New Delhi: Sebi on Friday clamped down on an investment scheme involving collection of public funds for purchase of cattle to earn huge returns from sale of ghee and asked the company as well as its directors to initiate the process for refunding Rs 1,100 crore to investors.
The operator of this scheme, HBN Dairies & Allied Ltd, has also been barred from disposal of assets totalling over Rs 1,000 crore, except for the purpose of winding up of its schemes, and refund of investor money with promised returns.
Sebi said in an order, which has come into force with immediate effect, that HBN and its nine directors can't solicit any further money from investors or its customers into these schemes. Besides, they have also been barred from launching or carrying out any other money collection schemes.
HBN and its directors have also been asked to submit to Sebi within 30 days a "reasonable proposal including firm time lines with regard to the manner in which it proposes to wind up its schemes and make payments along with the returns which are due to its investors".
Sebi said these directions are without prejudice to any further actions that might be taken in this case.
The regulator has been taking action against a host of entities running illegal money collection schemes. Some of the entities that have faced Sebi action recently include Sumangal for a potato investment scheme, Rose Valley for a holiday membership scheme and the infamous Saradha case of West Bengal.
Sebi began HBN probe following receipt of complaints that it was illegally collecting money from the public.
Subsequently, SEBI wrote to HBN in February 2009 seeking details like applications forms, brochures, sample agreements, balance sheets, profit and loss accounts, details of the past and present directors, details of funds mobilised under various schemes, to ascertain whether it was running unauthorised collective investment schemes.
In the meantime, HBN applied to Sebi for registration as CIS, but could not provide sufficient details and documents.
The company had apparently raised hundreds of crores through public deposits for purchase of cattle with a promise of more than doubling the money through returns linked to the ghee produced by them.
As per the financial details accessed by Sebi during its probe, the scheme named 'Cattles & Ghee' had mobilised a total amount of Rs 745 crore as on March 31, 2011. Further funds could have been garnered from the depositors since then.
As per its website, New Delhi-based HBN claims to be in dairy business since late 90s with dairy farms in Samalkha (Haryana) and Gannaur, among other places.
Sebi regulates CIS, which involves pooling in of money from multiple investors for a specific objective.
HBN is not registered as CIS entity with Sebi and therefore, the investment schemes run by it are in contravention of Sebi rules.
In reply to a show-cause notice from Sebi, HBN admitted that it has deposits of worth Rs 1,100 crore collected from the public and expressed its intention of repaying the amount to public.
Besides, the company expressed desire to wind up the schemes and repay investors and had sought reasonable time from Sebi to file a scheme of repayment to its customers or stakeholders.
Consequently, Sebi granted an opportunity to the company to submit an arrangement for quicker reimbursement of money to the investors.
However, Sebi said: "This cannot be at the risk of HBN continuing with its money collection activities/alienation of its assets."
It has barred HBN's nine directors -- Harmender Singh Sran, Satnam Singh Randhawa, Amandeep Singh Sran, Gajraj Singh Chauhan, Manjeet Kaur Sran, Jasbeer Kaur, Rakesh Kumar Tomar, Sukhdev Singh Dhillon and Sukhjeet Kaur -- from collecting any further money from investors or customers into these schemes.
The company had assets and investment worth over Rs 1,300 crore at the end of financial year 2012-13.
HBN was raising money from public depositors in the name of purchasing cattle with a promise of doubling of money or even more at the time of maturity.
The company claimed to link the promised maturity amount to the expected price of cattle and ghee at that time. It promised to secure the actual investment even if it was withdrawn in a month's time. The schemes were offered for periods ranging from one month to nine years.
As per the balance sheet for the year ended March 31, 2011, an amount of Rs 745 crore is being shown under Advance from customers. The corresponding figure for the year ended March 31, 2010 were Rs 529 crore.
The advances from customers appear to be deposits taken from customers, thus you have mobilised funds to the tune of Rs 216 crore in the year 2010-11 and have total mobilisation of Rs 745 crore.