Letter to Chairman, Press council of India

Hon’ble Mr. Justice Markandey Katju,
(Judge, Supreme Court of India (Retd.)
Chairman 
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 chit business.
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
General Secretary
All India Association of Chit Funds (Regd.)