Orissa moves fast to compensate chit fund victims, decides benchmark for loss

Orissa decided to make Rs 10,000 as the benchmark for identifying small depositors for reimbursing them.

Written by Debabrata Mohanty | Bhubaneswar | Updated: March 13, 2015 3:35:56 pm

More than a year and half after it set up a corpus fund to refund money to duped depositors in chit fund companies, Orissa has finally decided to make Rs 10,000 as the benchmark for identifying small depositors for the purpose of reimbursing people who were duped by scores of chit fund from its corpus fund as well as sale proceeds of the attached properties of the companies.

The move has come at a time when the duped chit fund investors, under the banner of ‘Arthika Sanstha Mananka Dwara Kshyatigrastanka Milita Mancha’ are planning to gherao the State Secretariat on April 15 to protest against the government apathy towards paying them their deposited amount. The duped investors have accused the CBI of going slow in its probe against the 44 chit fund companies and filing watered down chargesheets in the special CBI court.

Well-placed sources told The Indian Express that a decision on identifying small depositors was taken sometime in January this year and the State Cabinet would soon meet to ratify the decision. After the chit fund scam broke out in 2011, the Naveen Patnaik government enacted the Orissa Protection of Interest of Depositors Act.

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In July 2013, the government announced a corpus fund amounting to Rs 300 crore for refund the money to small depositors and set up justice RK Patra Commission of Inquiry to look into the involvement of influential persons including politicians and bureaucrats in protecting or promoting fraudulent chit fund. The OPID Act 2011 has the provision of selling the properties of chit fund firms for repaying the defaulted depositors.

Of the 1 million-odd envelopes containing affidavits of investors that the Patra Commission of Inquiry received at its Cuttack office,around 70 per cent are believed to be small investors. In Orissa chit fund firms collected around Rs 4,600 crore by defrauding the people.

The corpus fund of Rs 300 crore would cover the genuine and small depositors those have lost their deposits made with these chit fund companies and in case of death of depositor, his /her legal heirs who have lost their deposits would be eligible for compensation. The depositors would be eligible provided they have not been compensated for the loss under any other schemes of the Central or State government or insurance company. The payment would be made directly into the bank account of the depositor by electronic transfer.

A senior official of the finance department said with the demise of justice Patra in January this year, the terms of reference of the new Commission headed by justice MM Das would be recast. To kickstart the process of returning money to the duped investors, the new Commission would be asked to give an interim report quickly.

Apart from the Rs 300 crore corpus fund, the duped investors would be reimbursed from the sale proceeds of the chit fund companies’ properties attached by designated courts. As per the OPID Act, 2011 four designated courts in Cuttack, Balasore, Sambalpur and Berhampur headed by the as many additional district and sessions judges would pass verdict on attachment of properties. Of the 16 ad interim attachment orders of chit fund companies and real estate companies.

For the first time, a designated court in Cuttack in an ex-parte ad-interim order early this month asked the Cuttack Additional District Magistrate to sell through public auction the attached properties of Rose Valley Group of Companies and distribute the sale proceeds among the investors equitably. The designated court of Additional District and Sessions Court in Cuttack ordered confiscation and sale of properties of Rose Valley worth over Rs 63.64 crore through auction. The ex-parte order came as the Rose Valley Group officials did not turn up to court in spite of repeated reminders.

Prior to the auction of the attached property under OPID Act, 2011 the offset price would be decided by a committee to be chaired by a sub collector.

To make the punishment more stringent, the government has decided to delete Section 7 of the OPID Act which allowed compounding of offences if the company returned the entire amount due to the depositors with or without interest. The government rather plans to make the offences under the Act non-bailable ad cognisable, said sources.

The government also now plans to appoint band ambassadors from field of sports, art. music, literature, fine arts and social service to deliver messages of financial literacy through TV and radio campaigns. These brand ambassadors would raise public awareness about chit funds, fly by night operators, electronic bank frauds and financial inclusion.

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