Investigations by Serious Fraud Investigation Office

Posted on    01 December 2012


Government has said that the Ponzi and Multi-Level Marketing (MLM) schemes fall within the purview of ‘Money Circulation’ which is an offence under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. That Act is administered by the Ministry of Finance (Department of Financial Services) through the State Governments. Giving this information in written reply to a question in the Lok Sabha, Shri Sachin Pilot, Minister of Corporate Affairs, said that recently Ministry of Finance in consultation with the Reserve Bank of India, have circulated Model Rules to be notified by the States. These rules make it amply clear that investment schemes run in the MLM mode are illegal under the above Act and organizers of such schemes need to be prosecuted. While coordinating action against such schemes lies with the States and the nodal Ministry, the Ministry of Corporate Affairs has so far received complaints against 86 Companies mostly located in West Bengal and Tamil Nadu States and one company registered outside India doing business on-line in association with some Indian companies.


Shri Pilot informed the House that his Ministry has ordered investigation into the affairs of 7 companies under Section 235 of the Companies Act, 1956 to be conducted by Serious Fraud Investigation Office (SFIO) and scrutiny of balance sheets under section 234 and/or inspection of the Books of Accounts and other records of the remaining 80 companies under Section 209A of the Companies Act, 1956 to ascertain, if the activities involve violation of the provisions of the Companies Act, 1956.

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