TaxTMI 
TaxTMI 
2015 (6) TMI 1256
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....nder the existing schemes; not to launch any new schemes; not to dispose of any of the properties or alienate any of the assets of the schemes; not to divert any funds raised from public at large which are kept in bank account(s) and/or in the custody of the company ". SEBI also received complaints alleging that subsequent to the issuance of the SEBI Order, the Directors of Royal Twinkle are running Collective Investment Scheme through Citrus. 3. As a matter of preliminary inquiry into whether or not Citrus is carrying on activities of 'collective investment scheme' in terms of Section 11AA of the SEBI Act, 1992 (hereinafter referred to as "SEBI Act"), SEBI vide letter dated February 18, 2014 sought the following information from Citrus viz.- "a. Memorandum and Articles of Association of Citrus as filed with the Registrar of Companies, b. Details of the past and present directors of Citrus, c. Brochures/offer documents pertaining to Citrus's schemes, d. Application forms that are required to be submitted by investors to participate in the schemes of Citrus. e. Sample copies of the registration letter and allotment lette....
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....;s products/services is to avail the holiday and other facilities. iii. The amount received from the customers is not managed for and on behalf of the customers by the company. iv. The customers have absolute control/discretion as regards the manner in which the customers wish to avail their holiday facilities. c. Citrus sought more time to submit the remaining information." 7. As no further information was received from Citrus, SEBI issued reminders vide its letters dated July 23, 2014 and August 05, 2014. Subsequently, Citrus vide its letter dated August 07, 2014 furnished the following documents: a. "Copies of additional brochures/application forms of the remaining holiday plans; b. Copies of application forms that are required to be submitted by the customers while purchasing Citrus's holiday plans; c. Copies of Holiday Entitlement Certificates which Citrus issues to a customer on purchase of holiday plans; d. Total amount of plan - wise sale achieved by Citrus as on 31.03.13." 8. Vide the aforesaid letter, Citrus also submitted as under: "i. It is not engaged in the activities of mobilizing funds....
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....ts letter dated October 13, 2014 has referred to its earlier letter dated September 25, 2014 and did not submit any further information. 12. SEBI received a complaint dated September 19, 2014 followed by a reminder dated October 22, 2014 alleging "Citrus is trying to commit fraud by collecting investments from innocent public without legal authority or sanctity". The complainant also alleged "business group of Mr. Omprakash Goenka and others have been committing fraud, initially under the name of Royal Twinkle and thereafter in the name of Citrus Check- Inns". The complainant also stated "... I was contacted by certain agents working for "Citrus Check-Inns Limited" in or about July 2014 regarding investment plan and the new scheme launched by them. Upon several discussions they convinced me that after investing in their scheme named "SAPH-JUMBO-M-N" (Sapphire), I would be guaranteed an additional sum after 3 years. Relying on their word, I agreed to invest Rs. 2500/- per month for a period of 3 years with Citrus Check-Inns Limited. I was given a Certificate for the said investment and was assured that upon completion of the said period of 3 years, I would be returned Rs. 1,67,00....
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....ing mobilization of money by Citrus in the State of Goa." 12.1 In sum, the common allegation levelled against Citrus and its Directors are that despite SEBI Order directing Royal Twinkle and its Directors inter alia, not to collect any more money from investors including under the existing schemes and not to launch any new schemes etc., the Directors of Royal Twinkle were continuing its fund mobilizing activity through Citrus, circumventing the aforesaid directions issued by SEBI. 13. SEBI vide letter dated January 15, 2015 once again sought the relevant information from Citrus. 14. In response thereto, Citrus vide letter dated January 30, 2015 submitted the following information/documents: "a. Details regarding plan Sapphire b. The plan Emerald was discontinued and no sale were recorded in it. c. Details regarding Plans Orange, Lemon and Fragrance." 15. In addition, Citrus sought further time to submit the information regarding total number of customers who have actually availed the holiday plans and details of members who have subscribed to the plans. 16. Citrus vide email dated March 05, 2015 and March 19, 2015 sought additional time to ....
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.... etc.,'. Citrus is inviting subscriptions into its various plans with points accrued to the subscribers at the end of every year and the points are accumulated at the end of the plan period. These plans have varied payment options i.e. equal monthly installments and single premium payment plans. The Holiday plans viz., Crystal, Crown, Pearl and Glory are single premium payment plans. iv) The essential features of all the plans is that one has to invest a particular amount in a one payment plan or multiple payments plan with a promise to get a particular amount (which includes appreciation on the invested amount) at the end of the plan period with an option to avail the holiday facilities. The point value as mentioned in the offer document (over leaf) under the head "Salient Features") is Rs. 100/- per point. v) A tabular representation of the features of various holiday plans of Citrus are as follows:-- vi) The details of plan Gem mentioned in the marketing pamphlet furnished by one of the complainants (along with the complaint received on October 10, 2014) is reproduced as under: vii) As per plan Gem under option 'Nano', if a subscri....
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....e may consume, rent out or sell over the period or thereafter. In case of insufficient rent out realization of unutilized portion of holidays, the company undertakes and guarantees to make good to plan holder out of the profits/assets realization of the Mirah Group of companies having common board of directors" xi) Total amount mobilized by Citrus through its various holiday plans viz., Gem, Jewel, Crystal, Crown, Pearl, Glory, Sapphire, Coral, Quartz, Ruby, Orange, Lemon, Fragrance and Jade is Rs. 777,04,79,480 as on March 31, 2013." 19. The above mentioned features of Plans offered by Citrus have to be considered in light of the provisions of Section 11AA of the SEBI Act which provides for the conditions to determine whether the scheme or arrangement is a 'collective investment scheme', viz. - "(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 the exemptions from CIS sub-section (3), involving a corpus amount of one hund....
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.... the Holiday Points can be rented out or sold in the open market through Citrus. It is obvious that the contributions made by "customers"/investors in response to the 'Holiday Plans' offered by Citrus are pooled and utilized for providing various holiday facilities, and in case holiday facilities are not availed, the same are redeemed in cash. On examining the "Holiday entitlement Certificate" received along with the complaints mentioned in Paragraph No. 12 above, it is observed that the complainants had invested in the schemes, viz., "Saph-Jumbo-M-N"(Sapphire) and "Jewel Nano-M respectively. Both the schemes convert the moneys received into "Holiday Points". The schemes provide for either (i) conversion of points into availment of room accommodation or (ii) redemption of unutilized points @ Rs. 100/- per point. It is clear that the entire accumulated points would be available for redemption in cash where no availment of room accommodation is done. We have several times asked for the information as to the exact level of conversion of points into availment of room accommodation. Regretfully, the company has chosen not to give these details despite being given sever....
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....an application is the sole discretion of the company." Clause 12 states " All hotels or resorts or allied services whether owned by Citrus or its tie ups/arrangements are strictly subject to availability". Considering the fact that it is the company which takes decisions regarding the management and use of the money collected from "customers"/investors, and has day-to-day control over the operation of the holiday plans, it is clear that the third and fourth conditions prescribed in Section 11AA(2) are also prima facie fulfilled." 21. Citrus vide replies dated June 19, 2014 and August 07, 2014 stated that "it is engaged in selling holiday plans/packages and time share holidays and does not mobilize or pool funds from the general public". The contentions of Citrus is contradictory to the statements made by the complainants and the contents of the marketing pamphlets and Certificates furnished by complainant as detailed in para 12 as well as the schemes reproduced in para 18 (vi) of this Order. Holiday Points are awarded by Citrus to the "customers"/investors who subscribe to the Holiday Plans. The subscriber has the option of not availing these points for "benefits"/holiday rooms ....
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....the mobilization of funds by Citrus under its various holiday plans with a promise of returns/holiday points, when considered in light of the other features of the Holidays Plans offered by Citrus discussed earlier in this order, are nothing but a 'collective investment scheme' and prima facie, falls under the ambit of Section 11AA of the SEBI Act. 24. 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 the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as "CIS Regulations") also prohibits carrying on CIS activities without obtaining registration from SEBI. Therefore, the launching/floating/sponsoring/causing to sponsor any 'collective investment scheme' by any 'person' without obtaining the certificate of registration in terms of the provisions of the CIS Regulations is in contravention of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations. In this regard, I note that Ci....
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....l Twinkle and Citrus are identical in nature and the same management is running the schemes of both the companies i.e. Royal Twinkle and Citrus. This fact is in direct contravention of the assertion made in the company's letter dated August 07, 2014 wherein they stated that they have not offered similar holiday plans through its associates, group etc. This indicates that Citrus is deliberately making false/misleading statements. At this juncture, SEBI cannot be a mere spectator ignoring the investor complaints- specially in the light of the fact that the quantum of funds mobilized from public is a pretty sizeable Rs. 777.04 Crores as on March 31, 2013. As detailed before, Citrus has steadfastly refused to give the latest and relevant information to SEBI despite being given several opportunities to do so. The trail of all these events as well as the conduct of Citrus lead me to draw a prima facie inference that the refusal to give information is nothing but an attempt to conceal the real nature of its fund mobilizing activities. 28. Protecting the interests of investors is the first and foremost mandate for SEBI. Therefore, steps have to be taken in the instant matter to ens....
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....ccommodation provided/projected to be provided, iii. Year-wise number of "customers"/investors (1)who have actually availed the holiday accommodation under the plan(s)/subscribed to the plan(s) (2) who have encashed their points into cash. iv. Details of assets held by Citrus and its group companies, v. Full details of Mirah Group (as stated in the Clause 29 of the "Offer Document") including full inventory of its assets, vi. Details of charges created on its assets by Citrus, vii. Details of amounts mobilized as on March 31, 2014 and March 31, 2015 under its various Holiday plans/schemes, viii. Details of commission paid on amounts mobilized above, ix. Details of agents along with their addresses, etc., x. Audited Accounts for the financial years i.e. F.Y. 2012-13, 2013-14, and 2014-15; xi. Income Tax returns for F.Y. 2012-13, 2013-14, and 2014-15; xii. Details of fund transfers within group companies and associates and its directors for the for year 2012-2013, 2013-2014 and 2014-2015." 30. The above directions shall take effect immediately and shall be in force until further orders. 31....