The market regulator had noticed that around 800 private entrepreneurs, including promoters of Vipra Farms, undertook plantation activities and themselves invested minimal amount, but raised huge money from investors in the absence of any regulatory mechanism.
As high returns were promised by these companies in the schemes floated by them, these firms became successful in mobalising huge funds, thus leading to mushrooming of such plantation companies, Sebi said.
While the government in November 1997 had notified that schemes like agro and plantation bonds, will be treated as Collective Investment Scheme under the Sebi Act 1992, the market watchdog also notified the Sebi (Collective Investment Schemes) in 1999 to regulate such activities.
A bench headed by Justice DK Jain has sought reply from Vipra Farms (India) Ltd and its five directors on the Sebis petition alleging violation of its regulations.
Sebi has challenged the Madras High Court judgement that quashed a criminal complaint filed against the company on the ground that the averments in the complaint did not disclose that any part of action arose within the territorial jurisdiction of the trial court in Chennai.
Attorney general G E Vahanvati argued that the high court had erred in quashing Sebis complaint and had ignored the gravity of the charges. The complaint was filed in public interest to ensure that hard earned money invested by general public was repaid, he said, adding the respondent was permitted to take advantage of the procedural and technical aspect.
The market regulator in 2003 had filed a complaint against Vipra in the metropolitan magistrate, Chennai, alleging that the firm failed to apply for registration under the CIS regulations. Madras HC quashed the complaint against the firm and its directors on November last year.