SEBI restrains Citrus from operating collective investment schemes under Section 11AA

SEBI found that Citrus's activities constituted a 'collective investment scheme' under Section 11AA of the SEBI Act. Citrus was directed not to collect fresh funds, launch new schemes, or dispose of assets obtained through the schemes. The order was to be immediately effective and remain until further notice, with Citrus and its Directors given 21 days to respond.

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Issues Involved:
1. Allegations of Citrus Check Inns Limited running a "Ponzi Scheme" and "mis-selling" its schemes.
2. SEBI's investigation into whether Citrus's activities constitute a "collective investment scheme" under Section 11AA of the SEBI Act.
3. Non-cooperation of Citrus in providing required information to SEBI.
4. Determination of whether Citrus's mobilization of funds falls under the ambit of 'collective investment scheme'.
5. SEBI's interim order and directions to Citrus and its Directors.

Issue-wise Detailed Analysis:

1. Allegations of Citrus Check Inns Limited running a "Ponzi Scheme" and "mis-selling" its schemes:
SEBI received a complaint on January 17, 2014, alleging that Citrus Check Inns Limited was operating a "Ponzi Scheme" and mis-selling its schemes to the public. The complainant mentioned that the company refused to refund the money invested in June 2012, stating that the refund would only be provided after 4 to 5 years without interest.

2. SEBI's investigation into whether Citrus's activities constitute a "collective investment scheme" under Section 11AA of the SEBI Act:
SEBI initiated a preliminary inquiry to determine if Citrus was carrying out activities of a 'collective investment scheme' as per Section 11AA of the SEBI Act. SEBI sought various documents and information from Citrus, including the Memorandum and Articles of Association, details of directors, brochures, application forms, and financial statements. Despite multiple extensions, Citrus delayed providing the complete information.

3. Non-cooperation of Citrus in providing required information to SEBI:
Citrus repeatedly sought extensions and failed to submit the required information within the stipulated time. SEBI issued multiple reminders, but Citrus only partially complied. SEBI noted that Citrus was not cooperating and was attempting to conceal the true nature of its fund mobilizing activities.

4. Determination of whether Citrus's mobilization of funds falls under the ambit of 'collective investment scheme':
SEBI examined the material available and found that Citrus's schemes had the characteristics of a 'collective investment scheme' as defined under Section 11AA(2) of the SEBI Act. The schemes involved pooling of funds from investors with a promise of returns or holiday points, which could be redeemed in cash. The investors did not have day-to-day control over the management and operation of the schemes, and the funds were managed on their behalf by Citrus.

5. SEBI's interim order and directions to Citrus and its Directors:
SEBI concluded that the mobilization of funds by Citrus under its various holiday plans constituted a 'collective investment scheme' without obtaining the necessary registration. SEBI issued an interim order directing Citrus and its Directors to:
- Not collect any fresh money from investors under existing schemes.
- Not launch any new schemes or plans.
- Not raise fresh money from any other existing company within the group.
- Not float any new companies to raise fresh money under such schemes.
- Submit a full inventory of assets obtained through the money raised.
- Not dispose of or alienate any properties/assets obtained through the money raised.
- Not divert any funds raised from the public.
- Furnish all requested information within 15 days.

The order was to take immediate effect and remain in force until further notice. Citrus and its Directors were also given 21 days to respond to the order and indicate if they desired a personal hearing.

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