Sai Prasad Group's activities under multi-agency probe

MCA, Sebi, RBI and EOW probing violations firm says it has replied to notices

Pune-based Sai Prasad Group, which has interests in real estate, food and films, is being probed for alleged financial irregularities, including illegal raising of funds. The probe was initiated by the ministry of corporate affairs ( MCA) about two years ago, after it received complaints from investors based in Raipur. Now, the Securities and Exchange Board of India ( Sebi), the Reserve Bank of India ( RBI) and the economic offences wing (EOW) of the Goa police are also involved in the investigations.

The Sai Prasad Group, promoted by Balasaheb Bhapkar and his son, Shashank Bhapkar, has seen good growth in less than a decade. Among its assets, it lists several hundreds of acres of agriculture farms in Maharashtra, Madhya Pradesh and Chhattisgarh. The group also has offices in Goa and Uttar Pradesh. Last year, the Bhapkars also ventured into tinsel town, producing the film Chhodo Kal Ki Batein.

The funds for these ventures, however, are collected in an unauthorised manner from small investors who are promised attractive returns. The money is collected under several plans such as monthly installment plans and one-time plans. Several ‘advisers’ and ‘zonal’ and ‘regional’ officers, who together took up to 40 per cent of the amount collected as commission, helped the group collect the funds, investigations by Business Standard showed.

In a report in October, an investigation officer of the Goa police's economic offences cell said though Sai Prasad Properties had its registered office in Goa, the operations were being managed from Pune. "The Goa office is managed by an office assistant and an employee. The company is inviting investment in property and promising high returns. There is no allotment of property in the investment plan," the report said, adding the company hadn’t shown any property for the current investment scheme in Goa. “The investment plans of the company will start maturing after two to three years and a problem of repayment might arise,” it said.

The report was accessed under the Right to Information (RTI) Act by Mumbai-based RTI activist Bhupendra Singh.

According to the group’s website, currently, the group is spread across about 100 cities and accounts for 131 branches and 1,500 employees. It has about 600,000 advisers serving about 1,100,000 customers and associates. “The ultimate goal of Sai Prasad Group of Companies is to provide customer satisfaction and customer delight with diligence, sincerity and commitment, which is based on the principle of joint participation and expectations of customers,” the website says.

Shashank Bhapkar, managing director of the group, did not respond to calls and an email seeking comments. Group Chief Executive Officer Sanjay Roy said, “We have responded to all notices from the RoC (Registrar of Companies). If there are investigations, you have to ask the people conducting the investigations.” He declined to share further details on the group.

Sources in the RoC, however, confirmed the company hadn’t given satisfactory responses to many of the questions raised in show-cause notices. They added the registrar was in the process of initiating criminal prosecution proceedings against the directors and senior officials of the group.

The MCA and RBI have been receiving complaints on the group’s activities since 2010-11. RBI had written to the Goa police’s economic offences cell, saying the company wasn’t registered as a non-banking financial company and, therefore, wasn’t authorised to raise deposits from the public.

The MCA had directed its regional director for the western region (based in Mumbai) to inspect the books of Sai Prasad Properties and Sai Prasad Foods under Section 209. The inspection report alleged several violations, including diversion of funds, manipulation of records and non-compliance with provisions under the Income Tax Act, the Banking Regulation Act, etc. It also alleged several violations of the provisions of the Companies Act.

In August 2012, the RoC, Goa, had written to the Sebi chairman, intimating violation of Collective Investment Schemes Regulations under the Sebi Act. Officials said Sebi had issued a show-cause notice to this effect and was investigating the matter.

UNDER THE SCANNER

• Funds for group ventures are collected from small investors who are promised attractive returns
• The money is collected under several plans such as monthly installment plans and one-time plans
• 'Advisers' and 'zonal' and 'regional' officers together take up to 40% of the amount collected as commission
• Goa police's economic offences cell said though Sai Prasad Properties had its registered office in Goa, operations were being managed from Pune
• RBI said the company wasn't registered as an NBFC and, therefore, wasn't authorised to raise deposits from the public.

Courtesy:

N Sundaresha Subramanian / New Delhi Jan 25, 2013, 00:29 IST
http://www.business-standard.com/india/news/sai-prasad-groups-activities-under-multi-agency-probe/499897/