The Securities and Exchange Board of India (Sebi) on Tuesday directed Kolkata-based Sumangal Industries (SIL) and its several promoters and directors to wind up its existing collective investment schemes (CIS) and refund the money collected to investors within three months.
Sumangal Industries had collected money from investors under its 'potato purchase schemes'. Sebi's investigations found various schemes of the company are akin to CIS, which comes under the jurisdiction of Sebi.
Sebi has also barred the company from collecting any money henceforth from investors or carry out CIS activities. Sebi said if the company failed to refund money to investors, it would initiate criminal proceedings against Sumangal Industries or its promoters.
Sebi's investigation found Sumnagal's schemes fulfilled several conditions to come under the ambit of CIS.
First, the payments made by investors were pooled and utilised for the purposes of the scheme or arrangement. Second, contributions made to such scheme by the investors are with a view to receive profits. The third conditions was that the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors. The last condition was that the investors didn't have day to day control over the management and operation of the scheme or arrangement.
"Considering the above discussion, it can be said that the transactions between SIL and its customers are not trading business transactions simpliciter. They satisfy all the ingredients of a CIS as defined under Section 11AA of the Sebi Act. It is clear that the business run by the SIL is nothing but that of a CIS, as all the conditions of Section 11AA of the Sebi Act are satisfied by the scheme/ operations of SIL," said Prashant Saran, wholetime member, Sebi in an order.