Calcutta High Court Seeks CAG for Forensic Audit After SEBI Withdraws from Rose Valley Scam Investigation

The Calcutta High Court is seeking to assign the Comptroller and Auditor General (CAG) to conduct a forensic audit after SEBI withdrew from this responsibility.

SEBI has stepped back from performing the forensic audit into alleged financial irregularities by the committee led by Justice (Retd) Dilip Seth, which was established by the Calcutta High Court to manage investor refunds in the Rose Valley chit fund scam.

The division bench comprising Justice Rajarshi Bharadwaj and Justice Uday Kumar is interested in transferring this responsibility to the CAG. The Centre has been requested to inform the court next week if the CAG can undertake this task.

The bench emphasized, "If SEBI is unwilling to conduct the forensic audit, the court cannot remain silent. We had even suggested SEBI seek assistance from the CBI if needed, but they avoided the matter. Therefore, an investigation must proceed."

The Assets Disposal Committee's (ADC) legal representative claimed everything was in proper order, requesting that while an investigation could take place, it should not be labeled a forensic audit. They argued that such terminology might send an inappropriate message, given that a former judge heads the committee.

The court clarified that its order for SEBI to conduct a forensic audit came only after thorough examination of all relevant documentation and accounts. However, SEBI expressed reluctance, citing insufficient qualified personnel for the task.

Regarding the use of Webel's (West Bengal Electronics Industry Development Corporation) technology for refund operations, the Enforcement Directorate (ED) again raised objections, with support from the Justice Seth Committee. The ED contended that Webel lacks competence for this task and submitted a written application to engage another company. The Rose Valley company's attorney opposed this suggestion, and the bench appeared to concur.

The Calcutta High Court noted, "Webel performed excellently for another committee (the Talukdar Committee) - records confirm this. Now your committee claims Webel is underperforming and wants to bring in an external agency. Who would fund that agency? The committee has no resources. Why should depositors' money be used for this? Request funding from the Centre if necessary. Under no circumstances should funds be taken from depositors' accounts for this purpose."

The bench further commented, "Despite extensive discussion from the ED, they have recovered only Rs 500 crore out of the total Rs 17,500 crore still unpaid. Where is the remaining Rs 17,000 crore? What has transpired during this time? What actions has the ADC Committee taken? First, the forensic audit must occur, and only afterward will we hear all arguments."

The next hearing is set for November 7.