THE CORPORATE Affairs Ministry has made a pitch for the need to establish a lead agency for investigations in financial sectors where multiple agencies have overlapping roles.
Citing repeated instances of multiple agencies — Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Economic Offences Wing of state governments and Serious Fraud Investigation Office (SFIO) — simultaneously investigating the same set of cases, the Ministry has said this results in the agency that moves first seizing all books of accounts and keeping all information collected to itself.
While this recommendation by the Ministry of Corporate Affairs has been made specifically for Unregulated Deposit Schemes (prize chits and money circulation schemes), indications are that in high-profile cases in other sectors, such as the Punjab National Bank fraud case, multiple agencies ended up investigating the case centred around the public sector bank’s Brady House branch.
Speaking to The Indian Express, a government official said the Ministry of Corporate Affairs, at the highest level, has made a strong pitch for designating a lead agency as the process of investigation is impeded by the selective seizing of books and other incriminating evidence.
“There is simply no sharing of the information, and agencies have been found to be working individually than collectively. So there is a need to establish a way to a lead investigation agency concept, especially in cases where different Acts and legal provisions get invoked,” the official said.
In February this year, the Government approved the Banning of Unregulated Deposits Scheme Bill, 2018, which aims to streamline efforts to prevent such schemes and put in place a mechanism by which depositors can be repaid without delay by attaching the assets of defaulting establishments.
The submissions made by the Ministry of Corporate Affairs gains significance at a time when the fallout of an investment fraud allegedly perpetrated by the IMA Group of Companies and its founder and managing director, Mohammed Mansoor Khan, has come to light.
The LLP model followed by IMA enabled it to stay out of the definition of deposit under the Karnataka Protection of Interest of Depositors in Financial Institutions Act (KPID) 2004, and The Banning of Unregulated Deposit Schemes Ordinance, 2019.
Though the State Revenue Department and Economic Offences Wing of the Criminal Investigation Department initiated investigations between November 2018 and March 2019, these did not result in punitive action as officials concluded that the legislation for the protection of depositors did not apply to IMA. Investigators estimate that the fraud has tipped Rs 2,500 crore in terms of investor losses.
Besides, the fallout of the implosion at the Saradha Group in West Bengal and the subsequent investigations had led to a standoff between the state government and the Centre.
In the Saradha case, the central government had initially launched a multi-agency probe to investigate the scam and similar Ponzi schemes through the Income Tax Department and Enforcement Directorate. Then, in May 2014, the Supreme Court cited a political nexus and transferred all investigations in the Saradha case and other Ponzi schemes to the CBI. Prior to its collapse in 2013, Saradha had allegedly mopped up about Rs 3,900 crore from over 1.7 million depositors.