In a major crackdown on illegal money pooling schemes, Sebi has ordered Sai Prasad Corporation Ltd (SPCL) to refund investors' money worth Rs 615.47 crore, which it collected through illegal collective investment scheme (CIS).
The company and its directors – Balasaheb K Bhapkar, Shashank B Bhapkar and Vandana B Bhapkar – have also been barred from the capital market for four years.
According to the Securities and Exchange Board of India (Sebi), the firm and its three directors were allegedly running CIS in the name of its 'joint venture participation business for the development of land'.
SPCL mobilized Rs 137.12 crore from the investors during 2012-2013 and Rs 478.35 crore in financial year 2013-14, as per the order.
"I find that the noticees (the company and its directors) have launched and are carrying on collective investment schemes, without obtaining certificate of registration from Sebi.
"Therefore, the noticees have contravened the provisions of Section 12(1B) of the Sebi Act and Regulation 3 of the CIS Regulations," Sebi Whole Time Member Prashant Saran said.
Besides, the company violated certain norms of Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations.
In view of the violation committed by the directors and the company, Saran said that they are liable to wind up the scheme and repay the amount collected along with promised returns.
Sebi directed the entities to refund the money within 3 months of the order and then with 15 days submit a winding up and repayment report to the regulator.
In addition, they have been barred from selling any assets of the company, except for the purpose of making refunds to its investors.
In case they fail to comply with the order, Sebi said SPCL and its directors will continue to be barred from securities market, even after the completion of four years of restrictions imposed on them "till all the Collective Investment Schemes are wound up and all the money mobilized through such schemes are refunded to its investors with returns which are due to them."
Further, it would make a reference to state government/ local police and register a civil/criminal case against SPCL and would make a reference to the Ministry of Corporate Affairs to initiate the process of winding up of the firm.
In 2014, through an interim order, Sebi had already banned the company and its directors from the capital market. A year prior to that, Sebi had issued similar directions against two other Sai group firms — Sai Prasad Properties and Sai Prasad Foods.
The three directors of SPCL were also found to be directors of these other two group firms.