Diamantaire Mehul Choksi, along with his company Gitanjali Jewellery Retail Ltd and its other directors, face proceedings in a company petition filed by the Registrar of Companies (RoC), Ministry of Corporate Affairs (MCA), for alleged violations involving a gold deposit scheme.
Over a week ago, a sessions court granted bail to seven company officials, directing them to cooperate with the court in deciding the matter as early as possible.
According to the RoC, which has filed the petition through its assistant registrar, Gitanjali Jewellery is a public limited company registered in Maharashtra under the provisions of the Companies Act, 1956. The RoC had issued a notice to the company on October 28, 2014, calling for information on money collected by it from the public under sales promotion schemes called ‘Swarna Mangal and Shagun’.
The company, in its reply submitted on December 16, 2014, furnished the total amount collected, year-wise, from 2010 to 2014, claiming that under three separate schemes — Shagun Scheme, Swarna Mangal Labh Scheme and Swarna Mangal Kalash Scheme — a total of over Rs 30.78 crore, Rs 13.24 crore and Rs 15.27 crore was collected, respectively.
In another communication to the company, the RoC had sought an explanation as to why the amount accepted from the customers should not be treated as collection of deposits, disallowed under the Companies Act, 2013.
According to the RoC, the advertisements and promotion pamphlets of Gitanjali Jewellery show that the company is paying interest on deposits by offering to pay partly monthly instalments on behalf of the depositors, which violates the Act.
The RoC had initiated action after the CBI sent an input to the Central Economic Intelligence Bureau in 2014 regarding sales promotion schemes of various jewellery companies, including Gitanjali Jewellery.
According to the communication sent by the CBI to the MCA in 2014, under such schemes, jewellery companies invite the general public to pay a fixed sum of money every month for 12 months, at the end of which the additional one or two installments are paid for by the companies. The depositor is then eligible to purchase jewellery from the company at the ruling rate. The net gain to the depositor gets nullified as profit margin/making charges of the jewellery company.
The CBI had expressed apprehensions that these operators will one day either run away or declare themselves insolvent, “causing the gullible public to suffer”. It had alleged that the schemes violate the Companies (Acceptance of Deposits) Rules, 1975, and also claimed that the jewellers are “taking advantage of the lacuna in the system”, by using the funds for their working capital or to avail loans from banks against the working capital.
In its response to the show-cause notice in 2014 and 2016, Gitanjali Jewellery — through its director Aniyath Nair — had said that the company did not promise any return of money collected along with interest, which would qualify as acceptance of deposits. Nair, represented by his advocate, Rahul Agarwal, was one of the accused to be granted bail last month. He claimed that no new scheme was started by the company from 2013, when changes to the Companies Act were made, and that at the time it was operational, the company did not require any regulatory approval.
In October last, however, the court held that prima facie, the complainant (RoC), had shown that there is material to issue process against the accused under Section 74 (3) of the Companies Act. While four accused, including Choksi, were not present before the court for the hearing in March, the court has adjourned the case till May for steps against them.