Description

SEBI final order against Citrus Check Inns Limited and its directors for operating an unregistered collective investment scheme (CIS) in violation of SEBI Act and CIS Regulations.

Summary

SEBI 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 follows investigation into allegations that Citrus operated a ‘Ponzi Scheme’ and mobilized funds through collective investment schemes without obtaining registration as required under Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations, 1999.

Key Points

  • SEBI received complaint on January 17, 2014 alleging Citrus was running a Ponzi scheme and refusing refunds to investors
  • Preliminary examination found Citrus engaged in mobilization of funds constituting ‘collective investment scheme’ (CIS) without registration
  • Ad interim ex-parte order issued on June 03, 2015 against Citrus and four directors
  • Confirmatory order passed on August 24, 2015 directing SEBI to conclude investigation
  • SAT initially set aside SEBI orders on February 03, 2016, but Supreme Court reversed SAT decision on November 09, 2016
  • Supreme Court directed SEBI to complete investigation and determine CIS status, while prohibiting asset alienation without SEBI permission
  • Case reference: WTM/AN/IVD/ID5/31715/2025-26

Regulatory Changes

This order reinforces existing regulatory framework under:

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

Compliance Requirements

Directions issued in the interim order included:

  • Prohibition on collecting fresh money from customers/investors under existing schemes
  • Prohibition on launching new schemes or plans
  • Prohibition on raising fresh money from group companies
  • Prohibition on floating new companies to raise funds
  • Requirement to submit full inventory of assets obtained through funds raised
  • Prohibition on disposal or alienation of properties/assets obtained through public funds
  • Prohibition on diversion of funds raised from public kept in bank accounts or custody of Citrus, group companies, promoters, LLPs or proprietary concerns

Important Dates

  • January 17, 2014: Complaint received by SEBI
  • June 03, 2015: Ad interim ex-parte order issued
  • August 24, 2015: Confirmatory order passed
  • February 03, 2016: SAT order (later set aside)
  • November 09, 2016: Supreme Court order setting aside SAT decision and directing investigation completion
  • Order reference: WTM/AN/IVD/ID5/31715/2025-26 (2025-26 financial year)

Impact Assessment

This enforcement action has significant implications for:

  • Investor protection: Addresses fraudulent fund mobilization schemes targeting public investors
  • Market integrity: Demonstrates SEBI’s commitment to prosecuting unregistered CIS operators
  • Precedent value: Confirms SEBI’s authority to investigate and take action against Ponzi schemes disguised as business ventures
  • Director accountability: Holds individual directors personally liable for company’s regulatory violations
  • Asset preservation: Prevents dissipation of investor funds through asset alienation restrictions

The matter involves investigation into the nature of Citrus’s business model and whether it constitutes a collective investment scheme requiring regulatory registration and oversight.

Impact Justification

Final enforcement order against unregistered CIS scheme involving public fund mobilization, with directions against company and directors under sections 11(1), 11(4) and 11B of SEBI Act