Refund money with returns due to the investors within three months: SEBI

Within months of its action against the Sarada Group, the Securities and Exchange Board of India, on Tuesday, delivered an order against another Kolkata-based company, Sumangal Industries Ltd. (SIL), directing it not to collect any money from investors or carry out any collective investment schemes (CIS). The company used to solicit funds under potato purchase schemes.

It asked the company promoters to wind up the existing CIS, and refund money with returns due to the investors as per terms of the offer within three months of the date of today’s [Tuesday’s] order and submit a winding-up and repayment report to the capital market regulator. The company’s failure to comply with the order would force SEBI to make a reference to the state government to initiate police proceedings against Sumangal’s promoters.

The company attracted SEBI’s attention through its prominent advertisement in a leading vernacular daily last year, whereby funds were solicited under potato purchase schemes.

SIL had maintained in its reply to SEBI that it was operating under a valid trade licence to deal with agro and non-agro products inside and outside India. It, however, failed to provide documentary evidence. SEBI found that prime facie SIL was engaged in fund mobilisation activity from the public.

SEBI maintained in its order that several aspects of SIL’s business qualified as CIS, including the fact that SIL collected money from investors and sold potatoes with the customer making contribution or payment with a view to receiving the profits on their initial investments.

Moreover, investors do not have day-to-day control over the management and operation of the scheme or arrangement.

SEBI had delivered its order in the Sardha Reality India Ltd. case on April 23, 2013.

The main promoter of the Saradha Group and his three accomplices have been jailed, and efforts are on to return the money of lakhs of duped investors in one of the largest such cases of fraud through CIS schemes.

However, myriad other companies which started facing the heat in the aftermath of the Saradha scam, continued issuing large advertisements assuring their investors that all was well.

The state seems to have become the happy hunting ground for such companies, and it has been revealed that of the 87 companies against whom complaints were received for indulging in ponzi and multi-level marketing schemes, 73 were in West Bengal.

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