Market regulator Securities and Exchange Board of India (SEBI) has told the Supreme Court that ponzi schemes do not fall under its regulatory regime and it was for the state governments to act against them.
The SEBI told a bench of Chief Justice T. S. Thakur, Justice A. M. Khanwilkar and Justice D. Y. Chandrachud that the ponzi schemes were banned under the Prize Chit and Money Circulation (Banning) Act, 1978 and it was for the state governments to enforce the law.
The SEBI was responding to a petition by an NGO, Humanity Salt Lake, seeking the court's intervention to check and control the menace of the illegal collection of money in the garb of collective investment schemes.
SEBI said by examining the complaints on unauthorised money mobilisation it appeared that the overwhelming majority of complaints fall under Prize Chit and Money Circulation (Banning) Act, 1978 and Protection of Interest of Depositors Act that fall under the domain of state governments.
SEBI also informed the bench that Uttar Pradesh, Rajasthan and Arunachal Pradesh are the only states which don't have law to protect the interest of the depositors from fly - by - wire companies collecting money from the public.
Five Union Territories - - Chandigarh, Andaman and Nicobar, Dadar and Nagar Haveli, Daman and Diu and Lakshadweep - - too have not enacted laws to protect the gullible investors.
Pointing out that the banned activities could not be controlled by any regulator, the SEBI told the court that between April 2013 and March 2016, it received 1, 956 complaints, out of which it issued interim order in respect of 76 involving Collective Investment Scheme (CIS) and 223 involving Deemed Public Issue (DPI) rest 1657 were referred to other agencies.
The market regulator said that Collective Investment Scheme within the domain of SEBI was not a banned activity but was authorised only upon registration/permission by it.
"In the absence of such registration/permission, such schemes are not allowed to operate and have to be stopped, " said SEBI, adding that it had often acted after being informed or by taking suo motu cognisance of the schemes operating in the market to defraud the people.
The CIS is the money being collected by way of unauthorised multi - level marketing, pyramid marketing schemes and ponzi schemes without permission of competent authorities.
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On the action initiated by it against the unauthorised mopping of the money by the companies, SEBI told the court that till June 30, 2016 it had initiate action against 60 cases involving CIS and DPI, with total amount standing at Rs 54, 802 crores.
It said that it had attached 199 properties and recovered Rs 215. 50 crores.
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