Sebi orders dairy firm to wind up bizarre investment scheme -Governance Now

Sebi orders dairy firm to wind up bizarre investment scheme

HBN dairy had come under scanner after announcing a collective investment scheme that promised investors profits from ghee

Srishti Pandey | July 12, 2013

The market watchdog, securities and exchange board of India, (Sebi) today, directed a Delhi-based dairy company to wind up its five-year-old collective investment scheme with immediate effect using which it had raised around Rs 1,100 crore from the public. The regulator has further ordered the company’s directors to submit a report within a month’s time outlining the refund process.

The regulator began investigating the collective investment scheme being operated by HBN Dairy & Allied Ltd in February 2009 after it received complaints that the company was illegally collecting money from the public. Under the bizarre scheme, the company lured people to invest their money which it would use to purchase cattle and promised handsome returns linked to ghee it would produce.

The company’s directors were asked to submit the application forms, brochures, sample agreements and details of funds mobilized under the scheme besides the financial statements of the company.

The directors instead of submitting the relevant documents applied for registering a collective investment scheme but again failed to submit the documents required in the application process.

During the investigation, it was found that the company had raised around Rs 1,100 crore from the public through the scheme even though it had not been given regulatory approval.

In its order, the regulator directed the company's directors to wind up the scheme with immediate effect and submit a "reasonable proposal including firm time lines with regard to the manner in which it proposes to wind up its schemes and make payments along with the returns which are due to its investors" within 30 days.

Further, the directors have also been barred from selling off the assets of the company except for the purpose of making refunds to its investors.

The order comes merely three days after the regulator ordered closure of a collective investment scheme being run by Kolkata-based Rose Valley through which it raised approximately Rs 1,000 crore without the regulator's approval.

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