Firm collects investor money,gets fined

A plantation company and its two directors have been slapped with a fine of Rs 2.2500000 by a Delhi court for collecting a huge sum of money from the public,promising them high returns,without prior SEBI permission. Additional Sessions Judge Pawan Kumar Jain fined Yojna Agro Forestry Limited a firm among hundreds of collective investment companies (CIS) on a complaint by market watchdog Securities and Exchange Board of India (SEBI) to prosecute the plantation company for not getting prior certificate from it as prescribed by the SEBI Act. SEBI had alleged “the company had floated the CIS and mobilised0000000 of rupees from general public,in violation of the provisions of the SEBI Act which stipulates prior SEBI approval of such schemes”. ASJ Jain imposed the fine after convicting the firm and two of its promoters. “Ends of justice will be met if convicts are burdened with the fine of Rs. 75,000 each upon Yojna Agro Forestry Limited and it directors,Mukul C Aggarwal and Gopal Dutt,in default of which they will undergo three months simple imprisonment,” the court said. “Once the company failed to apply for the registration in terms of rules,it was bound to refund the amount to the investors and was also liable to submit the winding up and repayment report to SEBI. Admittedly,the accused company had not submitted the winding up and repayment report with the SEBI,” ASJ noted in his order. “Since the company had neither applied for registration nor submitted the winding up and repayment report in terms of regulations,it violated the law,” the court said. During the trial,the plantation company and its directors had admitted that they had not applied for registration in terms of the regulation and sought a mild punishment. Yojna Agro Forestry,incorporated in February 1996,said it was not aware of SEBI rules. The company claimed it had mobilised funds to the tune of Rs 6,72,399 only through three schemes it had launched. SEBI Act,amended in January 1995,stipulates that any venture capital funds or collective investment schemes have to obtain a prior registration certificate from SEBI. Hundreds of companies,however,continued their operations 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 collected 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.