The Securities Appellate Tribunal today asked two Collective Investment Scheme (CIS) operators, who have collected funds from millions of investors in the name of real estate business, to refund the money within six months.
One of the two firms, Maitreya Services Pvt Ltd had collected more than Rs 700 crore from about 2.5 million investors, while another entity NGHI Developers is also estimated to have mopped up a significant amount from about 30,000 investors.
Both the companies were found by SEBI to be running unauthorised CIS businesses and were asked by the regulator to refund the money collected through such schemes.
After hearing their appeals against respective SEBI orders, SAT today passed two separate orders upholding the regulatory directions against them, but gave each of them six months time to refund the money in view of the “arduous process involved in executing the scheme of repayment” to such large number of investors.
The timeframe was given with a rider that the companies would submit a report to SEBI after six months giving accurate details regarding the progress of payment to investors.
In the case of Maitreya Services, SEBI, in March, had barred the company and its directors from the securities market till the time all its CIS were wound up. It had decided to initiate prosecution proceedings against them.
SEBI found that the company had launched various schemes under which money was collected from the public. These schemes differed on the basis of the periodic payment to be made by the investor and the time period for which such investments were to be made.
In the course of its inquiry, SEBI found that the company had launched and operated CIS without registering with it for the same and an amount of Rs 804 crore was outstanding with it to be repaid to investors.
SEBI’s probe found that the company had mobilised Rs 1,332 crore from public as “advances” as on March 31, 2011, and had repaid Rs 538 crore as “repayment” to investors — resulting in Rs 794 crore as outstanding to be repaid as on that date.
The regulator also found that the assets were insufficient to meet the liabilities and its repayment obligations were almost double the value of its total movable and immovable assets.
Besides, it did not have enough land bank as compared to the investments mobilised by it from the investors. In 2007-08, it had an outstanding balance of Rs 305 crore due for repayment and a land inventory of only Rs 1.7 crore.
In the matter of NGHI Developers, SEBI through an order in July 2012, had banned the Jaipur-based firm from collecting money from investors and accessing the capital market.
The company was collecting funds from the public for developing plots of land through its plans.
SEBI had said, prima facie, it appears that NGHI is related to another company — Nicer Green Forests Ltd — which is under the regulator’s probe.
The SEBI found that the company was substituting Nicer Green’s investment certificates with the NGHI bonds.
It appeared that NGHI promoters and directors are using the company as a vehicle to subvert the SEBI order against Nicer Green.
SEBI regulates CIS, which involves pooling in of money from multiple investors for a specific objective. These two firms are not registered as CIS entity with the regulator and therefore, the investment schemes run by it are in contravention of SEBI rules.
While giving six-month timeframe to both companies for refund of money, the Tribunal today said, “in case any eventuality arises in future for the appellants (two firms) to seek further extension of time to implement SEBI’s order in question the appellants may approach SEBI for extension of time..”
“...and SEBI will consider the same and pass appropriate order depending upon progress made by appellants in respect of implementation of impugned order,” the SAT in a similar worded orders.