The Securities and Exchange Board of India (Sebi) has clamped down on an investment scheme of HBN Dairies & Allied Limited involving collection of public funds for purchase of cattle to earn huge returns from sale of ghee, while asking the company and its directors to initiate the process for refunding Rs 1,100 crore to investors.
In an order issued on Friday, Sebi said it has prevented HBN Dairies from disposal of assets totalling over Rs 1,000 crore, except for the purpose of winding up of its schemes, and refund of investor money with promised returns.
The Sebi order, effective immediately, stated that HBN and its nine directors can't solicit any further money from investors or its customers into these schemes, nor they can launch or carrying out any other money collection schemes.
"They (HBN and its directors) have also been asked to submit within 30 days a reasonable proposal including firm time lines with regard to the manner in which it proposes to wind up its schemes and make payments along with the returns which are due to its investors," it said.
Further, Sebi clarified that these directions are without prejudice to any further actions that might be taken in this case. The regulator has been taking action against a host of entities running illegal money collection schemes. Some of the entities that have faced (Sebi) action recently include Sumangal for a potato investment scheme, Rose Valley for a holiday membership scheme and the infamous Saradha case of West Bengal.
It may be noted that the market regulator had initiated HBN probe following receipt of complaints that it was illegally collecting money from the public. Subsequently, SEBI wrote to HBN in February 2009 seeking details like applications forms, brochures, sample agreements, balance sheets, profit and loss accounts, details of the past and present directors, details of funds mobilised under various schemes, to ascertain whether it was running unauthorised collective investment schemes (CIS).
In the meantime, HBN applied to SEBI for registration as CIS, but could not provide sufficient details and documents. It had apparently raised hundreds of crores through public deposits for purchase of cattle with a promise of more than doubling the money through returns linked to the ghee produced by them.
As per the financial details accessed by SEBI from its probe, the scheme named 'Cattles & Ghee' had mobilised a total amount of Rs 745 crore as on March 31, 2011. Further funds could have been garnered from the depositors since then. The company in its website claims to be in dairy business since late ‘90s with dairy farms in Samalkha (Haryana) and Gannaur, among other places.
In reply to a show-cause notice from Sebi, HBN admitted that it has deposits worth Rs 1,100 crore collected from public and expressed its intention of repaying them.