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March 31, 2023 06:49 am | Updated 06:49 am IST – GUNTUR
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The third Additional Chief Metropolitan Magistrate, Vijayawada, ordered 14 of days judicial remand for Chartered Accountant Kudaravalli Shravan, in connection with the Margadarsi Chit Fund Private Limited (MCFPL) case, on Thursday, according to Crime Investigation Department (CID) of the Andhra Pradesh police.
N. Sanjay, Additional Director-General of Police, CID, AP, Mangalagiri, said in a press note that the court considered the evidence produced by the CID and sent Mr. Shravan to 14 days judicial remand.
He said that the CID, on Wednesday arrested Mr. Shravan, in connection with the irregularities in the MCFPL case. The police also seized his laptop and a volume of records from him.
The CID registered seven FIRs under Sections 120(B) (criminal conspiracy), 409 (criminal breach of trust), 420 (cheating) and 477(A) read with 34 (falsification of accounts) of the Indian Penal Code, Section 5 of Andhra Pradesh Protection of Depositors in Financial Establishments Act, 1999 and Section 76,79 of Chit Funds Act,1982.
Mr. Sanjay said MCFPL was being investigated for various financial irregularities, including non-payment of monthly subscriptions/ instalments in respect of multiple tickets held in the name of the Margadarsi, which were later substituted with new subscribers.
“MCFPL was illegally diverting the amounts deposited by the chit subscribers to mutual funds and others to enable huge and unauthorised investments into the speculative markets. They also inflated the balance sheets citing unrealised cheques that never actually existed, towards the year end and got certified by auditors to the tune of hundreds of crores of rupees as balance on hand. No encashment of such cheques was seen in the bank accounts of MCFPL in the subsequent days.”, he said..
The official said that there were other irregularities like, instead of depositing the future subscription amount into a second bank account as per the provisions of Section 22, Chit Funds Act ,the company was transferring the said amount to the Corporate Office Account and in turn, issuing a ‘receipt’ carrying interest at the rate of 4 to 5% in the name of the subscriber. The company was also being investigated for its non-disclosure of revenue and expenditure account and statement of assets and liabilities and details of investment as per Rule 28 (read with Section 24 of the Chit Fund Act)”.
During questioning by the CID officials Mr. Shravan reportedly admitted that he had not followed due diligence and without following due process of verification of the branch-level financial statements or bank statements, he had certified the Annual Financial statements of MCFPL. This casts a shadow on the annual reports (including the cash reserves) submitted by MCFPL to the Registrar of Chits, the CID has concluded.
It was also found that principles of auditing were conveniently ignored at various levels by Mr. Shravan, especially when it came to financial statements of bank balances: both current and fixed deposits. The auditor could not provide confirmation of balances in banks — current and fixed deposits. “Confronted with the conformations obtained from banks by CID, the auditor could not explain the balances of fixed deposits shown on the balance sheet inflated by a few hundreds of crores.”, Mr. Sanjay claimed.
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