Trustees of CIG Realty Fund move SAT against Sebi order
Mumbai: The Trustees of CIG Realty Fund on Tuesday moved the Securities Appellate Tribunal challenging an order by the Securities and Exchange Board of India (Sebi) in December that barred them from accessing the capital markets.
The regulator had also taken over the role of trustee, citing alleged violations of Sebi’s venture capital fund (VCF) regulations.
The regulator had ordered the appellants not to take any new assignment as trustees of alternative investment fund of any category for two years from the date of the December order.
Sebi had received several complaints against CIG Realty Fund (CIGRF) between May 2011 and January 2022. These complaints pertained to three schemes – CIG Realty Fund Type I, II, and IV. – that made investments in the real estate sector through various Indian companies.
The complaints pertained to various issues including the extension of scheme tenures, non-liquidation of schemes, non-receipt of invested funds, fraudulent activities, and underperformance of the CIG Realty Funds.
These issues were shared by Sebi with the Fund, but there was no redressal in the matter. Subsequently, the regulator initiated an investigation into the books of accounts and other records of CIG Realty funds between 1 April, 2019 and March 2020.
On Tuesday, Rakesh Dhingra, one of the trustees, argued in the appeal before the tribunal that as trustees, they had no authority or involvement in the day-to-day operations of the trust. He emphasized that they couldn’t be held accountable under the relevant regulations as there had been no loss due to the non-winding up of the schemes.
“As trustees, we have no control over the operations of the fund except to pass the resolutions and direct the investment advisors,” said the appeal.
Dhingra also said the trustees had neither profited nor caused losses through any transaction contrary to the provisions of the Sebi Act or regulations during their tenure. Therefore, he said Sebi’s allegations against them were unfounded and legally flawed.
Shefali Shankar, representing Sebi, said, “The tenure of two schemes was wrongfully extended beyond the permissible limit and all the three schemes have not been wound up till date, as per the terms and conditions of the Private Placement Memorandum.”
Shankar added that the fund had failed to address investor grievances, let alone repay their investments. “Sebi has acted in favour of the aggrieved investors and rightly passed the order,” she said.
On 29 December, Sebi passed an order against trustees Anil Harish, S K Misra, Vijay Tulshyan, Mahesh Kumar Sharma, and Rakesh Dhingra. Each individual was fined ₹10 lakh, and they were barred from taking new assignments as trustees of AIFs of any category for one year.
Sebi had also imposed a fine of ₹1 crore on Unitech Advisors (now known as Auram Asset Management Company), which served as a fund manager/investment advisor to the realty fund.
It was discovered that nearly 80% of the corpus from CIG Realty Type IV funds was invested by Unitech Advisors in associate firms, violating Sebi’s venture capital fund regulations.
The matter will be next heard by the tribunal on 22 April.
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Published: 19 Mar 2024, 07:52 PM IST
Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.