Decided on January 13,2003



C.Achuthan, - (1.) THE present appeal is directed against the Respondent's order dated 19.7.2002. By the said order, the Appellant, which is operating Collective Investment Schemes, was directed to refund the money collected by it in the scheme(s) to the investors within one month from the date of the order. By the said order the Appellant has been informed of the consequences that would follow in case refund of money, as directed is not made.
(2.) The Appellant company was incorporated in the year 1984 as a private limited company. In 1989 it was converted into a public limited company. It is involved in resort and tourism activities. It is also involved in plantation activities. The Appellant had floated several Collective Investment Schemes. The fact that the Appellant is operating Collective Investment Schemes and as such amenable to the regulatory regime put in position by the Respondent is not in dispute. The Respondent is a statutory Board established under the Securities and Exchange Board of India Act, 1992( the Act). The object of the said Act is to protect the interests of investors in securities and to promote the development of and to regulate the securities market. Section 11 of the Act enumerates the functions of the Respondent. The section mandates the Respondent to protect the interests of investors by such measures as it thinks fit. Registering and regulating collective investment schemes is one of the measures, the Respondent is empowered to take. The Respondent in exercise of the powers so vested has notified the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 ( the 1999 Regulation) which came into force from October 15, 1999. The said Regulation provides for registration of the existing collective investment schemes and also the new schemes. The Regulation also provides certain measures to regulate the activities of the said schemes. Though the Act provided for registration etc., of the collective investment schemes, till October 15, 1999 this requirement could not be enforced as the requisite regulation was not in position. Statutory requirement in this regard is clear from the provisions of section 12(1B) of the Act as extracted below: "No person shall sponsor or cause to be sponsored or carry on or caused to be carried on any venture capital funds or collective investment schemes including mutual funds, unless he obtains a certificate of registration from the Board in accordance with the regulations: Provided that any person sponsoring or causing to be sponsored, carrying or causing to be carried on any venture capital funds or collective investment schemes operating in the securities market immediately before the commencement of the Securities Laws (Amendment) Act, 1995, for which no certificate of registration was required prior to such commencement, may continue to operate till such time regulations are made under clause (d) of sub-section (2) of section 30."
(3.) COLLECTIVE investment scheme has been defined in section 11AA of the Act, as under:- 11AA.(1) Any scheme or arrangement which satisfied the conditions referred to in sub-section (2) shall be a collective investment scheme. (2) Any scheme or arrangement made or offered by any company under which, - (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized 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; (iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; (iv) the investors do not have day-to-day control over the management and operation of the scheme or arrangement. (3)Notwithstanding anything contained in sub-section (2), any scheme or arrangement:- (i) made or offered by a co-operative society registered under the Co-operative Societies act, 1912 (2 of 1912) or a society being a society registered or demand to be registered under any law relating to co-operative societies for the time being in force in any State; (ii) under which deposits are accepted by non-banking financial companies as defined in clause(f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (iii) being a contact of insurance to which the Insurance Act, 1938(4 of 1938), applies; (iv) providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 ( 19 of 1952); (v) under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956); (vi) under which the deposits are accepted by a company declared as a Nidhi or a mutual benefit society under section 620A of the Companies Act, 1956 (1 of 1956); (vii) falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund Act, 1982 ( 40 of 1982); (viii) under which contributions made are in the nature of subscription to a mutual fund; shall not be a collective investment scheme".;

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