The Securities and Exchange Board of India (SEBI) on recently disallowed Sumangal Industries from raising funds from investors assuring returns of 20 to 100% through “Flexi Potato Purchase Scheme.”
The market regulator SEBI also asked the company to reply within 15 days to its prima facie observations in the matter, and barred the firm from diverting or alienating any assets of funds till further orders.
The firm has further been directed not to launch any other collective investment scheme without SEBI’s approval.
SEBI quoted the firm’s advertisement in a newspaper, which said, “Funds collected from public shall be used to buy potatoes from the market on behalf of the investors when the price is low and preserve them in their own cold storage & later on sell them when the market price rises.”
According to the advertisement, there is a guarantee of 20% to 100% profit. “The percentage of profit shall depend upon the market price of potato. It takes 15 months to complete the whole business and return to the investor the sale value of his potatoes.”
Mr. S. Raman, Whole-time member, SEBI, said in an order. “Sumangal Industries has to be prevented from carrying on further with its activity related to collective investment scheme without obtaining due registration from SEBI in accordance with law”
SEBI, in fact, in October 11, 2012, had informed the company that no entity can carry on or / sponsor or launch a collective investment scheme without obtaining a certificate from it.
However, the company immediately (October 20, 2012) denied that it was running a collective investment scheme (CIS). Sumangal Industries had said that it was trading in potatoes for which it has a trading licence and it was dealing in agricultural and non-agricultural products both within and outside India.
“The question of obtaining a certificate of registration from SEBI does not arise,” it had replied.
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