West Bengal commission yet to act on 500,000 complaints against 73 deposit takers
Five-member commission was asked to receive complaints from depositors and probe operations of all deposit-taking firms
Kolkata: For years the administration in West Bengal complained that it could not take action against deposit-taking firms for want of complaints of a default, but for nearly eight months it has done nothing on 500,000 complaints against at least 73 firms.
These complaints were filed with the commission of inquiry constituted by the state government in the wake of the collapse of the Saradha Group in April 2013. It received these complaints till June.
The five-member commission headed by retired chief justice of the Allahabad high court, Shyamal Kumar Sen, was asked to receive complaints from depositors and probe the operations of all deposit-taking firms, and not just the Saradha Group—one of the biggest in the trade in eastern India.
The state government has so far maintained that the commission received some 1.7 million complaints. Only now has it come to light, courtesy an official who asked not to be identified, that 500,000 of them were against other firms.
A list of some 73 firms has recently been prepared by the state government based on the complaints received by the commission and “other inputs”, this person added.
Sen explained away the lack of action against other firms on account of the “enormity of the Saradha crisis”, which prevented the commission from dealing with the others. “We have initiated the process of identifying the other firms that received deposits in the same manner,” he said.
Because the Saradha Group has already collapsed “while the others were still in operation”, the commission focused its attention on the defunct group, Sen added.
That may have been a mistake, because the errant firms got time to wind down their businesses without any regulatory or administrative oversight. With the Saradha Group running aground, depositors’ confidence was shaken, and it became difficult—for some, nearly impossible—to raise fresh money.
On Wednesday, agents of Pailan Group, a deposit-taking group, said at a press conference that they had filed a petition in the Calcutta high court seeking to recover Rs.900 crore. This group had lately turned delinquent, they alleged. Its owner, Apurba Saha, couldn’t be contacted because he is currently in a hospital for treatment.
The official at the commission said complaints had been received against groups such as Rose Valley Hotels and Entertainments Ltd, MPS Greenery Developers Ltd, Prayag InfoTech Hi-Rise Ltd and Alchemist Infra Realty Ltd, among others. The founder and chairman emeritus of the Alchemist group, Kanwar Deep Singh, is a Trinamool Congress-nominated member of the Rajya Sabha.
A spokesperson for Alchemist said the group was not aware of any complaint being lodged against it with the commission. “Unless the details of the complaints, if any, are known, it is not possible to comment,” this person added.
MPS Group chairman and managing director Pramatha Nath Manna admitted he was lately struggling to repay depositors, but that was because the state government had restrained his firms from selling its assets. “Only the state government is to blame for the difficulties faced by us, and hence by our depositors as well,” he said.
In an emailed statement, Rose Valley Group chairman Gautam Kundu denied raising public deposits, adding that “there are no complaints against us and the customers and clients of Rose Valley can proudly say that there interests are well protected”.
The top management of the Prayag Group could not be contacted despite several attempts.
The state government does have the political will to go after the other deposit-taking firms, stressed Sen. The scope of the commission’s inquiry was expanded only because the administration wanted to deal with the entire gamut of such enterprises, he added.
Many of the complaints received against these firms were filed “in anticipation of a default”, according to Sen. “We are trying to isolate such cases…by now some of those deposits may have matured and the companies may not have paid (up),” he said.
Though the commission was formed by an order of the state’s home department, it now works closely with the finance department.
H.K. Dwivedi, principal secretary in the finance department, said it was for the commission to decide what action was to be taken against which company and when.
Whether or not to go after all deposit-taking firms in operation has been a big dilemma for the administration from the beginning. Depositors’ losses on account of the Saradha Group alone was estimated at around Rs.1,700 crore. Forcing others to wind down could have extended depositors’ losses, said an official of the state’s home department who did not want to be named. The other groups were considerably larger—they had more money riding on them.
Alchemist, for instance, had at the end of fiscal 2013 Rs.2,370 crore of so called “trade payables”, classified as current liability, to be paid in less than a year. The company, which claims it does not raise public deposits at all and has no long-term liabilities, had Rs.860 crore in cash at the end of last March, whereas its cash flow from operations for the year was only Rs.30 crore.
It has been a common practice for many deposit-taking firms to classify the deposits they take as advances from customers or others.
For instance, Prayag InfoTech and Rose Valley had at the end of fiscal 2012 public deposits of Rs.885 crore and Rs.2,900 crore, respectively. Both companies have yet not filed their balance sheets for fiscal 2013 with the Registrar of Companies and auditors of both had described these deposits as advances from customers, classifying them as current liabilities.
MPS Greenery had in one of its own statements said it owed 1.6 million depositors Rs.1,600 crore at the end of last March. It is the only company that admits to receiving public deposits, and claims to do so legitimately for deploying the money in farming projects.
Market regulator Securities and Exchange Board of India (Sebi) has for years been trying to seize MPS’s assets and force it to repay all depositors. MPS has been fighting Sebi and the West Bengal government legally.
Law enforcement agencies have rarely been able to recover cash after deposit-taking firms went bust. Most such enterprises in the state have scaled back their operations in the past year, flying under the radar. Now that they have had so much time to cover their tracks, government officials fear that when they are eventually compelled to go after other delinquent firms, history would only repeat itself.
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