JUDGMENT
G.N. Bajpai, Chairman
1. M/s. Beauty Green Farms 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. 5.5.1998 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.
2. 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.
3. 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.
4. 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 investors latest by February 28, 2000.
5. In the meanwhile, SEBI having regard to the interest of the investors and requests received from various entities, extended the last date for submitting applications 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.
6. As a matter of fact, the company, neither applied for registration under the said Regulations nor has taken any steps for winding up of the scheme(s) and making payment to the investors in the manner provided under the said Regulations. On the contrary, the company contended that it did not fall under the purview of SEBI (Collective Investment Schemes) Regulations, 1999 and thus has prima-facie violated the provisions of Section 12(1B) of SEBI Act, 1992 and Regulations 5(1) read with Regulation 68 (1), 68(2), 73 & 74 of the SEBI (Collective Investment Schemes) Regulations, 1999. SEBI had also issued a public notice in various newspapers in this regard inviting attention of the concerned entities including the Company herein about the statutory requirements under the provisions of SEBI Act and the said Regulations.
7. 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.
8. 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.
9. 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 said argument further, he submitted that the company is ready to discharge all of its contractual obligations in terms of the agreement with the investors in the said scheme. In view of the above submission, as agreed by the representative of the company, it was directed to complete the registration of the land in the name of the investors and report compliance by November 2000.
10. As the company did not report compliance of the said directions within the time granted for the said purposes, directions under Section 11B of SEBI Act 1992 read with Regulations 65 & 73 of SEBI (Collective Investment Schemes) Regulations, 1999 were issued vide Chairman’s order dated December 7, 2000 directing the company to refund the money collected under its schemes 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 the order failing which various actions mentioned therein would follow. The company however did not comply with this direction either.
11. The company was granted another opportunity of personal hearing on September 18, 2001. During the hearing, the company was directed to obtain confirmation from all the investors specifically stating that the company has discharged all its contractual obligations and report compliance by December 2001. The company failed to report compliance of this direction also.
12. Final opportunity of personal hearing before the then Chairman, SEBI was granted to the company on January 14, 2002 wherein the company informed as follows:
That as per the auditor certificate dated 9.1.2002, out of the total 343 purchasers/ investors, 84% of the investors have given undertaking/confirmation stating that the land has been registered in their favour.
13. That though the company has completed registration in favour of 95% of the investors, it is yet to receive the undertaking/confirmation from the rest 11% of the investors. Regarding the remaining 5%, it was informed that these investors have not come forward inspite of letters written to them at the address available with the company.
14. Having regard to the submissions made on behalf of the Company and based on the facts on record, the then Chairman, SEBI directed the company to :
again write to those investors in whose name the land is yet to be registered and simultaneously issue a fresh advertisement in one National daily and one Regional daily having wide circulation in the place where the registered office of the company is situated.
submit to SEBI the audited certificate that the company has discharged all of its obligations to the investors in the scheme and that there are no claims/grievances pending against the company within three months from the date of intimation from SEBI, i.e. February 11, 2002.
15. However, this direction was also not complied with by the company. The company was even reminded about the said directions and its obligation vide SEBI’s letter dt. June 5, 2002. However, the company failed to report compliance of the aforesaid directions till date despite being reminded.
16. Having regard to the above, I am of the view that the Company has been given ample opportunities for complying with the statutory requirements as contained under SEBI Act and SEBI (Collective Investment Schemes) Regulations, 1999. The company has also been given number of opportunities for reporting compliance of various directions of SEBI issued during the personal hearings from time to time for discharging its liabilities toward its investors. The company has also failed to comply with directions of SEBI issued vide order dated 7.12.2000.
17. The company has also violated the provisions of Regulation 5 read with Regulations 68(1), 68(2), 73 and 74 of the SEBI (Collective Investment Schemes) Regulations, 1999.
18. Therefore, I am constrained to take a view, on the basis of the facts of the case, that the Company is not serious about making the repayment to the investors in compliance with the Regulations and directions issued to it from time to time.
19. Now, therefore, in exercise of the power conferred upon me under Section 11B of the SEBI Act, 1992 read with Regulation 65 of the said Regulations, I hereby debar the company / its promoters/directors/managers/persons in charge of the business of its schemes (as given in Annexure A) from operating in the capital market and from accessing the capital market for a period of 5 years from the date of this Order.