All That Twinkles Is Not Guaranteed Returns

From a farmer in Belgaum investing Rs 500 a month to the wealthy with crores lured by a foreign holiday, investors and agents, duped by the very deals they once sold, queue up outside the Citrus Checks Inn and the Royal Twinkle Star Club Private Ltd’s (RTSCPL) offices in Wadala every day. A total of 2.28 lakh investors are owed Rs 786 crore by RTSCPL, according to the capital markets regulator, Securities and Exchange Board of India (SEBI). Following complaints that began to trickle in in September 2012, SEBI accused RTSCPL of running an illegal Collective Investment Scheme (CIS) under the garb of a ‘Comfort Holiday Plan’. It ordered them to pay back investors within three months in August 2015. The queues began a few months ago when cheques issued as compliance began to bounce.

RTSCPL’s troubles began in 2012, when SEBI began to receive complaints from investors, though it had been operational since June 2008, offering equated holiday plans with “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,” according to the SEBI submission. While director Omprakash Basantlal Goenka, 69, who ran the scheme along with promoters Prakash Ganpat Utekar, Venkatraman Natarajan, and Narayan Shivram Kotnis, claimed to dna that they were merely seeking to compete with other timeshare holiday plans existing in the market by differentiating themselves with returns, SEBI dubbed it “tantamount to illegal fund mobilisation”.

To make matters worse, it is alleged that after last year’s SEBI order, RTSCPL continued its operations in the name of Citrus Checks Inn, a subsidiary of the Mirah Group of Companies, set up by the same directors.

As anxious investors run pillar to post, Goenka, who shows up to address the angry crowd every day, vows to return every penny. The Supreme Court upheld a tribunal order against Sebi’s order in February this year, allowing RTSCPL two years to make repayments. The Apex Court’s order on the legality of Citrus Checks Inn is awaited later this month.

Babasaheb Gondge stares into the abyss as he waits in a queue of anxious investors before the offices of Citrus Checks Inn and the Royal Twinkle Star Club, nervously clutching evidence of what he is owed. He is at the Shilpin Centre building, Ambedkar Road, Wadala, an Eastern Mumbai suburb. The 34-year-old construction supervisor rues the day he decided to invest Rs 2,500 in the equated monthly holiday plan of Citrus, squirreled out of his meagre Rs 19,000 salary. He had fondly dreamed of funding his two children’s education with promised, and now increasingly unlikely, returns of about Rs 1.09 lakh. He now desperately needs the amount, since his brother was recently diagnosed with tuberculosis. If the scheme hadn’t failed, since he had paid all his installments, he would have recovered considerable returns by now. But it has all but gone. In September this year, he says, the company reneged on a promised payment for the fifth time. “I pleaded for at least half the amount so that my brother’s treatment is not discontinued,” says Gondge. He is one of 2.28 lakh investors enlisted to the scheme by a word-of-mouth chain of agents.

RTSCPL had been operational since March 2008, offering equated monthly holiday plans promising high returns if the holidays were not availed of. It was offering “guaranteed returns of 1.5 times in four years, 1.7 times the investment in five years, double in 6.5 years and three times in nine years”. No wonder they came from far and wide. Jaysingh B Kamble from Belgaum to Bhimrao Dedhe in Solapur, all find a mention in SEBI’s report.

“Many who come there are really in desperate need of their money. One elderly lady barely able to walk has been coming from Roha. It’s painful to see that,” says Esmie D’silva, a social worker who has been helping the investors out.

Agents too are stuck in the deals they sold.

Alvira Pereira, a housewife from Matunga, who has been working as an agent with the company since 2011, claims the company owes her over Rs 1 lakh. She leads a team of six other agents, almost all close relatives she inducted. In frustration, she displays all the written assurances the company has given her over time. “I wanted to repay the gold loan I had taken,” says Pereira. Now she stands to lose her jewellery too.

Whether they put in a few thousand rupees or over Rs1 crore, small and big are all in the same camp outside now.

Legal or not?

The question of the scheme’s legality is still up in the air. All schemes of both companies are not under the scanner. Those that offered returns on a time-share holiday module are. The capital markets regulator, Securities and Exchange Board of India (Sebi), which first began to receive complaints in January 2012, accused RTSCPL of running a Collective Investment Scheme (CIS) and called it an “illegal mobilisation of funds”. It ordered them to pay investors within three months in August 2015.

Sebi then barred the company and its directors from raising fresh capital from the public as it did not have requisite approvals. RTSCPL appealed against the Sebi order, and was given an extended deadline of two years. When they began to comply with the tribunal’s orders, it was found many cheques issued were dishonoured. That’s when the queues began to form.

A similar order was passed against an illegal CIS by the regulator against another company, Citrus Checks Inn, a subsidiary of the Mirah Group. Here’s the catch: it had the same set of directors.

A year earlier, on September 23, 2014, Sebi, which was already investigating the company’s dealings by then, had received a complaint from an investor saying that RTSPCL had been renamed Citrus Checks Inn. It was the second complaint. On January 17 that year, an investor had alleged that directors of RTSCPL were now running their ‘ponzi’ and ‘mis-selling’ schemes through a second company. The investor had alleged the company was refusing to refund the money invested in June 2012, when she sought to discontinue the plan. RSTPCL had replied: “you would get the refund only after 4 to 5 years without interest”.

On the passing of the Sebi’s first show cause notice cum interim order dated March 7, 2014, against RTSPCL, the directors had complied and ceased raising funds, true, but they allegedly continued to do so in another company.

Citrus Checks Inn refutes the allegation saying both are distinct entities. Citrus claimed it was incorporated on September 26, 2011, and commenced the business in April 2012, i.e. much before Sebi first investigated it in February 2014. Citrus also claims to be merely a time-sharing scheme, like Club Mahindra or Sterling Resorts, and Sebi is being discriminatory. Sebi’s counter is that similar businesses do not offer returns in case of services not being utilised, and hence do not fall under the definition of a CIS. Citrus as of now has been given the green signal to operate. Is the scheme legal or not?

As with the Sahara and Saradha group cases, both of which had raised over Rs 24,000 crore and Rs 2,460 crore through a CIS respectively, the Apex Court order will decide.

The claims at stake

‘Submit original cheques on the counter’ a notice on the wall said. Those who wanted to withdraw their entire investment ignored it. While an agent on site claimed the company was still accepting recurring deposits for Citrus Checks Inn from existing investors, a company official at the counter denied they were accepting fresh funds.

According to an agent, the lure for investors was doubling and tripling their money in the lock-in period. In the recurring deposit scheme, returns promised were 12 to 13 per cent. Investors were awarded points, which could be used to avail of facilities in any listed holiday properties across the world. Those who did not avail a holiday plan were to be repaid their money with a benefit on expiry of the scheme. If they took a holiday, there was no refund.

The plan seemed straightforward enough and the directors claim there was indeed a genuine intention to honour it. Omprakash Basantlal Goenka, director of the Mirah Group which run RTSCPL and Citrus Check Inns seemed contrite. “It is true that cheques have bounced, but, I must tell you that we are trying to repay all investors,” he says. In RTSCPL’s case, the company had approached the appellate tribunal against the Sebi order and in February this year, it extended the deadline to return the funds to two years. The Supreme Court upheld the order of the appellate tribunal in July 2016. However, the Supreme Court ruling on Citrus is awaited later this month.”

What went wrong

Would you choose to double your money or effectively take a holiday on EMIs with no returns? The directors blame the business model. When investors were offered the choice, 27 per cent opted for the holiday. The rest wanted returns.

When the scheme was created it seemed like a brainwave. The Mirah Group had holdings in real estate, hospitality, and other industries since the mid-1970s. When a survey showed that annual occupancy rates in hotels stood at only 60 per cent, the company devised this scheme as a marketing strategy to utilize unsold inventory.

When the scheme began, they had factored their other assets could tide them over any tough times. The companies were heavily invested in real estate, a sector which has seen a steady downward trend recently. These left the company without sufficient cash reserves. “This has resulted in some cheque bounces,” he says.

The cases of cheques being dishonoured all pertain to RTSCPL, which has a present liability of Rs 786 crore, out of which it has cleared about Rs 110 crore. The rest is owed by February 2, 2018. Umesh Vartak, RTSPCL’s Vice President of Finance said in their submission before the SAT, that they have a realizable asset value of over Rs 1638 crore.

“It’s just a liquidity crunch. It’s not like we don’t have assets, but there is a shortage of working capital at the moment,” Goenka says. The company claims it is not getting the right value at current market rates to sell its assets, but claims itself “desperate sellers”.

As the company continues to challenge the Sebi order, the investors continue to wait.

Meanwhile, every time Gondge stands in queue, he forgoes a day’s wages chasing the elusive money.