It was not that the ministry of corporate affairs (MCA) was unaware of the explosive state of affairs of around 57 chit fund companies operating in West Bengal, including the Saradha Group. Based on a complaint by a Congress MP from the state in September 2011 (which he later withdrew), the MCA’s registrar of companies (RoC) West Bengal had initiated a probe that year itself and unearthed a series of irregularities. However, going through internal file notings, correspondence and some officers in the MCA asking for permission for a probe by the Serious Fraud Investigation Office (SFIO), the matter seemed to be moving in the slow lane in the last almost one and a half years.
In fact, as late as April 2, 2012, the MCA was not convinced about the need for an SFIO probe as it was not sure of the findings of the RoC eastern region. A note dated April 2, 2012, put up by the additional secretary, MCA for the approval of the corporate affairs minister concluded: “As regards Saradha Realty India Ltd and its group, it may be noted that the complaint was earlier withdrawn by the hon’ble MP. RoC has also not conducted an inquiry required under Section 234 (7) of the Act, which provides for opportunity to be given to the company to reply to the allegations earlier made by the hon’ble MP. RoC needs to be fully satisfied before recommending an investigation into the affairs of the company.”
The note was based on the inputs by RoC, West Bengal citing detailed irregularities in four firms: Sunshine India Land Developers Ltd, ICore Services, Saradha Realty and Rose Valley Real Estate Construction. Each group had a dozen or more holding companies and offered a host of services.
An SFIO probe by the corporate affairs minister Sachin Pilot was ordered on April 24. As is known, the Saradha Group chit fund scam broke in the national media by the third week of April.
In fact, for the first time, an inquiry a by multi-special task force into the affairs of the four firms mentioned above was made in September 2012 by deputy director (investigation) in the MCA. “Since the scope of investigations and activities involves several regulatory bodies, the inherent complications need a special task force with experts from the financial sector, capital market, accountancy, forensic audit, IT and customs including CAG and Sebi,” the note said.