TaxTMI 
TaxTMI 
2020 (7) TMI 60
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....s also extended and ended on 31-1-2012. It may also be mentioned that these Trusts Funds were established so that investors could invest in works of art. In the Confidential Information Memorandum, it was made clear to the investors that these were investments which were fraught with grave risks and that the investors invest in these Trusts Funds with open eyes knowing of the aforesaid risks. So far as the first Fund was concerned, a total corpus amounting to Rs. 10.95 crores was collected from the investors. We are informed that 50 such investors invested in this Fund. So far as the second Fund is concerned, the total corpus was Rs. 21.92 crores, with 132 persons having so invested. On 18-6-2007, the Securities and Exchange Board of India (hereinafter referred to as 'SEBI') first apprised the appellants, who are the trustees of these two Trusts Funds stating that, as these Funds were Collective Investment Schemes, they should apply for certificates of registration insofar as these Funds were concerned. This was responded to by Fund I on 16-7-2007, denying that the activities would amount to the activities of a Collective Investment Scheme. As a result thereof, on 12-....
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.... of three months from the date of this Order and thereafter, within a period of fifteen days, submit a winding up and repayment report to SEBI in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999, including the trail of funds claimed to be refunded, bank account statements indicating refund to the investors and receipt from the investors acknowledging such refunds. c. Yatra Art Fund is restrained from accessing the securities market and are prohibited from buying, selling or otherwise dealing in securities market for a period of four (4) years. d. Yatra Art Fund is also directed to immediately submit the complete and detailed inventory of the assets owned by Yatra Art Fund. e. In the event of failure by Yatra Art Fund to comply with the above directions, the following actions shall follow: - Yatra Art Fund shall remain restrained from accessing the securities market and would further be prohibited from buying, selling or otherwise dealing in securities, even after the period of four (4) years of restraint imposed in Paragraph 29(c) above, till all the monies mobilized through such schemes are refunded to its investors wit....
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....ent schemes, including mutual funds;" In 1995, Section 12(1B) was introduced, by which it became clear that no person can sponsor or cause to be sponsored or carry on or cause to be carried on any collective investment scheme unless he obtains a certificate of registration from the Board in accordance with the regulations. What is of importance is to notice that the expression "person" is used by Section 12(1B). However, in 1999, by amendment, Section 11AA was introduced in which it was stated as follows: "11AA. Collective investment scheme.- (1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) or sub-section (2A) shall be a collective investment scheme: Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under sub-section (3), involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme. (2) Any scheme or arrangement made or offered by any company under which,- (i) the contributions, or payment made by the investors, by whatever name called, are pooled and utilized for the pur....
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....ss in the form of a Trust, the provisions of SEBI Act would not be attracted at all. This argument would fly in the face of both Section 12(1B) and the CIS Regulations, in particular, Regulation 2(h), which defined a "Collective Investment Management Company" as follows: "(h) "Collective Investment Management Company" means a company incorporated under the Companies Act, 1956 and registered with the Board under these regulations, whose object is to organise, operate and manage a collective investment scheme;" Regulation 3 of the CIS Regulations states: "3. No person other than a Collective Investment Management Company which has obtained a certificate under these regulations shall carry on or sponsor or launch a collective investment scheme." The statutory scheme, therefore, is that, if a collective investment scheme, as defined, is to be floated by a person, it could only be done in the form of a collective investment management company and in no other form. This is the reason why Section 11AA uses the expression "company" in sub-Section (2) and not the word "person" (as the CIS Regulations of 1999 had come into force on 15-10-1999; Section 11AA being en....