The Andhra Pradesh’s Crime Investigation Department (CID) on Friday July 28, probing the alleged financial irregularities and violations of Margadarsi Chit Fund Private Limited (MCFPL), decided to attach certain movable properties worth Rs 15.81 crores. Margadarsi Chit Fund Private Limited (MCFPL) is owned by media baron Ramoji Rao, widely perceived as a supporter of the Telugu Desam Party.
The Superintendent of the CID Amit Bardar on Friday in a press conference stated that the Andhra Pradesh state government had issued ad-interim orders directing the CID to attach certain movable properties worth Rs 15.81 crores of Margadarsi in the alleged chit fund scam.
“MCFPL had invested funds in subsidiary companies of the Eenadu group as a joint venture and had invested in the form of share capitals as well. The state government’s orders have been issued und,er Sections 3 and 8 of the Andhra Pradesh Protection of Depositors of Financial Establishment Act, 1999,” he said.
Section 3 of the APPDFE Act deals with attachment of properties on default in respect of deposits whi,le Section 8 handles attachment of property of certain transferees. In other words, if the government has reason to believe that any financial establishment is acting in a manner prejudicial to the interests of its depositors and if assets available for attachment of such an establishment are found to be less than the amount/value they are required to pay their depositors, the establishment, in this case MCFPL can be held liable.
Denying the CID’s allegations, the MCFPL in a press statement argued that the provisions of the AP protection of depositors of financial establishment act are not applicable to the company engaged in chit fund business, classified as misc and that they are only bound by the Chit Funds Act, 1982. The MCFPL denounced the CID investigation as “baseless” and “malicious.”
The MCFPL case gained momentum last year amid the continual face off between the Eenadu group and the YSRCP government. Eenadu had accused the Jagan-led government of promoting sales of Sakshi newspaper (owned by Jagan Mohan Reddy’s family) by releasing a GO in 2022. The government order granted an allowance of Rs 200 per month to 3.78 lakh employees and volunteers working with ward/village Secretariats to subscribe to one newspaper which Eenadu claims was done to ensure rising sales of Sakshi.
On June 21 this year, the CID had registered seven FIRs against MCFPL for alleged financial irregularities based on a complaint by the Commissioner and Inspector General (Registration and Stamps). The FIRs were lodged und,er Sections 420 (cheating), 409 (breach of trust), 120B (criminal conspiracy), 477(A) (falsification of accounts) read wi,th Section 34 (acts done by several persons in furtherance of common intention) of the Indian Penal Code (IPC) as well ,as Section 5 of the AP protection of depositors of financial establishment act 1999 a,nd Sections 76 and 79 of the Chit Funds Act, 1982.
The FIRs were registered against Eenadu group owner Ramoji Rao and his daughter-in-law Sailaja Kiran as well as 13 other persons. Aside from attaching movable properties worth Rs 15.81, the state police also attached properties worth Rs 1,050 crore including fixed deposits, shares, amounts invested in mutual funds and amounts collected from chit subscribers in two phases; ie on May 29 and June 15.
MCFPL however maintains that there have been no financial irregularities and that all profits earned by the 60-year-old company was done so without "touching" the subscribers' money.
The AP High Court on December 26, 2022 had directed the Registration and Stamps department not to take “coercive steps”, providing relief to MCFPL.
The Telangana High Court on March 22 had similarly directed the Andhra Pradesh government to not take “coercive measures” against the Chairman, Managing Director, Branch Managers and senior staff of the MCFPL.