Unregistered Collective Investment Scheme violative of S. 12(1)(b) of SEBI Act and Regulations, order to pay 10% p.a. interest on refundable amount not vitiated: SAT

Securities Appellate Tribunal, Mumbai: Coram of Justice Tarun Agarwala (Presiding Officer) and Justice M.T. Joshi (Judicial Member), upheld the direction given by SEBI whereby the appellant was required to pay 10% per annum interest from the date the amount was due till the date it was actually refunded.

Instant appeal was filed against the Order passed by the Whole Time Member of SEBI whereby certain directions were issued to refund the amount with interest.

Factual Matrix

Appellants had launched a scheme/fund in 2006 known as “The Osian’s Art Fund Scheme Contemporary-1” by way of subscription from private investors to enable the appellant to make investments in artworks. An amount of Rs 102.40 crores was raised and the scheme was ended in July 2009.

SEBI had concluded that the fund launched by the appellant was nothing but a Collective Investment Scheme. The said scheme was not registered and therefore was violative of Section 12(1)(b) of the SEBI Act read with Regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1999.

The only contention raised by the learned counsel for the appellant was that the direction to pay interest at the rate of 10% per annum was wholly illegal and against the teeth of the directions given by this Tribunal.

Bench stated that counsel for the appellant’s contention does not hold any water. WTM in its earlier order had directed payment of interest at the rate of 10% per annum from the due date till the amount was refunded.

In light of the facts and circumstances of the case, Coram stated that it does not find any error in the directions issued by the WTM with regard to the payment of the balance principal amount which was not disputed by the appellant and the payment of interest at the rate of 10% p.a. from the date when it became due till the closure of the scheme which was in consonance with the directions given in the decision of Pravin Gandhi v. SEBI, 2017 SCC OnLine SAT 89

Hence, the appeal was dismissed. [Osian’s -Connoisseurs of Art (P) Ltd. v. SEBI, 2021 SCC OnLine SAT 249, decided on 9-07-2021]

Advocates before the Tribunal:

Mr. Vyapak Desai, Advocate with Ms. Payel Chatterjee, Mr. Mohammad Kamran, Mr. Adimesh Lochan and Ms. Lakshmi Narayan, Advocates for the Appellant.

Mr. Abhiraj Arora, Advocate with Ms. Rashi Dalmia and Mr. Karthik Narayan i/b. ELP for the Respondent.

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