The Kolkata Crisis (Sarada Group Financial Scam)
By Chinnamma KC
The Sarada Group financial scam is one of the biggest financial scams ever seen by the country. The Sarada Group which is a consortium of about 200 companies ran a fraudulent chit fund scheme which collapsed in 2014. The group had owned several TV channels and newspapers in West Bengal. The Group ran collective investment schemes without clearance from SEBI (Securities and Exchange Board of India). About 17 lakh people from West Bengal, Tripura, Assam, Jharkhand and Chhattisgarh were the victims of this Ponzi scheme. The West Bengal government even constituted a fund to ensure that the low-income investors in the scam could be compensated. The issue turned into a political scandal when the involvement of many politicians of West Bengal and other states in the scandal came to light. It was a major campaign issue in the 2014 national elections. The scandal with its political overtones has recently been in the news due to the conflict between the West Bengal government and the CBI.
When the matter came to light in 2014, the Income Tax department and the Enforcement Directorate started investigating the issue. The West Bengal government formed a Special Investigation Team (SIT) headed by Mr. Rajeev Kumar, the present police commissioner of Kolkata. Later, the investigation of the scam was handed over to the CBI (Central Bureau of Investigation). The CBI claims that Mr. Kumar had failed to appear before it inspite of being repeatedly summoned for inquiry. Mr. Kumar is accused of ‘inaction, selective action and nexus with the perpetrators of the scam’ during his stint as the head of SIT probing into the scam. The CBI alleged that Mr. Kumar had failed to hand over all the evidence and had doctored the evidence related to the scam. The CBI had claimed that they had substantial evidence against Mr. Kumar to arrest him without a warrant.
However, on February 3 when the CBI officials reached Mr. Kumar’s residence to arrest him they were rounded up and detained by the State Police. Their mobile phones were taken away and they were illegally confined. The State Police surrounded the CBI office and denied CBI officials access to the office. The house of Mr. Pankaj Shrivastava, CBI Joint Director (East) was surrounded and the officer and his family were virtually held hostage. The Chief Minister Ms. Mamatha Banerjee, along with the DGP and the Additional Commissioner of Police staged a Dharna protesting the act of the CBI and called it a ‘constitutional breakdown’. She alleged that Central Government was misusing the CBI for its political vendetta. The act of the TMC members and the Chief Minister was viewed suspiciously by politicians of other parties with some politicians even voicing doubts that the TMC was involved in the scam and the protest was to save itself.
The CBI filed an application in the Supreme Court on February 4 seeking a direction to be issued to the West Bengal police to co-operate in the investigation. The CBI complained of a hostile environment and non-cooperation by the West Bengal police. The CBI had previously filed a petition before the Hon’ble Court on the grounds of destruction of evidence by the parties involved. The CBI had also filed a contempt of court petition alleging that the Supreme Court’s orders to investigate were disobeyed by the West Bengal government and the police by their non-compliance with the same. The Supreme Court bench headed by Chief Justice Ranjan Gogoi, on February 5, decided that Mr. Kumar could not be arrested but he should appear before the CBI in Shillong, Meghalaya. He was also directed to cooperate with the CBI in the investigation.
The CBI which is the premier investigation agency of India finds itself embroiled in a tussle between the Central and West Bengal government. The issue also raises the question whether the Supreme Court can refer a matter to the CBI without the consent of the concerned state government. It also raises the question whether the West Bengal police were justified in detaining the CBI officials. The Supreme Court has justified its actions on the grounds that the scam had a multi-state effect. According to the Delhi Special Police Establishment Act, the CBI can operate in any part of the country. The CBI officials have claimed that they were promised full cooperation by the DGP of the state. However, the actions of the West Bengal government and its police certainly do not meet the standards expected of the Executive in a democratic State.
 Vivek Kaul, "Dear KC Chakrabarty, here's the real reason why people invest in Ponzi schemes", Firstpost, (December 20, 2014), available at https://www.firstpost.com/business/dear-kc-chakrabarty-heres-the-real-reason-why-people-invest-in-ponzi-shemes-748689.html.
 Substantial material against Kolkata Police Commissioner, CBI tells SC, MoneyControl, (February 4, 2019), available at https://www.moneycontrol.com/news/india/substantial-material-against-kolkata-police-commissioner-cbi-tells-sc-3482351.html.
 CBI vs Mamata Banerjee: Supreme Court to hear CBI's plea on February 5, MoneyControl, (February 4,2019), available at https://www.moneycontrol.com/news/politics/cbi-vs-mamata-banerjee-supreme-court-to-hear-cbis-plea-on-february-5-3477881.html.
 Mamata vs CBI: Supreme Court directs Kolkata Police commissioner to join probe in chit fund scam, The Economic Times (February 6, 2019), available at https://economictimes.indiatimes.com/news/politics-and-nation/supreme-court-directs-kolkata-police-commissioner-to-join-the-cbi-probe-in-chit-fund-scam/articleshow/67846008.cms.
 SC brought Mamata's Banerjee's political histrionics to screeching halt: Smriti Irani, MoneyControl, (February 5, 2019), available at https://www.moneycontrol.com/news/politics/sc-brought-mamatas-banerjees-political-histrionics-to-screeching-halt-smriti-irani-3486721.html.