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Kerala-based Chemmanur International Jewellers has been running a deposit scheme under the pretext of advance payment for gold purchase, which directly violates the Reserve bank of India (RBI) Act, a SEBI probe has found.
According to an Indian Express report, the jewellery brand, endorsed by football legend Diego Maradona, has been under the radar of various financial agencies in the recent past.
Capital markets regulator Securities and Exchange Board of India (SEBI) reported to the Kerala State Level Bankers Committee in August that Chemmanur International Jewellers was running a deposit scheme that directly violated Section 45 (S) of the RBI Act, 1934.
The scheme was operational in many states. SEBI said that the group had collected Rs 998.4 crore between FY13 and FY15, but the total sale of gold by the group in the same period amounted to only Rs 66.3 crore with a negligible inventory compared to the amount raised.
The SEBI report said that there was no actual sale of gold in most cases and that the group had accumulated a large sum of money from lots of people in two bank accounts.
"Gold advances appear to be a major source of funds for the jewellers and the quantum of advance is no way comparable with the sales figures and the inventories in stock," the SEBI report said.
Also, some of the money was invested in or transferred to sister companies, including NBFC Chemmanur Credit and Investment. Allegations of deemed public issues by companies in the group are still being probed by SEBI.
Former Chief Minister and Chairman of Administrative Reforms Committee V S Achuthanandan told Indian Express that the government should take strict action against the financial fraud of the group.
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