TMI Blog2005 (6) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order may be briefly stated as follows: 4. The appellant M/s. Guru Teak Investment (Mysore) Private Limited is a company incorporated under the Companies Act, 1956 on 01/02/1996. The main objective was to carry on business under Collective Investment Scheme including farming, horticulture, floriculture and for the purpose of manufacture and sale of agro chemicals and to carry on business as timber merchants and the business to sell land with or without trees and plants. 5. Section 11AA dealing with Collective Investment Scheme was introduced by Act 31 of 1999 w.e.f. 22/02/2000. Before Section 11AA was introduced the Collective Investment Scheme was subject to various laws depending on whether the scheme was a company, partnership or an individual. By the introduction of Section 11AA such Scheme which come within the definition of Collective Investment Scheme as defined under Section 11AA was to be brought within the purview of SEBI. In other words even those Collective Investment Scheme which existed even prior to the introduction of Section 11AA has now been brought under the provisions of Section 11AA. 6. It may not be necessary for the purpose of this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for registration as provided under Regulation 71(1). The respondent by communication dated 09/07/2001 was pleased to grant provisional registration under Regulation 70(1) read with Regulation 71(1) of the Regulations. [The previous regulation was amended w.e.f. 01/07/2001]. The respondent imposed 11 conditions while granting provisional registration in order to obtain final registration. The 11 conditions were: (i) Company shall get existing schemes rated by a Credit rating agency within one year from the date of grant of provisional registration; (ii) The company shall not launch any new scheme or raise money from the investors under the existing scheme; (iii) Company shall get the existing schemes audited by an auditor within one year from the grant of provisional registration; (iv) Company shall get the existing schemes appraised by appraising agency within one year; (v) Company shall create trust and appoint trustees as specified in Chapter IV of Regulations within one year; (vi) Company shall comply with accounting and valuation norms as provided in Part II of the ninth schedule of the Regulations within one year; (vii) Company shall meet a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulations/SEBI Act for violation of said Regulations, you are hereby granted an opportunity before Chairman, SEBI on November 5, 2004 at 4.30 p.m. at our Head Office, address of which is mentioned below: SEBI Mittal Court, B Wing 224, Nariman Point Mumbai - 400 021 Please acknowledge receipt of this letter and confirm your appearance to us. 12. The appellant by letter dated 04/10/2004 confirmed that they will be appearing before the Chairman on 5th November, 2004 at 4.30 p.m. through Annexure 'A'. There was a hearing on 5th November, 2004. 13. Three days after the hearing, the appellant on 8th November, 2004 wrote to SEBI as per Annexure 'Q' which reads as follows: We thank you for giving us an opportunity to represent our case before you and also for giving us a patience (sic) hearing to air our views on Friday, 5th November, 2004. We also thank you for giving us a further time of 30 days to fulfill the requirements laid down at the time of giving us the Provisional Registration Certificate. We assure you that we will take all necessary steps to get the requirement documentation completed before the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investors. Finding of SEBI was that the company had mobilized ₹ 52.53 crores during the period 01/04/2000 to 31/03/2004. The respondent holds that this mobilization of funds is in violation of Regulation 69. It is not known on what basis SEBI has made this statement. The least SEBI could have done was to refer to materials, if any, in the impugned order to hold that the company had mobilized funds. 20. Curiously condition No. 2 deals with the requirement of credit rating. Admittedly credit rating by ICRA has been given and the rating says 'high risk'. There is nothing in the regulation or under the provisions of the Act to compel a scheme to be wound up merely because the rating indicates high risk. 21. Mr. Naganand, learned Sr. Counsel for the appellant vehemently submits that all schemes which involves growth of teak are, as a matter of routine, treated as high risk. He also submitted that there is no bar for a company to deal in collective investment schemes involving the growth of teak trees merely because the rating indicates high risk provided the investing publics are made to know the rating. He further submitted that all dealings in the stock mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red with SEBI as Debenture Trustees under the SEBI (Debenture Trustee) Regulations, 1993. The explanation by the appellant is that no names were forthcoming until recently. The learned senior counsel for the appellant fairly submitted that the names are now available on the website and the learned senior counsel for the appellant has offered to induct the Trustees recommended by SEBI as Trustees on the Board of the Trust. It would be appropriate for SEBI to consider this aspect of the matter and give time to enable the appellant to comply with condition No. 6 and also give the name of the Trustees who will have to be taken on the Board of the Trust. That, in our view, would meet the ends of justice with regard to complying with the condition No. 6. 27. Condition No. 7 is a valid condition and the learned senior counsel for the appellant submitted that the accounting and valuation will be done scheme-wise and it would be open to SEBI to direct the appellant to audit each of the schemes separately and submit the same to the respondent within a reasonable time. 28. Condition No. 8 speaks about net worth certificate. The learned senior counsel for the appellant submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirements of SEBI in accordance with law if sufficient time was granted. Learned counsel submitted that after the impugned order was passed and even before it, a sum of ₹ 95 lakhs have been repaid to investors who sought full refund. This was to show the bonafide of the appellant that there was no investor grievance. The appellant further submitted that the appellant employs more than 1200 persons for maintaining the plantations. The appellant spent enormous amount of money in manure, fertilizers, pesticides, etc., to keep the plantations in good and healthy conditions. If these inputs are not provided the entire amount spent would be lost. The plants are irrigated by using modern dripping irrigations. Hundreds of labourers are employed to look after the plantations and to supply of manures and other materials. 250 persons are employed on monthly salary. In these circumstances it was submitted that no useful purpose will be served by winding up the scheme. It was submitted that the appellant be given time by SEBI to rehabilitate and make the scheme workable so that the investors are benefited. The learned senior counsel for the appellant also assures and agrees that if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: Application under Rule 21 of Securities Appellate Tribunal (Procedure) Rules 2000, the Appellant herein begs to submit as follows : 1. The appellant has preferred this appeal against the orders dt. 18/02/2004 by the respondent. It is submitted along with the appeal the appellant sought for the stay of the operation of the orders of the respondent. This hon'ble authority granted an interim order in the following terms : a) the appellant shall deposit with the respondent a sum of ₹ 50,00,000/- (Fifty lakhs Only) within 8 weeks from the date of the receipt of the order, b) The appellant shall not alienate any immovable property standing in the name of the company without the leave of the Tribunal, c) The appellant shall not mobilize any further funds from the public, d) The respondent shall keep a sum of ₹ 50,00,000 (Fifty Lakhs Only) in a fixed deposit with accrued cumulative interest for a period of three months with any nationalized bank at the discretion of the Chairman SEBI, e) It is the desire of the Tribunal even those lands which are not owned by the company which are subject matter of the scheme be not allowed to be alienated pending app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onth. It is necessary to mention that the company is incurring expenses to an extent of 1,71,49,5727-(One Crore Seventy One Lakhs Forty Nine Thousand Five Hundred and Seventy Two Only) per month. On its operations as detailed in the amended statement. In addition on account of certain adverse publicity for the company undertaken by certain vested interest during the pendency of this appeal, several investors demanded refund of their money. After the interim order was passed in this appeal on 11.03.2005, the Appellant has repaid ₹ 96,51,991-00 to such investors. No other investors have demanded the repayment till date. 7. It is submitted that in view of the terms imposed by this Hon'ble Tribunal, the appellant was forced to stop its business of accepting deposits and it is depending upon the borrowing to meet its day to day commitments with great difficulty. The appellant herein has partially met its expenses during the last 83 days and it has become very difficult to continue the affairs of the company in the same manner. The monthly inflow into the company which has been curtailed by the interim order is around 8 crores. This is adversely affecting the cash flow po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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