Who can investigate multi-State financial scams - State police or CBI? Supreme Court to examine

A plea has been filed before the Supreme Court seeking a Central Bureau of Investigation (CBI) probe into an alleged ₹1,000-crore deposit scam [Sureshkumar & Ors. vs. Union of India & Ors.].

The plea was filed by a a group of depositors arguing that the ongoing investigation by the Tamil Nadu Police has failed to protect their right to a fair and effective investigation

A Bench of Chief Justice of India Surya Kant and Justice Joymalya Bagchi issued notice on the petition on February 6 and called for a response from the Union government.

The Court will examine whether such multi-State schemes will have to be probed by the CBI or whether the State police can investigate such matters.

The petitioners are depositors who say they are victims of a large-scale financial fraud allegedly committed by Universal Trading Solution Private Limited, a Coimbatore-based company, and its Managing Director G Ramesh. According to the plea, the company collected deposits not only in Tamil Nadu but across several southern States.

The scheme, the petition states, was widely advertised in 2018. Investors were promised 12 percent annual interest, along with a monthly return of 10 percent of the principal, with full repayment assured within one year. Many depositors are said to have invested their life savings, believing the scheme to be safe and lucrative.

By early 2019, the company allegedly defaulted on repayments.

As per the petition, it became clear that the scheme was fraudulent and that public deposits had been siphoned off to acquire immovable properties in the names of the company, its Managing Director and his family members.

Following complaints, the Economic Offences Wing (EOW) of the Tamil Nadu Police registered the first FIR in June 2019 for offences under cheating and criminal breach of trust, as well as under the Tamil Nadu Protection of Interests of Depositors Act and the Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act).

Over time, multiple FIRs were registered in connection with the same scheme.

According to the petitioners, despite the registration of these cases, the investigation remained inconclusive.

As per the plea, key provisions of the BUDS Act have not been followed and that no meaningful progress has been made either in identifying all depositors or in realising assets for repayment. According to the petition, around 73,000 depositors were affected and the total amount involved is close to ₹1,000 crore.

In 2019, the Madras High Court appointed a committee headed by former judge Justice KN Basha to oversee repayment to depositors. That committee was later discontinued.

In 2022, the High Court constituted another committee headed by former judge Justice M Sathyanarayanan but it was subsequently dissolved after the High Court held that disbursement before substantial recovery of funds would be premature.

The matter then reached the Supreme Court.

In May 2023, while hearing a challenge filed by the Managing Director of the company, the Supreme Court appointed a one-member committee headed by retired Madras High Court judge Justice M Govindraj to supervise the sale of properties linked to the alleged fraud.

The depositors have now alleged that even this committee has failed to deliver results.

According to the plea, more than two and a half years have passed since the committee was constituted, but no property has been auctioned, no comprehensive list of depositors has been finalised, and no money has been disbursed.

As per the petitioners, the investigation itself is fundamentally flawed since deposits were collected from different States and therefore, the State police lack jurisdiction to continue the probe.

Further, the inter-state nature of the scheme has resulted in an anomaly in that the Kerala High Court has already ordered a CBI probe into connected offences arising from the same scheme in Kerala, with the State of Kerala granting consent under the Delhi Special Police Establishment Act.

In contrast, the investigation in Tamil Nadu continues with the State police, leading to fragmented and inconsistent proceedings, it has been contended.

In this backdrop, the petitioners have sought three principal reliefs:

First, they have asked the Supreme Court to transfer all FIRs linked to the scheme to the CBI.

Second, they have sought directions to the court-appointed committee to urgently identify depositors, sell attached properties and disburse proceeds within a fixed timeframe.

Third, they have requested that one of the petitioners be appointed as a representative of the depositors to facilitate communication with the committee.

With the top court's notice, the matter will next be heard once the Central government files its response.

The petitioners were represented by advocates Mukund P Unny and Sanjay Nair S.

[Read Order]