Mumbai

Capital markets regulator Sebi on March 16 imposed fines totalling Rs 3 crore on a real estate company and its directors for fraudulently collecting funds from thousands of people in Madhya Pradesh in the name of providing high returns.

The company Garima Real Estate & Allied Ltd and its six directors - Banwari Lal Kushwah, Balkishan Kushwah, Shivam Kushwah, Banabarilal Lodhi, Bijendra Pal Singh and Jitendra Kumar - have been asked to pay this penalty within 45 days, the regulator said in its order.

The Securities and Exchange Board of India (Sebi) said the Finance Ministry's Department of Financial Services had forwarded to it in September 2012 an order dated July 13, 2012, passed by the High Court of Madhya Pradesh (Gwalior bench).

The order was passed pursuant to a public interest litigation seeking order of an enquiry against various financial companies including Garima Real Estate & Allied Ltd for allegedly cheating thousands of residents of Madhya Pradesh by asking them to make deposits promising higher returns ranging from 15-20 percent.

The High Court had directed that the copy of its order be forwarded to the various authorities including Sebi to take appropriate action.

After looking into the matter, Sebi concluded that Garima was operating a Collective Investment Scheme (CIS) and mobilising money from investors without obtaining necessary registration from the regulator.

Sebi, subsequently, passed an order in May 2016 declaring the schemes of Garima as CIS and also initiated adjudication proceedings against the company and its directors for alleged violations of regulations prohibiting fraudulent and unfair trade practices, and also for failure to comply with its orders directing winding-up of unlawful schemes.

Sebi said its show-cause notices returned undelivered from their respective addresses in Madhya Pradesh and Rajasthan, after which its officials also visited the addresses to affix the notices at the places. However, no addresses could be found except for the company and one of its directors in the national capital.

A public notice was also issued in English and Hindi newspapers in Madhya Pradesh and Rajasthan in August last year, asking the noticees to revert to Sebi for personal hearings.

While no reply was received from any of the noticees, Sebi decided to go ahead with its proceedings and relied on the submissions made by the company during earlier proceedings wherein it had admitted to mobilisation of funds.

The company had informed Sebi in December 2013 that it had collected more than Rs 55 crore from nearly 1.08 lakh investors, but repaid nearly Rs 45.87 crore, leaving an outstanding amount of Rs 9.35 crore towards 15,683 investors.

However, the company could not prove veracity of its refund claims with documents.

Sebi said the company and its directors have not only breached law, they have also shown obstinacy to comply with earlier directions and the gravity of this matter cannot be ignored as non-compliance of the directions is continuing till date after lapse of more than three years.

Accordingly, Sebi decided to impose a further penalty of Rs 3 crore on the company and its six directors.

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