SEBI digs deeper, chit scam gets bigger

FPAgents and investors of Saradha Group protest in Kolkata on Thursday. Partha Paul

Saradha Realty Ltd, which has gone bust now, may be just the beginning of the unfolding of a deeply entrenched Ponzi scheme network involving dozens of other companies in West Bengal, some of which also wield considerable media power given their ownership of television channels and newspapers.

According to information available with the union corporate affairs and finance ministries, six companies, against whom market regulator Securities and Exchange Board of India (SEBI) has already moved, are running a variety of doubtful and exotic deposit schemes and have raised in excess of Rs 7,000 crore so far. But, regulatory sources said, most of these companies have developed political connections with the ruling party, resulting in a situation where SEBI's every move is resisted by the state government and the police.

Two companies of the Rose Valley group Rose Valley Real Estate and Construction Ltd and Rose Valley Hotels and Entertainment Ltd have separately raised Rs 1,272 crore and Rs 2,900 crore respectively. Though SEBI passed an ad interim ex parte order restraining Rose Valley Real Estate and Constructions from accepting further deposits on January 3, 2011, the company continues to raise money. It has so far stalled all efforts by the regulator to give effect to its order by approaching the courts.

For SEBI, it has been a long, lonely and frustrating battle against not just the Rose Valley group, but five more companies, including Saradha, where lakhs of investors have deposited money in various schemes. At the regulator's instance, the Union Finance Ministry wrote to the West Bengal government almost a year back to rein in such companies that are defrauding investors. But little or no action has been forthcoming so far, said sources in regulatory agencies.

All the six companies under SEBI scanner have either filed writ petitions in the Calcutta high court or managed to get injunction orders from district courts. "It is ridiculous that district courts are issuing injunctions against our restraint orders in collective investment schemes," said a SEBI official on condition of anonymity.

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