Collective investment scheme regulation bars private trust structures and sustains investor refund and interest obligations.

Pooled investment arrangements managed without investors' day-to-day control fall within the regulatory concept of a collective investment scheme, and such schemes must be operated only in the form and manner prescribed by the securities law regime. The Court held that art fund schemes run through private trusts were collective investment schemes under the SEBI Act and CIS Regulations, and that carrying them on outside the prescribed corporate form was impermissible and illegal. It also maintained the obligation to refund investors' principal and interest, but substituted fixed compliance timelines instead of remanding the matter for further reconsideration.

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Issues: (i) Whether the art fund schemes operated through private trusts constituted collective investment schemes under the SEBI Act and the CIS Regulations, and whether they could be carried on outside the prescribed corporate form; (ii) Whether the directions for refund of investors' monies and payment of interest required interference or modification.

Issue (i): Whether the art fund schemes operated through private trusts constituted collective investment schemes under the SEBI Act and the CIS Regulations, and whether they could be carried on outside the prescribed corporate form.

Analysis: The statutory framework permitted collective investment schemes only in accordance with the regulatory regime, and the definition and scheme of the SEBI Act and CIS Regulations showed that such activity had to be undertaken through a collective investment management company in the prescribed form. The schemes involved pooling investor contributions for the benefit of investors without their day-to-day control, and the Court accepted the concurrent factual findings that the arrangements fell within the mischief of collective investment schemes. The reliance on the use of the word "company" in the governing provision did not exclude the regulatory prohibition against persons other than registered entities sponsoring or carrying on such schemes.

Conclusion: The schemes were collective investment schemes and their operation through private trusts was impermissible and illegal; the challenge on this issue failed.

Issue (ii): Whether the directions for refund of investors' monies and payment of interest required interference or modification.

Analysis: Although the regulatory order was substantially upheld, the Court considered the prolonged pendency of the dispute and declined to remit the refund question back to SEBI. Instead, it fixed specific timelines for repayment of the balance principal and interest, thereby substituting a direct compliance mechanism for further reconsideration. The earlier appellate interference with certain ancillary directions did not affect the core obligation to repay investors.

Conclusion: The refund and interest obligation was maintained with modified timelines, and no further remand was ordered.

Final Conclusion: The challenge to the regulatory characterization of the schemes failed, and the matter was finally concluded with directions to repay the outstanding principal and interest within the time fixed by the Court.

Ratio Decidendi: A pooled investment arrangement managed without the investors' day-to-day control falls within the regulatory concept of a collective investment scheme and can be operated only in the form and manner prescribed by the securities law regime.

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