Security and Exchange Board of India (SEBI): In a setback to Adel Landmarks Limited, a real estate enterprise, the SEBI directed the company and its directors to refund the money collected from the public under its ‘pre-booking of plots’ scheme. Adel, without registration and approval under SEBI’s Collective Investment Schemes (CIS) Regulations, collected the money from the public for purchase /acquisition of future land for development of residential colonies. Adel contended that it collected the money for pre-booking of plots being developed on the land already owned by it either directly or through subsidiaries. The SEBI through its whole time member, on the other hand, examining the agreements by Adel with perspective buyers and other materials on record found that Adel was pooling money to purchase future land which amounts to scheme/arrangement under S. 11AA(2)(i) of the SEBI Act, 1992.
He observed that the Company has solicited investments with a promise of refund of investment amount along with return in the nature of compensation. Hence, the second condition, which stipulates that the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property as stipulated in Section 11AA (2) (ii) of the SEBI Act is satisfied. He ruled that agreements with the investors do not identify exact plot/land; and till the sale deeds are executed the control of land will be with Adel, therefore the third and fourth conditions to constitute a scheme as CIS stipulated in Section 11AA(2)(iii) and (iv) of the SEBI Act are satisfied. He held that Adel has launched a CIS without obtaining certificate of registration from SEBI; thereby it has contravened the provisions of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations. Adel and its directors are also found guilty under regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
The order restrained Adel from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities market for a period of 4 years. Criminal proceeding under 11(4) and 11B of the SEBI Act read with regulation 65(e) of the CIS Regulations and Chapter VI A of the SEBI Act may also be initiated against Adel and its director for indulging into fraudulent practices. [In re Adel Landmarks Limited, 2015 SCC OnLine SEBI 159, decided on 07.10.2015]