Mamata clears arrest to nip chit contagion

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  • Published 19.04.13

Calcutta, April 18: Mamata Banerjee today said a manhunt had been launched for Saradha Group chairman and managing director Sudipto Sen, the announcement reflecting the government’s resolve to arrest the promoter of one of the largest chit fund companies in the state.

While stepping out of Writers’ Buildings in the evening, the chief minister was asked whether Sen, known for his proximity to the Trinamul leadership, would be arrested.

“He is somewhere in the north. A search is on. You will get to know once he is arrested,” Mamata said after boarding her car.

Through the day, Writers’ was abuzz with suggestions that Sen — who could not be contacted apparently even by senior management in the Saradha Group for the past few days — had been arrested somewhere in northern India.

A senior official in the company said he and his colleagues were in the dark on the whereabouts of the owner.

Mamata’s comment on Sen assumes significance as the group, which started its chit fund operations in 2007-08, widened its portfolio to cover segments ranging from media to hospitality and education to real estate during Trinamul rule under patronage from a section of the ruling establishment.

Sources in Writers’ said that although the group had close ties with the party, the chief minister had little option but to take action because of some recent developments.

Some media outfits of the Saradha Group were closed recently amid allegations of non-payment of salaries and defalcation of deductions made under the provident fund. There have also been complaints of defaults in repaying investors and flouting of building rules in some real estate projects, sources said. They added that there had been cases in Calcutta and the districts.

“Apart from the complaints lodged by employees of the media outlets, there are several other complaints of default, for which cases have been started. The number of such complaints is growing,” said a senior official in the home department.

The volume of complaints is said to be one of the reasons behind the chief minister’s resolve to arrest Sen, said the sources at Writers’, adding that she had discussed the matter with the chief secretary, home secretary and the finance secretary during the day.

“She is well aware that defaults could result in law-and-order problems. As the Saradha Group was believed to be close to Trinamul, she has to be seen taking some action to distance the party from the company,” said a senior officer.

A trust deficit on chit fund companies — the state has at least 30 such prominent companies — may result in a run on them. In such a situation, most depositors turn up at the same time and seek to withdraw their funds, which few establishments are able to honour. A panic reaction inevitably results in a contagion and other such companies can go bust.

“Through her directive to arrest Sen, the chief minister is sending out a message and trying to draw a distinction between the Saradha Group and others…. She thinks this will stave off the possibility of a run on other companies for some time,” said an officer.

Yesterday, around 600 collection agents claiming to be associated with a chit fund company run by the Saradha group had assembled at Trinamul Bhavan and held a meeting with the party’s all-India general secretary, Mukul Roy.

The collection agents came for an assurance from the Trinamul leaders that the investors would be repaid as there have been reports of defaults from several parts of Bengal. Last week, some investors had virtually blocked the South 24-Parganas district headquarters at Alipore for nearly four hours demanding the administration’s intervention to ensure repayments.

Trinamul insiders said Mamata had realised that association with companies like the Saradha Group would go against the party in the panchayat polls as most chit fund companies typically operate in rural areas and target villagers with the promise of very high returns on their investments.

The CPM has already alleged Trinamul proximity to chit fund owners. The Opposition party had sought a discussion in the Assembly on chit funds, which the ruling party refused.

The eventual arrest of Sen may defer the impending crisis, but the government will have to take stern measures to counter the problem, the officer added.

“This government has withdrawn a bill that the Left government wanted to bring to crack down on chit funds. The new government has promised to draft another bill with more teeth against the chit fund companies. The sense of urgency in bringing that bill will show the government’s true intent,” the officer added.