sebi:CO/198/IMD/01/2004

SEBI · SEBI · 2001-07-23 · G.N Bajpai, Chairman

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Company, its promoters, directors, managers and persons in charge of business of its schemes prohibited from dealing in the securities market and from accessing the securities market for a period of five years from the date of the order.

Provisions invoked

• s. 11B
• s. 4(3)
• s. 11

Regulations

• Reg. 71
• Reg. 73
• Reg. 73(2)
• Reg. 65
• Reg. 5
• Reg. 71(2)

Parties

• M/s Ion Exchange Enviro Farms Ltd
• Mr. Gopal Shankar Ranganathan
• Mr. Jose Peter
• Mr. K.R. Alpaiwalla
• Mr. Murlidhar Digambar Dharmadhikari
• Mr. Abhiram Seth
• Mr. Narendra Kumar Pandey
• Mr. M.A. Sreeram Chellappa
• Mr. V. Sreeram Rao
• Mr. Jaya Prakash Narakkat
• Mr. Rajesh Sharma
• Mr. P.S. Gupchup
• Mr. V.G. Rajadhyaksha

Holding

SEBI prohibited M/s Ion Exchange Enviro Farms Ltd and its promoters, directors, managers and persons in charge of the business of its schemes from dealing in and accessing the securities market for five years for failure to comply with Regulation 71 conditions and with SEBI's order dated 27.11.03 directing refund of money collected under the schemes.

Full text

M/s Ion Exchange Enviro Farms Ltd (hereinafter referred to as the "company") mobilized funds amounting to Rs. 2360.35 lacs from the investors / public under the Collective Investment Schemes being operated by it. Pursuant to the press release and the public notice issued by SEBI on November 26, 1997 and December 18, 1997, the company filed an application with SEBI for the grant of provisional registration which was granted by SEBI on February 16, 2001 subject to the conditions, inter alia, as specified in Regulation 71 of the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as the said Regulations). Subsequent to the grant of provisional registration, SEBI, periodically advised the company vide letters dated July 23, 2001, January 11, 2002, May 7, 2002, May 21, 2002 and September 16, 2002 to submit an interim report on the status of compliance of the conditions specified in Regulation 71 of the said Regulations, such as creation of trust, getting the existing schemes appraised and rated as required under the said Regulations. However, the company failed to comply with the conditions specified in Regulation 71 of the said Regulations. In the interest of natural justice, SEBI granted an opportunity of personal hearing to the company before me, on January 18,

to the projects / arrangements of the company and the initial application of the company for a provisional registration being misconceived the question of complying with the aforesaid Regulations did not arise. In this regard, it is noted that the company while submitting the application to SEBI seeking registration, vide letter dated June 1, 2000 had sent a declaration signed by the directors of the company, inter alia, stating that "The schemes of the applicant company are in the nature of Collective Investment Schemes". Further in terms of Regulation 71(2) of the said Regulations, the company vide letter dated February 27, 2001, had informed SEBI that the company would be complying with the conditions of Regulation 71 of the said Regulations and a written undertaking in this regard had been submitted to SEBI. Thereafter, vide a letter dated December 24, 2001, the company had sought an extension of provisional registration for a further period of 6 months from February 2002 for complying with all conditions for grant of final registration. It is also noted from the terms of the agreement entered into between the company and the investors, as well as the report dated February 17, 1999 of the Special Auditor, viz. M/s Mukund M. Chitale & Co., Chartered Accountants appointed by SEBI as per the directions of the Hon’ble High Court of Delhi, that the contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the

As per the provisions of Regulation 73 (1)( c) of the said Regulations, if an existing Collective Investment Scheme, after obtaining provisional registration, fails to comply with the provisions of Regulation 71 of the said Regulations, has to wind up the existing scheme(s) in accordance with the procedure stipulated in Regulation 73(2) to (9) of the said Regulations. Since the company has failed to comply with several conditions specified in Regulation 71 of the said Regulations such as getting the existing schemes rated, appraised and creating a trust, etc., within the stipulated period of two years from the date of grant of the provisional registration, the company is required to wind up the existing schemes and make repayments to the investors. Further, the company is required to send an Information Memorandum to the investors, who have subscribed to the schemes, within 2 months from the date of receipt of the intimation from SEBI in terms of Regulation 73(2) of the said Regulations. SEBI vide its letter dated 25.4.03 advised the company, on completion of the winding up and repayment to the investors in terms of Regulation 73 of the said Regulations, to file a detailed report in the prescribed format so as to reach SEBI within 3½ months of the date of the Information Memorandum. Thereafter, a press release dated 2.5.03 was issued by SEBI to that effect. However, the company has not wound up its schemes to make repayment to its investors in accordance with the said Regulat

Source: SecMarx — sebi:CO/198/IMD/01/2004. 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.