Order in the matter of Marwahs Fine Art Dealers

WTM/PS/87/CIS/MAR/2014 BEFORE THE SECURITIES AND EXCHAGNE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER IN THE MATTER OF MARWAHS FINE ART DEALERS 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 19, 2013 Appearances: For Marwahs Fine Art Dealers: Mr. Atul Marwah For SEBI: 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 Marwahs Fine Art Dealers (hereinafter referred to as 'Marwah') was one such entity which had solicited investments in 'art fund'. SEBI therefore vide its letter dated January 09, 2007, inter alia advised Marwah 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. In the meantime, SEBI received a letter on January 17, 2007, from one MEC Art Gallery (signed by Mr. Atul Marwah) seeking thereby guidance from SEBI to set up an art fund. However, no specific reply came from Marwah. SEBI analysed the information available on record and prima facie observed that Marwah 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 Marwah 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. Marwah vide its undated letter (received by SEBI on July 12, 2007) replied to the SCN. Before proceeding further, an opportunity of personal hearing was granted to Marwah on August 19, 2013. On the date fixed Mr. Atul Marwah appeared for Marwah and made submissions. During the personal hearing, Marwah was asked to submit all the relevant/ accounts/ bank statements/ other documents to support their assertion that it had not collected money under the scheme of 'art fund'. Marwah sought fifteen days’ time to submit the details, which was duly granted to it. Marwah vide its letter dated August 27, 2013, filed the written submission and certain documents which were taken on record.

4. I have carefully considered the SCN issued to Marwah, the reply received, the submissions made during the personal hearing and the written submissions filed pursuant to the personal hearing. The submission of Marwah in brief are as under : a. It is a proprietorship firm and engages only in the sale of paintings. It has never indulged in collection of money under the scheme of 'art fund'. b. Apart from the proceeds received by selling paintings, there is no other deposit/ receipt of the firm. c. It is not soliciting contribution in the nature of investments from the investors under the alleged 'art fund' scheme.

5. I have considered the material available on record and find that there is nothing to show that Marwah had mobilized funds under the scheme of 'art fund' or launched any scheme of such nature. I have perused the bank statement of Marwah for the period of June 01, 2007 till August 23, 2013. I have seen the credit entries in the subject bank account and note that there is no regular receipt of money or credit of huge amount. Marwah has argued that there is no other deposit/ receipt of funds by it in the only bank account maintained by it.

Having considered the above discussion, in the absence of any further detail, I am unable to conclude that the activities of Marwah were in the nature of CIS as defined under section 11AA of SEBI Act and that Marwah had acted in contravention of section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations.

6. I also note that SEBI has not received any complaint against Marwah till date regarding any scheme of 'art fund'. Considering the above, I do not consider this a fit case to impose any penalty against Marwah.

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 section 11 and 11B thereof, hereby dispose of the show cause notice issued to Marwahs Fine Art Dealers on June 14, 2007 without any direction.

PLACE : MUMBAI PRASHANT SARAN DATE : March11th, 2014 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA