SAT asks two CIS operators to refund money within 6 months

Securities Apellate Tribunal today asked two Collective Investment Scheme (CIS) operators, who have collected funds from millions of investors in the name of real estate business, to refund the money within six months.

One of the two firms, Maitreya Services Pvt Ltd had collected more than Rs 700 crore from about 2.5 million investors, while another entity NGHI Developers is also estimated to have mopped up a significant amount from about 30,000 investors. Also read: Invest only in regulated cos or pick long-term funds: Sebi Both the companies were found by Sebi to be running unauthorised CIS businesses and were asked by the regulator to refund the money collected through such schemes.
    
After hearing their appeals against respective Sebi orders, SAT today passed two separate orders upholding the regulatory directions against them, but gave each of them six months time to refund the money in view of the "arduous process involved in executing the scheme of repayment" to such large number of investors. The time-frame was given with a rider that the companies would submit a report to Sebi after six months giving accurate details regarding the progress of payment to investors.
   
In the case of Maitreya Services, Sebi, in March, had barred the company and its directors from the securities market till the time all its CIS were wound up. It had decided to initiate prosecution proceedings against them. 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 CIS without registering with it for the same and an amount of Rs 804 crore was outstanding with it to be repaid to investors. Sebi's probe found that 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. The regulator 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.