AI Drafter 
TaxTMI 
TaxTMI 
2014 (7) TMI 1246
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.... the company and the designated person for corresponding with SEBI, iii. Details of the past and present directors of the company. Details should contain name, address, PAN and contact details (Email/fax/contact no) of the directors, iv. Brochures/offer document pertaining to PCL's schemes/arrangements, v. Copies of application forms that are required to be submitted by investors/applicant to participate in PCL's schemes, vi. Sample copies of the registration letter/allotment letter or any other document issued to the investors who subscribe to PCL's schemes, vii. Sample copies of the agreement letter/contract required to be entered into by investor/applicant under PCL's schemes. viii. Details of the scheme wise and year wise amount mobilized by PCL till date along with the number of investors under the schemes, ix. Details of the scheme wise and year wise amount paid/redeemed by PCL till date along with the number of investors under the schemes, x. Details of scheme wise timeshare availed by the investors/applicants. In case the investors/applicants opted for surrender value instead of timeshar....
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.... scheme." 5. I have carefully considered the materials available on record, correspondence exchanged between SEBI and PCL, its Directors along with the documents contained therein and the submissions made by PCL etc. In this context, the issue for determination is whether the mobilization of funds by PCL under its schemes fall under the ambit 'collective investment scheme' provided in Section 11AA of the SEBI Act, 1992 (hereinafter referred to as "SEBI Act"). 6. On an examination of the material available on record, it is prima facie observed that: a) PCL (CINU91900MH1997PLC105363) was incorporated on January 24, 1997. It has its registered office at 111-113, Kallandas Udyog Bhavan, near Century Bazar, Prabhadevi, Mumbai- 400 025. Its directors are Mr. Sudhir Shankar Moravekar, Mrs. Shobha Ratnakar Barde, Mrs. Usha Arun Tari, Mr. Manish Kalidas Gandhi, Mr. Chandrasen Ganpatrao Bhise and Mr. Ramachandran Ramakrishnan. b) The main object of PCL as per the MoA, is "to carry on business as proprietors of all types of clubs, gaming rooms, card rooms and billiard rooms, golf club and creating recreation and club facilities and generally as amusement caterers and o....
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....t Total entitlement room nights Total entitlement Room Nights per month Current surrender Value as on Today Rs. 2,40,000/- (1,000*240) Rs. 1,02,000/- (425*240) 240 2 Rs. 850 (per room night v. Pancard Clubs - New Premium Holiday for 10 years (w.e.f. May 22, 2007): Current Average Tariff for Eighty room Nights Offer Price of Eighty room Nights Total entitlement room nights Total entitlement Room Nights per quarter Current estimated surrender Value per unutilized room nights Rs. 80,000/- (1,000*80) Rs. 34,000/- (425*80) 80 2 Rs. 850 vi. Sunrise Holiday for 5 years (w.e.f. February 05, 2009): Current Average Tariff for one hundred and twenty room nights Offer Price of one hundred and twenty room nights Total entitlement of room nights Entitlement of room nights per months Current Estimated surrender value per unutilized room nights. Rs. 2,40,000/- (2,000*120) Rs. 1,08,000/- (900*120) 120 2 Rs. 1800 * As per the policy of PCL, applicants of abovementioned schemes at (iv) and (v) can "...commence utilising his room night entitlements after 30 days from acceptance of his applica....
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..... 4,800/- * The tenure of Pancard Clubs-Divine Holiday scheme is 66 months. The offer price for one room nights is Rs. 900. The applicant has to confirm to acquire a minimum of four room nights and thereafter in multiples of 4 room nights. The applicant shall have to complete their committed number of room nights in a maximum period of 36 months from the date of first payment. Persons completing all the 36 payments for the committed number of room nights shall be considered as a valid applicant and shall be formalised for and eligible for the benefits of the scheme. In the event of non-payment of instalment consistently, the applicant shall be levied a late fee of Rs. 15 per month for each such delayed payment. * The applicant can commence utilising his room night entitlements after 60 days from completion of all the 36 payments towards committed room nights. As per the policy of PCL, an applicant shall be entitled to utilise a maximum of 33% of the total room nights purchased by him in a single financial year. For availing the room nights, at the affiliated destination, applicant shall have to pay exchange fees of Rs. .150 per room nights. 7. For all the eight....
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....s noted that provision has been made in respect of all unutilised outstanding room nights. Provision has been made for the difference between the estimated surrender value and the offer price and has been equally distributed from the period in which the membership was sold and the period in which the membership matures. 11. As regards Column No.5, the Statutory Auditor has stated that the amount received as advance against room nights does not get the character of income till the time it is determinable as to when the room nights shall be utilised by the member. Therefore, the amount received is credited under the head "advance against sale of room nights" and is reflected under the head of "current liabilities". 12. As per the submission of PCL, with respect to amount mobilised, and number of room nights actually utilised for the financial years 2010-11, 2011-12 and 2012-13 under various schemes is tabulated as under: Financial year 2012-13 (Rs. in Crores) Sl. No Scheme Amount mobilized Total no of applicants room nights sold Room nights utilized % of room nights actually utilised 1 Delight Holiday 327.19 314576 3635525 8326 ....
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....ls provided by PCL vide letter dated April 11, 2014, it is noted that the available room night for a year owned by PCL is only 5,18,300. However, it has sold around 1.35 Crores room nights. In other words, PCL possesses less than 4% rooms. 14. As per the financial statements for the financial year 2009-10, 2010-11, 2011-2012 and 2012-13 and the detail of the submission of PCL, with respect to amount mobilised, and number of room nights actually utilised for the financial year 2010-11, 2011-2012 and 2012-13 under various schemes, it is noted that less than 1% of customers are actually utilising the room nights and more than 99% of the customers are getting back the money deposited along with certain promised returns. 15. The abovementioned features of "Holiday Plans" offered by PCL have to be considered in light of the provisions of Section 11AA of the SEBI Act. The aforesaid Section 11AA, which provides for the conditions to determine whether a scheme or arrangement is a collective investment scheme, reads as follows: "(1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) shall be a collective investment scheme. (2) Any ....
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....d. In view of the said facts, "Holiday Plans" offered by PCL satisfies the first condition stipulated in section 11AA(2) (i) of the SEBI Act that the contributions received from the investors are pooled and utilized for the purpose of the scheme. ii. The contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement. PCL is collecting money from investors and assuring them a certain return on investment, which is in the nature of profit. For instance, in the Divine Holiday scheme, if any person invests an amount of Rs. 3600/- (i.e. 4 room nights) then after 66 months, the investor gets a return of Rs. 4800 for surrendering the four room nights. Similarly, in its Sunrise Holiday Scheme, the investors are assured a return of Rs. 1800/- on an investment of Rs. 900/-, at the end of five years. Further, as compared to the total number of investors in its Holiday Plans, only a very small proportion of investors i.e. less than 0.3% (of the sold room nights) have actually availed the holiday facilities/plans being marketed by PCL. Th....
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....tain and identify any scheme or arrangement, irrespective of the nature of business, which attracts investors to invest their funds at the instance of someone else who comes forward to promote such scheme or arrangement in any field and such scheme or arrangement provides for the various consequences to result there from..." 18. The features of the Holiday Plans offered by PCL, as discussed in the preceding paragraphs, shows that the activity of fund mobilization by PCL under its 'scheme(s)/plan(s)' with a resultant promise of returns, prima facie falls within the ambit of 'collective investment scheme' as defined under section 11AA of the SEBI Act. Therefore, I am of the view that PCL is engaged in the mobilization of funds from public under its holiday plans, which is in the nature of 'collective investment scheme' as defined under Section 11AA of the SEBI Act. 19. I note that in terms of section 12(1B) of the SEBI Act, "no person shall sponsor or cause to be sponsored or cause to be carried on a 'collective investment scheme' unless he obtains a certificate of registration from the Board in accordance with the regulations". Regulation 3 of t....
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....are brought and final decision is taken in the matter, it is incumbent on SEBI to take preventive action by way of an immediate measure. In the light of the above, I find no other alternative but to take recourse to an interim order against PCL and its Directors for preventing them from further carrying on with its existing fund mobilizing activity by launching 'collective investment scheme', without obtaining registration from SEBI in accordance with law. 22. In view of the foregoing, I, in exercise of the powers conferred upon me under sections 11(1), 11B and 11(4) of the SEBI Act read with Regulation 65 of CIS Regulations, hereby direct PCL and its Directors, namely, Mr. Sudhir Shankar Moravekar (PANAADPM2933M), Mrs. Shobha Ratnakar Barde (PAN-ASLPB1204C), Mrs. Usha Arun Tari (PAN-ABYPT8841M), Shri. Manish Kalidas Gandhi (PAN-AITPG8933H), Shri. Chandrasen Ganpatrao Bhise (PAN-AADPB6103E) and Shri Ramachandran Ramakrishnan (PAN-AAIPR9196G): * not to collect any fresh money from investors under its existing scheme; * not to launch any new schemes or plans or float any new companies to raise fresh moneys; * to immediately submit the full invent....