Description

SEBI final order under Sections 11(1), 11(4) and 11B against Citrus Check Inns Limited and four directors for operating unregistered collective investment scheme.

Summary

SEBI has issued a final order under Sections 11(1), 11(4) and 11B of the SEBI Act, 1992 against Citrus Check Inns Limited (CIN: U55101MH2011PLC222394) and its four directors - Omprakash Basantlal Goenka, Prakash Ganpat Utekar, Venkatraman Natrajan, and Narayan Shivram Kotnis. The order stems from allegations that the company was operating a ‘Ponzi Scheme’ and mobilizing funds through an unregistered collective investment scheme (CIS) in violation of Section 12(1B) of the SEBI Act and Regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1999.

Key Points

  • Original complaint received on January 17, 2014 alleging Citrus was running a Ponzi scheme and refusing investor refunds
  • SEBI passed ad interim ex-parte order on June 03, 2015 restraining the company from collecting fresh money
  • Confirmatory Order issued on August 24, 2015
  • SAT initially set aside SEBI orders on February 03, 2016, but Supreme Court reversed SAT order on November 09, 2016
  • Supreme Court directed SEBI to complete investigation and determine if Citrus business constitutes CIS
  • Company prohibited from alienating or creating encumbrance on assets without SEBI permission
  • Five noticees involved: Citrus Check Inns Limited and four individual directors

Regulatory Changes

This order reinforces existing regulations under:

  • Section 11AA of the SEBI Act, 1992 (definition of CIS)
  • Section 12(1B) of the SEBI Act (registration requirement for CIS)
  • Regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1999
  • Sections 11(1), 11(4) and 11B of the SEBI Act (enforcement powers)

Compliance Requirements

  • Citrus Check Inns Limited must not collect any fresh money from customers/investors
  • Cannot launch any new schemes or plans
  • Cannot raise fresh money from existing group companies
  • Cannot float new companies to raise funds under such schemes
  • Must submit full inventory of assets obtained through money raised
  • Prohibited from disposing or alienating any properties/assets obtained through public funds
  • Cannot divert funds raised from public kept in bank accounts or custody
  • All asset transactions require prior SEBI permission

Important Dates

  • January 17, 2014: Original complaint received by SEBI
  • June 03, 2015: Ad interim ex-parte order issued
  • August 24, 2015: Confirmatory Order issued
  • February 03, 2016: SAT order (later set aside)
  • November 09, 2016: Supreme Court order directing investigation completion
  • October 09, 2025: Final order circular published

Impact Assessment

This final order has significant implications for investor protection and market integrity. The case demonstrates SEBI’s enforcement action against unregistered collective investment schemes that mobilize public funds without proper authorization. The restraint orders prevent further investor harm while investigation and potential refund mechanisms are established. The involvement of company directors highlights personal accountability for regulatory violations. This action serves as a deterrent for similar schemes and reinforces the mandatory registration requirements for entities seeking to mobilize funds from the public through collective investment schemes.

Impact Justification

Final enforcement order against company and directors for operating unregistered CIS, involving investor fund mobilization violations and refund obligations