nadu
74 Panggo Exports Ltd. Tamil Nadu
75 Sai Graha Finance and
Engineering Ltd.
Tamil Nadu
76 Shyam Printers & Publishers Ltd. Tamil Nadu
77 AVR Securities Ltd. Tamil Nadu
78 Global Blooms India Ltd. Tamil Nadu
79 Rizvi Exports Ltd. Uttar Pradesh
80 Shefali Papers Ltd. Uttar Pradesh
81 Siddhartha Pharmachem Ltd. Uttar Pradesh
82 Vidiani Agrotech Industries Ltd. Uttar Pradesh
83 Asian Vegpro Industries Ltd West Bengal
84 Kiev Finance Ltd West Bengal
85 Oriental Remedies and Herbals
Ltd
West Bengal
86 SSK Fiscal Services Ld West Bengal
87 Saket Extrusions Ltd West Bengal
Action taken against
Vanishing Companies
Details Total
Total Number of Vanishing
Companies
87
Companies against which
prosecutions filed u/s
62/63, 68 & 628 of the
Companies Act, 1956
85
Companies where FIRs
filed/ registered under IPC
87
S.NO. Name of the State No. of
Complaints
received
Prosecutions filed for
violation of Section 58A of
the Companies Act, 1956
1. Delhi & Haryana 76 03
2. Punjab & Himachal -- 03
3. Rajasthan 02 04
4. Gujarat 02 05
5. Madhya Pradesh 05 04
6. Tamil Nadu 06
7. Kerala 02 01
8. Maharashtra 51 06
9. Orissa -- 02
10. Hyderabad 34 04
11. Karnataka 04 04
Total 182 36
State-wise/ UT-wise list of number of complaints received for non-payment of
deposits and penal action taken

COVER STORY
scam chit funds
WEST BENGAL
(1) M/s. Vibgyour Allied Infrastructure Ltd.
(2) M/s. Rose Valley Real Estates Constructions Ltd.
(3) M/s. Rose Valley Industries Ltd.
(4) M/s. Silver Valley Communications Ltd.
(5) M/s. Rose Valley Food Beverage Ltd.
(6) M/s. Rose Valley Marketing India Ltd.
(7) M/s. Rose Valley Infotech Pvt. Ltd.
(8) M/s. Rose Valley Hotels and Entertainments Ltd.
(9) M/s. Rose Valley Projects Ltd.
(10) M/s. Rose Valley Patrika Ltd.
(11) M/s. Rose Valley Films Ltd.
(12) M/s. Modern Investment Traders Pvt. Ltd.
(13) M/s. Rose Valley Travels Pvt. Ltd.
(14) M/s. Brand Value Communications Ltd.
(15) M/s. Rose Valley Housing Development Finance
Corporation Ltd.
(16) M/s. Rose Valley Airlines Ltd.
(17) M/s. Rose Valley Fashions Ltd.
(18) M/s. Rupasi Bangla Projects India Ltd.
(19) M/s. Rupasi Bangla media and Entertainments Ltd.
(20) M/s. Rose Valley Realcom Ltd.
(21) M/s. Saradha Realty India Ltd.
(22) M/s. RTC Properties India Ltd.
(23) M/s. RTC Real Trade India Ltd.
(24) M/s. Jasoda Real Estate Ltd.
(25) M/s. Saradha Printing & Publication Pvt. Ltd.
(26) M/s. Saradha Agro Development Ltd.
(27) M/s. Saradha Biogas Production Pvt. Ltd.
(28) M/s. Saradha Tour and Travels Pvt. Ltd.
(29) M/s. Saradha Automobiles India Ltd.
(30) M/s. Saradha Constructions Company Pvt. Ltd.
(31) M/s. Saradha Shopping Mall Pvt. Ltd.
(32) M/s. Saradha Education Enterprise Ltd.
(33) M/s. Saradha Exports Ltd.
(34) M/s. Goldmine Agro Ltd.
(35) M/s. Tower Infotech Pvt. Ltd.
(36) M/s. Chakra Infrastructure Ltd.
(37) M/s. Gold Field Agro Ltd.
(38) M/s. Golden Life Agro India Ltd.
(39) M/s. Golden Pariwar Holding and Developers India Ltd.
(40) M/s. Goldmine Food Products Ltd.
(41) M/s. Hallo India Express Sales Ltd.
(42) M/s. Happy Life Realty (India) Ltd.
(43) M/s. ICore E-Service Ltd.
(44) M/s. MPS Aqua Marine Products Ltd.
(45) M/s. MPS Greenery Developers Ltd.
(46) M/s. MPS Industries & Agro Research Ltd.
(47) M/s. MPS Resorts and Hotels Ltd.
(48) M/s. Prayag Agrotech Pvt. Ltd.
(49) M/s. Prayag Infotech Hi-Rise Ltd.
(50) M/s. Prayag Infra Realtors Ltd.
(51) M/s. Prayag Micro Finance
(52) M/s. Rahul Heights Ltd.
(53) M/s. Rahul Hi-Rise Ltd.
(54) M/s. Ramel Industries Ltd.
(55) M/s. Shine India Agro Industries Ltd.
(56) M/s. Silicon Projects India Ltd.
(57) M/s. Sunshine Agro-Infra Ltd.
(58) M/s. Sunshine India Land Developers Ltd.
(59) M/s. URO Agro India Ltd.
(60) M/s. URO Autotech Ltd.
(61) M/s. URO Hotels and Resorts India Ltd.
(62) M/s. URO Hygenic Goods Ltd.
(63) M/s. URO Infotech Ltd.
(64) M/s. URO Infra Realty India Ltd.
(65) M/s. URO Life Care Ltd.
(66) M/s. URO Trexim Ltd.
(67) M/s. URO Walkers Ltd.
(68) M/s. Vasundhara Realcon Ltd.
(69) M/s. Vibgyor Allied Industries Ltd.
(70) M/s. Vishwamitra India Consultancy Services Ltd.
(71) M/s. Vishwamitra India Multi-Developers Ltd.
(72) M/s. Waris Hospital & Diagnostic Centre Ltd. (Now
Waris Healthcare Ltd.)
(73) M/s. Waris Telecom Services Ltd. (Waris Tel
International Ltd.)
RAJASTHAN
(1) M/s. PACL (India) Ltd.
(2) M/s. Goldsukh Trade India Ltd.
TAMIL NADU
(1) M/s Unipay 2U Marketing Pvt. Ltd.
(2) M/s Unipay Creative Business Pvt. Ltd.
(3) M/s Unipay 2U Production Pvt. Ltd.
(4) M/s. Goldquest International Pvt. Ltd.
(5) M/s. Questnet Enterprises India Pvt. Ltd.
KARNATAKA
(1) M/s Unigateway 2U Trading Pvt. Ltd.
DELHI
(1) M/s Speakasia Online Pte. (Unregistered)
(2) M/s. Basil International Ltd.
(3) M/s. Vamshi Chemicals Ltd.
(4) M/s. Appeline Cosmetics & Toiletries Ltd.
(5) M/s. Basil Express Ltd.
UTTAR PRADESH
(1) M/s. Nixcil Pharmaceuticals Specialties Ltd.
State wise list of companies against which complaints received for indulging in Ponzi/ MLM Schemes
COVER STORY
scam chit funds

Dubious companies
sum payment plans against the sale
of land units, plants and livestock.
The CBI report concluded that the
contract entered by the company
with its investors violated Section
3 (1), 3 (2) and 3(4) of the Madhya
Pradesh Investor Protection Act,
2000, Section 58B (5 and 5A), and 58
of the RBI Act, 1934, and Sections 4,
5, and 6 of the Prize Chits and Money
Circulation Schemes (Banning)
Act, 1978 and Section 420 of the
Indian Penal Code.
Another such prominent case is
from Punjab. The Pearls Group pro-
moted by Nirmal Singh Bhangoo,
positioned itself as a government
undertaking “endorsed by the Union
Ministry of Corporate Affairs” to
make nearly five crore investors
invest over Rs 45,000 crore in mul-
ti-level marketing (MLM) pyramid
schemes and other ponzi deals. The
investors were given the false assur-
ance that they would be provided
agricultural plots of land, but in real-
ity a sizeable part of the money was
redirected to foreign countries like
Australia. The group allegedly used
this money to purchase the Sheraton
Mirage Resort and Spa in Gold Coast,
Queensland, through its subsidiary
Pearls Australasia. Bhangoo’s Pearls
Agrotech Corporation Ltd (PACL)
and Pearls Golden Forest Ltd (PGFL)
and their associates were siphoning
off funds in 1,000 bank accounts of
a maze of firms all over India. PACL
alone had 256 branches nationwide.
The CBI registered a case against
PGFL, PACL Limited and their pro-
moters—Bhangoo and Sukhdev
Singh—for cheating and criminal
conspiracy and seized their pass-
ports to prevent them from slipping
out of the country. But how does this
help the investors? Bhangoo’s com-
panies are still in business and con-
tinue to collect money from gullible
investors. The Catch-22 situation for
millions of small investors is either
to keep depositing their recurring
deposit EMIs every month and lose
much more, or to stop paying and
forget the previous amounts paid.
The whole operation was channelised
through a network of five lakh com-
mission agents, who were paid 15-40
per cent commission.
A series of raids on the company
offices in New Delhi, Chandigarh,
Mohali, Ropar and Jaipur yielded
data relating to the deposits and mis-
utilisation of funds. One of the ways
adopted by PACL to cheat investors
was to forge land registry documents
of farmers and show them to investors
in other states to lure more and more
people into the net.
AccordingtoCBIsources,thegroup
was never in a position to repay all its
deposits. A sizeable chunk of money
collected from the investor deposits
was used to buy barren land and fund
foreign acquisitions. The leftover

COVER STORY
scam chit funds
money was used to honour the pre-
mature withdrawals of recurring and
fixed deposits and also those deposits
nearing maturity. As a result, pay-
ments for recurring deposits which
matured in 2013 were delayed by over
six months. On top of that, investors
had to be paid an additional 12.5
per cent interest on maturity. The
Group could never recover from
the strain of 2011 when thou-
sands of panic-stricken inves-
tors withdrew their money,
fearing an imminent financial
collapse. It had reached the
stage where the money col-
lected from new investors was
perpetually less than the payouts
or returns due to old investors. In
other words, it had all the makings of
a doomed ponzi scheme.
The youngest of the three sons of
Gurdyal Singh, a farmer who migrat-
ed from Pakistan and settled in Atari
village in Ropar district, Bhangoo is a
Jatt-Sikh from Punjab. A small time
dairy farmer, he started his career
as an agent of Peerless Finance.
This is where he learnt the tricks of
finance and investment but had to
leave the job after he allegedly com-
mitted some irregularities. Bhangoo
founded Pearls Group in 1983 in asso-
ciation with RK Sayal, the founder of
(now defunct) Golden Forests India
Limited, as one of the eight promot-
er-directors of PGFL which quickly
became one of India’s fastest growing
firms and largest private landholders.
Another of his companies, Gurwant
Agrotech, which started by selling
magnetic pillows and therapeutic
products, was rebranded as Pearls
Agrotech Corporation and subse-
quently as PACL India in 1996. In a
short time, it managed to amass over
Rs 20,000 crore in deposits from the
public. Encouraged by the success in
the Indian market, Bhangoo made a
dramatic entry into the Australian
property market in 2009 and appoint-
ed Australian cricketer Brett Lee as
the company’s international ambas-
sador. Things started happening for
him when the Gold Coast Sheraton
Mirage property, developed by failed
tycoon Christopher Skase, went up
for sale and Pearls paid $62m for it
in 2009 and spent another $30m
renovating the 296-room property.
B
HANGOO’S empire today
includes tourism, media, enter-
tainment and insurance compa-
nies. In a filing before the Registrar
of Companies, PACL claimed to be
India’s biggest corporate landowner,
with possession of 1.85 lakh acre—
nearly 20 times the land owned by
the biggest realty concerns. But what
the figures try to hide is the fact that
most of this is unusable tracts of
desert wasteland purchased along
the India-Pakistan border in Barmer
district of Rajasthan.
Another big catch for the CBI are
Sambit Khuntia, Pradip Sethy,
Chandrika Patnaik, Radhakrishna
Padhi and Jhuma Chakravorty—
directors of Artha Tatwa (AT)
Group—an Odisha-based chit fund
and multi-crore ponzi scheme opera-
tor which allegedly mopped up over
`500 crore from small investors and
owned an Odisha Premier League
team. Khuntia’s luck ran out when
the CBI sleuths found him hiding in
the well in the backyard of his house.
The searches at the residences of
other directors of the chit fund com-
pany also revealed incriminating
documents. All this was the fallout of
month-long searches at 60 locations
in Mumbai and Odisha. Searches
were also carried out at the residence
of stockbroker Deepak Parekh, who
allegedly helped Artha Tatwa obtain
licences from SEBI and MCX. CBI
seized `28 lakh in cash from the
house of BJD MP Ramachandra
Hansda. BJD MLA Pravata Tripathy
was allegedly charging protection
money from the group while two for-
mer MLAs, Subarna Naik of BJD and
Hitesh Bagarti of BJP, were also alleg-
edly hand-in-glove with the company.
Similarly, TV producer Priti
Bhatia, who floated a media com-
pany with Pradip Sethi the disgraced
CMD of the AT Group, currently in
jail for allegedly defrauding over
`1,000 crore from investors, Bikash
Swain, the owner of Surya Prabha
Sudipta Sen, the mastermind behind
the Saradha Group, has been taken
into custody

COVER STORY
scam chit funds
newspaper, and Manoj Dash, owner
of Kamyab TV, having close links
with the Group, were also searched.
The AT Group and its network of 20
organisations owns over 122.73 acres
of land in Puri, Khurda, Balasore and
Ganjam district of Odisha.
Similarly, Rose Valley chit fund
operator managed to mop up over
`4,000 crore from the public before
its collapse. The company was oper-
ating over 1,000 bank accounts in
different parts of the country and
collected more money than the
Saradha Group. But when the Justice
RK Patra Commission of inquiry sent
notices to Rose Valley Real Estates
& Constructions Ltd, Adarsh Wealth
Ventures Ltd, Flourish Development
India Ltd, Artha Tatwa Multipurpose
Cooperative Society Ltd, Seashore
Multipurpose Cooperative Ltd,
Astha International Ltd and Sastra
Enterprises, the notices were
returned by the postal department
with the endorsement ‘addressee
left’. This means that the compa-
nies gave wrong addresses in their
affidavits filed before the commission,
which received more than 800,000
complaints on affidavits from inves-
tors. Later, there was a move to attach
the properties of five financial enti-
ties—Flourish India, Saradha Group,
Sastra Enterprises and Seashore
Group. The Economic Offences Wing
seized 204 acres of land held by the
Seashore Group, 1,364 acres of the
Saradha Group, 234 acres of the
Artha Tatwa Group and 24 acres of
Flourish India.
Another such case includes that of
Bhausaheb Chavan, a former banker,
and his wife, Aarti, who used their
contacts to get several of Chavan’s
former bank customers to invest in
KBC Multi Trade promoted by them.
Bhausaheb’s magic offering was to
make his investors ‘crorepatis’ within
a few months and he promised 20-30
per cent commission to ‘agents’ to lure
more people into the ‘get-rich-quick’
schemes. The husband-wife duo col-
lected over `2,000 crore within four
years before going underground.
KBC’s over-ambitious Multi Trade’s
scheme offered three-times return on
investment in 30 months. According
to unconfirmed reports, Bhausaheb
may have fled to Singapore along
with his family, leaving thousands of
investors in a financial crisis.
I
N another case, Rameshwar
Poddar, CMD, and two devel-
opment officers of Ramuel chit
fund were arrested in Kolkata
on charges of murder and
cheating to the tune of
`2,500 crore. Rubi Gan,
a widow, lodged an FIR
naming Poddar in the
murder of her husband
Prashanta Gan. Ramuel
Group and Golden Parivar
have earlier been accused
of ‘shadowy’ deals to cheat
people of their life’s savings.
Both Golden Parivar and Ramuel
Group have not reimbursed the due
amounts to their clients over the past
year. Incidentally, the offices of both
Golden Parivar and Ramuel Group,
in the same building, are locked.
Both the companies started opera-
tions in Kalimpong in 2010. Golden
Parivar managed to collect about `20
lakh while Ramuel Group amassed
`25 lakh. Today, both companies
are unable to repay their customers.
Previously, Basil, Rose Valley, Axis
Multi-Developer, Prayag Group and
Gulshan Group pleaded inability to
reimburse investors. g
With inputs from Ajit Ujjainkar
Trinamool MP Satabdi Roy was the brand
ambassador of Saradha Group

Frauds and Scams in India

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