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2015 (11) TMI 591 - SECURITIES APPELLATE TRIBUNAL MUMBAI

2015 (11) TMI 591 - SECURITIES APPELLATE TRIBUNAL MUMBAI - TMI - Guilty of sponsoring and managing “Collective Investment Scheme” without obtaining certificate of registration from SEBI - contravention of Section 12(1B) of the Securities and Exchange Board of India Act, 1992 and Regulation 3 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 - Held that:- Except finding fault with the appellant in not seeking registration before operating the scheme, .....

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ill 2013 as to whether the scheme in question is covered under CIS or not. In fact when respondent no. 2 who had invested in the scheme had complained against the appellant, SEBI by its communication dated 31.01.2011 informed the respondent no. 2 that the scheme was not covered under CIS and therefore the investors who have invested in the scheme of the appellant cannot seek redressal of their grievances from SEBI. It is only when this Tribunal on 29.11.2012 set aside the said communication date .....

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inordinate delay on part of SEBI in arriving at correct conclusion whether the appellant can be penalized by directing to refund the amount with interest at the rate of 10% from the date of investment needs consideration, especially when the scheme has come to an end in the year 2010 and the terms of the said scheme neither offered guaranteed return nor offered interest on the amount invested. Although regulation 65 of CIS Regulations empower SEBI to direct refund with interest in appropriate ca .....

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s that the WTM has not done the work of ascertaining the profits if any, at the time when the scheme ended and further submits that NAV (ex-income) ought to have been taken into consideration by the WTM while passing the impugned order.

Thus while upholding the impugned order of SEBI to the extent it holds that the scheme operated by the appellant during the period from 2006 to 2010 constituted CIS, we set aside the directions contained in the impugned order to the extent it directs t .....

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d:- 13-10-2015 - J.P. Devadhar and Jog Singh, JJ. For The Appellant : Mr. Janak Dwarkadas, Senior Advocate with Mr. Vyapak Desai and Mr. Siddharth Ratho, Advocates i/b Nishith Desai Associates For The Respondent : Mr. Shiraz Rustomjee, Senior Advocate with Mr. Tomu Francis, Advocate, Mr. Mahadevan Krishna Iyer, Advocate Per: Justice J.P. Devadhar 1. Appellant is aggrieved by the order passed by the Whole Time Member ( WTM for short) of Securities and Exchange Board of India ( SEBI for short) on .....

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wind up the said CIS and refund the monies collected but not paid to the investors. In addition, the appellant is also directed to pay the amount of profits/income earned, if any, that is due to the investors as per the terms of its offer or pay interest at the rate of 10% per annum on the amount invested from the date of investment till the date of refund, whichever is higher. 2. Facts relevant for the purpose of present appeal as set out in the memorandum of appeal are as follows:- a) Appella .....

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nd ( Trust for convenience) under the Indian Trusts Act, 1882 under which Oseta Investments Trustee Company Private Limited ( Trustee for convenience) was appointed as a Trustee to the Trust. The Trustee in turn appointed the appellant as Asset Management Company ( AMC for short) of the Trust. Thus, the appellant is the sponsor and AMC of the Trust. c) Sometime in June 2006 the appellant as AMC of the Trust launched a fund called The Osian s Art Fund Scheme Contemporary 1 ( Art Fund for short) b .....

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participation by persons as beneficiaries in such properties or investments and in the profits or income arising therefrom. From the aforesaid scheme in all ₹ 102.40 crore was collected by the appellant from 656 investors for the purpose of acquiring artworks. d) Prior to the launching of the scheme the appellant had formal meeting with SEBI s Director Mr. Pradeep Kar on February 15, 2006 and also had informal discussions and correspondence with SEBI on the question as to whether the sche .....

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the appellant, SEBI by its letter dated June 18, 2007 sought certain information from the appellant which was furnished by the appellant on July 3, 2007. g) On perusal of the information furnished by the appellant, SEBI formed a prima facie opinion that the scheme/fund which was floated and managed by the appellant is a CIS covered under Section 11AA of the SEBI Act, 1992. Since the said CIS was managed by the appellant without obtaining certificate of registration as required under Section 12 .....

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CIS and are governed by the CIS Regulations framed by SEBI. h) In the meantime, the Respondent No. 2 filed a complaint before SEBI in relation to his investment of ₹ 25 lac in the scheme managed by the appellant. SEBI by its letter dated January 31, 2011 informed the Respondent No. 2 that the said complaint did not fall within the purview of SEBI. Thereupon, Respondent No. 2 filed a writ petition before the Madras High Court which was dismissed on April 16, 2012 with liberty to the Respon .....

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d of the show cause notice issued to the appellant on October 12, 2007 as also the complaint filed by Respondent No. 2 against the appellant before SEBI. Appellant has filed the present appeal to challenge the said order dated April 15, 2013. 3. Mr. Dwarkadas, learned Senior Advocate appearing on behalf of the appellant submitted as follows:- a) When the Art Fund was sponsored and launched by the appellant as AMC of the Trust in the year 2006, there was no legal regime existing to govern the fun .....

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the Securities Contracts (Regulation) Act, 1956, the expression Company under Section 11AA of SEBI Act, 1992 would have to be construed as a company registered under the Companies Act, 1956. Thus, jurisdiction of SEBI under Section 11AA of SEBI Act is in relation to schemes made or offered by any company registered under the Companies Act, 1956. In the present case, the CIS is made/offered by the Trust and hence the same would fall outside the purview of SEBI Act. c) Apex Court in case of Harbha .....

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s to justify the inference that the legislature clearly so intended. Since the expression Collective Investment Scheme under Section 11AA of the SEBI Act is restricted to any scheme or arrangement made or offered by any company, SEBI is not justified in holding that Section 11AA is applicable to a scheme made or offered by a Trust. d) It is not in dispute that Mutual Funds established by any Trust fall within the regulatory power of SEBI and therefore, in respect of Mutual Funds, Venture Capital .....

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Art Fund is launched by the appellant for and on behalf of the Trust which is governed by the provisions contained under the Indian Trusts Act, 1882. Neither the SEBI Act nor the CIS Regulations authorize SEBI to regulate the functioning of a private Trust and, therefore, the impugned order passed by SEBI in relation to a scheme offered by a Trust is without jurisdiction. f) CIS Regulations have been framed by SEBI on the basis of Dave Committee report which was meant to govern plantation and a .....

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currently owns about 34.66% shares of the appellant company and Mrs. Swaraj Tuli owns 99% shares of the Trustee Company. Both the appellant company and the Trustee Company are distinct legal entities and there is neither interse shareholding nor the two entities have common promoters/shareholders. Therefore, in the impugned order the WTM of SEBI has gravely erred in making observation with respect to the shareholding pattern and control of the appellant company. i) The Trust is set up for the be .....

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act in accordance with the Deed of Trust and discharge their obligations towards the Beneficiaries. SEBI which is not otherwise empowered to regulate the functioning of a Trust would not become entitled to regulate a Trust merely because, the beneficiaries of the Trust are more than 50 in number. j) It is not the case of SEBI that the scheme managed by the appellant on behalf of the Trust is a bogus scheme or intended to defraud the investors. In fact at all times, the appellant has declared the .....

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ore the impugned order passed by SEBI against the appellant is without jurisdiction. k) Provisions of SEBI Act are not intended to override the provisions of the Indian Trusts Act. Neither the CIS Regulations nor Section 11AA of SEBI Act seek to regulate the manner in which unincorporated entities raise funds. The Art Fund settled by a private Trust does not fall within the ambit of SEBI Act or the CIS Regulations. l) CIS Regulations read with Section 11AA of SEBI Act clearly provide that the ap .....

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ourt in case of PGF Ltd. vs. Union of India (AIR 2013 S.C. 3702) and Sahara Indian Real Estate Corporations Ltd. & Ors vs. SEBI (2013) 1 SCC page 1 is misplaced. The Apex Court decision in case of PGF Ltd. (Supra) has no relevance to the present case, as in that case, there was a guaranteed return to be provided by PGF, whereas, in the present case, the confidential information memorandum issued by the appellant clearly states that there would be no guaranteed return. Similarly, in case of S .....

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t prescribe a maximum subscription level and allotment is not undertaken on a proportionate basis, whereas, under CIS, maximum subscription level is specified and allotment is required to be undertaken on a proportionate basis. ii) CIS Regulations do not necessitate calculation of NAV and there is no underlying requirement to value investments or the units by calculating NAV on on-going basis, whereas, NAV is the fundamental characteristic of the valuation of the units issued by the Art Funds. i .....

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tion of the CIS Regulations upon the operation of such schemes would be incongruous and impracticable. iv) The Art Fund sponsored by the appellant as AMC of the Trust cannot be considered as CIS, because, firstly, Section 11AA and CIS Regulations apply only to a scheme launched or sponsored by a company. Secondly, those provisions apply only to plantations and agro industries. Thirdly, those provisions apply only in case of solicitation, mobilization of investments from public and not in case of .....

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nt case, because, the scheme offered by the appellant as AMC of the Trust in the year 2006 came to an end in the year 2009, that is, much prior to the Amendment of Section 11AA with effect from 18.07.2013. Since the legislature has specifically brought into force the above amendments with effect from 18.07.2013, it is not open to the SEBI to contend that the said amendments must be applied retrospectively even for the period prior to 18.07.2013. p) The SEBI (Venture Capital Funds) Regulations, 1 .....

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t to approval of the 75% of the contributors. In the absence of any regulation framed by SEBI, in respect of Art Fund, the impugned order passed by the WTM of SEBI is highly prejudicial to the appellant as the appellant is ordered to make payment to the investors based on either the NAV or the principle amount with 10% interest thereon from the date of investment till the date of refund whichever is higher. Accordingly, it is submitted that in the facts of present case, since the Art Fund sponso .....

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est, especially when the art market has crashed and as per the information memorandum, the investors were not entitled to guaranteed return. It is further submitted that as and when the market improves, the balance artworks lying with the appellant would be sold and the sale proceeds would be distributed amongst the investors whose claims are not yet settled. 4. Mr. Rustomjee, learned Senior Advocate appearing on behalf of the Respondent No. 1 on the other hand submitted as follows:- a) Under Se .....

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ored or carry on or cause to be carried on a Collective Investment Scheme unless that person holds a certificate of registration from SEBI in accordance with the regulations framed by SEBI. From the aforesaid provisions it is clear that SEBI is the regulatory authority for CIS. b) On the basis of Dave Committee Report, SEBI has framed and notified the CIS Regulations with effect from 15.10.1999. As per Regulation 3 of CIS Regulation no person other than a Collective Investment Management Company .....

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a Collective Investment Management company which is entitled to obtain a certificate for carrying on a CIS. Section 11AA(2) cannot be construed to mean that the CIS carried on by an entity other than a company falls outside the purview of SEBI Act and the CIS Regulations. To construe that Section 11 AA restricts the power of SEBI to regulate CIS made or offered by a company alone would render Section 12(1B) of the SEBI Act and Regulations 3 and 4 of the CIS Regulations otiose and would also run .....

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mendment) Act 2014, Section 11AA has been amended inter alia, by replacing the word company with the word person in Section 11AA(2) with retrospective effect from 18.07.2013. By the said Amendment Act, Section 11AA of SEBI Act has also been amended by inserting, inter alia, a proviso to Section 11AA (1) to the effect 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) of Section 11AA, involving a corpus amount o .....

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n of SEBI in holding that the scheme floated by SEBI falls within the scope of CIS cannot be faulted. Accordingly, counsel for SEBI submitted that there is no infirmity in the impugned order and hence, the appeal be dismissed with costs. 5. Mr. K. Mahadevan Iyer, learned Advocate appearing on behalf of Respondent No.2 while adopting the arguments advanced by counsel for SEBI, submitted that under Section 11AA of SEBI Act, CIS can only be made or offered by a company and therefore, in the present .....

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rly provide that a scheme or arrangement made or offered by a company alone would be eligible to obtain a certificate of registration from SEBI & no other entity would be eligible to obtain certificate of registration. Moreover Section 11AA(2) has been amended with retrospective effect from 18.7.2013 by deleting the word company and substituting the word person . Therefore, reading Section 11AA(2) with regulation 3 of CIS Regulations it becomes clear that any scheme or arrangement made or of .....

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erned by the Indian Trust Act, functions of the Trust relating to the payments to the beneficiaries would be governed by the SEBI Act. Similarly in view of the decision of the Apex Court in case of Sahara India Ltd. (supra), collecting funds from 656 investors would be a public issue falling within the scope of SEBI Act and CIS Regulations. Accordingly, it is submitted by counsel for respondent no.2 that the appeal is without any merit and hence be dismissed with cost and SEBI be directed to imp .....

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t of, and to regulate the securities market, by such measures as it thinks fit. (2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for- (a)...................... (b)...................... (c) registering and regulating the working of collective investment schemes including mutual funds; (emphasis supplied) Section 12(1B) (w.e.f. 25.1.1995) Section 12(1B) No person shall sponsor or cause to be sponsored or carry on or caused to be car .....

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ion was required prior to such commencement, may continue to operate till such time regulations are made under clause (d) of subsection (2) of section 30. (emphasis supplied) Section 11AA inserted to SEBI Act by Securities Laws (Amendment) Act 1999 (w.e.f. 22.2.2000) 11AA. Collective investment scheme:- (1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) shall be a collective investment scheme. (2) Any scheme or arrangement made or offered by any company u .....

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managed on behalf of the investors; (iv) the investors do not have day-to-day control over the management and operation of the scheme or arrangement (3) Notwithstanding anything contained in sub-section (2), any scheme or arrangement- (i) made or offered by a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912) or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any St .....

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Act, 1956 (1 of 1956); (vi) under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society under section 620A of the Companies Act, 1956 (1 of 1956); (vii) falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund Act, 1982 (40 of 1982); (viii) under which contributions made are in the nature of subscription to a mutual fund; shall not be a collective investment scheme. (emphasis supplied) 9. Before defining the expression .....

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nt scheme has the meaning assigned to it by sub-regulation (2) of this regulation; (2) In these regulations, unless the context otherwise requires collective investment scheme means any scheme or arrangement with respect to property of any description- (a) the purpose of which is to enable the investors to participate in the scheme or arrangements by way of subscriptions and to receive profits or income or produce arising from the management of such property or the investments made thereof; and .....

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be deemed to be a collective investment scheme: (a) acceptance of deposits by companies under section 58A of the Companies Act, 1956 (1 of 1956) or by Non-Banking Financial Companies as defined in section 45-I of the Reserve Bank of India Act, 1934 ( 2 of 1934 ); b) acceptance of funds by Chit Funds in terms of the Chit Funds Act, 1982 (40 of 1982); (c) acceptance of funds by companies declared as Nidhi companies under section 620A of the Companies Act, 1956, ( 1 of 1956 ), as per directions iss .....

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n force; (g) any scheme under Securities and Exchange Board of India (Mutual Funds ) Regulations, 1996; or (h) any other scheme or arrangement specifically exempted by the Board, from the operation of these regulations. 3. No Person Other than Collective Investment Management Company to Launch Scheme - 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. 10. Aft .....

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nt scheme was initially defined under the CIS Regulations, 1999 thereafter, by inserting Section 11AA the expression Collective Investment Scheme was defined under the SEBI Act with effect from 22.02.2000. 11. With this background, we may now consider the first question raised in this appeal, namely, whether SEBI is justified in holding that the Art Fund sponsored by the appellant as AMC of the Trust constitutes CIS under Section 11AA of SEBI Act 1992. 12. Section 11AA (1) inserted to SEBI Act w .....

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under Section 11AA(2). Section 11AA(2) sets out four conditions in relation to any scheme or arrangement made or offered by any company. Fact that Section 11AA(2) refers to any scheme or arrangement made or offered by any company would not mean that the jurisdiction of SEBI to regulate CIS is restricted to any scheme or arrangement made or offered by any company, because, Section 11AA(2) merely sets out the conditions applicable to any scheme or arrangement made or offered by an entity to which .....

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nt made or offered by any company which satisfy the conditions set out under Section 11AA(2). It is contended that in the present case the scheme is floated on behalf of a Trust and not by a company and therefore the scheme in question falls outside the purview of SEBI Act. There is no merit in the above contention because, as noted earlier, the expression Collective Investment Scheme defined under Section 11AA(1) is wide enough to cover any scheme or arrangement made or offered by any entity an .....

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hall carry on CIS, Section 11AA inserted to SEBI Act with effect from 22.02.2000 reiterates that any scheme or arrangement made or offered by any entity which satisfies the conditions set out under Section 11AA(2) would be CIS, however, only a collective investment management company which satisfies the conditions set out under Section 11AA(2) shall be eligible to obtain registration from SEBI for operating CIS. 14. Above reasoning is further fortified from Section 11(1) and Section 11(2)(c) of .....

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t issued by any collective investment scheme to the investors in such schemes. Thus, under the SEBI Act, SEBI is duty bound to protect the interest of all investors who invest in Collective Investment Schemes and not merely the interest of investors who invest in any scheme or arrangement made or offered by any company. Therefore, when the legislature under Section 11(1) read with Section 11(2)(c) has expressly conferred power on SEBI to regulate CIS made or offered by any entity and even Sectio .....

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made or offered by any entity, whereas, on the other hand, Section 11AA(2) restricts the power of SEBI to regulate any CIS made or offered by any company. Such an argument of the appellant which renders the provisions of the SEBI Act mutually contradictory and runs counter to the object with which SEBI Act is enacted, cannot be accepted. 15. Apart from the above, Section 12(1B) inserted to the SEBI Act with effect from 25.1.1995 provides that no person shall sponsor/carry on any CIS unless he ob .....

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on 2(2). Regulation 3 of CIS Regulations provides that no person other than a Collective Investment Management Company which has obtained a certificate under the CIS Regulations shall carry on or sponsor or launch a CIS. Thus, reading section 12(1B) together with the CIS Regulations, it is apparent that under the SEBI Act any CIS made or offered by any entity could be carried on only till 14.10.1999 and on the CIS Regulations coming into force from 15.10.1999 only a Collective Investment Managem .....

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sion Collective Investment Scheme under the SEBI Act, which was till then defined only under the CIS Regulations. On insertion of Section 11AA by Securities Laws (Amendment) Act, 1999, regulation 2(2) of the CIS Regulations has been substituted by the SEBI (Collective Investment Schemes) (Amendment) Regulations, 2000 with effect from 14.2.2000. As per the substituted regulation 2(2), the expression Collective Investment Scheme under the CIS Regulations shall have the same meaning as assigned to .....

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ment of a collective investment management company which satisfy the conditions set out under Section 11AA(2) would be entitled to carry on CIS by obtaining registration from SEBI. Therefore, after the CIS Regulations coming into force and after insertion of Section 11AA, running CIS by any entity other than a collective investment management company without obtaining registration from SEBI would be in violation of SEBI Act. Consequently, argument of the appellant that the scheme sponsored by th .....

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e or arrangement made by any of the entities specified therein shall not be a Collective Investment Scheme. Thus, Section 11AA(3) carves out exception and provides that notwithstanding the provisions contained under Section 11AA(2), any scheme or arrangement made or offered by the entities specified therein shall not be treated as CIS. Very fact that Section 11AA(3) carves out exception, clearly shows that but for the exception, the scheme or arrangement made or offered by those entities being i .....

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ted with the word person with retrospective effect from 18.07.2013 does not in any way enhance the case of the appellant. That amendment was necessitated in view of insertion of a proviso to Section 11AA(1) with retrospective effect from 18.07.2013. As per the said proviso, any pooling of funds under any scheme or arrangement which is not registered with the Board, or is not covered under Section 11AA(3) involving a corpus amount of one hundred crore rupees or more is deemed to be CIS. The entit .....

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an entity other than a company would be a CIS, it became necessary to substitute the word company in Section 11AA(2) with the word person so that there is no inconsistency in the provisions under the SEBI Act. 19. Argument of the appellant that the Art Fund made and offered by the appellant on behalf of the Trust do not fulfill the conditions set out under Section 11AA(2) is also without any merit. Clauses 1, 2.1 & 5.1 of the Trust Deed specifically provide that the Trust property shall be .....

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ing therefrom. In the Confidential Information Memorandum ( CIM for short) under the head Summary it is stated that the scheme, plans to collect money from eligible investors and plans to invest the same in art works. Admittedly ₹ 102.40 crores collected from the investors have been pooled and utilized for the purpose of purchasing art works which is the purpose of the scheme. The CIM speaks of the Fund having the objective of generating significant medium and long term income and capital .....

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for the benefit of the Unit Holders. From the Trust Deed and the CIM it is evident that the Trust Property is managed and administered by the appellant and the investors never had any day to day control over the same. No case is made out by the appellant to demonstrate that condition number (iii)&(iv) set out in Section 11AA(2) are not satisfied in the present case. Thus, the facts on record demonstrate beyond shadow of doubt that all the conditions set out under Section 11AA(2) are satisfie .....

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with effect from 22.02.2000 read with the CIS Regulations further provide that any scheme or arrangement made or offered by any company which satisfy the conditions set out under Section 11AA(2) would be a CIS and only to such a company registration would be granted by SEBI under Section 12(1B) of SEBI Act for running CIS. Therefore, the appellant is not justified in contending that there was no legal regime existing when the scheme was launched by the appellant in the year 2006. 22. Various de .....

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would be granted only to a collective investment management company which satisfies the conditions set out therein. Even Section 11AA inserted to SEBI Act with effect from 22.02.2000 reiterates the same position. Therefore, fact that Section 11AA(2) sets out the conditions applicable to a company, it cannot be inferred that the powers of SEBI is restricted only to regulate CIS made or offered by a company, especially when the provisions contained in Section 11(1) & 11(2)(c) specially empower .....

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Alternative Investment Funds and the fact that no independent regulations have been framed in respect of Art Fund, cannot be a ground to infer that the Art Fund falls outside the purview of SEBI. In the absence of any independent regulations framed in respect of Art Funds, it is obvious that the Art Funds which satisfy the conditions set out under Section 11AA(2) would be governed by the CIS Regulations. 24. Argument of the appellant that the Art Fund is launched by the appellant for and on beha .....

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out therein and in the interests of investors in securities market SEBI is empowered to take such measures as it deems fit. In the present case, appellant has collected money from the investors under a scheme floated on behalf of the Trust with a view to invest the pooled amount in art works and thereafter on sale of the said art works distribute the profits to the investors. In such a case, decision of SEBI in holding that the appellant was running CIS without obtaining registration from SEBI c .....

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on and agro schemes. 26. Argument of the appellant that as AMC of the Trust the appellant was only entrusted with the duty to manage the funds of the Art Fund and was not responsible for making payments is without any merit. Admittedly, the Trust was created by the appellant. Mr. Neville Tuli (Founder and Chairman of the appellant) holds about 34.66% shares of the appellant company. The appellant has appointed Oseta Investments Trustee Company Private Limited as Trustee of the Trust. Mrs. Swaraj .....

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the close proximity between the appellant and the Trustee of the Trust and in view of the fact that Mr. Neville Tuli, Founder and Chairman of the appellant is also the Chief Advisor of the Art Fund, it is held in the impugned order that the Art Fund is sponsored by the appellant as an arrangement to launch its scheme which involves investment contracts in the nature of CIS, while de-facto management and control of the scheme remains with the appellant. It is further held that the appellant has s .....

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the erroneous belief that if the CIS operated through a Trust, it would be outside the purview of SEBI and under that erroneous belief the appellant adopted the modus operandi of running CIS through the arrangement of a private Trust. Therefore, in the facts of present case, since the appellant has been running CIS through the arrangement of a private Trust without obtaining registration from SEBI, no fault can be found with the decision of SEBI that the appellant is guilty of operating CIS in v .....

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cally be deemed to be a public offer and not a private placement. In the present case, investments from more than 650 investors have been received in violation of SEBI Act and CIS Regulations and therefore SEBI is justified in passing the impugned order with a view to protect the interests of investors. Similarly, decision of the Apex Court in case of PGF Limited would also be squarely applicable to the facts of present case because amounts have been collected from the investors for the purpose .....

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IS Regulations do not necessitate calculation of NAV and there is no underlying requirement to value investments or the units by calculating NAV on ongoing basis, the scheme in question falls outside the purview of CIS is also without any merit. Once the scheme or arrangement satisfies the four conditions set out under Section 11AA(2) then, the scheme or arrangement would be covered under CIS and the provisions of SEBI Act and CIS Regulations would apply accordingly. Similarly, fact that there a .....

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w the procedure prescribed under CIS Regulations. For all the aforesaid reasons, in the facts of present case, decision of SEBI in holding that the scheme floated by the appellant constitutes CIS and since the said scheme was operated without obtaining registration from SEBI, appellant has contravened the provisions of the SEBI Act and CIS Regulations cannot be faulted. 29. Question then to be considered is, by the impugned order dated April 15, 2013, apart from restraining the appellant from ac .....

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floated by the appellant in the year 2006 has come to an end in January 2010. SEBI had issued a show cause notice to the appellant on October 12, 2007 calling upon the appellant to show cause as to why the scheme in question should not be held to be covered under CIS. During the pendency of the said show cause notice SEBI, issued a press note on February 13, 2008 to the effect that the investments made in Art Funds constitute CIS and are governed by the CIS Regulations framed by SEBI. Inspite of .....

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ceived is ₹ 53,26,00,000/-, whereas the Art Fund has paid ₹ 70,76,91,971/- to the investors as of 30.06.2013 and the outstanding amount as of 30.06.2013 is ₹ 43,63,20,829/-. It is the case of the appellant that 16.72% of the total investors have been paid entire amount payable as per the final NAV, 36% of the total investors have been repaid more than 50% of the total amount payable and the balance 47% of the total investors have been repaid less than 50% of the total amount pa .....

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um from the date of investment till the date of refund, whichever is higher. 33. Except finding fault with the appellant in not seeking registration before operating the scheme, no fault is found in the scheme operated by the appellant. In other words, SEBI does not find fault with the scheme of the appellant which neither offered guaranteed return nor offered interest on the amount invested. In such a case, on what basis appellant is directed to refund the amount invested with interest at the r .....

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ested in the scheme of the appellant cannot seek redressal of their grievances from SEBI. It is only when this Tribunal on 29.11.2012 set aside the said communication dated 31.01.2011 and directed SEBI to reexamine the issue afresh in accordance with law, SEBI has passed the impugned order on April 15, 2013 holding that the scheme floated by the appellant is covered under CIS. 35. Thus, it is evident that even after issuing show cause notice in the year 2007, SEBI did not adjudicate the same, be .....

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