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CO/438/CIS/01/2003
SECURITIES AND EXCHANGE BOARD OF INDIA
DIRECTIONS UNDER SECTION 11B OF THE SEBI ACT, 1992, READ WITH REGULATIONS 65 AND 73 OF SEBI (COLLECTIVE INVESTMENT SCHEMES) REGULATIONS, 1999, ISSUED TO M/S. GREEN EARTH FARMS AND ESTATE PRIVATE LIMITED, CHENNAI.
M/s. Green Earth Farms and Estate Private Limited (hereinafter referred to as "Company") having its office at Flat No.4, 1st Floor, Swati Complex, 10, Bazullah Road, T. Nagar, Chennai, did not file information with SEBI pursuant to public notice dated 18.12.1997 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 SEBI’s letter dated 21.04.1998 asking the company to show cause as to why appropriate action should not be initiated against it for non furnishing of information, the company while furnishing certain information contended that it is not operating Collective Investment Schemes.
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 was 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.
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.
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 (IM) to all the investors detailing the state 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.
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.
As a matter of fact, the company, neither applied for registration under the said Regulations nor had 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 continued to contend that it did not fall under the purview of SEBI (Collective Investment Schemes) Regulations, 1999. 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 utilized for the purposes of the scheme, 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.
Thus, the company had prima-facie violated the provisions of Section 12(1B) of SEBI Act, 1992, and Regulations 5(1) read with Regulations 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, 1992, and the said Regulations.
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. As the company did not reply to the show cause notice,
directions under Section 11B of SEBI Act, 1992, read with Regulations 65 & 73 of SEBI (Collective Investment Schemes) Regulations, 1999, were issued vide the then SEBI Chairman’s order dated December 7, 2000, directing the company to refund the money collected under its scheme(s) 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.
However, before proceeding further in terms of the said Order dated 7.12.2000, the company was granted personal hearings by the then Chairman, SEBI. The first personal hearing was granted to the company to make its submissions on its contentions on September 18, 2001. As the company expressed its inability to attend the hearing on the said date, another opportunity of personal hearing was granted to it on October 31, 2001 which was attended by the Managing Director of the company.
During the hearing, the company was directed by the then Chairman, SEBI to wind up its scheme(s) and repay the investors in compliance of the Regulations. The representative of the company requested time of one and a half months to obtain consent letters from the investors to continue with its scheme(s) at their own risk and responsibility. The company vide letter dated January 4, 2002 stated that it is working on the directions of the then Chairman, SEBI during the hearing held on 31.10.2001 to secure confirmations from the investors and file before SEBI. However, the company did not comply with the said directions.
Final opportunity of personal hearing was granted to the company by the then Chairman, SEBI on January 14, 2002. The company vide its letter dated January 4, 2002 expressed its inability to attend the said hearing and requested time upto 15.02.2002 to obtain confirmation from all the members and give more statistical information to SEBI.
As it was felt that the company is not complying with the Statutory requirements, directions issued from time to time and it is also avoiding appearance before SEBI, having regard to the written submissions filed by the company vide its letter dated 27.12.01 and 04.01.02 and other facts on record, the then Chairman, SEBI granted the company time upto 15.02.2002 either to obtain positive consent from the remaining investors to continue with their scheme(s) at their own risk and responsibilities or discharge its obligations to those investors to their satisfaction.
The company was informed of these directives vide SEBI’s letter dated January 28, 2002. It was also advised to file the winding up and repayment report within 15 days of completion of winding up of its scheme(s).
However, the company did not file the report within the prescribed time. Instead, vide letters dated February 19, 2002, March 27, 2002, April 12, 2002 and May 16, 2002 the company repeatedly sought extension of time to file the winding up and repayment report thereby delaying the process of winding up and making repayment to the investors.
Vide SEBI’s letter dated June 13, 2002 , the company was again advised to complete the process of winding up and make repayment to the investors and file the Winding up and Repayment Report within 10 days from the date of receipt of the letter. The company was forewarned that failing to comply with these directions various actions mentioned in the then Chairman SEBI’s Order dated 07.12.2000 would follow.
Subsequently, the company vide its letter dated 16.9.2002 filed the Winding up and Repayment Report to SEBI. As it was seen that the process of winding up and repayment is yet to be completed, the company was advised vide SEBI’s letter dated 03.10.2002 to complete the process of winding up, make repayment to the investors and file the Winding up and Repayment Report with SEBI within 10 days from the date of receipt of the letter. The company was again forewarned that failing to comply with these directions, various actions mentioned in the then Chairman SEBI’s Order dated 07.12.2000 would follow. The company however has failed to submit complete Winding up and Repayment Report till date in terms of aforesaid directions.
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, 1992, 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.
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.
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/its directors/its 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.
Place : Mumbai G. N. BAJPAI
Date : 6.01.03 CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA
ANNEXURE A
Names of the Directors:
- Shri B Anantharamakrishna – Managing Director.
- Shri G Rajesh, Executive Director.
- Shri B S Purushotham
- Shri B Suryanarayanna
- Shri R Suresh Babu