Pancard Clubs Ltd - Collective Investment Scheme (CIS) Case - Securities and Appellate Tribunal sets aside Sebi order

The Securities and Appellate Tribunal (SAT) today set aside Sebi's interim order that had barred Pancard Clubs from raising funds from public as well as launching any new scheme, and asked the regulator to pass a fresh order after examining all documents.

Pancard Clubs has been asked to provide the documents expeditiously but the company will not be able to launch any new scheme and sell or dispose of any of the properties till the time Sebi issue its new order.

The Securities and Exchange Board of India (Sebi), in July, had asked the company and its directors --"not to collect any fresh money from investors under its existing scheme and "not to launch any new schemes or plans or float any new companies to raise fresh money".

The regulator prima facie found that Pancard Clubs is running a CIS under its holiday plans without obtaining a certificate of registration from Sebi.

Consequently, Pancard Clubs approached SAT against the Sebi's order.

In its order issued today, SAT has "set aside the impugned ex parte interim order dated July 31, 2014." It also directed the regulator "to pass appropriate order on merits after hearing the appellant (Pancard Clubs) as expeditiously as possible, preferably within a period of eight weeks from the date of appellant tendering all documents / particulars to Sebi."

"Till then, the appellant shall not launch any new CIS schemes and both appellants shall not sell or dispose of or create any third party rights in respect of the assets belonging to them in any manner whatsoever."

SAT said that the company, which has taken more than a year to furnish requisite particulars called for by the regulator, shall "cooperate with Sebi in the matter of tendering all documents called for by Sebi and in Sebi passing order on merits within the time stipulated herein."

The company has assured that the remaining documents would be furnished within a period of two weeks from today.

According to SAT, Pancard Clubs has been knocking on the doors of Sebi since 2001 by seeking its decision on the question as to whether the time sharing business carried on by the company is covered under CIS or not, although no formal order was issued in the year 2001.

"It is now admitted by counsel for Sebi that since the very beginning Sebi was of the opinion that time sharing business is not covered under CIS."

"In fact, in 2010, Sebi once again scrutinized the documents relating to the business carried on by the appellant and it is evident from the letter addressed by Sebi to a Member of Parliament (MP) on October 21, 2013 that even after scrutiny of documents furnished by appellant in 2010 Sebi was of the opinion that the time sharing business carried on by the appellant was not covered under CIS," SAT said.

Sebi, in July, had barred the company and its directors --Sudhir Shankar Moravekar, Shobha Ratnakar Barde, Usha Arun Tari, Manish Kalidas Gandhi, Chandrasen Ganpatro Bhise and Ramachandran Ramakrishnan--from collecting any fresh money from investors under its existing scheme as well as from launching any new schemes.

The entities have also been ordered to immediately submit the full inventory of the assets owned by the company out of the amounts collected from the investors.

Besides, the company and its promoters or directors have been asked not to dispose of any of the properties or alienate the assets of the existing scheme as well as not to divert any funds mobilised from the public.

"Pancard Clubs, is engaged in the mobilization of funds from public under its holiday plans, which is in the nature of 'collective investment scheme'..." Sebi had said in its interim order.

The company has collected around Rs 3,100 from nearly 25 lakh investors, by asking them to invest in its holiday scheme with a promise of assured return on investment, according to the regulator.

Source: PTI Sep 17, 2014

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