In a fresh crackdown against 'collective investment schemes', Sebi has asked Alchemist Infra Realty Ltd to wind up all such activities and refund the money collected from public investors, which could be more than Rs 1,000 crore, within three months.
Besides, the company and its five directors have also been barred from the securities market till the time all its schemes are wound up and the money is refunded to investors.
In its order dated June 21, Sebi has also warned the company and its directors of initiating prosecution proceedings and a criminal case for "offences of fraud, cheating, criminal breach of trust and misappropriation of public funds" if its orders are not complied with.
Sebi probe also found that the investment application forms of the company also mentioned that it was part of 'Alchemist Group', which was engaged in diverse activities such as steel, food and beverages, IT, healthcare, media, aviation, realty, hospitality, education and tea estate, among others, with asset base of over Rs 5,000 crore.
"Thus, an investor/applicant is misled to believe that the company, Alchemist Infra Realty Ltd, is part of the Alchemist Group, whereas the company has contended (before Sebi) that it is not associated with the Alchemist Group," the Sebi order said.
The said 'Alchemist Group' is headed by industrialist KD Singh, currently a Rajya Sabha MP of Trinamool Congress from Jharkhand.
Sebi began its investigations into the affairs of the company in 2011 after receipt of an anonymous complaint about Alchemist Infra Realty Ltd mobilising money from the public investors in breach of regulations.
The regulator later found that the company was running 'collective investment schemes' in the name of real estate business and had garnered Rs 1,087 crore as on March 31, 2011.
The company was charging up to 75% as 'development charges' from the money collected from investors towards purchase of land.
During the initial probe, the company refused to provide details sought by Sebi, saying the regulator did not have a jurisdiction and it was not running any Collective Investment Scheme (CIS) business.
Alchemist Infra later provided some details to Sebi after repeated reminders and Sebi issued show-cause notices to the company and its directors in 2012.
In the meantime, the company sought to settle the case through Sebi's consent mechanism, but the plea was rejected by the regulator.
The company also approached Jharkhand high court in Ranchi in February 2013, but the court dismissed its petition through an order dated May 10 and asked Sebi to conclude its inquiry and pass an order within six weeks.
The company filed another petition before the Delhi high court on June 4 in the matter, after which it was asked to reply to Sebi's show-cause notice by June 11.
In its reply, the company maintained that Sebi did not have any juridiction over its activities and it was not running any CIS business.
Sebi, however, found that Alchemist was seeking investments of a minimum amount of Rs 1,000 and in multiples of Rs 1,000 thereafter, wherein investors were allotted immovable property that could be leased out to the company under 'fixed term tenancy agreement'.
The regulator said it was clear that the transactions of the company were "not at all a land purchase-sale transaction' and the only document that the purchases were getting was a 'certificate of property', which was rather like a certificate of investment.
Sebi said that the business schemes run by the company were entirely in the nature of CIS and were being operated without necessary regulatory approvals.
Accordingly, Sebi ordered that Alchemist Infra Realty cannot collect any money from investors or launch or carry out any scheme which could be identified as a CIS activity.
The regulator also asked the company and its directors to wind up all the existing CISs and refund the investors' money within three months.
Sebi said it would initiate prosecution proceedings against the company and its directors, make reference to the state government and police to register a civil/criminal case, and ask the orporate affairs ministry to initiate winding-up process for the company, if its orders are not complied with.
The regulator also barred the company and its five directors - Brij Mohan Mahajan, Narayan Madhav Kumar, Balvir Singh, Chandra Shekhar Chauhan and Sunil Kanti Kar - from the securities markets till the time all the CIS activities are wound up and the money collected from them are refunded with returns due to the investors.