Lakshmikumaran & Sridharan 律师事务所An ISO 9001 / 27001 certified law firm

Land Developer Scheme linking returns to land value appreciation is a ‘Collective Investment Scheme'

17 December, 2014

SEBI has held that fund mobilizing activity of a company under the garb of real estate business for sale/purchase, development and maintenance of agricultural land is covered within the parameters of ‘collective investment scheme’ as defined in Section 11AA of the SEBI Act, 1992. The company in this case was running a scheme whereby it collected deposits from public in lump-sum or in installments.

As per the scheme, deposits were invested in purchase, development and maintenance of agricultural land. Return of 15-20% on  investment was advertised. Noting that the scheme satisfied various conditions stipulated under Section 11AA(2)(i), (ii), (iii) and (iv) of the SEBI Act, the SEBI in its decision dated 9-12-2014 held that such a scheme is to be considered a ‘Collective Investment Scheme’ under SEBI (Collective Investment Schemes) Regulations, 1999, and hence the company cannot initiate such a scheme without obtaining prior registration from SEBI under the said regulations. An interim order barring the company from diverting any funds collected from the public has been issued by SEBI. The company has also been asked to provide a full inventory of its assets to SEBI.
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