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TMI Blog2015 (6) TMI 1256X X X X Extracts X X X X X X X X Extracts X X X X ..... any new schemes; not to dispose of any of the properties or alienate any of the assets of the schemes; not to divert any funds raised from public at large which are kept in bank account(s) and/or in the custody of the company ". SEBI also received complaints alleging that subsequent to the issuance of the SEBI Order, the Directors of Royal Twinkle are running Collective Investment Scheme through Citrus. 3. As a matter of preliminary inquiry into whether or not Citrus is carrying on activities of 'collective investment scheme' in terms of Section 11AA of the SEBI Act, 1992 (hereinafter referred to as "SEBI Act"), SEBI vide letter dated February 18, 2014 sought the following information from Citrus viz.- "a. Memorandum and Articles of Association of Citrus as filed with the Registrar of Companies, b. Details of the past and present directors of Citrus, c. Brochures/offer documents pertaining to Citrus's schemes, d. Application forms that are required to be submitted by investors to participate in the schemes of Citrus. e. Sample copies of the registration letter and allotment letter issued to the investors who subscribed to the schemes of Citrus. f. Sample ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have absolute control/discretion as regards the manner in which the customers wish to avail their holiday facilities. c. Citrus sought more time to submit the remaining information." 7. As no further information was received from Citrus, SEBI issued reminders vide its letters dated July 23, 2014 and August 05, 2014. Subsequently, Citrus vide its letter dated August 07, 2014 furnished the following documents: a. "Copies of additional brochures/application forms of the remaining holiday plans; b. Copies of application forms that are required to be submitted by the customers while purchasing Citrus's holiday plans; c. Copies of Holiday Entitlement Certificates which Citrus issues to a customer on purchase of holiday plans; d. Total amount of plan - wise sale achieved by Citrus as on 31.03.13." 8. Vide the aforesaid letter, Citrus also submitted as under: "i. It is not engaged in the activities of mobilizing funds from the general public but it is engaged in selling holiday plans/time share holidays to its customers and ii. Citrus do not issue any registration letter and allotment letter/agreement letter/contract to its customers. iii. On purchase of holiday pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority or sanctity". The complainant also alleged "business group of Mr. Omprakash Goenka and others have been committing fraud, initially under the name of Royal Twinkle and thereafter in the name of Citrus Check- Inns". The complainant also stated "... I was contacted by certain agents working for "Citrus Check-Inns Limited" in or about July 2014 regarding investment plan and the new scheme launched by them. Upon several discussions they convinced me that after investing in their scheme named "SAPH-JUMBO-M-N" (Sapphire), I would be guaranteed an additional sum after 3 years. Relying on their word, I agreed to invest Rs. 2500/- per month for a period of 3 years with Citrus Check-Inns Limited. I was given a Certificate for the said investment and was assured that upon completion of the said period of 3 years, I would be returned Rs. 1,67,000/- my investment of Rs. 90,000/-". It was further stated that subsequent to his making the investment in August 2014, the complainant came to know about the Order dated March 7, 2014 passed by SEBI against Royal Twinkle Star Club Pvt. Ltd. and its Directors including Mr. Omprakash Basantlal Goenka, Mr. Prakash Ganpat Utekar, Mr. Venkatraman Natra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bilizing activity through Citrus, circumventing the aforesaid directions issued by SEBI. 13. SEBI vide letter dated January 15, 2015 once again sought the relevant information from Citrus. 14. In response thereto, Citrus vide letter dated January 30, 2015 submitted the following information/documents: "a. Details regarding plan Sapphire b. The plan Emerald was discontinued and no sale were recorded in it. c. Details regarding Plans Orange, Lemon and Fragrance." 15. In addition, Citrus sought further time to submit the information regarding total number of customers who have actually availed the holiday plans and details of members who have subscribed to the plans. 16. Citrus vide email dated March 05, 2015 and March 19, 2015 sought additional time to submit the information sought by SEBI. However, Citrus has failed to submit till date the relevant information sought by SEBI (detailed in para 9 of this order) such as the total number of customers who have actually availed the holiday plans and details of members who have subscribed to the plans, etc. despite multiple opportunities given in this regard. 17. In view of the above, it is clear that the Company and its Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o invest a particular amount in a one payment plan or multiple payments plan with a promise to get a particular amount (which includes appreciation on the invested amount) at the end of the plan period with an option to avail the holiday facilities. The point value as mentioned in the offer document (over leaf) under the head "Salient Features") is Rs. 100/- per point. v) A tabular representation of the features of various holiday plans of Citrus are as follows:-- vi) The details of plan Gem mentioned in the marketing pamphlet furnished by one of the complainants (along with the complaint received on October 10, 2014) is reproduced as under: vii) As per plan Gem under option 'Nano', if a subscriber pays Rs. 1,000/- for 36 months, he will get 540 points at the end of 5th year (@ 1 point = Rs. 100/-), which is equivalent to Rs. 54,000/- (i.e. if he/she pays for 3 years and they can enjoy the benefits for 5 years). The Subscriber has the option of either using these points for availment of "benefits"/holiday room facility for himself (or sell the points to someone else through the company) during the plan period or redeem the points in cash. Citrus has promised to redeem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,480 as on March 31, 2013." 19. The above mentioned features of Plans offered by Citrus have to be considered in light of the provisions of Section 11AA of the SEBI Act which provides for the conditions to determine whether the scheme or arrangement is a 'collective investment scheme', viz. - "(1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) or sub-section (2A) shall be a collective investment scheme. Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under the exemptions from CIS sub-section (3), involving a corpus amount of one hundred Crore rupees or more shall be deemed to be a collective investment scheme. (2) Any scheme or arrangement made or offered by any person under which, (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement; (ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewel Nano-M respectively. Both the schemes convert the moneys received into "Holiday Points". The schemes provide for either (i) conversion of points into availment of room accommodation or (ii) redemption of unutilized points @ Rs. 100/- per point. It is clear that the entire accumulated points would be available for redemption in cash where no availment of room accommodation is done. We have several times asked for the information as to the exact level of conversion of points into availment of room accommodation. Regretfully, the company has chosen not to give these details despite being given several opportunities to do so. In view of these facts, the Holiday Plans offered by Citrus satisfy the condition stipulated in Section 11AA(2)(i) of the SEBI Act. ii. The contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement. Citrus is collecting money from "customers"/investors and assuring them a certain return on investment, which is in the nature of profit. For instance, in 'plan Gem' under option 'Nano', if a subscrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling holiday plans/packages and time share holidays and does not mobilize or pool funds from the general public". The contentions of Citrus is contradictory to the statements made by the complainants and the contents of the marketing pamphlets and Certificates furnished by complainant as detailed in para 12 as well as the schemes reproduced in para 18 (vi) of this Order. Holiday Points are awarded by Citrus to the "customers"/investors who subscribe to the Holiday Plans. The subscriber has the option of not availing these points for "benefits"/holiday rooms during the plan period and can request Citrus to redeem the points in cash. Citrus promises to redeem the points in cash and make good any loss to subscriber arising out of rent out/sale of these points in the open market through Citrus. The Holiday Entitlement Certificate issued to the customers/investors clearly states "...unutilized points can be redeemed on or after expiry date at any of the Co's branches @ Rs. 100/- per point". It is noted that Citrus also sought time vide letter dated October 13, 2014 to submit (i) the certified true copies of the Order passed by the Honourable Gauhati High Court which is directly re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as "CIS Regulations") also prohibits carrying on CIS activities without obtaining registration from SEBI. Therefore, the launching/floating/sponsoring/causing to sponsor any 'collective investment scheme' by any 'person' without obtaining the certificate of registration in terms of the provisions of the CIS Regulations is in contravention of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations. In this regard, I note that Citrus has not obtained any certificate of registration under the CIS Regulations for its fund mobilizing activity from the public. 25. Further, the activity of illegal mobilization of funds by Citrus through its schemes, prima facie, amounts to a fraudulent practice in terms of Regulation 4(2)(t) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market), 2003 ("PFUTP Regulations"). 26. It is noted that Citrus was advised to respond to the preliminary inquiry conducted by SEBI, on several occasions vide SEBI letter dated February 18, 2014, email dated October 01, 2014 and reminder dated January 15, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on March 31, 2013. As detailed before, Citrus has steadfastly refused to give the latest and relevant information to SEBI despite being given several opportunities to do so. The trail of all these events as well as the conduct of Citrus lead me to draw a prima facie inference that the refusal to give information is nothing but an attempt to conceal the real nature of its fund mobilizing activities. 28. Protecting the interests of investors is the first and foremost mandate for SEBI. Therefore, steps have to be taken in the instant matter to ensure that only legitimate investment activities are carried on by Citrus and no investors are defrauded. Further, in order to safeguard the assets/property acquired by Citrus and its promoters/directors using the funds collected from the investing public until full facts and materials are brought and final decision is taken in the matter, it is incumbent on SEBI to take preventive action by way of an immediate measure. In the light of the above, I find no other alternative but to take recourse to an interim order against Citrus and its Directors for preventing them from further carrying on with its existing fund mobilizing activity by launchi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc.,
x. Audited Accounts for the financial years i.e. F.Y. 2012-13, 2013-14, and 2014-15;
xi. Income Tax returns for F.Y. 2012-13, 2013-14, and 2014-15;
xii. Details of fund transfers within group companies and associates and its directors for the for year 2012-2013, 2013-2014 and 2014-2015."
30. The above directions shall take effect immediately and shall be in force until further orders.
31. This order shall be treated as a show cause notice and Citrus and its Directors may show cause as to why the plans/schemes identified in this order should not be held as a 'collective investment scheme' in terms of the Section 11AA of the SEBI Act and the CIS Regulations and why appropriate directions under the SEBI Act and CIS Regulations, including directions in terms of Regulations 65 and 73 of the CIS Regulations should not be issued against them.
32. Citrus and its abovementioned Directors may, within 21 days from the date of receipt of this Order, file their reply, if any, to this Order and may also indicate whether they desire to avail themselves an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard. X X X X Extracts X X X X X X X X Extracts X X X X
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