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What the Supreme Court order says on Odisha chit fund case

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Odisha Sun Times Bureau
New Delhi, May 9:

The honorable two-member bench of the Supreme Court comprising Justices TS Tahkur and C. Nagappan while disposing of the petition filed by Alok Jena with regard to the multi-crore chit fund scam in Odisha have made a number of observations and comments in their 47-page judgement.Supreme Court of India

The following are excerpts from the court order that are relevant to the Odisha case. Two observations made in the court order are significant :

(i) Investigation by the State Police in a scam that involves thousands of crores collected from the public allegedly because of the patronage of people occupying high positions in the system will hardly carry conviction especially when even the regulators who were expected to prevent or check such a scam appear to have turned a blind eye to what was going on.

(ii) The question, however, is not whether the State police has faltered. The question is whether what is done by the State police is sufficient to inspire confidence of those who are aggrieved. While we do not consider it necessary to go into the question whether the State police have done all that it ought to have done, we need to point out that money trail has not yet been traced.

Excerpts from the SC Order :

“In Writ Petition (C) No.413 of 2013 we had by our order dated 26th March, 2014 confined the proceedings to 44 companies mentioned in two list one filed by Mr. Alok Jena, the petitioner in the petition and the other by the Counsel for the State Government. The involvement of these companies in the scam had inter-state ramifications besides the fact that their collections had exceeded over 500 crores each.

26. It was submitted by counsel for the parties that looking to the large number of cases that had been registered, transfer of each and every case may work as an impediment in the effective investigation of the cases by the CBI. For all intents and purposes, therefore, proceedings in these two writ petitions were confined to a prayer for transfer of cases registered against 44 companies named in the lists filed by the counsel for the parties.

27. Since certain aspects of the information considered relevant for the transfer of the cases was not forthcoming, we had directed the State Government to file an affidavit providing the said information. The information related primarily to the number of companies involved in the scam in the State of Odisha. The total amount allegedly collected by 44 companies referred to in the lists furnished by the State Counsel and Counsel for the petitioner.

The total number of claims made by the depositors before Justice R.K. Patra Commission set up with the State Government as also the total number of properties, seized in regard to the 44 companies referred to above. The total amount so far paid to the investors under the orders or the Commission or otherwise and the total number of charge-sheets so far filed.
Investments made in real estate or otherwise by the 44 companies were also demanded from the State who was asked to disclose whether the larger conspiracy angle was being investigated and, if so, furnish the particulars of the FIR in which that was being done.

28. An affidavit has been filed by the State of Odisha pursuant to the said directions in which the FIRs where the State Investigating Agency is examining the larger conspiracy angle, have been identified. A perusal of the Affidavit, further, shows that 163 companies were involved in the chit-fund scam in the State of Odisha who have collected Rs.4565 crores approximately from the public out of which a sum of Rs.2904 crores has been collected by 43 companies mentioned in the list referred to earlier excluding M/s Nabadiganta Capital Services Ltd. against which no criminal case have been registered so far.

The affidavit also states that 7,45,293 envelopes containing claim petitions have been received from the depositors by Justice R.K. Patra Commission. The affidavit also gives details of the properties of the companies seized/sealed in the course of the on-going investigation. The affidavit also refers to payment of Rs.24,17,65,866/- allegedly made to 18,596 investors by M/s Prayag Infotech High Rise Limited, Kolkata and the willingness expressed by M/s Rose Valley Hotels and Entertainment Limited to pay back the investors.court judgement

Larger conspiracy angle is according to the affidavit being examined in three cases. These are (i) CID PS Case No.39 dated 18.07.2012 under Section 420/120-B IPC read with Sections 4, 5 and 6 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 registered against M/s Seashore Group of Companies, (ii) Case No.44 dated 07.02.2013 under the same provisions registered in Kharavelnagar Police Station (Bhubaneswar Urban Police District) against M/s Artha Tatwa Group of Companies and (iii) EOW PS Case No.19 dated 06.06.2013 registered against M/s Astha International Ltd.

It was submitted that while charge sheets have been submitted in three cases mentioned above within the period of limitation, investigation has been kept open under Section 173 (8) of the Cr.P.C. to investigate the larger conspiracy angle. The affidavit also refers to certain legislations enacted in the State of Odisha to protect the interest of depositors. It also refers to certain interim orders passed by the Government for attachment of the properties of the defaulting companies.

29. Appearing for the State of Odisha, Mr. Gopal Subramanium, learned Senior Counsel argued that while this Court may transfer for further investigation into the cases registered against 44 companies referred to above, any such transfer should not hamper the attachment or recovery process otherwise initiated by the State in terms of the measures taken by it

It was also contended by Mr. Subramanium that public prosecutors appointed by the CBI would be assisted by the State Police Officials so that the efficacy of the investigation and prosecution are both taken care of by the joint efforts that the Central and the State police authorities may make.

30. The factual narrative given in the foregoing paragraphs clearly establish the following:

1. That financial scam nicknamed chit-fund scam that has hit the States of West Bengal, Tripura, Assam and Odisha involves collection of nearly 10,000 crores (approx.)from the general public especially the weaker sections of the society which have fallen prey to the temptations of handsome returns on such deposits extended by the companies involved in the scam.

2. That investigation so far conducted suggests that the collection of money from the depositors was neither legally permissible nor were such collections/deposits invested in any meaningful business activity that could generate the high returns/promised to the depositors.

3. That more than 25 lac claims have so far been received by the Commissions of Enquiries set up in the States of Odisha and West Bengal which is indicative of the magnitude of scam in terms of number of citizens that have been defrauded by the ponzi companies.

4. That the companies indulge in ponzi schemes have their tentacles in different States giving the scam inter-state ramifications. That such huge collections could have international money laundering dimensions cannot be ruled out and needs to be effectively investigated.

5. That Investigation so far conducted reveals involvement of several political and other influential personalities wielding considerable clout and influence. under the Companies Act and the Reserve Bank of India is also under investigation by the State Police Agency which may have to be taken to its logical conclusion by an effective and independent investigation.

31. The question is whether the above features call for transfer of the ongoing investigation from the State Police to the CBI. Our answer is in the affirmative. Each one of the aspects set out above in our view calls for investigation by an independent agency like the Central Bureau of Investigation (CBI). That is because apart from the sensitivity of the issues involved especially inter-state ramifications of the scam under investigation, transfer of cases from the State police have been ordered by this Court also with a view to ensure credibility of such investigation in the public perception.

Transfers have been ordered by this Court even in cases where the family members of victim killed in a firing incident had expressed apprehensions about the fairness of the investigation and prayed for entrusting the matter to a credible and effective agency like the CBI.

Investigation by the State Police in a scam that involves thousands of crores collected from the public allegedly because of the patronage of people occupying high positions in the system will hardly carry conviction especially when even the regulators who were expected to prevent or check such a scam appear to have turned a blind eye to what was going on. The State Police Agency has done well in making seizures, in registering cases, in completing investigation in most of the cases and filing charge-sheets and bringing those who are responsible to book.

The question, however, is not whether the State police has faltered. The question is whether what is done by the State police is sufficient to inspire confidence of those who are aggrieved. While we do not consider it necessary to go into the question whether the State police have done all that it ought to have done, we need to point out that money trail has not yet been traced.

The collections made from the public far exceed the visible investment that the investigating agencies have till now identified. So also the larger conspiracy angle in the States of Assam, Odisha and West Bengal although under investigation has not made much headway partly because of the inter-state ramifications, which the Investigating Agencies need to examine but are handicapped in examining.

32. M/s Vaidyanathan and Gopal Subramanium, learned counsel for the States of West Bengal and Odisha respectively argued that the CBI itself has in a great measure lost its credibility and is no longer as effective and independent as it may have been in the past. Similar sentiments were expressed by Mr. P.V. Shetty appearing on behalf of some of the investors and some other intervenors, who followed suit to pursue a similar line of argument.

33. There is, in our opinion, no basis of the apprehension expressed by the State Governments. It is true that a lot can be said about the independence of CBI as a premier Investigating Agency but so long as there is nothing substantial affecting its credibility it remains a premier Investigating Agency. Those not satisfied with the performance of the State Police more often than not demand investigation by the CBI for it inspires their confidence. We cannot, therefore, decline transfer of the cases only because of certain stray observations or misplaced apprehensions expressed by those connected with the scam or those likely to be affected by the investigation.

34. In the circumstances, we are inclined to allow all these petitions and direct transfer of the following cases registered in different police stations in the State of West Bengal and Odisha from the State Police Agency to the Central Bureau of Investigation (CBI):court judgement

Odisha State

All cases registered against 44 companies mentioned in our order dated 26th March, 2014 passed in Writ Petition (C) No.413 of 2013. The CBI is also permitted to conduct further investigations into all such cases in which chargesheets have already been filed.
35. We reserve liberty for the Joint Director CBI, Incharge of the States of West Bengal and Odisha to seek further directions in relation to transfer of any other case or cases that may require to be transferred for investigation to CBI for a full and effective investigation into the scam.

36. Transfer of investigation to the Central Bureau of Investigation (CBI) in terms of this order shall not, however, affect the proceedings pending before the Commissions of Enquiry established by the State Government or stall any action that is legally permissible for recovery of the amount for payment to the depositors. Needless to say that the State Police Agencies currently investigating the cases shall provide the fullest cooperation to the CBI including assistance in terms of men and material to enable the latter to conduct and complete the investigation expeditiously.

37. The Enforcement Directorate shall, in the meantime, expedite the investigation initiated by it into the scam and institute appropriate proceedings based on the same in accordance with law.

38. We make it clear that nothing said in this order, shall be taken as a final opinion as to the complicity of those being investigated or others who may be investigated, questioned or interrogated in relation to the scam.

39. We do not for the present consider it necessary to constitute a Monitoring Team to monitor the progress of the investigation into the scam. But, we leave the exercise of that option open for the future.

40. The Writ Petitions and T.P.(C) No. 445 of 2014 are disposed of in terms of the above directions. No costs
(T.S. THAKUR) (C. NAGAPPAN)
New Delhi,
9 May 2014

4 COMMENTS

  1. The honorable bench of Justices TS Thakur and C. Nagappan has set an example for everybody in their 47-page historic verdict. The bench has examined the case by petitioner Alok Jena in great detail.

  2. How Narendra Modi govt. administration best ? Already one year has passed after F.I.R was lodged on 4th February 2013 with Surat crime branch,Gujarat.by Odisha people. But till date they have not arrested , Astha international ltd. company’s CMD -SANTOSH KISSAN SAPKALE, MD- CHANDRES SINGH CHOUHAN,& seized property also not auctioned yet.

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