The Securities and Exchange Board of India has issued wind-up notice to Sumangal Industries Ltd (SIL) for its collective investment schemes (CIS).
In an order made on Tuesday, the market watchdog instructed the Bengal-based company to refund investors the promised (“due”) returns within three months ending October 8.
Assured Returns
“Sumangal Industries Ltd shall not collect any money from investors or launch or carry out any collective investment schemes including the scheme which has been identified as CIS in this Order,” the SEBI said.
SIL has been mobilising funds from investors assuring returns of 20-100 per cent through its “Flexi Potato Purchase Scheme.”
The regulator had, in May this year, issued a show-cause notice to Sumangal asking for its explanation as to why its schemes should not be considered as collective investment schemes.
The company, however, had earlier claimed that it was only trading in potatoes for which it has a trading licence and was not running a collective investment scheme. According to the company, it was dealing in agricultural and non-agricultural products both within and outside India.
CIS
The samples of purchase order, invoice, authorisation letter, credit note and transfer of credit note submitted by the company reveal that it receives investment from the customers with the application form and issues invoice against those investments made by the customers in its products.
“The sequence of events suggests that SIL has pooled the investment received from the customers for the purchase of potatoes,” the SEBI order said.
Moreover, the cold storage receipts are issued in the name of SIL thereby giving it the sole access to potatoes stored in the cold storages. “The investor does not have day-to-day control over the potatoes,” the order said.
The schemes are, therefore, CIS in nature and were being run without obtaining the registration from SEBI.
“Considering the above discussion, it can be said that the transactions between SIL and its customers are not trading business transactions simpliciter, rather they satisfy all the ingredients of a CIS,” the SEBI order noted.