Fraud office catches West Asia whiff

Trinamul vice-president and retired IPS officer Rajat Majumdar being taken to hospital after the CBI arrested him in the Saradha case on Tuesday. Picture by Mayukh Sengupta

New Delhi, Sept. 9: The Serious Fraud Investigation Office (SFIO) within the ministry of corporate affairs has detected violations of the Companies Act by the Saradha Group while raising deposits from the public.

It has also unearthed a skein of transactions between group entities with clear indications that some of the money had been siphoned off to certain West Asian destinations, including Dubai.

Sources said the voluminous report, which has been submitted to the corporate affairs ministry, traced the web of transactions between Saradha’s frontline companies and other minor group entities like Saradha Agro, Saradha Tea and Saradha Exports.

The frontline Saradha group entities include Saradha Realty India, Saradha Construction Company and Saradha Garden Resorts and Hotels.

These firms then transferred interest-free funds among one another, further complicating the money trail.

The report says 43 companies were involved in the transfers, including some of the media firms that the Saradha Group had invested in.

Some of the suspicious transactions included a loan of Rs 2.31 crore that Saradha Construction had given to Bengal Media Private Ltd, a company that at that time had a negative net worth of Rs 43.12 crore and a loss of Rs 14.05 crore for 2011-12.

A negative net worth arises when a company’s debt liabilities exceed its equity capital plus its reserves and assets. In such a situation, a company won’t be able to repay its debts even if it sells all its assets and dips into its reserves.

Several companies quickly funnelled money they received to other entities, creating a maze of rapid-fire transactions. For instance, during 2011-2012, Saradha Construction received long-term advances of Rs 40 crore from Saradha Realty. This firm quickly transferred a sum of Rs 12.37 crore as a reverse loan to Saradha Realty.

It also paid out a sum of Rs 6.4 crore to its subsidiary -- Devkripa Vyapar Pvt Ltd, an entity that was registered on February 14, 2006, and has its offices in Salt Lake. Devkripa had four directors: Sudipta Sen, the owner of the Saradha Group, his close associate Debjani Mukherjee, artist Shuvaprassana Bhattacharya and his daughter Jonaki Bhattacharya. Officials said Devkripa had no visible business.

The SFIO also found verifiable trails of how funds were funnelled into and out of a “central pool” on “a daily basis”.

Saradha’s money trail showed that funds had been transferred to West Asian countries. The SFIO has already passed on its preliminary findings to the Enforcement Directorate and it was trying to establish the ultimate destination of this cache of money. SFIO officials said some of the money might have also gone to South Africa.

Officials said that the fund transfers were in clear violation of several sections of the Companies Act, which require companies to seek prior permissions before making the transfers.

More than 1.5 million people had invested in Saradha, three-fourths of whom could be classified as small investors with deposits of Rs 10,000 or less.