Serious Fraud Investigation Office (SFIO) under leadership of Mr. Nilimesh Baruah – Director SFIO; IRS (IT) 1985; has completed investigation into the affairs of 14 companies of the Saradha Group of Companies. The investigation has concluded that schemes run by such companies were ‘Ponzi Schemes’ i.e. arrangements where the primary source of payment to subscribers is the collections made from newly enrolled members rather than from income generated from investments.
The companies, their promoters, directors and managerial personnel have been found to be guilty on many counts for violation of various provisions of the Companies Act, 1956 including Sections 58A and 628 dealing with illegal collection of deposits and false statements, etc. Companies of the group which were declared by SEBI to be carrying out unauthorized ‘Collective Investment Schemes’ (CIS) will be prosecuted for violation of the SEBI Act instead of Section 58A of the Companies Act, 1956, as the former carries longer terms of imprisonment.
Several instances of violation of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 have also been found. As prosecution under this law are to be initiated by the State Governments concerned, the Report along with evidence is being shared with the CBI. The Report is also being shared with SEBI for proceeding against companies which were found to be running unauthorized/ illegal Collective Investment Schemes (CIS).
Such Sections are : 107 (Abetment of Crime), 120B (Criminal Conspiracy), 403 (Dishonest misappropriation of property), 406 (Criminal breach of trust), 409 (Criminal breach of trust by public servant), 415 (Cheating), 418 (Cheating with knowledge that wrongful loss will be caused), 419 (Punishment for cheating by personation), 477A (Falsification of accounts). Since, CBI is now investigating cases under the IPC under orders of the Supreme Court, it has been decided to share evidence collected by the SFIO with CBI so as to avoid duplication in prosecutions.
About SFIO- The SFIO is a multi-disciplinary organization under Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, law, information technology, investigation, company law, capital market and taxation for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds. The SFIO will normally take up for investigation only such cases, which are characterized by complexity having inter-departmental and multi-disciplinary ramifications, substantial involvement of public interest to be judged by size, either in terms of monetary misappropriation or in terms of persons affected, and; the possibility of investigation leading to or contributing towards a clear improvement in systems, laws or procedures. The SFIO shall investigate serious cases of fraud received from Department of company Affairs.