Hon’ble Mr. Justice Markandey Katju,
Judge, Supreme Court of India (Retd.)
Press Council of India,
Soochna Bhavan, 8-C.G.O. Complex,
Lodhi Road, New Delhi-110003, Your Honor,
Subject: Complaint against Entire Media for Breach of the recognized ethical canons of journalistic propriety and taste in the publication, which were published in most of the Newspapers & magazines against our industry ‘CHIT FUND’
1. Your honor must be well aware of the recent extensive coverage by the print and visual media of what has come
to be known as Saradha scam. Chit funds governed by the Chit Funds Act 1982 who are members of our Association
are aggrieved by the labeling of the scam as chit fund scam or chit gate scam by the media.
2. We understand
that the Saradha Group from West Bengal has varied business interest in areas like Realty, Agro, Exports, Multi
marketing and even Media and had floated around 160 companies. We further understand that not one of the 160
companies carried on the business of chit funds as per Chit Funds Act 1982 (40 of 1982) enacted by Parliament
which had come into force in the State of West Bengal from as early as 02.04.1984. The scam related to fraudulent
money pooling activities similar to ponzi scheme and had nothing to do with chit transactions by a company doing
3. Though there is no denying that what happened in the matter of Saradha Group and other Multi-level
marketing/Ponzi companies is tragic and has robbed the general public of their hard earned money and it very
well deserves the media attention it’s generating, yet, that does not at all entitle the media to act irresponsibly
without ascertaining the basic facts and launch a vilification campaign against chit funds and malign them badly
under the hallucination that the culprit is a chit funds company.
4. The media, in their frenzy to outwit each
other and spice up their story started writing out of their imagination and how creative they can be! Even under
such tragic circumstances. They freely quoted various sections of the laws governing our industry, without even
bothering to check if it is correct, and in fact some of the newspapers went to the extent of manipulating the
entire Section to suit their requirement. One such example is the case of a story in ‘Navbharat Times’ where
the Reporter invented his own version of Section 2(b) of the Chit Fund Act, 1982, which defines ‘Chit Fund’.
5. Though we held Press Meets in various cities like Delhi, Chennai & Bangalore with the sole purpose of
educating the media and through them the Regulators, Administrators, Ministry officials and Politicians etc.,
it probably was not enough and did not get us the desired result. Though the media carried our version, to some
extent, they continue to tarnish our image. One such instance is the case of a death of the owner of Micro-Finance
Company. In this report, while the body of the report clarified that the person was managing Director of a Micro-finance
company, the headline shrieked “Chit Fund Boss Dies’. The fact is that in spite of our various pleas, this media
onslaught seems to be never ending, as even as of couple of days ago, in a so–called investor education initiative,
in association with Ministry of Corporate Affairs, the TOI carried defamatory article against us. As regards
the eastern starts such reports appear even now, on a day-to-day basis.
6. Our case is that of ‘wrong victimization’ wherein failure of individual or a Residuary NBFC
or Deposit accepting companies and Multi-level Marketing/Ponzi scheme companies is being reported as failure
of a chit fund company, Hence, this complaint.
To present our case, we start with the legal definition of ‘Chit Fund’.
Section 2 (b) of THE CHIT FUNDS ACT 1982 is reproduced below
“Chit” means a transaction whether called chit, chit fund, chitty, kuri or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount;
Explanation – A transaction is not a chit within the meaning of this clause, if in such transaction,-
i.Some alone, but not all, of the subscribers get the prize amount without any liability to pay future subscription; or
ii.all the subscribers get the chit amount by turns with a liability to pay future subscriptions;
7. Some basic features of Chit Funds that distinguishes it from MLM/Ponzi companies are as follows. ·
Reserve Bank of India is the Principal Regulator for Chit funds, and has an advisory role, as provided u/s 73
of The Chit Fund Act, 1982 (Act No. 40 of 1982). · Chit Funds are defined under Sec. 45 I(c) of the RBI
Act. RBI Notification No.DNBC.39/DG(H)-77 dated 20th June 1977 categorizes it as Miscellaneous Non-Banking
company (MNBC) · Since the subject is in the concurrent list (Entry 7 of List III) of the Constitution,
administration of the Rules is with the respective State Governments. The company should be registered with the
Registrar of Chit Fund of the State of their operation · Chit fund company means a company managing,
conducting or supervising, as foremen, agent or in any other capacity, chits as defined in Section 2 (b) of ‘The
Chit Funds Act, 1982’ · Any company carrying on the operation of ‘Chit Fund’ should have the words ‘Chit’,
‘Chitty’ or ‘Kuri’ as part of their company name. · Chit Fund companies are not allowed to
accept deposits from the Public, Trade in Stock, Equity or other cash management. · Chit Funds, as of
now, are not allowed to carry on other businesses without the permission of the Registrar/State Governments.
8. The above submission makes it amply clear that in the said instance of ‘Saradha’, the media committed on egregious
blunder in calling it a ‘Chit Fund’ company.
9. The media, before filing their report/stories, should find out
the nature of the company, the laws governing their operation and should desist from loosely worded reports,
a procedure they conveniently forgot to follow and started screaming ‘MURDER’, in the matter of ‘Saradha Scam’.
In fact, the office of Registrar of Chit Funds in Kolkata is at the ‘Writer’s building’ and is open to one and
all. A mere telephone call would have served the purpose of justice! However, the media were either callous in
their behavior or had any specific agenda to malign our industry, which only they can and should answer.
10. Attributing such events/incidents and failure of individual or a Residuary NBFC or Deposit accepting companies,
as failure of Chit Fund Companies, you will agree, is Erroneous, Unauthenticated and Malicious, and will create
a run-in situation for the various Chit Fund Companies working for last several years in various parts of India.
In fact some companies are more than 100 years old and have been carrying on their activities in impeccable manner.
11. Our resentment is that the media chose to lend credence to such idle speculation, instead of acting in a
responsible manner and abused their potential to create panic and added fuel to the fire!
About our industry
Chit Funds have been around from time-immemorial, even before the advent
of banking. Though the buzzword ‘Financial Inclusion’ is recent, Chit Funds have been doing it since inception,
catering to the un-served population in remote areas and are one of the most popular & trusted form of informal
finance. Even the Bill & Melinda Foundation have chosen the channel of ‘Chit Funds’ for their poverty alleviation
program, in India and are working closely with them in rural as well as urban India In the light of the above,
we request you pass an order 1. Directing the Press at large to issue a clarification/article of similar size
and prominence, as of the earlier incorrect reports, acknowledging the mistake and clarifying the correct facts
along with an unconditional apology. 2. Putting a gag on erroneous use of the term ‘CHIT FUND’ 3. To run
Public awareness campaign, highlighting the difference between Chit Fund Companies and Residuary NBFC or Deposit
accepting companies, MLM Companies/Ponzi schemes, at their cost, to offset some the damage done to our image
Merit for bypassing the laid down Procedure for complaint
While, we are aware that the laid
down procedure is to first write to the editor of the concerned newspaper first drawing his attention as to what
is considered to be a breach of journalistic ethics or an offence against public taste and seeking right of reply,
this being the case of entire Media and not restricted to any particular publication, we seek your indulgence
to allow us to approach your honor directly and if you deem it proper, make it a case, as in a case of public
importance, touching the council’s statutory responsibilities, suo-motu take cognizance and order on-the- spot
inquiry Sample copies of the said media reports can be furnished on hearing from you. If given an opportunity,
we can present our case in person. Thanking you, Sincerely, T.S. Sivaramakrishnan
All India Association of Chit Funds (Regd.)