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SEBI pulls up consumer body over suspected irregularities in bills

Market watchdog seeks explanation from Consumer Guidance Society of India for 'inflated' reimbursement claims

After a slew of corruption cases involving politicians and corporations in the country, the functioning of a supposedly upright consumer body may now be under the scanner. It is learnt that the Consumer Guidance Society of India (CGSI) is suspected of financial irregularities related to the various programmes that it conducts on behalf of the Securities and Exchange Board of India (SEBI).


Hear us out: A letter dated May 21 sent by CGSI to SEBI to clarify its
stand on the amounts disallowed by the market watchdog


For the expenses it incurs on these consumer awareness programmes held for SEBI, CGSI is reimbursed by the market watchdog. The issue now is that CGSI has been claiming reimbursements for allegedly inflated expenses for the various programmes and events organised for SEBI.

The issue was raised in the Rajya Sabha this August by MP Rajiv Chandrashekhar, which prompted the SEBI to be more vigilant. According to highly placed sources in CGSI, SEBI has rejected reimbursement claims of around Rs 3 lakh. They say SEBI has questioned the authenticity of several bills claimed by the consumer body.

The irregularities came to light in mid-2010 when officials from the SEBI's Investor Assistance and Education Department scrutinised the bills submitted by CGSI and allegedly found many unnecessary, dubious or inflated bills.

The issue surfaced after careful examination of nine letters (copies available with MiD DAY) written to SEBI by CGSI that justified the expenses and made an appeal for reimbursement of the amount. According to SEBI rules, the money is reimbursed two to three years after the claim is made.

In one such letter dated May 21, CGSI explained its stand on each expense made by it. The claims rejected by SEBI were expenses incurred on conveyance and travel allowance, photography charges, hiring of halls and LCD projectors, along with the cost of designing pamphlets and banners (see box).

A CGSI insider, who spoke on the condition of anonymity, said no bills were submitted for claiming travel vouchers and very few were signed by the treasury department. "Some bills were signed by the managing committee members themselves and fuel vouchers were submitted without proper bills from the gas station," the source said.

Another source said that while most programmes were held in college auditoriums, the hall charges for one such seminar was fraudulently claimed even when the college authorities had provided the facility free of cost. "The SEBI officials detected the foul play when the officials cross-checked with the college authorities and they denied charging the consumer body," the source said.

While Dr Manohar Kamath, honorary secretary, CGSI, claimed the SEBI had simply raised certain doubts and CGSI was just clarifying these as part of routine procedure (see The Other Side box), a SEBI source said the watchdog had directed the CGSI to produce its bank statements to corroborate its justifications. "Several representations to justify the expenses failed to convince SEBI since some of the programmes were visited by the observers, who found irregularities," said the source. 

Rejected claims
>> Conveyance and travel expenses: Rs 1,64,261 
>> Photography charges: Rs 32,800 
>> Hall rent and cost of hiring LCD projector at Saket College (on 6/1/2011): Rs 15,000  
>> Designing charges for 27 events at rate of Rs 2,000 per event: Rs 54,000 
>> Rent for 13 projectors at rate of Rs 3,000 per projector: Rs 39,000

The other side
DR Manohar Kamath, honorary secretary, CGSI, said CGSI was only clarifying some doubts raised by SEBI. "It is a routine procedure in all organisations before releasing large sums. Certain unscrupulous elements in CGSI are picking holes despite its transparent functioning and maligning its image. We are a public organisation and function within all guidelines and frameworks prescribed by government," Kamath said. 

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