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Chit fund scam: Odisha, ED battle over whose law is bigger

As lakhs of duped investors in Odisha wait endlessly hoping to get some of their money back from scores of ponzi firms, the state government and Centre seems to have got into a fight over whose investigation should hold sway.

Written by Debabrata Mohanty | Bhubaneswar |
October 8, 2015 8:16:28 pm

As lakhs of duped investors in Odisha wait endlessly hoping to get some of their money back from scores of ponzi firms, the state government and Centre seems to have got into a fight over whose investigation should hold sway.

Enforcement Directorate which is probing money laundering by ponzi firms in Odisha, West Bengal and other states following an order by Supreme Court in May last year has protested attachment of the ponzi firms’ assets by Odisha’s Economic Offences Wing under a special State Act. ED is particularly sore with the attachment order of Rose Valley Group, the biggest ponzi group, by Odisha’s EOW under Odisha Protection of Interest of Depositors(in financial establishment) Act, 2011.

“OPID Act 2011 is a State law and Prevention of Money Laundering Act 2002 is a central law. It is pertinent to mention that the OPID Act, 2011 came into existence on 19.8.2013 whereas the Prevention of Money Laundering Act, 2002 came into existence from July 1, 2005. The PML Act was enacted with a view to giving effect to international conventions thus its ambit and scope is wider than OPID Act. Hence, the provisions of PML Act would prevail over OPID Act,” special director of ED’s eastern region office, Yogesh Gupta wrote to Odisha chief secretary recently.

Quoting Article 253 of Constitution of India, Gupta wrote that “Parliament has power to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference.” The ED special director made it clear that “whenever there is conflict between law made by the State legislature and law made by Parliament, the law made by union legislature has supremacy/predominance”. A senior official of the finance department said the law department would be asked to give its suggestion on the issues raised by ED.

The Rose Valley Group of companies had raised Rs 15,400 crore in last few years from the people of Bengal, Bihar, Asam, Madhya Pradesh and Odisha. In Odisha, Rose Valley floated attractive tour packages and returned hefty amounts to the customers if they cancelled the packages. A lot of people walked into trap and lost their investments after the company refused to return them their money. The company is accused of cheating around Rs 100 crore in Odisha.

In June last year, the Economic Offences Wing of Odisha Crime Branch had attached Rose Valley’s properties worth Rs 63 crore under OPID Act, 2011. The OPID Act 2011 has the provision of selling the properties of chit fund firms for repaying the defaulted depositor.

On November 27, 2014 and June 20, 2015, ED attached properties over Rs 300 crore including 2807 bank accounts having balance of Rs 295.85 crore of Rose Valley group under section 5 of PML Act. The adjudicating authority of ED, a quasi judicial authority constituted under PML Act has confirmed the attachment orders.

But with the state government planning e-auction of attached properties of Rose Valley Group, after a designated court under the Orissa Protection of Interests of Depositors (In Financial Establishments) Act, 2011 in February this year ordered for confiscation of the company’s properties, ED officials said it would hamper their investigation. The attachment orders in respect of properties involved under PML Act cannot be rescinded, said a senior official.

ED officials said the investigation by the EOW had revealed offences under section 420 and 120(B) of IPC which are also scheduled offences under part-A of PML Act. Further, the recent amendments under PML Act, 2002 made through Finance Act, 2015, a new sub-section 8 of section 8 has been carved out for restoration of confiscated property to the entitled persons.

“ED would render full cooperation to the State police in their investigation and prosecution of the accused persons, but they should cooperate and assist in the investigation being carried out under PML Act.

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