SEBI imposes penalty on Orient Resorts (India) Pvt for mobilizing public funds through CIS without obtaining registration from SEBI

SEBI imposes penalty on Orient Resorts (India) Pvt for mobilizing public funds through CIS without obtaining registration from SEBI

The Securities and Exchange Board of India (SEBI) has imposed heavy penalties upon Orient Resorts (India) Pvt., Dilpes V Shah and Darshanbhai Arvindbhai Shah. Herein, SEBI received a complaint against Orient Resorts (India) Pvt., Ltd., (ORIPL/Noticee 1)alleging that it had raised an amount of more than Rs. 10 crore from the public (more than 50,000 investors) through Collective Investment Scheme (CIS) without obtaining certificate of registration from SEBI.

The Whole Time Member of SEBI had earlier issued certain Directions whereby ORIPL and its Directors Mr. Darshanbhai Arvindbhai Shah and Mr. Dilpesh V Shah were directed to windup its scheme and to repay the income or returns to the investors or transfer the produce i.e., one teak tree per unit to them as represented under the scheme, within a period of three months from the date of this Order.

It was observed that ORIPL (Noticee 1) and Dilpesh V Shah (Noticee 2) failed to submit any report to SEBI about compliance with the aforesaid Directions. It was alleged that the Noticees had not complied with the Directions issued by SEBI vide Order dated November 26, 2013.

The Adjudicating Officer observed that the Noticees' act of carrying on an unregistered collective investment scheme was not only a violation of provisions of SEBI Act and Regulations made thereunder, but it also put investments of lakhs of investors in jeopardy, which is a serious offence.

The AO also noted that here was no documentary proof on record to substantiate the claim of the Noticees 1 and 2 for having repaid the income or returns to the investors. Moreover, the Noticees 1 and 2 failed to provide any reply to SEBI as to how the permissions were sought by Suruchi Vruksh Utpadak Sahakari Mandali Ltd., and not ORIPL.

The Noticees 1 and 2 in their replies to the instant proceedings had neither made any reference to the aforesaid facts nor submitted any reply thereafter on the same. As per the scheme details the 18 years period stipulated in the scheme had expired and ORIPL had not yet made repayment of profit, income to investors as promised by it.

The AO also found that ORIPL had illegally continued the scheme in contravention of the provisions of the SEBI Act and the SEBI (CIS) Regulations. Further, the scheme period was over and income or profit or produce to investors was not contingent upon the cutting of the trees as per the scheme. Nevertheless, if it was so, ORIPL had to take appropriate steps before the expiry of 18 years and should have ensured the repayment to investors in terms of its scheme.

It was noted that the non-compliance of the Directions issued by SEBI by the Noticees 1 and 2 further corroborated the fact that the notice of demand demanding a sum of Rs. 13,42,91,111/- due to non-compliance of the Order dated November 26, 2013was served on the Noticees 1 and 2 and that their bank accounts & demat accounts had been frozen. It was evident from the above facts that the Noticees 1 and 2 had failed to comply with the Directions issued by SEBI vide Order dated November 26, 2013.

It was also concluded that the Noticee Company by mobilizing public funds through CIS without obtaining registration from SEBI as required under Section 12(1B)of the SEBI Act and Regulation 3, 5, 73 and 74 of the SEBI (CIS)Regulations, the Company (Noticee 1) and its Directors viz., Dilpesh V Shah (Noticee 2) and Darshanbhai Arvindbhai Shah (Noticee 3), contravened the above provisions and therefore the Noticees were liable for monetary penalty under Section 15D(a) of SEBI Act.