Sunday Action Line
Money, muscle and murder
The murder of Everest Chits owner Ramesh on July 20 on National Highway 47, allegedly by rival group Himalaya Chits, brought the hideous operations of chit companies and money-lending firms into light. But the police investigation that ensued is limited to the immediate cause of the murder and turns a blind eye towards the root of the disease – the unholy nexus between money-hungry politicians, police officers and more than 39,000 illegally operated chit companies in the State.
Even though State laws require chit companies be registered in Kerala for operating here, only 5,696 of the 45,000 chit companies functioning in Kerala comply to this law (as on March 2004). This is also causing serious revenue loss as the State gets only around 12 percent of the tax that is due from this Rs 400-crore industry.
By registering in states like Jammu and Kashmir, chit companies overcome the provision in Kerala Chitties Act 2002 that 20 percent of the amount collected should be deposited with the State to prevent companies getting away with investors’ money.
As chit companies in the State utilize their deposits in high-rate money-lending, the assistance of goondas became necessary in daily operations. Over years, the chitty company owners learned that it is more profitable to employ goondas as collection agents than outsourcing the ‘pressurized collection’ cases.
Thus Himalaya group, a prime example of chitty companies in the State, grew into a multi-crore business with 58 branches and more than 10,000 collection agents. Are our laws sufficient to bring these fraudulent chitty companies to book? What protection does the law offer to investors in out-of-State chitty companies? Mahir Haneef in Kochi tries to find out the answers.
VA Hakeem, Convener, Kanichukulangara Action Council
Chitty companies have close relations with finance ministers. The president of Kerala State Chitty Foremen’s Association is also the secretary of a minister’s party. Local police also has an understanding with chitty companies. Monthly tips are regularly given to police officers saying that they have won chitty prizes. This happens even if the policemen do not partake in actual chitty proceedings.
All laws in India have ‘except Jammu and Kashmir’ in them. Thus chitties registered in Jammu and Kashmir (JK) do not have to abide by the rules in other states. They do this to avoid remitting security deposit to the government. No government agency has enquired into this till date.
Investors cannot get back their money as they have to go to JK for the legal proceedings as the head office will be set up there. In reality, these companies have only a name board in JK. All these companies are owned by Malayalees and operated in Kerala.
DB Binu, lawyer
The existing laws are enough to provide protection to investors and curb these chitty companies, but they are not being implemented properly. This continues because of the unholy link the chitty companies have with politics and police.
The investors are also at fault in the case of these chitty companies (out-of-State chitty companies). In their craving for high profits, investors forget the risks. The simple procedures in chitty companies also attract them. The collection agent would come to their homes and they can remit as well as get loans from these persons. Investors should be careful in investing only in chitty companies registered according to Kerala Chitties Act.
P Vijayan, Commissioner of Police, Kochi
People are not complaining about chitty companies nor do they enquire about the credibility of these companies before investing. People just want the police to facilitate reimbursement of their money. They are hesitant to register a case stating they were defrauded. We can make an arrest under Money Lenders Act if we get a complaint.
We have formed an action plan to regularly monitor money-lenders and goondas in the city. People can report of such activities to any police station and inform me if no action is taken by them. We plan to strengthen the monitoring and make the money-lenders report to the station and make statements about their activities. All violations do not come under the jurisdiction of police. There are some boards appointed to monitor such cases.
Sharaf, former gangster
When the chitty companies find it difficult to collect money from somebody, they approach us. The normal rate is Rs 20,000 per lakh, but it varies depending on the profile of the defaulter. If the defaulter has ‘grip’, the rate increases.
The chitty companies recover the maximum amount from the defaulter through us and then lodge a case against him on the basis of the blank cheques given by him. The defaulter has to pay our fees also to settle the case.
If we get into trouble with police, the chitty companies will look after that. They will also bear other expenses incurred in the course of collecting the amount. There are collection gangs that operate on an all-Kerala basis.
