sebi:WTM/PS/19/CIS-NRO/JULY/2015

SEBI · SEBI · 2013-11-26 · Prashant Saran, Whole Time Member

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Facts / Headnote

Noticees found to have violated Section 12(1B) of the SEBI Act, Regulation 3 of the CIS Regulations, and Regulation 4(2)(t) of the PFUTP Regulations; directed to wind up schemes, refund investments with 15% interest within three months, restrained from securities market for four years, and referred for civil/criminal proceedings and winding up.

Provisions invoked

Regulations

Parties

Holding

The noticees were found to have launched and carried on collective investment schemes without obtaining a certificate of registration from SEBI, in contravention of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations, and to have illegally mobilized funds in violation of Regulation 4(2)(t) of the PFUTP Regulations.

Full text

Page 2 of 27 received a complaint vide e-mail dated November 26, 2013 alleging that several companies including Kalpbut have launched various collective investment schemes without obtaining certificate of registration from SEBI or Reserve Bank of India. 1.3 On enquiry, SEBI, prima facie found that Kalpbut is engaged in fund mobilizing activities from the public, which is in the nature of a Collective Investment Scheme without obtaining a certificate of registration from SEBI. Therefore, SEBI, vide an

Page 3 of 27 matters relating and incidental to development of the plot including survey, demarcation, clearing, cultivation, planning to develop crops, trees, plants, saplings , use of fertilizer and pesticides irrigation harvesting, etc.. 2.4 The property forming part of the scheme would be managed solely by Kalpbut on behalf of the buyer/investors further indicating uncertainty regarding plot of land that will be allotted to the investor upon maturity of the agreement term. 2.5 The schemes also provided for return to the investors. The 'Registration letter' issued to an investor by Kalpbut under its 'Multiple Installment Scheme' indicated an 'Assured Realizable cost' at the end of the term. ', For instance, an investor making an investment in 'Multiple Installment Scheme for a period of 5 years had to pay Rs. 1,150/- as half yearly installment, for a plot size of 60 sq. yards, where the "plot/land consideration" was mentioned as Rs 12,000/-. The investor was entitled to an 'Assured Realizable cost' of Rs 18,000/- i.e. he/she was entitled to an amount of Rs 6,000/- as return after the term period of 5 years. Further, in case Kalpbut committed breach of the agreement by not allotting land in favour of the investor, the "buyer” was entitled to terminate the Plot buyer agreement, and in such event the investor was entitled to refund of the investment along with simple interest @ 15% per annum from the date of contract. Thereby, the scheme also provided for the return to the in

Page 4 of 27 (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as ‘the CIS Regulations’). However no registration was sought by the noticees from SEBI. 2.7 The mobilization of funds from the public, was also prima facie found to be a fraudulent practice in terms of Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practice Relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’). The directors of Kalpbut were alleged to be responsible for the illegalities. 2.8 In view of the prima facie findings on the violations, vide the said interim order dated December 10, 2014,the noticees were directed:- not to collect any fresh money from investors under its existing schemes; not to launch any new schemes or plans or float any new companies to raise fresh moneys; to immediately submit the full inventory of the assets including land obtained through money raised by Kalpbut; not to dispose of or alienate any of the properties/assets obtained directly or indirectly through money raised by Kalpbut; not to divert any funds raised from public at large which are kept in bank account(s) and/or in the custody of Kalpbut.” 3.1 The noticees, in the said interim order, were advised to file their replies within a period of 21 days from the date of receipt of the interim order and also to indicate whether they wish to avail an opportunity of personal hearing in the matter. 4.1 Service of the interim order: The

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Source: SecMarx — sebi:WTM/PS/19/CIS-NRO/JULY/2015. 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.