KOLKATA: Securities and Exchange Board of India (Sebi) started their probe into Rose Valley's alleged Ponzi schemes when the then state finance secretary, Chanchal Mal Bachhawat, raised the alarm against the group in 2010.
In 2010, Rose Valley's real estate arm was raising public money through several schemes. Alarmed with the rapid spread of the schemes, Bachhawat lodged a complaint with the registrar of companies. Rose Valley had been issuing debentures in 2000-'01, 2004-'05, 2005-'06 and 2007-'08.
In the complaint, Bachhawat alleged that Rose Valley Real Estate & Construction Ltd had been issuing an unlimited number of secured debentures to the public.
Based on registrar of companies' complaint, Sebi started an inquiry into the case and found that Rose Valley had raised Rs 5 crore by issuing secured debentures. Around 791 persons had subscribed to the scheme. Rose Valley raised another Rs 4.97 crore in the same year by issuing non-convertible debentures to 383 persons. According to Enforcement Directorate (ED) officials, Rose Valley flouted Sebi norms during the process.
Sources in ED said that Rose Valley raised a total of Rs 12.82 crore by issuing secured debentures to the public without complying with the Sebi Act. The debentures were issued to a total of 2,585 persons. The case was later referred to the Securities Appellate Tribunal in Mumbai. In its reply, Rose Valley claimed that the amount mobilized by it had a reflection in the balance sheets. Rose Valley also claimed that the company had already paid Rs 3 crore to the shareholders.
Sebi, on the other hand, found the documents submitted by Rose Valley group inadequate. It also alleged that the firm did not file any document regarding the issuance of non-convertible debentures for 2001-06. It also alleged that for all the debentures, through which the company raised money from the public, documents were incomplete.
"In 2013, we had written to Sebi that all the money collected through debentures were paid back. The court also found submitted documents to be sufficient," said a Rose Valley group lawyer.
The Securities Appellate Tribunal later reduced the penalty on Rose Valley from Rs 1 crore to Rs 10 lakh.
According to ED officials, the fund collected from issuing the non-convertible debentures was primarily deposited in several bank accounts of Rose Valley. It was then diversified and utilized in other businesses.
ED has also alleged that funds accumulated through schemes like 'Ashirbad' were later invested in the project at Mandarmani.
ED officials, who are interrogating Gautam Kundu at present, are looking into transactions through an account with a nationalized bank. According to them, the money trail will eventually lead them to discover how the amount was utilized.
According to ED officials, Rose Valley chairman Kundu used the word secure debentures to lure investors and give them a feeling of false safety.
During investigation, ED officials found that one of the debenture holders had neither received any debenture nor was the money refunded to him. ED sources said that the debenture holder was threatened by the Rose Valley group employees and was told not to disturb them about the issue further.