TaxTMI 
TaxTMI 
2014 (1) TMI 1957
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....fore 25.1.1995, for which no certificate of registration was required prior to the said date, to continue to operate till such time Regulations are made under clause (d) of sub-section (2) of Section 30, which to the extent it is relevant, permits SEBI to make Regulations inter alia providing for the conditions subject to which certificate of registration is to be issued, the amount of fee is to be paid for certificate of registration and the manner of suspension or cancellation of certificate of registration under Section 12 of the Act. 2. Vide press release dated 18.11.1997, the Government of India conveyed that instruments such as agro bonds, plantation bonds, etc. shall be treated as CIS coming under the Act and SEBI was asked to formulate its Regulations for such schemes. The Accord Plantation Limited (hereinafter referred to as 'the Company') vide its letter dated 9.12.1997 (Ex.CW1/1), submitted information to SEBI, pursuant to its press release dated 26.11.1997 and/or public notice dated 18.11.1997. The aforesaid information was signed by the appellant, Sunita Gupta, one of the Directors of the Company at that time. The main objects of the Company were stated in the said c....
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....Company. It was further stated that Mr. P.C. Thakur was an agriculturist whereas the remaining Directors were in business. 3. The Securities and Exchange Board of India Regulations, 1999, (hereinafter referred to as 'the Regulations') came to be notified only on 15.10.1999. After notification of SEBI CIS Regulations on 15.10.1999, the Company was informed in this regard vide letter dated 21.10.1999 (Ex.CW1/4). The Company vide its letter dated 7.2.2000 informed SEBI that they were no more interested in operating their CIS due to stringent guidelines of SEBI and, therefore, intended to pay all the deposits from sale of tree on due date. A year-wise detail of income and payment of maturities was annexed to the said letter. As per the details annexed to the letter, the Company intended to realize Rs. 4,14,45,000/- between 2001 and 2004 and intended to pay Rs. 3,58,92,617/- during the said period. 4. Since the Company neither sought registration in terms of the Regulations nor intimated winding up of its scheme, a show cause notice dated 12.5.2000 (Ex.CW1/6) was issued to it by SEBI. The Company vide its letter dated 23.5.2000 referred to its earlier letter dated 7.2.2000 about windi....
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....f the Company would be ready, for cutting, by the end of 2001 and repayment to the investors would commence from that date and would be completed by the end of 2003. 6. Since the Company neither obtained registration nor complied with the requirement of the Regulations, a complaint came to be filed before the learned ACMM, Delhi. SEBI examined only one (1) witness in support of the complaint, whereas nine (9) witnesses were examined in defence. 7. Vide impugned judgment and order on sentence dated 25.3.2010 and 26.3.2010 respectively, the appellants were sentenced to under RI for six months each and to pay fine of Rs. 10 lac each or to undergo simple imprisonment for three months each in default. 8. A perusal of the Certificate of Incorporation of the Company would show that the Company came to be incorporated on 16.10.1996, at Jallandhar, which was much after sub-section (1B) of Section 12 of the Act came to be notified. The expression 'Collective Investment Scheme' has been defined in Section 2(ba) to mean any scheme or arrangement which satisfies the conditions specified in Section 11AA. Sub-section (2) of Section 11AA provides that any scheme or arrangement made or offered....
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....Plantation Scheme of the company. The company proposed to purchase property and plant and grow trees on such land. It offered high returns, mortgage of land against investment and tax free agricultural income to the investors. In view of the absolute bar contained in the aforesaid sub-section, the Company could not have come out with such a scheme, without obtaining a certificate of registration from SEBI, in accordance with its Regulations on the subject. Admittedly, no such registration was even applied for by the Company before it came out with its scheme. As far as the proviso is concerned, it is evident from its bare perusal that it applies to only those schemes which were already in operation on 25.1.1995 when Security Laws (Amendment) Act, 1995, came into force. Though really not necessary, a reference in this regard may be made to a judgement of the Allahabad High Court in Paramount Biotech Industries Limited Vs. Union of India 2003 LawSuit (All.) 1206 where noticing that petitioner No.1 was incorporated in 1996, and, therefore, was not carrying on business on 25.1.1995, it was held that the proviso to sub-section (1B) of Section 12 of the Act was not applicable to it and ....
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....two (2) months from the date of receipt of intimation from SEBI. The said memorandum was required to give details such as state of affairs of the scheme, the amount repayable to each investor and the manner in which the said amount was determined. No copy of the information memorandum, if any, sent to the investors has been proved by the appellant. As noted earlier, in terms of Regulation 73, the payment to the investors was to be made within three (3) months from the date of the information memorandum. This is not even the case of the appellants that the Company had actually sent information memorandum in terms of the Regulations to all its investors within two (2) months of receipt of intimation from SEBI and the said memorandum envisaged payment to the investors within three (3) months from its date. In fact, the details annexed to the letter dated 7.2.2000 clearly show that the Company did not even intend to pay to its investors within the time frame stipulated in the Regulations. The schedule of payment drawn up by the Company from time to time did not comply with the requirements of the Regulations to send information memorandum to the investors within two (2) months of recei....
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....en if it is presumed that 16 investors by whom the aforesaid affidavits purport to be sworn were paid by the company, there is no documentary proof of as many as 316 investors having been paid, as claimed by Mr. Ajay Vohra. Moreover, there would be contravention of Regulations if even a single investor was not paid within three months of the date of the Information Memorandum, which the company was required to send to all its investors, and it is admitted even by Mr. Ajay Vohra that as many as 24 investors were not paid even by the time they filed a winding up petition in the year 2003. In his cross examination, Mr. Ajay Vohra admitted that they had not filed the winding up repayment report with SEBI even till the date he was examined. Had the company made payments to 316 investors, as is claimed by Mr. Ajay Vohra, it ought to have produced its account books and supporting documents with SEBI so that enable it to verify the alleged payments. DW8 Mr. Dinesh Gupta, who had invested Rs. 20,000/- in the company claimed to have received back his money on 22.12.2002, in cash, in installments between July, 2002 to December, 2002. But, neither he signed any voucher nor did he issue any rec....
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....s with the Regulations and the directions issued by SEBI by refund of money to the investors. Similar view was taken by another Bench of this Court in Samarpan Agro and Livestock Ltd. Versus SEBI [2010 (104) SCL 584]. 16. As far as the appellant, Ajay Vohra, is concerned, the learned counsel for the appellants did not dispute during the course of arguments that he was a person in-charge of and responsible to the Company for conduct of its business. Even otherwise, not only has, Mr. Ajay Vohra, been corresponding with SEBI, he also signed the balance sheet, profit & loss account, schedule of deposits, schedule of fixed assets, schedule of cash and bank, notes on account forming part of the balance sheet, etc. of the Company for the year 1997-1998, a copy of which the Company had submitted to SEBI along with its letter dated 28.5.1998 (Ex.CW1/2). The CIS of the company was promulgated and in fact even the company was formed later. Even when he came in the witness box, Mr. Ajay Vohra did not claim that he was not the person incharge of and responsible to the company for conduct of its business. This would clearly show that he was a person in-charge of and responsible to the Company f....
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....produced by the appellants themselves clearly show that the company continued to accept the money from members of the public at least till 7.5.2001. In view of the prohibition contained in Sub Section (IB) of Section 12 of the Act, the company could not have collected any payment under its CIS on and after 25.01.1995. Therefore, contravention of Sub Section (IB) of Section 12 took place at the time Major P.C. Thakur was a director of the company is made out. As noted earlier, SEBI had, vide its letter dated 21.10.1999 informed the company of its CIS Regulations notified on 15.10.1999. In terms of the Regulation 73, the scheme was required to be wound up and an Information Memorandum was to be sent to all the investors within two months of intimation from SEBI. Since neither the scheme was wound up nor the Information Memorandum was sent to the investors within two months of receipt of intimation from SEBI, the contravention of CIS Regulations of SEBI also took place at the time Mr. P.C. Thakur was the director of the company. As would be evident from the balance sheet of the company, remuneration was being paid by it to Mr. P.C. Thakur. It has also come in the deposition of DW2, ....