SEBI questions Artha Group’s Blue Mountain Estates scheme
May 26, 2010
The market regulator has sought details from Artha Property for its Blue Mountain Estates scheme in Ooty to see if it falls under the ambit of a collective investment scheme
Market watchdog Securities and Exchange Board of India (SEBI) has initiated a preliminary enquiry into the Artha Group’s Blue Mountain Estates project, according to SEBI sources. The enquiry is aimed at finding out whether the project in Ooty falls under the ambit of a Collective Investment Scheme (CIS), and if so, whether it should be registered under the CIS rules of SEBI. The company had told Moneylife earlier that the scheme does not fall under the CIS category.
“This is not (a) collective investment scheme. Each customer buys his/her own piece of land, which will be demarcated and be identifiable. The nature of transaction is that of outright purchase of land and Artha facilitates the purchase of plots and hence (this) is not an investment scheme but land purchase,” asserted Suresh Rangarajan, managing director and chief executive officer of the Artha Group in an email to Moneylife. Artha Group has interests in real estate, insurance, loans and an online money management service. It has been substantially funded by the Times of India group.
SEBI defines CIS as: “Any scheme or arrangement made or offered by any company under which the contributions, or payments made by the investors, are pooled and utilised with a view to receive profits, income, produce or property, and is managed on behalf of the investors is a CIS. Investors do not have day-to-day control over the management and operation of such scheme or arrangement.” Any company floating a scheme, which invites deposits from the public as a CIS has to obtain SEBI’s permission. No entity can mobilise any money from the public or from investors unless the scheme is assigned a rating from a credit rating agency registered with SEBI.
“Blue Mountain tea estates are sold as plots of land. Customers have full freehold legal titles for the land and can freely transfer the sale deeds. It is typical of a property purchase and does not guarantee any recurring returns. Nor does it guarantee any fixed capital appreciation. It is like a typical property asset purchase and the customer is free to use the same in the manner he/she deems it fit. Upon payment of full consideration, the plot of land is transferred and registered in the name of the customer. The objective of this project is to offer customers an opportunity to own half or one acre of a plot of land at a hill station and combine holidays with capital appreciation,” said Mr Rangarajan.
According to Artha, after investing in a plot, the person becomes a co-owner of the land. The investor is also entitled to a 50% share in profits from all the produce generated from the plot of land. The day-to-day maintenance like planting, harvesting and processing is done by the company. The scheme claims to offer a regular income. The investor has an option to sell the land after a certain period of time. The land costs Rs9.9 lakh for one acre. Moneylife gathers that the Artha scheme has been cleverly formulated by the company so as to apparently fall outside SEBI’s rules. — Moneylife Digital Team
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