Easy come, easy go

Four hundred branch offices, spread all over the country, collected money from investors, including the poor sections like rickshaw pullers and petty kiosk owners. There were as many as 300 splinter investment schemes in which the small investors put their money.

But what the Kuber group of companies did was nothing new. It was a modus operandi allegedly adopted by several other Non-Banking Financial Companies NBFCs 8212; the CRB, JVG, Hoffland,Global Finance and Modern Group 8212; which collected crores of public rupees and then either siphoned the money off for the personal use of the owners or lost it, only to declare bankruptcy. The losers in any case being the investors. According to an estimate, gullible investors have been deprived of more than Rs 20,000 crore in the various scams involving NBFCs.

The Kuber group was no different. In October last, it was reprimanded by the Delhi High Court for even giving misleading advertisements and for claiming that the Reserve Bank of India RBI had given it a 8220;clean chit8221;.

An eminent lawyer handling several such NFBC scams, says the estimate of Rs 20,000-crore loss to investors is based on just known scams. 8220;There are hundreds of other such scams just waiting to happen,8221; he adds. There are thousands of NBFCs functioning all over the country, collecting money from people by promising them unheard of interest rates, going up to 25-30 per cent. How many of them fit the bill is apparent from the factthat of the 37,478 that applied for registration to the RBI, just 7,000 were deemed worthy of recognition.

8220;The scams are happening despite the stringent regulatory framework governing NBFC activities. They need to have a minimum capital base of Rs 25 lakh, capital adequacy of 12 per cent and there are also ceilings on interest rates they can offer. But with so many companies and little enforcement, many of them think that they can get away,8221; the lawyer explains. At least for some, luck has run out. Chairman of the JVG group of companies V.K. Sharma has been in judicial custody, lodged in Tihar jail, since September last. Another co-accused in the Rs 600-crore JVG scam, Colonel retd T.S. Bhan, was granted bail by the Supreme Court on medical grounds on May 14.

Pradyuman Kumar Sharma, chairman of the Kuber group of companies, too has been trying to obtain anticipatory bail. Earlier, on May 7, he had got two weeks8217; interim bail from the Supreme Court. The officials of the Economic Offences Wing EOWof the Crime Branch in Delhi and the police of various states have been looking for Sharma for more than a month.

Sharma and other directors of the company 8212; mostly members of his family 8212; have been in hiding ever since the scam broke out last month. The EOW in Delhi had received dozens of complaints and registered a case based on the complaint of high court advocate Hari Mohan Kapoor, who had himself invested Rs 17 lakh in the Kuber group. Another group of people left in the lurch are the group8217;s agents. 8220;I got suspicious when the interest cheque given to me bounced six months ago,8221; says an agent based in Gorakhpur, Ram Kesraj. 8220;I was planning to make a trip to Delhi when other investors started coming to me with the same complaint.8221; Now he has been in Delhi for the past six months, trying to 8220;settle accounts8221;. Hundreds of people had invested in the Kuber group through Kesraj. 8220;It was because of my goodwill that poor tea stall owners, rickshaw pullers and others invested in the group. Now I cannotgo back home because I am the guilty party for the investors. They are all baying for my blood. I have lost my personal money also,8221; he rues.

Biswanath Guha, a Kuber agent from Calcutta, has also been camping in Delhi for the past six months. More than Rs 6 lakh had been deposited through him. 8220;Even if I had a little inkling that the investors will never get back their money, I would have never done this work. I feel so guilty. There are rickshaw pullers who used to deposit Rs 10 every day and fishermen who gave Rs 5 daily. For them it was extremely difficult sparing the money but they were hopeful of getting a good return as promised by Kuber. And now they have nothing,8221; Guha says regretfully.

Avdhesh Chandra Gupta, an agent from Badayon, got Rs 1.25 crore invested in Kuber over the past five years. For the agents, the incentive was they could keep 5 per cent of the invested amount as their commission.

8220;I deposited my commission with the company and that too is lost. I had wanted to start abusiness of my own with the interest. But now the situation is so bad that my family has had to sell all the jewellery and even the household items,8221; says S.N. Rai from Gorakhpur, parked outside the C-42, Greater Kailash-I, office of the Kuber group in south Delhi.

8220;The chairman is not worried about the investors at all,8221; he adds. 8220;In the last meeting with investors, he said the Indian memory is too short and even the depositors will forget about their money. He also said that nothing happened to CRB and nothing will happen to him. While all the investors are running from pillar to post to get their hard-earned money back, Sharma is still driving around in his BMW and staying in five-star hotels.8221;

However, Kuber group chairman Sharma, who The Indian Express managed to talk to in hiding, strongly refutes the allegation, saying the interest of investors was uppermost in his mind. 8220;We have all the intentions of paying back the investors. We have been making payments worth Rs 1 crore every day.Despite no inflow of funds, we are in a position to pay back the investors because our assets are more than the liabilities. We have been disposing of our assets to pay the investors,8221; he claimed. The group8217;s liabilities, according to his legal advisor, Shalabh Khanna, are not more than Rs 150 crore and its assets worth much more 8212; Rs 212.06 crore.

The Kuber group chairman also claimed the constant comparison of Kuber to the JVG group of companies was 8220;unfair8221;. Unlike JVG, he said, Kuber was a well-established, 20-year-old company which had never had any problems with the investors. 8220;It all started with an Income Tax raid on Kuber on May 7, 1997, when Fixed Deposit Receipts worth Rs 20 crore were seized. This disturbed the cash flow. The last straw was a public interest litigation PIL filed by the Public Action Forum PAF. This was supposed to be against various defaulting companies and they included Kuber only because it had been in news after the I-T raid. Otherwise, there was no problem andeverything was fine. It was then that the investors panicked and started demanding their money back,8221; he claims.

The PIL, pending in the Delhi High Court, named RBI; Securities and Exchange Board of India; Department of Company Affairs; Secretary, Ministry of Law and Company Affairs; Chairman of the Central Board of Direct Taxes; Income Tax Commissioner; Delhi Police Commissioner; CBI; Sahara; JVG; Hoffland; Rapti; and Kuber. Though most investors have given up hope of recovering their money, Khanna says they have approached the Company Law Board CLB for approval of a repayment schedule to investors, and that it is likely to clear repayments in instalments soon.

But until the RBI and the CLB formulate some safeguards, and also enforce them, there will be more Kubers, and more desolate investors.