Chhattisgarh makes rules to protect investors from ponzi financial schemes
Raipur: After almost a
decade of formulating the draft for the Chhattisgarh Protection of Depositors
Interest (in Financial Establishment) Act 2005, the government has now finally
framed and notified rules to protect depositors' interests from ponzi money
The state, which has
witnessed over 3000 people being cheated of a whopping Rs 124 crore between
2009 and 2013, had passed the bill in 2005 but it received the President's
assent only in July 2015 due to various clarifications and references sought by
the union government. Following the President's assent, the state government
appointed all district magistrates as "competent authority" within
their respective districts for the purpose of the said Act.
Finance, Kamalpreet Singh, said the Act empowers the District Magistrate to
enter the premises of the accused, conduct search, seizure, confiscation and to
attach property and initiate the procedure to conduct its public auction to
recover funds of the defrauded investors. Singh said special courts would be
designated by the High Court to decide such auctions in order to generate funds
to return money to depositors.
The recent spate in
incidents of embezzlement of depositors' money by promoters of ponzi financial
schemes had caused lot of concern, with people accusing the government of doing
little to protect their financial interest from such fraudsters. As per
information given by home minister, Ram Sevak Paikra, on the floor of the House
last year, 3717 people had been cheated for an estimated amount of Rs 124 crore
between 2009 and 2013. About 174 accused in these cases had been arrested and
in 73 cases challans had been put up in the court of law.
Taking note of
mushrooming of financial establishments in the state in the recent past, the
Act says it is observed that such establishments have been gaining wrongfully
by receiving money as deposits from the public, particularly of the middle
class and poorer sections of the society.
establishments, it said, did this by making impracticable or commercially not
viable promises or by offering highly attractive rates of interest or rewards,
with the intention of not fulfilling the obligation of refunding the deposits
on maturity or with intention of not rendering proper services assured, to the
investors at the time of accepting the deposits.
With the Act getting
implemented in the state, all working of hitherto unregulated financial bodies
like multi-level marketing companies, proprietorship, partnership firms can be
regulated by the state government by appointing a regulators for financial
institutions which it feels is indulging in fraudulent activities.
In fact, it was the
vacuum of a regulatory body that led to the mushrooming of multi-level
marketing companies in the state. Not only gold, but dubious schemes including
investments in sheep and land had also been rolled out by some companies. To
curb such activities, the Reserve Bank of India Act was amended and department
of non-banking services was created (DNBS). The department was entrusted with
the responsibility of conducting meetings with state governments and
authorities and urging them to bring an act in their respective states.