Despite orders from SEBI in the past, the MPS group company continued to collect money and publish ads in local newspapers
Capital market watchdog, Securities and Exchange Board of India (SEBI) has asked controversial MPS Greenery Developers to deposit Rs1,169 crore in an escrow account of nationalized bank. SEBI also barred MPS Greenery from entering the capital market for violating the regulator's provision by collecting money under Collective Investment Scheme (CIS) without proper registration. The amount has to be deposited within 15 days of the order.
MPS is among many companies which had come under the regulator's scanner for accepting deposits under CIS. Earlier Moneylife had reported on how several dubious conglomerates are flourishing in West Bengal and Tripura, thanks to a combination of financial illiteracy and political protection, irrespective of the political parties in power. (Will Rose Valley’s clones, flourishing with CPM’s help, come under the lens now?)
SEBI in its order, dated 11th May, said that, "…MPS Greenery Developers Ltd to deposit with a nationalized bank in an interest bearing Escrow Account, an amount of Rs1,169.39 crore, which it has raised through its collective investment schemes, without obtaining certificate of Registration and in contravention of the conditions imposed by Securities and Exchange Board of India while granting provisional registration…"
MPS Greenery Developers, the flagship company of the MPS group, is based in Jhargram (West Bengal), and deals in agro-products and food processing. In 2000, it had applied for registration under SEBI's Collective Investment Schemes Regulations, 1999. However, in 2002, the regulator rejected MPS's application and ordered it to repay the deposits it had collected from the public after noticing that it raised the money in violation of SEBI circular (dated 24 February 1998) and Delhi High Court's order (dated 7 October 1998) which made it mandatory for all plantation companies to comply with the circular. It had also ordered the company to wind up its scheme.
Further, the company challenged the SEBI's decision in Calcutta High Court. According to the SEBI order, in June 2009, the High Court disposed off MPS's petition but asked SEBI to "reconsider the matter and revisit the issue as to whether the registration as sought by the petitioner company can be granted." However the court also, according to SEBI order, did not remove the restrictions imposed on the company by the SEBI.
In August 2009, SEBI granted MPS a provisional registration as a Collective Investment Management company in accordance with its CIS Regulations, 1999 with certain conditions. This included restrictions on launching any new scheme or on raising fresh money from the investors; even under the existing schemes, unless a certificate of registration is granted to them by SEBI. This provisional registration expired on 20 August 2011.
However, a press note from SEBI says that, "MPS not only failed to fulfil the conditions of Provisional Registration, it also raised money from the public in violation of the conditions of provisional registration and it appears to be still mobilizing money from public. As per information provided by ICRA Limited, the total outstanding balance of funds with the company stood at around Rs1,169.39 crore as on 25 January 2011. Moreover, MPS had issued a newspaper advertorial which wrongly stated that the company is allowed to carry out Collective Investment Scheme activities."
Interestingly, according to the details of the advertorial (published on 30 March 2012 in Kolkata's edition of Business Standard) given in the SEBI order, the company claimed to have 14 lakh of investors, 1.25 lakh marketing members, 4 thousand direct and indirect labourers and more than 6 thousand workers and officers associated with MPS Group. It also said that it was looking to investment Rs30,000 crore in a project, 80% of which will be raised through collective investment schemes.
Apart from ordering the company to return the deposits, SEBI has also directed MPS not to collect any money from investors or to launch any scheme.