Regulatory winding-up order set aside where collective investment scheme compliance and investor interests were not properly assessed.

An order directing winding up of a collective investment scheme could not stand where SEBI proceeded on alleged non-compliance without adequate supporting material and without properly considering compliance already undertaken, the object of the regulations, and investor interests. The tribunal noted that the appellant had obtained provisional registration and had taken substantial steps such as credit rating, audit, appraisal and creation of a trust; some conditions were premature, some could still be complied with on further time, and others required reconsideration by the regulator. The winding-up direction was set aside and the matter remanded to SEBI for fresh disposal in accordance with law.

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Issues: Whether the order directing winding up of the appellant's collective investment schemes and repayment to investors was sustainable, and whether the matter required fresh consideration by SEBI.

Analysis: The appellant had obtained provisional registration and had taken substantial steps towards compliance with the regulatory conditions, including credit rating, audit, appraisal and creation of a trust. The impugned order proceeded on alleged non-compliance with several conditions without adequate supporting material and without adequately considering the object of the regulations or the interest of investors. Some conditions were found to be premature, some capable of being complied with on granting further time, and some were held to require reconsideration by the regulator. In these circumstances, the order was held to have been passed without proper application of mind.

Conclusion: The impugned order directing winding up was set aside and the matter was remanded to SEBI for fresh disposal in accordance with law.

Ratio Decidendi: Where a regulatory order affecting an existing collective investment scheme is passed without adequate material and without proper consideration of compliance already undertaken and investor interests, the order cannot stand and must be reconsidered afresh in accordance with law.

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