Although the government has asked the Securities and Exchange Board of India (Sebi) to regulate these entities and frame guidelines to this effect, it is felt that these regulations would be with prospective effect. This would mean that Sebi would not be able to take any action against those plantation companies who have already defaulted.Sebi had recently asked all plantation companies to mobilise fresh deposits only after having their schemes credit rated. The issue is about the amount that have already been mobilised, which is in excess of Rs 20,000 crore, through about 4,000 companies of which 3,000 companies cannot betraced."There are only two ways in which dues can be recovered from an entity. Either by taking control of the money or by taking control of the management. Both these functions can concurrently not be done by Sebi. The government is considering issuing an ordinance which will enable the regulator to perform these functions from retrospective effect", said a top government source.

Sebi officials said that the Dhanuka committee has made recommendations to this effect so that investors do not continue to suffer at the hands of several unregulated plantation companies. The government too has realised the gravity of the situation in the wake of a spate of cases that have been filed in various high courts of the country.

There are several ambiguities in the regulation of these entities. While the government has directed Sebi to regulate these entities, the market watchdog has discovered that in several cases these plantation companies have in addition to issuing securities also raised deposits. This activityis akin to an NBFC which does not come under the purview of Sebi.

Sebi has already urged the Department of Company Affairs (DCA) for clarifications on the issue. In the meantime, several case have reached the courts with investors and Sebi approaching the judiciary to recover dues of investors.

Several plantation companies have refused to accept orders of Sebi on the grounds that they do not come under its jurisdiction and this has forced Sebi to seek judicial recourse.

A Sebi appointed committee is currently drafting the regulations for collective investment schemes. The committee has proposed that these companies are structured through an asset management company format akin to mutual funds.

Sources said that Sebi is currently only relying on investor complaints in taking action against such companies. "Wherever we are receiving complaints we are taking action. Apart from that there is little information about these companies. Even the credit rating agencies have met with little success in beingable to effectively rate these entities. All the entitiesd which have agreed to get themselves rated have been found to be below investment grade", said a top Sebi source.