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Big West Bengal deposit-taking firm defaults on repayments

CMD’s arrest ordered, Saradha Group on verge of collapse; more such firms likely to collapse in same way

Kolkata: The time bomb that has been ticking away in West Bengal may be about to go off.

One of eastern India’s biggest deposit-taking companies—the Saradha Group—is on the verge of collapse. The state administration has ordered the arrest of its chairman and managing director (CMD) Sudipta Sen for defaulting on repayments.

“The honeymoon is over—the chief minister (Mamata Banerjee) wants him arrested," said a key government official who did not want to be identified. “We are confident that we will be able to nab him in a day or two."

Sen, who according to the state administration is on the run, could not be contacted for comment.

More are likely to collapse in the same way even before the state promulgates a proposed law to contain the growth of deposit-taking companies, said a finance department official, asking not to be named.

This could happen within days, according to this official.

It isn’t immediately known how much money the Saradha Group owes its depositors. According to some estimates, including those of the state administration, it could run into thousands of crores of rupees.

Pressure on the group’s finances forced it to wind up, over the past few weeks, at least 10 media organizations—newspapers and television channels—that it had launched or acquired since 2010-11.

The closure made at least 1,000 journalists and technicians redundant in Kolkata, making it the biggest layoff in the media industry in eastern India.

Trinamool Congress leaders such as general secretary Mukul Roy and Partha Chatterjee, the state’s minister for commerce and industries, are looking for investors to rescue some of the media organizations that have closed.

The administration swung into action on Wednesday after at least 200 commission agents of the Saradha Group from across the state came en masse to Kolkata to meet Roy.

They asked for the state government’s immediate intervention to recover money from the group, which, according to these agents, started defaulting on repayments last month.

In the event of defaults, agents typically face the ire of depositors because they mobilize money largely on the strength of their own credibility.

The state government assured them that it will take necessary steps to seize all assets of the Saradha Group by the weekend, the agents said after their meeting with Roy. Even so, they fear the state may not be able to recover anything from the 100-odd companies that the group ran.

The group management had already started liquidating assets and there may not be much left on the books of its firms, they said.

Debasish Banerjee, an agent from Sonarpur in Kolkata’s suburbs, said 6 crore was immediately required to repay matured deposits. “Our team leaders are scared of being lynched," he added.

Another agent, Shaukat Ali from Murshidabad, said agents were initially asked to settle repayment claims on their own from fresh deposits collected by them, “but we soon realized that it was impossible for us to sustain that for a long time".

Ali, who along with his sub-agents used to collect 60-70 lakh a month until the end of last year, said he and other agents feared they would soon be driven from their homes by the depositors.

“Some agents have already fled their homes," he said.

Agents from the northern part of West Bengal said the Saradha Group started defaulting on repayments in January. Some cheques bounced because there wasn’t enough money in the group’s bank accounts, they said. These agents refused to be identified.

Some agents managed to get an audience with Sen at his office in Kolkata last week. They were told they would be given power of attorney, or legal authority, to sell land held by the company to repay depositors, said an agent from Dakshin Dinajpur district. He did not want to be identified. It is not known how much land the group owns.

While the agents of the group fear an imminent collapse, this hasn’t stopped several other companies in West Bengal from raising public deposits in the name of fictitious business ventures, selling instruments that are beyond the jurisdiction of India’s securities market and banking regulators.

Most of the older deposit-taking groups were founded in 2007-08, and the instruments they initially sold were mostly of five-year maturity. These deposits are now due for repayment, according to the state finance department official.

Historically, the collapse of a deposit-taking company leaves a trail of ruin and suicide in its wake. The biggest such collapse in West Bengal thus far was that of Sanchayita Investments, a partnership firm that went bust in the early 1980s. A large number of its depositors killed themselves after they failed to recover their savings.

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