Mumbai: Market regulator SEBI on Monday ordered winding up of collective investment schemes being run in the garb of real estate business, asking the entity concerned to refund the money to investors within three months.
SEBI also barred the company, Maitreya Services Pvt Ltd, and its directors Varsha Madhusudan Satpalkar and Janardan Arvind Parulekar from the securities market till the time all its collective investment schemes are wound up and has decided to initiate prosecution proceedings against them.
The SEBI order also said that a reference would be made to the police to register a civil/criminal case against the company, their directors and persons in charge of the CIS business for "offences of fraud, cheating, criminal breach of trust and misappropriation of public funds".
Besides, a reference will be made to the Ministry of Corporate Affairs to initiate the process of winding up of Maitreya Services Pvt Ltd.
The market regulator began the probe after a reference from the Income Tax department in September 2010 alleging violation of SEBI regulations by Maitreya.
During the inquiry, the company submitted that it carries out the business of real estate and its business includes buying and selling of land, development of the land, construction and other land related activities.
SEBI found that the company had launched various schemes under which money was collected from the public. These schemes differed on the basis of the periodic payment to be made by the investor, and the time period for which such investments were to be made.
In the course of its inquiry, SEBI found that the company had launched and operated 'collective investment schemes' without registering with it for the same and an amount of Rs 804 crore was outstanding with it to be repaid to investors.
In reply to the show-cause notices by SEBI, the company denied being in CIS operations and refuted all the charges.
In 2012, the company sought to settle the proceedings through a consent procedure, but that was rejected by SEBI.
SEBI's probe found that the the company had mobilised Rs 1,332 crore from public as "advances" as on March 31, 2011, and had repaid Rs 538 crore as "repayment" to investors -- resulting into an amount of Rs 794 crore as outstanding to be repaid as on that date.
SEBI also found that the assets were insufficient to meet the liabilities and its repayment obligations were almost double the value of its total movable and immovable assets.
Besides, it did not have enough land bank as compared to the investments mobilised by it from the investors. In 2007-08, it had an outstanding balance of Rs 305 crore due for repayment and a land inventory of only Rs 1.7 crore.
In the subsequent years as well, it did not have corresponding inventory even for 25 percent of its investors.