sebi:CO/386/CIS/11/2002

SEBI · SEBI · 1999-10-15 · G.N. Bajpai, Chairman, Securities and Exchange Board of India

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Facts / Headnote

Debarred the company/its promoters/directors/managers/persons in charge of the business of its schemes from operating in the capital market and from accessing the capital market for a period of 5 years from the date of the Order

Provisions invoked

• s. 11B
• s. 11A
• s. 12

Regulations

• Reg. 68
• Reg. 74
• Reg. 73
• Reg. 65
• Reg. 5
• Reg. 5(1)
• Reg. 68(1)
• Reg. 30A

Parties

• M/s. Beauty Farms and Resorts Pvt. Ltd.
• Shri B L Narasa Reddy, CMD
• Shri K Sreedhar Reddy, Director
• Shri C Sreenivasulu Reddy, Director
• Shri K Sassidhar Reddy, Director
• Shri K Sacheendranadh Reddy, Director

Holding

The Company was found to be operating an unregistered Collective Investment Scheme in violation of Section 12(1B) and Regulations 5(1), 68(1), 68(2), 73 and 74, and the Company/its promoters/directors/managers/persons in charge (Annexure A) were debarred from operating in and accessing the capital market for 5 years from the date of the Order.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ DIRECTIONS UNDER SECTION 11B OF THE SEBI ACT 1992 READ WITH REGULATIONS 65 AND 73 OF SEBI (COLLECTIVE INVESTMENT SCHEMES) REGULATIONS, 1999. M/s. Beauty Farms and Resorts Pvt. Ltd. (herein after referred to as "Company") did not file information with SEBI pursuant to the Public Notice dt. 18.12.97 whereby SEBI had directed all the existing Collective Investment Schemes to file certain information about their schemes with it by 15.01.1998. Pursuant to the letter dt. 18.05.1998 from SEBI asking the company to show cause as to why appropriate action should not be initiated against it for such non-furnishing of the information the company while furnishing certain information contended that it is not operating Collective Investment Schemes. Consequent to the notification of SEBI (Collective Investment Schemes) Regulations, 1999 (herein after referred to as the "said Regulations") dated October 15, 1999, every person who, immediately prior to the commencement of the said Regulations, operating a Collective Investment Scheme(s), was required to make an application to SEBI for the grant of registration within a period of two months from the date of notification, under the provisions of the said Regulations. In terms of Regulation 73 of the said Regulations, an existing Collective Investment Scheme which has failed to make an application for registration with SEBI was required to wind up its schemes and

Consequent to the notification of SEBI (Collective Investment Schemes) Regulations, 1999 (herein after referred to as the "said Regulations") dated October 15, 1999, every person who, immediately prior to the commencement of the said Regulations, operating a Collective Investment Scheme(s), was required to make an application to SEBI for the grant of registration within a period of two months from the date of notification, under the provisions of the said Regulations. In terms of Regulation 73 of the said Regulations, an existing Collective Investment Scheme which has failed to make an application for registration with SEBI was required to wind up its schemes and repay its investors in the manner specified therein. 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 by way of a public notice dated December 10, 1999 and also vide letter dated December 29, 1999 had given intimation to the Company that in case it is not desirous of obtaining registration from SEBI, it was obliged to send an Information Memorandum to all the investors detailing the sate 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 investor

Further, by way of a Show Cause Notice dated May 12, 2000, the Company was asked to show cause as to why the action mentioned therein be not initiated against it for the aforesaid violations/ non-compliance. The Company vide its reply dated May 27, 2000 reiterated that it did not fall under the definition of collective investment schemes. However from the perusal of document filed by the company with SEBI it was observed that the schemes of the company were squarely falling within the definition of Collective Investment Scheme as defined under Section 11AA of the SEBI Act, 1992 as the contributions made by the investors were pooled together and then utilised for the purposes of the schemes, the contributions or payments to such scheme were made by the investors with a view to receive profits, income or produce, the scheme property was managed by the company and the investors therein did not have day to day control over the management and operation of the scheme. However before proceeding further in terms of the said Show Cause Notice dt. 12.05.2000, the company was granted personal hearings. First of such personal hearings took place on September 6, 2000 before the then Chairman, SEBI to explain the reason of such non compliance of the said Regulations. Shri Muralidhar Reddy, Advocate, authorised representative for the Company, appeared for the personal hearing and reiterated that the schemes of the company are not collective investment schemes. However, without pressing the

Source: SecMarx — sebi:CO/386/CIS/11/2002. 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.