Court fines plantation firm for flouting SEBI norms

A Delhi court has slapped a fine of Rs 200000 on a plantation firm and its three directors for raising huge funds from the public on promise of high returns without prior approval from market watchdog Securities and Exchange Board of India (SEBI). The court also slapped a fine on Sangam Forests India Limited and its three directors,rejecting their plea for mild punishment as they were now leading a strenuous life on a meagre salary of Rs 7,000 in a private firm. “Ends of justice will be met if convicts are burdened with substantial fine. Accordingly,I impose a fine of Rs 50,000 each (on the company and its three directors) in default of which the three directors will be liable for two months simple imprisonment for the offence punishable under the SEBI Act,” Additional Sessions Judge (ASJ) Pawan Kumar Jain said. Sangam Forest is among several of collective investment companies (CIS) against whom SEBI had filed complaints between 2003 and 2005,seeking their prosecution for raising huge funds from the public without getting prior approval from it as prescribed under the SEBI Act. SEBI had alleged “the company had floated the CIS and raised approximately Rs 800000 from general public,violating the SEBI Act provisions.” The market regulator explained that after CIS regulations came into the force,a public notice was issued on December 18,1997,for either registration of the Collective Investment Scheme with SEBI or winding it up after returning investors’ fund,but the accused continued to operate without paying heed to the statutory provisions. During the trial,the directors of the plantation company admitted that they had not applied for registration and sought a mild punishment. One of the convicts also submitted that he now has private job on a meagre monthly salary of Rs 7,000 only. Jain,however,imposed the fine after convicting the firm and directors Ganga Prasad Tiwari,Nirmal Singh Bains and Naresh Kumar Sharma for flouting SEBI norms. The SEBI Act,amended in January 1995,stipulates that for raising venture capital funds or collective investment schemes prior registration certificate from the market regulator is mandatory. Hundreds of companies,however,continue to operate without getting the registration certificate,prompting SEBI to launch criminal proceedings against them. These companies offer schemes under which investment from general public is mobilised and utilised with the purported aim to generate high returns. The money is managed by the plantation company on behalf of the investors who do not have day-to-day control over the management and operation of such schemes.