Enforcement Directorate says RBI could have acted against Ponzi companies

The Enforcement Directorate (ED) is looking into 'role' of senior Reserve Bank of India (RBI) officials for not taking any action in major Ponzi scams like Saradha and Rose Valley as the investigative agency is not convinced by the Central bank's argument that it did not have powers to act in these cases. A senior ED official told Mail Today that Section 58 B of the RBI Act clearly empowers officials of the Central to take action in scams related to companies that collect money from the public.

Section 58 B states, "Whoever in any application, declaration, return, statement, information or particulars made, required or furnished by or under or for the purposes of any provisions of this Act, or any order, regulation or direction made or given there under or in any prospectus or advertisement issued for or in connection with the invitation by any person, of deposits of money from the public willfully makes a statement which is false in any material particular knowing it to be false or willfully omits to make a material statement shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine."

According to sources, ED had questioned both RBI and Security and Exchange Board of India (Sebi) officials for their response to these scams. Although Sebi had initiated prosecution proceedings against these complaints, RBI had not taken action on the grounds that its role is merely regulatory in nature.

ED has also sent a detailed questionnaire to RBI on the issue but has not received a satisfactory reply. RBI replies are reported to be vague and evasive and ED has asked them to provide specific answers to the queries.

So far, ED has attached Saradha Group properties worth Rs 600 crore in West Bengal, Jharkhand, Assam and Odisha. However, some action taken by the Shyamal Sen Commission, formed by West Bengal to refund money to the depositors, is causing problems in going ahead with the legal process. ED does not have adequate manpower and logistics support. The Central Bureau of Investigation also plans to examine some RBI officials in connection with the Saradha scam as it has found certain instances for which clarification is required from the bank.

INACTION

>> ED says Section 58 B of the RBI Act clearly empowers officials of the Central to take action in scams related to companies that collect money from the public

>> According to sources, ED had questioned both RBI and Sebi officials for their response to these scams like Saradha

>> Although Sebi had initiated prosecution proceedings against these complaints, RBI had not taken action on the grounds that its role is merely regulatory in nature

>> ED has also sent a detailed questionnaire to RBI on the issue but has not received a satisfactory reply

>> RBI replies are reported to be vague and evasive and ED has asked them to provide specific answers to the queries