Order in the matter of Bajaj Capital Limited

WTM/PS/86/CIS/MAR/2014 BEFORE THE SECURITIES AND EXCHAGNE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER IN THE MATTER OF BAJAJ CAPITAL LIMITED Under Sections 11, 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 read with Regulations 65 and 73 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 Date of Hearing: August 14, 2013 Appearances: For Bajaj Capital Limited: Mr. Rajiv Bajaj, Vice Chairman and Managing Director Mr. Surajit Misra, Executive Vice President For SEBI: Ms. Anitha Anoop, Deputy Legal Advisor Mr. Pradeep Kumar, Assistant Legal Adviser Mr. Mridul Rastogi, Assistant General Manager 1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') came across certain media reports and newspaper articles during the year 2005-2006 regarding the mobilization of funds from the investors under the scheme of 'art fund', with an objective to invest in the works of art. While examining these reports/ articles, it appeared to SEBI that Bajaj Capital Limited was one such entity which had solicited investments in 'art fund'. SEBI therefore vide its letter dated December 21, 2006, inter alia advised Bajaj Capital Limited to furnish certain information/ documents including structure of the fund, number of schemes launched, terms and conditions of the art schemes, names of the promoters/ directors, number of investors and amount collected in each schemes.

2. Bajaj Capital Limited vide its letter dated December 27, 2006 submitted its reply and said that it inter alia advises its clients/ investors on art as an investment option. SEBI analysed the submissions of Bajaj Capital Limited and prima facie observed that Bajaj Capital Limited is carrying out the activities in the nature of a 'collective investment scheme' (hereinafter referred to as 'CIS') without obtaining a certificate of registration in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as 'CIS Regulations'). Subsequently, SEBI issued a show cause notice dated June 14, 2007 (hereinafter referred to as 'SCN') to Bajaj Capital Limited advising it to show cause as to why the appropriate directions under sections 11 and 11B of the Securities and Exchange

Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') should not be issued against it for the alleged violations of the provisions of section 12 read with sections 11 and 11AA of the SEBI Act and the CIS Regulations.

3. Bajaj Capital Limited vide its letter dated June 20, 2007 replied to the SCN and denied of setting up any 'art fund'. Before proceeding further, an opportunity of personal hearing was granted to Bajaj Capital Limited on August 14, 2013, when its Vice Chairman and Managing Director, Mr. Rajiv Bajaj and Executive Vice President, Mr. Surajit Misra appeared and made submissions. During the personal hearing, Bajaj Capital Limited was asked to produce all the relevant accounts/ bank statements/ other documents to support their assertion that it had not collected money under the scheme of 'art fund'. Bajaj Capital Limited sought fifteen days’ time to submit the details as asked, which was duly granted to it. Bajaj Capital Limited vide its letter dated August 26, 2013 submitted certain details and documents, which were duly taken on record.

4. I have carefully considered the SCN issued to Bajaj Capital Limited, the reply received, the details submitted and the submissions made during the personal hearing. The submission of Bajaj Capital Limited in brief are as under: a. It is not engaged in soliciting contributions in the nature of investments from the investors under any scheme of 'art fund' with the objective to invest in the works of art. b. The company has neither set up any 'art fund' nor intend to set up an 'art fund' in the future. c. As per its business model, it does not accept any money from its investors for being pooled and utilized for the purpose of any scheme.

5. I have perused the material available on record and find that there is nothing to show that Bajaj Capital Limited had mobilized funds under the scheme of 'art fund' or launched any scheme of such nature. I have also perused the certificate of the Statutory Auditors submitted by Bajaj Capital Limited, certifying that the company has no scheme of 'art fund'. From the audited financial statements submitted by Bajaj Capital Limited for the accounting periods from the financial year 2006-2007 till the financial year 2011-2012, it is seen that the heading 'income' comprises of only commission/ brokerage/ sale of assets. Further, the said financial statements does not show any entry for advance taken from the customers/ investors. Having seen the said audited financial statements, I am unable to conclude that the activities of Bajaj Capital Limited were in the nature of CIS as defined under section 11AA of SEBI Act.

6. In the absence of any relevant material, one cannot find that Bajaj Capital Limited had acted in contravention of section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations. I also note that SEBI has not received any complaint against Bajaj Capital Limited till date regarding any scheme of 'art fund'. Considering the above, I do not consider this a fit case to impose any penalty against Bajaj Capital Limited.

7. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11 and 11B, hereby dispose of the show cause notice issued to Bajaj Capital Limited on June 14, 2007, without any direction.

PLACE : MUMBAI PRASHANT SARAN DATE : March 11th, 2014 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA