Sebi imposes Rs 2-cr penalty on Saradha Realty, executives

The Securities and Exchange Board of India (Sebi) on Friday imposed a penalty of Rs 2 crore on Saradha Realty, its chief Sudipta Sen and two directors for not complying with its earlier order to wind up existing collective investment schemes (CIS) and to refund the money collected by it under the schemes with returns.

The Saradha group is involved in a major financial scam and alleged political scandal caused by the collapse of a Ponzi scheme run by Saradha Group, a consortium of 200 private companies that was believed to be running CIS, popularly, but incorrectly, referred to as chit funds. The crisis became an issue amongst the political parties in West Bengal during the 2014 national election, resulting into probe by various investigative and enforcement agencies including Sebi.

“I am of the view that upon such conclusion and upon being so directed to comply with directions as mentioned in the aforesaid order, if the company/ its directors fail to wind up its existing CIS, fail to refund the money collected by it under the schemes with returns, and fail to submit a winding up repayment report to Sebi within a period of three months from the date of order, then, it means its status is still alive as unregistered CIS. Also, the status of Saradha Realty is still shown as active at the MCA (ministry of corporate affairs) website. Therefore, continuing with such status without having registration certificate from Sebi is in contravention of Sebi Act and CIS regulation,” said the Sebi order passed by Adjudicating Offer (AO) Rachna Anand.

Interestingly, the AO criticised the due diligence work done by its own legal department in the Saradha Realty matter.   “Surprisingly, the legal affairs department without examining the said issue, had merely stated that the AO be guided by what Sebi’s eastern office zone had stated in the quasi-judicial proceedings,” Anand said in the order.

Citing the previous finding of Sebi Kolkata office, the AO said: “It is relevant to mention that while proposing any action(s) against the entities, due care should be applied by the departments considering their role into violations and same can be re-examined / modified at a later stage once it is brought into their knowledge. However, unfortunately, it was not so done in this case.”

She added: “No records/ evidence has been produced by the eastern office zone proving that the person (who are observed to have ceased as directors of the company) are the current directors or were the directors after passing of said Sebi order.”