Saradha Group Financial

Scandal

Group no1
Sarthak Gupta
2014D23
Surin Kapoor
2014D30
Pratik Das
2014D
Kaushik Shekar 2014D52
Priyanka Jakhar 2014A
Nitin Gupta
2014D12

Overview
The Saradha Group financial scandal was a major financial
scam and political scandal caused by the collapse of a Ponzi
scheme run by Saradha Group, a consortium of over 200 private
companies that was believed to be running collective
investment schemes popularly but incorrectly referred to as chit
funds in Eastern India.
The group collected around 200 to 300 billion US$46billion
from over 1.7 million depositors before it collapsed in April 2013.
In the aftermath of the scandal, the State Government of West
Bengal where the Saradha Group and most of its investors were
based instituted an inquiry commission to investigate the
collapse.

CHIT FUND

A kind of savings scheme practiced in India

Can be conducted by financial institutions or between

group of friends and family.

Popular because other small savings schemes run by

Indian Postal Service etc give low rate of return.

Chit Funds are also misused by its promoters and there are
many instances of the founders running what is basically a
Ponzi scheme and absconding with their money.

ACTS
Chit funds in India are governed by various state or central
laws. Organized chit fund schemes are required to register
with the Registrar or Firms, Societies and Chits.

Union Government - Chit Funds Act 1982 (Section 2(b))

Kerala - Kerala Chitties Act 1975
Tamil Nadu - Tamil Nadu Chit Funds Act, 1961
Karnataka: The Chit Funds (Karnataka) Rules, 1983
Andhra Pradesh - The Andhra Pradesh Chit Funds Act, 1971
New Delhi- The Chit Funds Act,1982 and Delhi Chit Funds
Rules, 2007
Maharashtra - Maharashtra Chit Fund Act 1975

SARADHA GROUP

Key People
Sudipto Sen
Debjani Mukhopadhdhay
Originally a financial concern but invested heavily in brand
building.
Bengali film industry
Local television channels
Newspapers
In 2011, Saradha Group buys Global Automobiles, a
heavily indebted motorcycle company.
CSR Activities Donated motorcycles to Kolkata Police
The group also invested in football clubs like Mohan Bagan
and sponsored Durga Puja.

OPERATIONS AND SCAM

Started in 2006 with promises of astronomical returns in

Ponzi Schemes. Started building brand by buying and
selling media channels
Used nexus of companies for money laundering
Collected money by using secured debentures and
redeemable preferential bond
Violation of section 67 of Indian Companies Act
SEBI challenged them for the first time in 2009
Creation of more than 300 new companies

Contiued..

SEBI persisted, in 2010, Saradhas method of raising funds

changed
Collective Investment Schemes like tourism packages, real
estate fund launched in the name of Chit Fund
In 2011, SEBI warned West Bengal government about the
alleged schemes of the company as the concept of chit
fund is regulated by state governments and not by SEBI
In 2012, SEBI identified that the group operated CIS and
not Chit Fund.
Saradha group started trading in stock market and
siphoning off the proceeds

REACTION

On 7 December 2012, RBI governor stated that the West

Bengal government should initiate suo motu action against
companies which were indulging in financial malpractices.
Sudipto Sen, wrote a confessional letter to CBI in April
2013 and fled. He was later arrested.
PIL was filed on 22nd April 2013 in Guwahati High Court and
Calcutta High Court
CBI investigation started

LEGAL IMPLICATION AND

CURRENT STATUS

22 April 2013 West Bengal government announced that a fourmember judicial inquiry commission headed by Shyamal Kumar
Sen, retired Chief justice of Allahabad High Court would probe the
scam
On 24 April 2013, Mamata Banerjee announced a controversial Rs
500-crore relief fund for the low income depositors of the Saradha
Group
In light of the scam, SEBI requested sweeping powers to
investigate and prosecute any fraudulent collective investment
schemes.
On 7 May 2013, Calcutta High Court appointed a three member
administrator group to run Tara News and Tara Muzic.
On 23 May 2013, Chief Minister, Mamata Bannerjee indicated the
willingness of West Bengal Government to take over Saradha
owned TV channels Tara News and Tara Muzic, which had earlier
been sent under administration by Calcutta High Court.

Thank You