Lok Sabha

July 24, 2019

Kalyan Banerjee speaks on The Banning of Unregulated Deposit Schemes Bill, 2019

Kalyan Banerjee speaks on The Banning of Unregulated Deposit Schemes Bill, 2019


Firstly Sir, I broadly agree with the various clauses of this Bill, except in one place. I have to speak on certain things. The Chit Fund Act was enacted in 1982. Chit funds are working since 1982. There are regulatory agencies yet there are unauthorised chit funds which have been established. Why did regulatory agencies like the Reserve Bank of India,\ and SEBI did not act? Why were no steps taken by the RBI and SEBI at all? This is my first concern. 

Had they taken those steps then we would not have faced this situation at all. The cases have been happening right from 1982, they did not start yesterday. Therefore, why were steps not taken from 1982 and chit funds allowed to run without a license, and why have the regulators not been able to catch the people running these unauthorised chit funds?

Do chit fund constitute a valid business? Ponzi schemes are invalid. So if chit funds are valid and Ponzi schemes are invalid, how will the common people be able to make a decision about investing in chit funds? 

Recently we have come to learn that one of the members at the Standing Committee meeting which is being referred to forwarded a question to the governor of the Reserve Bank of India, asking why the term ‘chit fund’ is used to describe such funds. The Reserve Bank of India answered the question. 

If a businessman says that he is running such and such a business, or if a person says he is from such a profession, I have to take it on face value. How will I know whether he is running a chit fund or a Ponzi scheme? I am appealing to the Honourable Minister of State, who is present here, through you, Sir, to kindly communicate to the Honourable Prime Minister that our opinion is that all chit funds must be banned. This is our opinion. 

In the Saradha case, which is being referred to, the Supreme Court said in its judgment, in para 25: ‘There is another aspect to which we must pay attention to at this stage, this relates to the role of the regulatory authorities. The investigation conducted so far puts a question mark on the role of the regulatory authorities like SEBI, Registrar of Companies and officials of RBI within whose respective jurisdictions and areas of operation this can not only be proved but …’. The synopsis of the judgement named some of the officials belonging to these authorities and gives reasons why their roles need to be investigated. 

Please, Honourable Minister of State, talk with your colleagues later on, and note the language of the Supreme Court – the synopsis goes to the extent of suggesting that regular payments towards bribe were paid through middlemen to some of those who are supposed to keep an eye on such Ponzi companies. 

Some of the regulatory authorities’ members’ – whose duty it is to prevent such breaches of law – possible connivance needs to be closely examined. The Supreme Court has also directed for an investigation against such persons. So now, jhas there been any investigation against the RBI? Against the SEBI? Have any officers of the RBI have been interrogated? Has the CBI been intimated? Has any regulatory agency been interrogated? Has any person been arrested? The Supreme Court has clearly said that they were taking bribes. So what is the status on this aspect? You are giving power to the RBI and the SEBI as agencies and authorities. I don’t mind that. But the question is whether they are working or not. They are not working at all.

 There are Acts too, like in our State and in Kerala. In our state, the Act is The West Bengal Protection of Interest of Depositors in Financial Establishments Act, 2013, which was passed in 2015. Now the Bill has come here. I have only one point with respect to this Bill. I’m not going to any other part. 

We know that law and order comes within the Seventh Schedule, List II, entry number 1. Therefore if any offence is committed, it is also under the States’ jurisdiction to act on it. Now what is being done? Under Section 30(2), the reference made by the competent authorities under Sub-section 1 shall be deemed to be with the consent of the State gGovernment. Sir, you know this deeming is a legal fiction and nothing more than that. It’s a legal fiction. Can a legal fiction be made an explicit legal provision in a statute? It cannot be done. So therefore you are interfering with the power of the States. 

You are hitting at the federal structure of the Constitution.The question is whether  the power which is under List II of the Seventh Schedule can be exercised in an indirect manner under List I of the Seventh Schedule. Therefore this question is ultra vires. There cannot be a deeming provision.

I have another point to make, and then I will finish. Why are these people running chit funds, Ponzi schemes, etc. The reason is simple. The ground reality is this: Every day you are deducting interest rates, either bank interest or small savings interest rates; so how will a common man, a pensioner, a divorced woman or a poor man depend on these small savings schemes for their daily needs? Therefore you, the Government, is forcing the common people, the poor people to take loans in an indirect manner. This should not be done.If you want to stop these Ponzi schemes, these chit funds, you need to increase the interest rates.

Sir, now my last point. I have heard so many comments about Saradha, Rose Valley, etc. I want to say through you, Sir, that the nation knows the Supreme Court gave a judgement in 2014 on the basis of which the CBI is doing an investigation. Now we are in 2019. Chargesheets have been filed. But why has the money trail, the list of beneficiaries, not been revealed? 

Speedy trial is also a right under Article 21. An accused is also a victim; both enjoy the right to a speedy trial under Article 21 of the Constitution of India. Why should the sword of Damocles be hung upon a person for years together? It has to be proved that he is an accused, I ask, why has the CBI not been able to find out the entire money trail? If you think I have committed an offence, throw me into jail. I am not opposing it but do it quickly. Don’t keep the sword of Damocles hanging over my head year after year. 

Thank you, Sir.