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Business News/ Industry / Deposit-taking firm flexes muscle amid increased scrutiny in Bengal
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Deposit-taking firm flexes muscle amid increased scrutiny in Bengal

Rose Valley brings together an estimated 150,000 agents at a 'confidence-building' convention in Kolkata

Rose Valley Group chairman Gautam Kundu. Photo: Indranil Bhoumik/MintPremium
Rose Valley Group chairman Gautam Kundu. Photo: Indranil Bhoumik/Mint

Kolkata: Exactly a year to the day that West Bengal chief minister Mamata Banerjee announced the launch of a probe into the operations of the Saradha Group, threatening to pull the plug on all deposit-taking companies in eastern India, the Rose Valley Group—the biggest in the trade—on Monday brought together an estimated 150,000 agents at a confidence-building convention in Kolkata.

Most such enterprises have had to scale back their operations, largely on account of a trust deficit among depositors in the wake of the collapse of the Saradha Group, but Rose Valley has weathered the storm and remains afloat, still raising deposits in the same manner as previously, despite several restrictions imposed on its operations by central regulators such as the Securities and Exchange Board of India (Sebi).

“It is not so easy to kill us."

That was the message Rose Valley Group chairman Gautam Kundu delivered on Monday, unfazed by the controversy over the Saradha Group lately rearing its ugly head again, this time with the Enforcement Directorate (ED) seeking to interview key Trinamool Congress leaders on suspicion of abetting money laundering. Banerjee reacted on Saturday, saying the move was politically motivated.

As if to throw a challenge to the state administration, the Rose Valley Group chose for its congregation a ground opposite the office of the inquiry commission constituted a year ago to investigate the operations of the Saradha Group and other deposit-taking companies.

Add to it the stunning turnout, which was three times the initial expectations, and the message to the state administration couldn’t have been clearer: forcing enterprises such as the Rose Valley Group to wind down their operations could see tens of millions of people lose their savings, with potentially disastrous consequences for the political party in power.

The now defunct Saradha Group alone claimed at least one million victims. Rose Valley, which, according to a key official, has raised at least 10,000 crore in deposits, is several times bigger. There are many others, currently flying under the radar, which are as big as the Saradha Group in terms of deposits.

Pressure is piling on the state government to take action on other firms that raise public deposits. Judge Dipankar Dutta of the Calcutta high court on Monday asked the inquiry commission created last year to take action against all firms, not just the Saradha Group, against which complaints have been received by it from defrauded depositors.

Mint had reported on 28 February that the commission had received at least half-a-million complaints against some 70-odd companies, but was unwilling to go after them immediately. Former judge Shyamal Kumar Sen, who heads the commission, had said at the time that the administration focused on the Saradha Group because it had already collapsed while the others were still in operation.

Dealing with a petition filed by a person named Ahmad Alam, a depositor of the little known Premium Group, which alleged that Sen’s commission wasn’t acting on his complaint, judge Dutta said the commission must take action against other firms as well. While constituting the commission, the state government made it clear that it could probe the operations of all firms that receive deposits from savers.

Rose Valley has, for years, played the judiciary against the market regulator and used the lack of clarity in regulations to collect money after its earlier schemes to raise money were shot down by Sebi four years ago.

It now sells so-called time shares, or a right to enjoy hospitality at its hotels, which it claims is completely legitimate. However, on maturity, it redeems deposits in cash as well—they are not necessarily settled through the sale of hotel rooms. Rose Valley has lately diversified into other businesses—it now sells consumable goods such as packaged drinking water and biscuits, and has launched a gold deposit scheme.

“We can refund the outstanding 200 crore under this scheme (advance towards plot booking) within three months even if Sebi rules it is illegitimate," Kundu said at Monday’s convention. “Unless Indian courts force us to wind down this scheme (time share), we will continue raise money through sale of time share." He was referring to a recent Guwahati high court injunction on a Sebi order barring Rose Valley from selling time shares.

Of the 10,000 crore that Rose Valley has raised, it has repaid at least 6,200 crore, claimed Amit Banerjee, general secretary of a joint forum of Rose Valley’s field agents and employees. In the wake of people seeking premature withdrawal, Monday’s convention was intended to tell the administration as well as depositors that Rose Valley remains unscathed by the collapse of the Saradha Group, Banerjee said.

Though getting people to renew deposits was a challenge, money has started to come into new schemes launched by the group, agents said. “Unlike others, our promoters have not run away," said Sheikh Saiful, an agent from Behrampur.

Romita Datta contributed to this story.

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Published: 21 Apr 2014, 11:48 PM IST
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