Tribunal sets aside refund order for Osian's art scheme

Directs Sebi to start fresh proceedings under CIS regulations

The Securities Appellate Tribunal on Tuesday set aside an order that directed Osian’s Connoisseurs of Art to refund Rs 102 crore to investors. The Osian’s scheme is promoted by Neville Tuli, an art dealer.

The tribunal said that collective investment scheme rules applied to art fund schemes. Hence, art fund schemes come under the jurisdiction of the market regulator, Securities and Exchange Board of India. (A collective investment scheme is any scheme made by any company under which the contributions by investors are pooled, to receive profits. Investors do not have day-to-day control over the management of the scheme.) In April 2013, the market regulator had asked Osian’s Connoisseurs of Art to return Rs 102 crore, with profits earned or 10 per cent annual interest, to 656 investors. The order had held that the company operated a collective investment scheme without a licence. Osian’s Connoisseurs of Art had appealed against the order in 2013, saying that art funds did not come under the regulator’s jurisdiction.

The tribunal held that art funds came under the regulator’s jurisdiction. But the tribunal asked the regulator to re-examine its refunding order. It said the regulator had not said why Osian’s Connoisseurs of Art needed to return money to investors.

Osian’s Connoisseurs of Art operated between 2006 and 2010. The regulator initiated proceedings against the company in 2013.

In 2007, the regulator asked Osian’s Connoisseurs of Art why its collective-investment-scheme rules should not apply to it. In 2008, the regulator said these rules applied to all art funds.

"It is relevant to note that even after issuing a press note on February 13, 2008, Sebi itself was not sure till 2013 as to whether the scheme in question is covered under CIS or not," said SAT.