In the matter of:

M/s. Celestine Farms & Properties Management Pvt. Ltd.          Appellant
Vs.
Securities and Exchange Board of India                                         Respondent
 
 

APPEARANCE:

Ms. Usha K. Srivastava
Advocate                                                                                          for Appellant

Shri J. Ranganayakulu
Jt. Legal Advisor, SEBI                                                                    for Respondent
 

(Appeal arising out of the order dated 26.07.2001 made by the Securities and Exchange Board of India)

The Appellant is a private limited company registered under the Companies Act, 1956.  It is stated to be carrying on the activities of collective investment schemes attracting the regulatory provisions applicable to the collective investment schemes provided in the SEBI (Collective Investment Schemes) Regulations, 1999 (the 1999 Regulations).

The Respondent is a Statutory Board established under the Securities and Exchange Board of India Act, 1992 (the Act).  Registering and regulating the working of collective investment schemes is one of the functions of the Respondent.  The Respondent has notified the 1999 Regulations for the purpose.  The said Regulations came into force from 15.10.1999.

The 1999 Regulations interalia provides for registration of the existing collective investment schemes as well as new schemes with the Respondent in the manner prescribed in the Regulations.

The Appellant was carrying on the activities of collective investment schemes on the date of notification of the 1999 Regulations.  As per regulation 5  �any person  who immediately prior to the commencement of the Regulations was operating a scheme, shall subject to the provisions of chapter IX of the Regulations make an application to the  Board for the grant of certificate  within a period of 2 months from such date�. Chapter IX prescribes the requirements to be followed by collective investment schemes which were operating on the date of notification of the  Regulation  (i.e. 15.10.1999).  It is a self contained chapter on �existing Collective Investment Schemes�  The chapter contains regulations 68 to 74 directed to the existing schemes.

Regulation 72 provides for registration of the existing schemes.  Collective investment schemes which fail to get registered under regulation 72 are required to comply with the requirements of regulations 73/ 74.  The text of these regulations is extracted below:

�73.  Manner of repayment and winding up.- (1)  An existing collective investment scheme which,-

(a)   has failed to make an application for registration to the Board; or

(b)   has not been granted provisional registration by the Board; or

(c)   having obtained provisional registration fails to comply with the provisions of regulation 71;

(2)    The existing collective investment scheme to be wound up under sub-regulation (1) shall send an information memorandum to the investors who have subscribed to the schemes, within two months from the date of receipt of intimation from the Board, detailing the state of affairs of the scheme, the amount repayable to each investor and the manner in which such amount is determined.

(3)   The information memorandum  referred  to  in  sub-regulation (2)  shall  be dated and signed by all the directors of the scheme.

(4)   The Board may specify such other disclosures to be made in the information memorandum, as it deems fit.

(5)   The information memorandum shall be sent to the investors within one week from the date of the information memorandum.

(6)   The information memorandum shall explicitly state that investors desirous of continuing with the scheme shall have to give a positive consent within one month from the date of the information memorandum to continue with the scheme.

(7)   The investors who give positive consent under sub-regulation (6), shall continue with the scheme at their risk and responsibility:

Provided that if the positive consent to continue with the scheme, is received from only twenty-five per cent or less of the total number of existing investors, the scheme shall be wound up.

(8)   The payment to the investors, shall be made within three months of the date of the information memorandum.

(9)   On completion of the winding up, the existing collective investment scheme shall file with the Board such reports, as may be specified by the Board.

74.  Existing scheme not desirous of obtaining registration to repay.-  An existing collective investment scheme which is not desirous of obtaining provisional registration from the Board shall formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in regulation 73.�

The Appellant could not comply with the requirements of regulation 72.  It also did not comply with the requirements of regulations 73  and 74.  In that context the Respondent passed the following order:

�Vide Order dated May 18,2001, directions under Section 11B of the SEBI Act, 1992 read with Regulations 65 & 73 of SEBI (Collective Investment Schemes) Regulations, 1999 were issued to you as you, having failed to make an application for grant of registration, had failed to wind up your existing collective investment schemes and make repayments to your investors in accordance with the provision of the SEBI (Collective Investment Schemes) Regulations, 1999.  As per the said Order, you were directed to refund the money collected under the 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 said Order.

As you have failed to comply with the directions of the said Order, you have 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 powers conferred under Section 11B of the SBEI Act, 1992, I hereby debar you/your promoters/your directors/your managers/persons in charge of the business of your schemes from operating in the capital market for a period of 5 years form the date of this Order.�

The Appellant has filed an application (20 of 2002) on 12.7.2002 stating the action so far taken by it to comply with requirements of regulation 74 and its willingness to comply with the requirements of the said regulation.  Learned Counsel submitted that the Appellant is in touch with the Respondent in this regard.  She stated that in the said context, the Appellant desires to withdraw the present appeal with liberty to approach the Tribunal in case the Respondent passes any fresh adverse order against the Appellant.

In the application under reference also, the Appellant has prayed that it be permitted to withdraw the appeal with liberty to file appropriate proceeding in case any further adverse orders are passed by the Respondent.

The prayer allowed.  Appeal dismissed as withdrawn.