sebi:WTM/RKA/EFD-DRA-III/1-2/2016

SEBI · SEBI · 2009-03-20 · Rajeev Kumar Agarwal, Whole Time Member

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Facts / Headnote

Directions issued: refund of investments with interest and/or in specie distribution of shares to contributories/beneficiaries, public notice, winding up of the Trust, and compliance report to SEBI; failure to comply within twelve months to attract further actions.

Provisions invoked

• s. 11A
• s. 11
• s. 19
• s. 11(1)
• s. 12
• s. 11(2)
• s. 73
• s. 28A
• s. 67(3)
• s. 67
• s. 32
• s. 56
• s. 2(1)
• s. 153
• s. 3(42)

Regulations

• Reg. 73
• Reg. 65
• Reg. 3
• Reg. 2(h)
• Reg. 4(2)
• Reg. 107
• Reg. 2(1)(i)
• Reg. 65(d)

Holding

The Trust's arrangement of pooling contributions from 32,376 farmers to invest in GBL shares constituted an unregistered 'collective investment scheme' under section 11AA of the SEBI Act, and the noticees were directed to refund investments with interest and/or distribute shares in specie to the contributories/beneficiaries and wind up the Trust.

Full text

Order in the matter of Godavari Biorefineries Limited Page 2 of 31 (i) GBL has formed a trust namely Sameerwadi Sugarcane Farmers’ Welfare Trust (hereinafter referred to as the “Trust”); (ii) The Trust was collecting contributions from sugarcane farmers in North Karnataka aiming at a total of ₹100 crore; (iii) As against investments received from the Trust, GBL privately placed its 50 lakh shares of ₹10/- each at a premium of ₹190/- per share to the Trust; and (iv) The share certificates were to be subsequently transferred by the Trust to the contributors/beneficiaries on pro rata to their contributions.

Order in the matter of Godavari Biorefineries Limited Page 3 of 31 Bagalkot and Bijapur who have been supplying or will supply sugarcane to GBL. (h). The Trust Deed contemplated contribution by the beneficiaries for the purpose of investment in securities. In order to become a beneficiary, the farmer had to contribute money to the trust. Some of the salient features of the Trust Deed, were observed as under:  Clause 1.1 – “Contribution” means the money to be contributed by a farmer to the Trust to become a beneficiary.  Clause 7.4 - “the Trustees shall utilize the corpus to acquire Securities, with potential to generate returns, and shall fund the objectives of the Trust from the dividends accruing such Securities”.  Clause 4.2 - The Trust Fund shall vest in the Trustees and the Trustees shall hold the Trust Fund and the accumulation, additions, accretions thereto in trust for the benefit of the beneficiaries.  Clause 5.2.3 - The beneficiaries could inter alia opt for distribution of their beneficial interest in the Trust as per the procedure laid down in Clauses 5.3 and 5.4 of the Trust Deed.  Clause 8 - General Powers of the Trustees: All the affairs of the Trust shall be managed and administered by the Trustees in accordance with the Trust Deed- viz; carrying out welfare schemes, borrowing money, investment in the securities, to hold and administer the Trust Fund, to open accounts with any scheduled banks and depository, to appoint from time to time mangers, secretari

Order in the matter of Godavari Biorefineries Limited Page 4 of 31 from 50 to 50,000 shares each certificate) representing these 22,69,600 shares as described in the following Table:

Source: SecMarx — sebi:WTM/RKA/EFD-DRA-III/1-2/2016. 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.