SEBI bars Royal Twinkle Star Club from collecting money

Market regulator Securities and Exchange Board of India (SEBI) has barred Royal Twinkle Star Club Ltd (RTSC) and its four directors from collecting money from investors under its holiday package plans. As per SEBI, RTSC, which claims to have 2.34 lakh rooms across the country for offering holidays to its members, has collected Rs668.33 crore from 3.69 lakh people!
 
On 3 March 2014, Moneylife has sent an email to SEBI’s corporate communications department informing about RTSC and Citrus Check Inns' fund mobilizing activities and collective investment scheme (CIS). However, till writing this story, there is no response from SEBI.
 
On 6th March, Moneylife wrote an article (Citrus Check Inns mis-selling holiday package as investment plan?) explaining about how RTSC and Citrus Check Inns were collecting money from investors.
 
SEBI issued an order on 7th March barring RTSC. However, the action from the market regulator came too late as RTSC had already changed its name to Citrus Check Inns Ltd and is very much active in collecting money from people like house maids, watchmen and small vendors in and across Mumbai.
 
In an order, issued on 7th March, S Raman, whole time member of SEBI restrained RTSC and its directors, Omprakash Basantlal Goenka, Prakash Ganpat Utekar, Venkatraman Natrajan and Narayan Shivram Kotnis to from collecting money from investors under its holiday package plans.
 
In its order, the market regulator said, “This order shall also be treated as a show cause notice and directed company and its directors,
 
  1. Not to collect any more money from investors including under the existing schemes;
     
  2. Not to launch any new schemes;
     
  3. Not to dispose of any of the properties or alienate any of the assets of the schemes;
     
  4. Not to divert any funds raised from public at large which are kept in bank account(s) and/or in the custody of the company;
     
  5. Submit the list of investors with full particulars such as PAN numbers, addresses etc within fifteen days from the date of receipt of this order;
     
  6. Submit full inventory of 2.34 lakh rooms as mentioned in the letter of RTSCL dated 5 August 2013 within fifteen days from the date of receipt of this order.”
 
SEBI said its investigation revealed that, the payments made by the investors were being pooled and utilized solely for the scheme and RTSC was operating investment plans through its holiday plans. RTSC has admitted to raising Rs669.33 crore from about 3.69 lakh investors under its comfort holiday plan (CHP), economic holiday plan and luxury holiday plan.
 
SEBI said RTSC was collecting money from investors and assuring them a certain return on investment, which is in the nature of profit. SEBI order reveals that, as compared to the total number of investors in its holiday plans, less than 2% (6,675 out of total 3.69 investors) actually seem to have availed the holiday facilities being marketed by RTSCL.
 
This indicates that most investors in the said scheme invested in the plan on account of the promise of assured returns.
 
SEBI has received complaint alleging that RTSC was collecting “thousands of crores” from gullible investors under the garb of ‘Comfort Holiday Plan’ which was tantamount to illegal mobilization of funds. Further, it was submitted that RTSC was indulging in illegal deposit mobilization involving “guaranteed returns of 1.5 times in 4 years, 1.7 times the investment in 5 years, double in 6.5 years and 3 times in 9 years”.
 
Although the SEBI order against RSTC is a welcome step, it appears to have come too late. As pointed out by Moneylife, RSTC is now collecting money under the name of Citrus Check Inn by offering the same holiday package ‘investment’ plans.
 
Last week Moneylife wrote and informed SEBI that, money collecting activities of both RTSC and Citrus Check Inns, carry the features of a CIS, specified under Section 11AA of the SEBI Act under Regulation 3 of the SEBI (CIS) Regulations.
 
Earlier, SEBI had barred several companies like Osian’s-Connoisseurs of Art Pvt Ltd, Sun-Plant Agro, Kolkata-based Rose Valley group, Green Ray International Ltd and Maitreya Plotters and Structures Pvt Ltd from collecting money from public under the pretext of offering ‘investment plan’ and ‘huge returns’. The Rose Valley group was found running a holiday membership plan similar to what is being offered by RTSC and Citrus Check Inn.
 
Moneylife Foundation has conducted various seminars to make people aware about money trails by various CIS and multi-level marketing schemes which lures gullible investors and frequently warned that “If it looks too good to be true, it usually is.”