States told to monitor property deals in wake of Saradha scam

The Central Economic Intelligence Bureau (CEIB) has issued an alert to all state governments to monitor property deals as a host of companies running ponzi or multi-level transaction schemes would try to transfer and commit assets and also draw assignment agreements in the wake of the Saradha scam.

This would squeeze available resources, with which the government could compensate depositors, who have lost money in ponzi schemes. Assignment agreements would put the parties receiving the properties into difficulty since such agreements, other than giving contractual rights on properties, also delegate duties.

?If many of such deals take place, it would become difficult for the state governments to seize properties,? a CEIB official said.

A state finance department official said there was virtually no mechanism to prevent such property deals unless a huge intelligence network was in place. ?Even if some checks can be put on property transfers, a check on commitment of assets and assignment agreements would be difficult since it would be simply drawn on stamp papers,? the official said.

The ministry of corporate affairs has identified 73 companies running ponzi schemes in West Bengal, but officials in the state finance department felt the number could well exceed 600 in the state. There were traces of 431 such businesses running in North Bengal alone and most of them were proprietorship entities with only trade licences from municipalities.

India had around 54,000 chit funds, of which only 12,379 were legal, Pradip Biswas, president, Bank Employees Federation of India, said.

“In West Bengal, the inquiry commission formed under Justice Shyamal Sen should look into whether the municipalities provided trade licences after assuring that the object clauses of such business entities were not prohibitory to safety and security of normal businesses and people?s interest at large,” Sumit Binani, a member of the Institute of Chartered Accountants of India (ICAI) said.

A home ministry official said the departments of home, finance and municipal affairs in West Bengal would come under scanner to see if these departments had any hand in the mushrooming of ponzi schemes.

“Saradha is only a tip of the iceberg. If all the government departments were cautious, then such companies wouldn?t have mushroomed in the state,” Binani said.