Faced with mounting criticism for looking the other way while deposit-taking companies flourished in West Bengal, the Trinamool Congress government has started seizing land from these companies for the violation of local laws, which prohibit ownership of more than 24 acres.
A battery of officials spread across districts has been pressed into action, and land ownership of all deposit-taking firms is under scrutiny both at the Writers’ Buildings—the state’s administrative headquarters—and the district level.
When, in February, the state government made up its mind to introduce a new law to deal with unregulated financial enterprises, it also started the legal process of seizing their real estate assets under land ceiling laws—an indication that the state was bracing to take them on even two months ago, though chief minister Mamata Banerjee claims she came to know about the dangers these firms posed only in mid-April.
R.D. Meena, principal secretary in the state’s land and land reforms department, however, described the ongoing drive to seize land from financial enterprises as a “routine initiative”.
With fresh deposits drying up and the government finally cracking its whip on these companies, the crisis that precipitated two weeks ago with the collapse of the Saradha Group—one of the biggest deposit-taking companies in eastern India—threatens to wipe out every firm in this trade.
At stake is close to at least Rs.20,000 crore of household savings, according to conservative estimates of state officials based on the decline in collections in state-run small savings schemes in West Bengal over the past five-six years. This amount and more is thought to have been channelled into deposit schemes of unregulated enterprises by unsuspecting savers.
Land is at the core of this protracted fraud targeted mostly at the rural poor and the middle class because these companies raise money as advance from customers to be repaid in the form of real estate assets or hotel accommodation. However, after a specified period, they settle these deposits by returning cash.
With land snatched from them, these firms will be struggling for survival as more and more depositors throng their offices seeking foreclosure of deposits.
Government officials said action so far has been taken against two groups, Rose Valley and Prayag, for owning land in excess of the threshold.
“We have been asked to seize land from all financial establishments that have been found to flout the land ceiling laws,” said Arindam Dutta, land and land reforms officer of West Midnapore district.
“We have identified quite a few violations,” he added, but refused to disclose the names of the firms that face scrutiny.
District officials have identified 110 acres held illegitimately by the Rose Valley group, according to Srishtidhar Samanta, land and land reforms officer of East Midnapore district. “The legal process of vesting (seizing) 12.65 acre was launched on 29 March,” he added.
In North 24 Parganas and South 24 Parganas, the group faces similar action, according to a land and land reforms department official in Kolkata, who did not wish to be named. At least 16 acres in these two districts could be seized from the Rose Valley group, he said.
Gautam Kundu, chairman of the Rose Valley group, said he was aware of the state’s drive to seize land from his companies, and that the firm had voluntarily disclosed to the government details of 20 acres held by them in violation of the local laws.
Rose Valley, according to Kundu, owns 1,500 acres in West Bengal—a claim that could not be independently verified. But these lands are held through a clutch of around 150 companies in compliance with land laws, Kundu said, adding that //his group had legally challenged and stalled the state’s move to seize land.
This is only a way to circumvent the ceiling on ownership, said the land department official in Kolkata cited above. “Sensing trouble”, Rose Valley applied for exemption from the land ceiling under section 14Y of the West Bengal Land Reforms Act only towards the end of February, he added.
In West Midnapore district, the legal process of confiscating 24.36 acres from the Prayag Group’s proposed film city has already started, said Dutta. This, incidentally, was one of chief minister Banerjee’s dream projects, endorsed by actor Shah Rukh Khan, who is the state’s brand ambassador.
As many as 29 block level officers in West Midnapore district have been tasked with identifying tracts of land held illegitimately by deposit-taking firms, said Dutta. “It is taking time because these firms have not registered their names as owners,” he said.
Officials of the Prayag Group were not available for comments. An email sent to a public relations firm that manages its external communications remained unanswered