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The Calcutta High Court on Tuesday dismissed a writ petition filed by Rose Valley challenging the constitutional validity of SEBI in regulating collective investment schemes.
SEBI had, in January 2011, observed that Rose Valley Real Estate and Construction Ltd was mobilising funds under collective investment schemes (CIS) without obtaining a certificate of registration as required under Section 11AA of SEBI Act.
Rose Valley in turn moved the High Court challenging the constitutional validity of the said Act.
Dismissing the writ petition, Justice Dipankar Dutta observed that Section 11AA of SEBI Act was legal and the provisions provided in it were valid.
Rs 10-lakh fine imposed
The Court also slapped a Rs 10-lakh fine on Rose Valley.
SEBI, in its January 2011 order, said that Rose Valley was raising funds through sale of plots of land and pooling the same to develop the land and providing investors the return on the amount invested at the end of the scheme in the form of credit value. Investors could utilise the credit value to either adjust partly against the cost of land or to get refund for the investments made.
“These activities were akin to the features of a CIS, specified under the section 11AA of the SEBI Act,” the regulator’s January 2011 order said. SEBI had further directed the company not to collect any money from investors or to launch any scheme and not to dispose of any of the properties of the scheme.
SEBI has recently also barred Rose Valley Hotels and Entertainment from collecting money from investors under its ‘holiday membership’ schemes alleging that such schemes were CIS in nature and required a certificate of registration from the market watchdog.
Meanwhile, Rose Valley will appeal to the Division Bench of Calcutta High Court shortly against Tuesday’s judgment, Gautam Kundu, Chairman of Rose Valley Group, said in a statement.
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