In Relief To1.8 Million Investors Of Ponzi Scheme, SC Orders SMC To Proceed With Sale Of Properties

In a decision set to bring cheers to 1.8 million investors who lost their savings of Rs 8,500 crore in two "ponzi schemes" run by Royal Twinkle Star Club and Citrus Check Inns, the Supreme Court has directed the Sale cum Monitoring Committee (SMC) headed by Justice J P Deodhar (Retd) to proceed with the sale of 114 properties/investments identified by the Resolution Professional and endeavor to complete the process within six months.

Clearing confusion around the sale of properties, a bench of Justice Rohinton Fali Nariman and Justice S Ravindra Bhat made it clear that the SMC can proceed with the sale notwithstanding any attachment levied on these properties by the EoW Unit 7, Mumbai, and other EoW Units, State of Maharashtra and upon sale by SMC, any attachment levied with respect to such property will be deemed to have been raised.

The court directed that the proceeds from sale of properties shall not be used for any purpose at this stage and shall be retained for distribution amongst investors.

It also directed scheme's promoter and premium restaurant owner O P Goenka, to furnish before it a "tangible scheme for repaying all investor dues including the sale of overseas assets and bringing money into India".

Goenka has also been directed to furnish full particulars of companies/entities and projects to whom amounts received from investors/customers have been channeled.

He has also been told to furnish details of funds transferred overseas to relations/related parties from 01.04.2008 onwards and any overseas assets purchased from the transfers.

The bench also issued notices to Citrus Check Inn directors Narayan Kotnis, Prakash G. Utekar and V. Natarajan asking them to show why they be not proceeded against for contempt of court for failing to disclose their personal assets worldwide in compliance of court's May 2018 order.

The EoW Unit 7, Mumbai, and other EoW Units, State of Maharasthra; Enforcement Directorate and the Serious Fraud Investigating Office have been directed to complete within 8 weeks their investigations with respect to RTSCL, CCIL and their associate and sister concerns and submit a status report.

This is the first such case which involved a huge base of investors but no financial creditors.

18 lakh investors had invested in the schemes run as holiday plans by Royal Twinkle and Citrus Check Inns. In 2017, two investors moved NCLT seeking companies' liquidation. More investors intervened saying SEBI had already banned Royal Twinkle from collecting money from investors and it then floated Citrus Check Inns providing same schemes.

The investors suffered further delay with conflict between SEBI Act and IBC.

However, last year, the apex court ordered formation of SMC which included the Resolution Professional, representatives of investors, SEBI, and the company".

A web portal 'citrusroyal.com' has also been created in compliance of SC orders to provide access to relevant documents of Royal Twinkle Star Club and Citrus Check Inns and their sister/ associate companies.

Meanwhile, the bench in its latest order also passed a series of directions with regard to SMC and the Resolution Professional and clarified that "the functions of the SMC, subject to further orders that may be passed, will include sale of assets as well as related issues including the distribution of sale proceeds amongst investors. The Resolution Professional shall execute all the decisions taken by the SMC".

The Resolution Professional, Devendra Jain, has been directed to submit a plan prepared in consultation with SMC for distribution of sale proceeds with respect to claims where the principal amount is Rs.15000 or less.

With the RP, represented by advocate Nipun Singhvi, expressing apprehension regarding his personal safety and the safety of his staff, the court directed the jurisdictional Superintendent of Police with respect to the office of the RP at Lower Parel(West), Mumbai to provide adequate security.

Singhvi, an IBC expert, said of the Supreme Court order, "This is a welcome step and will set precedent in matters where contradiction has been harmoniously resolved among SEBI and IBC and the Supreme Court has given supremacy to protection of investors' interest by forming SMC leading to wonderful solution to a complex problem".

With respect to commission agents, the bench said, "The commission agents involved may appear before an officer deputed by SEBI in order to put their case before SEBI.

"SEBI may then determine inter alia whether the schemes are collective investment schemes and also look into all points raised by the commission agents at the hearing to be given within eight weeks from today. The person so deputed must then consider as to whether any steps need to be taken under the SEBI Act and give us a report in a sealed cover, of findings relatable to collective investment scheme as well as all issues raised by the commission agents. This may be done within a period of 12 weeks from today".

Besides this, the court has directed Deloitte, enlisted by SEBI to conduct audit of listed companies, to submit a supplementary forensic report upon conducting a forensic audit of the 24 companies/entities identified as additional associate/sister concerns of Royal Twinkle.