Sebi to auction Ponzi assets

Calcutta, Oct. 5, 2014 (PTI): Capital market regulator Sebi will conduct the e-auction of land and buildings of city-based Tower Infotech Ltd, which had garnered money through so-called “chit fund” schemes, to repay investors.

Bids for the assets have been invited till October 27, while the auction will take place on October 30, Sebi said in a tender notice.

Earlier, Calcutta High Court had directed Sebi to sell certain assets of Tower Infotech and distribute the proceeds among duped depositors and debenture holders. This is probably the first instance of Sebi conducting an e-auction to liquidate the assets of a deposit-mobilising company for refund to the investors.

In some other cases, Sebi has ordered the sale of shares held by certain companies that have found to be in default of payments.

Through enhanced powers, Sebi has been allowed to attach and liquidate the assets of defaulter entities. Sebi has also been given the power to act against companies running illicit money-pooling schemes involving Rs 100 crore or more.

The four properties of Tower Infotech being sold have a total reserve price of over Rs 17 crore.

Bids have been invited along with a payment for an amount equivalent to 10 per cent of the reserve price as earnest money.

The properties listed for sale include a land parcel with a four-storey building in Calcutta with a reserve price of Rs 6.36 crore and another land with a three-storey lodge building and marriage hall (among others) in Midnapore with a reserve price of about Rs 2.94 crore.

Two other properties include land plots with a three-storey hospital building; and an office building (reserve price of Rs 2.32 crore) in South 24 Parganas and land with a two-storey auditorium hall, a single-storey restaurant building, a single-storey office building and a pump room (reserve price of Rs 5.56 crore).

The unauthorised money-collection schemes are widely known as “chit funds” in Bengal and other eastern and northeastern states, although their operators are not registered as “chit fund” companies in most cases.

In many such cases, regulators and government agencies such as the Securities and Exchange Board of India (Sebi) and the Serious Fraud Investigation Office (SFIO) have found that these were Ponzi, or illegal money-circulation schemes, where new investors were given returns from funds of earlier investors.

This has been the case for the Saradha group, too, whose schemes were among the most high-profile. The SFIO had recently submitted its final report in the case to the government.