Sought additional details, acting only when company was on verge of collapse
The Securities and Exchange Board of India (Sebi) had a fair amount of information on the deposit scheme run by Saradha Realty India (SRIL) three years ago, in 2010. However, the market regulator seems to have wanted additional details ? on the money raised by the group ? before it acted. Sebi passed an order against the company on April 23, 2013, banning it from raising any money further from the market, when it became quite clear that SRIL was on the verge of collapse ? by mid-April, the Saradha Group had been forced to wind up several of its media organisations due to the pressure on its finances.
The communication between Saradha and Sebi, through numerous letters in 2010, clearly indicates that Saradha never agreed that it was, as Sebi alleged, running collective investment schemes (CIS). It even exhorted Sebi to stop the investigation, while the regulator?s Kolkata office continued to ask for additional details on the investors and money raised.
In its letter dated December 22, 2010, to SRIL, Sebi wrote: ?It is observed from your brochure that you have lump sum deposit scheme (with minimum amount of R1000/- and multiple thereof) under plans namely ?L1? to ?L7? with deposit tenure varying from 12 months to 168 months.? Sebi further wrote in the same letter, ?We have also observed from the same brochure that you have schemes for collecting deposit with tenure varying from 15 months to 120 months.?
Sebi observed that from the details available in the brochure, ?you (SRIL) are paying 12% interest per annum for 15 months period, 14.40% for 30 months and 24% interest for 120 months. For 15 months period the payable interest options are quarterly and monthly, for 30 months period interest is payable half yearly, quarterly and monthly. For 60 months and 120 months period, the payable interest options are yearly half yearly, quarterly and monthly.?
Pointing out that the company had not submitted the desired information sought through earlier letters, Sebi asked SRIL to furnish details of when the schemes were introduced, whether the company was raising funds under these schemes, the number of investors and funds mobilised. Sebi also wanted to know if refunds had been made as also the terms and conditions.
In its response to Sebi?s letter dated November 3, 2010, SRIL said, ?We had in our previous letters already clarified all matters sought for in the right earnest and intentions. Nonetheless since you have sought some more clarifications we are pleased to submit the same,? and provided details about the funds gathered along with answers such as: ?Options available with the investor if he does not want to hold his investment till maturity. In case of accidental death of the applicant/first applicant ? his/her nominee will get the facility of cancellation of booking. In case of any urgent situation, mutual agreement will be done between the company and the party.? The company all along maintained it was not running a CIS saying Sebi should withdraw the enquiry against it.
Sebi,however, appears to have wanted definite information, asking for more and threatening action against SRIL if it didn?t provide it.