sebi:16927

SEBI · SEBI · 1999-12-29 · G.N. Bajpai, Chairman, Securities and Exchange Board of India

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Facts / Headnote

Direction to refund money collected under Collective Investment Scheme(s) with returns within one month, failing which four specified enforcement actions would follow

Provisions invoked

• s. 11B
• s. 24
• s. 12

Regulations

• Reg. 68
• Reg. 74
• Reg. 73
• Reg. 65
• Reg. 5

Parties

• Company (name not specified in the text)

Holding

The Company, having failed to either apply for registration of its Collective Investment Scheme(s) with SEBI or wind up and repay investors as required by the SEBI (CIS) Regulations, 1999, was directed to refund money collected under its scheme(s) with returns within one month, failing which prosecution, debarment, criminal referral, and winding up proceedings would follow.

Full text

In terms of Regulation 73 (1) of the said Regulations, an existing Collective Investment Scheme which has failed to make an application for registration with SEBI, is required to wind up the existing scheme(s) and repay the investors. Further as per regulation 74, an existing Collective Investment Scheme which is not desirous of obtaining provisional registration from SEBI is required to formulate a scheme of repayment and make repayment to the existing investors in the manner specified in Regulation 73. SEBI vide a letter dated December 29, 1999 and also by way of a public notice dated December 10, 1999, had given intimation to the Company in terms of regulation 73 (2) which cast an obligation on it to send an Information Memorandum to all the investors detailing the state of affairs of the scheme(s), the amount repayable to each investor and the manner in which such amount is determined. Accordingly, the Company was required to send the Information Memorandum to the investors latest by February 28, 2000. In the meanwhile, SEBI having regard to the interest of the investors and requests received from various entities, extended the last date for submitting application for grant of registration by existing entities upto March 31, 2000. The same was intimated by SEBI to the Company vide a letter, a press release and a public notice. However, the Company still did not apply for grant of registration with SEBI in terms of the said Regulations. As a matter of fact, the Company, ne

Repayment Report" to SEBI in accordance with the said Regulations, despite its confirmation to do so. As requested, the Company was granted personal hearings on February 6, 2001, February 7, 2001, February 20, 2001, June 20, 2001, September 26, 2001, December 4, 2001, February 11, 2002 and on May 08, 2002 before Chairman, SEBI to explain the reason of such non compliance of the said Regulations. The said hearings were attended by the Company officials wherein they submitted that the Company does not want to continue with its Collective Investment Scheme (s) and therefore it has not applied for registration. However, they promised that the Company is taking all the steps for the repayment to the investors and sought further time for such repayment to the investors. During the personal hearing on 26.09.2001, which was attended by Shri Mukhtar Hussain, Chairman and Shri Surendra Khandhar, Managing Director of the Company, both of them had given a written assurance to SEBI, interalia, to the effect that the Company would make all the efforts to repay the investors at the earliest but not later than December 31, 2002, it would make an application in Company Application No. 340/2001 filed by it before the Hon'ble Bombay High Court amending the proposed scheme of repayment in terms of the aforesaid assurance and shall also publish this commitment in four newspapers within 45 days from the date of such commitment. During the hearing it was noted that the Company has made contradictor

Proceedings have been held on number of occasions. Opportunity has been given several times. Having regard to the above, I am of the view that the Company has been given number of opportunities for making repayment to the investors. At every occasion, the representatives of the Company has assured SEBI that it would repay the investors and would take every possible action in this regard. However, the conduct of the Company is such that it wants to pay lip service to what is committed to SEBI. Therefore, I am constrained to take a view, on the basis of the facts of the case, that the Company is not serious about fulfilling its promises and making the repayment to the investors. In any case, the fact remains that the Company has not complied with SEBI (CIS) Regulations, 1999. Now, therefore, in exercise of the power conferred upon me under section 11B of the SEBI Act, 1992 read with Regulation 65 of SEBI (CIS) Regulations, I hereby direct the Company to refund the money collected under its Collective Investment Scheme (s) with returns which is due to the investors as per the terms of the offer within a period of one month from the date of this Order failing which the following actions would follow: Initiation of prosecution under section 24 of SEBI Act, 1992 which prescribes imprisonment for a term which may extend to one year, or with fine, or with both against the Company /its promoters /its directors/managers / persons in charge of the business of its scheme (s). The Company

Source: SecMarx — sebi:16927. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.