1. M/s. Touchwood Agrotech (P) Ltd., Chennai (hereinafter referred to as "Company") having its office at # 63, 3rd Street, W- Block, Anna nagar, Chennai 600 040 did not file information with SEBI pursuant to public notice dated 18.12.1997 whereby SEBI had directed all the existing Collective Investment Schemes to file certain information about their schemes with it by 15.01.1998. The company filed information only on April 29, 1998 , that too in response to our letter dated April 22, 1998 .
2. Consequent to the notification of SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as the "said Regulations") dated October 15, 1999, every person who, immediately prior to the commencement of the said Regulations, operating a Collective Investment Scheme(s), was required to make an application to SEBI for the grant of registration within a period of two months from the date of notification, under the provisions of the said Regulations.
3. In terms of Regulation 73 of the said Regulations, an existing Collective Investment Scheme which has failed to make an application for registration with SEBI, is required to wind up the existing scheme(s) and repay the investors. Further as per Regulation 74, an existing Collective Investment Scheme which is not desirous of obtaining provisional registration from SEBI is required to formulate a scheme of repayment and make repayment to the existing investors in the manner specified in Regulation 73.
4. SEBI vide a letter dated December 13, 1999 had given intimation to the Company that in case it is not desirous of obtaining registration from the SEBI, it was obliged to send Information Memorandum (IM) to all the investors detailing the state of affairs of the scheme(s), the amount repayable to each investor and the manner in which such amount is determined 5. In reply, the company vide letter dated 28.12.99 contended that it was not operating Collective Investment Scheme(s). However, from the perusal of the documents filed by the company with SEBI vide letters dated 28.4.1998, 29.9.1998, 14.10.1999 it was observed that the schemes of the company squarely fall within the definition of Collective Investment Schemes as defined under section 11 AA of the SEBI Act, 1992, as the contributions made by the investors were pooled together and then utilized for the purposes of the schemes , the contributions or payments to such scheme were made by the investors with a view to receive profits , income or produce , the scheme property was managed by the company and the investors therein did not have any day to day control over the management and operation of the scheme.
6. The fact that the company was running Collective Investment Schemes was supported by the company's letter dated 28.4.1998 wherein while submitting certain details as required by SEBI, it has stated that it was carrying on the business of plantation from 1995 and had collected money from the public by issuing instruments and sale of farm lands.
7. SEBI vide letter dated 29.12.1999 had intimated the Company that in case it is not desirous of obtaining registration from the SEBI, it was obliged to send Information Memorandum to all the investors detailing the state of affairs of the scheme(s), the amount repayable to each investor and the manner in which such amount is determined.
Accordingly, the Company was required to send the Information Memorandum to the investors latest by February 28, 2000.
8. In the meanwhile, SEBI having regard to the interest of the investors and requests received from various entities, extended the last date for submitting application for grant of registration by existing entities upto March 31, 2000. The same was intimated by SEBI vide a press release and a public notice. However, the Company still did not apply for grant of registration with SEBI in terms of the said Regulations.
9. As a matter of fact, the Company, neither applied for registration under the said Regulations nor has taken any steps for winding up of the scheme(s) and making payment to the investors in the manner provided under the said Regulations. Thus, the company has prima-facie violated the provisions of Section 12 (1B) of SEBI Act, 1992 and Regulations 5 (1) read with Regulations 68 (1), 68 (2), 73 & 74 of the SEBI (Collective Investment Schemes) Regulations, 1999.
10. SEBI had also issued a public notice in various newspapers in this regard inviting attention of the concerned entities including the Company herein about the statutory requirements under the provisions of SEBI Act, 1992, and the said Regulations.
11. Further, by way of a Show Cause Notice dated May 12, 2000, the Company was asked to show cause as to why the action mentioned therein be not initiated against it for the aforesaid violations/non-compliance. The Company vide its reply dated May 26, 2000 reiterated that it did not come under the definition of collective investment schemes.
12. Another Show cause notice was issued to the company on June 1, 2000 where in it was pointed out to the company that as per the information filed by it with SEBI, it was clear that the company was operating schemes which were in the nature of Collective Investment Schemes and therefore their argument in their letter dated 26.5.2000 are unacceptable.
13. Before proceeding in the matter, however, SEBI granted the company an opportunity of personal hearing before the then Chairman, SEBI on 7.9.2000. However, the company failed to attend the said hearing at Mumbai and instead sought hearing at Chennai.
14. On the basis of the facts it was observed that the company had violated the provisions of the said Regulations as mentioned vide SEBI show cause notices dated 12.5.2000 and 1.6.2000 and did not report compliance of the statutory requirements. Therefore, the then Chairman SEBI vide his directions under Section 11 B of SEBI Act, 1992, read with Regulations 65 & 73 of SEBI (Collective Investment Schemes) Regulations, 1999, directed the company to refund the money collected under the schemes with returns which is due to the investors as per the terms of the offer within a period of one month from the date of the order failing which penal actions would follow.
15. The company vide its reply dated January 17, 2001, reiterated that it does not fall under the purview of SEBI Act, 1992 .
16. Therefore, the company was granted another opportunity of personal hearing before the then Chairman, SEBI on September 18, 2001. This time again the company did not attend the said hearing at Mumbai and requested for the hearing at Chennai. In such circumstances, the company was called for a discussion on 19th November 2001 at SEBI, Southern Regional Office, Chennai when the entire facts & circumstances of the case and legal position was explained to its representative which fact was duly acknowledged by the company vide its letter dated 24.11.2001.
17. Pursuant thereto the company informed SEBI vide its letter dated 7.2.2002 that the Information Memorandum was sent to the investors on 17.01.02 and later, the company submitted the Winding up and Repayment Report on May 6, 2002. It was observed, however, that the Winding up and Repayment Report was not complete with the required details.
18. The company was thus advised vide SEBI's letter dated June 7, 2002 to furnish the Winding Up and Repayment Report with complete details of the repayment made to the remaining investors who have not given their positive consent, within 15 days from the date of receipt of the letter. It was forewarned that failing to comply with these directions various actions mentioned in the then SEBI Chairman's Order dated December 7, 2000 would follow. The company, however, did not furnish the Winding up and Repayment Report, complete with all details, despite a reminder dated July 29, 2002.
19. Having regard to the above, I am of the view that the company has been given ample opportunities for complying with the statutory requirements as contained under the SEBI Act, 1992, and the SEBI ( Collective Investment Schemes) Regulations, 1999 . The company has failed to comply with directions issued by the then Chairman SEBI on 07.12.2000 and also directives issued by SEBI from time to time regarding the submission of the Winding up and Repayment Report.
20. As stated above, the company has violated the provisions of Regulation 5 read with Regulations 68(1), 68(2), 73 and 74 of the SEBI (Collective Investment Schemes) Regulations, 1999.
21. Now, therefore, in exercise of the power conferred upon me under section 11B of the SEBI Act, 1992 , read with Regulation 65 of the said Regulations, I, hereby debar the company / its promoters/ its directors /its managers/ persons in charge of the business of its schemes (as given in Annexure A) from operating in the Capital market and from accessing the capital market for a period of 5 years from the date of this Order.