AgriMin, probe agencies join hands to check frauds in co-ops

Aim is to share info between probe agencies on suspect promoters who haven't been brought to book due to grey areas in the law

Agriculture ministry officials recently met officers from various investigative agencies for a coordinated effort to check financial frauds in co-operative societies. Such meetings are to be held regularly, officials said.

Officers attended from the Central Bureau of Investigation, Enforcement Directorate, Serious Fraud Investigation Office, registrars of co-operative societies from the states, and the Securities and Exchange Board (Sebi) of India, apart from those of the department of agriculture and co-operation in the ministry.

The aim is to share information between all financial probe agencies on promoters or proprietors thought to have resorted to fraud but to have escaped being brought to book because of grey areas in the law.

The department is also the central registrar of co-operative societies. All such societies which operate in more than one state have to get a licence from it, under the Multi-State Co-operative Societies Act. About 1,400 multi-state co-ops (these operate in more than one state and must have at least 50 members) are registered under the central law. Another 600,000-odd co-ops are registered with state authorities.

“The basic idea is to share information, speed investigation, keep a tab on dubious transactions between financial entities and so on,” an official said. He said the multi-state law was also being amended, to plug loopholes and make it more effective.

“There have been cases of money laundering in some societies,” the official added. The trigger for the meeting was a case where a Pune-based private food company transferred Rs 400 crore into a multi-state co-operative society floated by the same name, to escape Sebi regulations. The transaction was completely legal under the multi-state co-op law but dubious under the Sebi Act.

“Such frauds happen when regulators are weak,” the official explained. Two years earlier, it was made mandatory for all multi-state co-ops to get a no-objection certificate from all states where they wished to operate. The order was issued after the Saradha scam.

PLUGGING ALL LEGAL LACUNAE

• Department of cooperation under the ministry of agriculture gets in touch with CBI, ED, SFIO and SEBI to check financial frauds in cooperate societies
• Meeting happened after it was found that several companies escaped the law taking advantage of the loophole in the legal structure
• All cooperative societies, which operate in more than one state, have to seek licence under the Multi-State Cooperative Societies Act
• Centre is planning to strengthen the Act to give it more teeth