Oct 31, 2009 07:59 AM
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Here is the clip extract from Times of india for the information of all investors
Firms offering get-rich-quick schemes continue to thrive RBI Can Do Little To Check Such Firms From Duping Investors C Unnikrishnan I TNN
Mumbai: Even as investigators probe the dealings of City Limouzines(India) Ltd, which defaulted on payments to thousands of its investors, it is possible that another company could easily replicate the same business module without any impediment.
An RBI spokesperson admitted that it cannot stop such companies. “Under the present law, this is how it works. We do not regulate them. So no permission is required before launching.’’
City Limouzines is neither registered as a non-banking financial company(NBFC) nor a bank. RBI steps in only when a fraud takes place in any of these two institutions. A NBFC works almost on the same lines as a bank and collect deposits but with certain restrictions.
City Limouzines described itself as “a full fledged company with a unique approach to vehicle lease and fleet management’’. The company collected money from the public saying it would be used to buy vehicles in the name of the investors. These vehicles, claimed the firm, would be given out on rent. Promising returns as high as 48%, the company said that it would hand over the vehicles to the investors at the end of the five year period. Now that the scheme has fallen through, investors are running from pillar to post to get their money back.
According to sources, when the case against the company was first registered in 2007, the police had sought the intervention of the RBI as crores of rupees were at stake and thousands of investors were involved. RBI reportedly said that the money collected from the public cannot be termed as a deposit where it could intervene.
A police officer said, “In public interest, the RBI has to step in when scams of such huge magnitude take place. There is a possibility of litigation in the courts if RBI intervenes. But at times, we have to put in the extra effort to work around the system.’’
City Limouzines is registered with the Registrar of Companies(RoC), but has not been filing its annual accounts regularly, sources said. The police, in the past, had asked the RoC to carry out a special audit but it did not happen.
The cops are now is in the process of asking Serious Fraud Investigation Office, set up by the ministry of corporate affairs, to initiate a probe. “It conducts the probe under the Companies Act and submits its report to the central government. However, it has no powers to prosecute the erring firm under the Indian Penal Code, ’’ an officer said.
Officials from the banking sector whom TOI spoke to said that there should be a proper mechanism in place to prevent such companies from collecting money from the public.
*City Limouzines: A Case History
*City Limouzines(India) Ltd launched a scheme, offering investors returns up to 48%. In 2007, the Economic Offences Wing of the Mumbai police registered an FIR against the firm for cheating one of the investors. The firm approached the Bombay high court seeking quashing of the FIR. In March 2008, the HC quashed the FIR, saying there was “no intention to cheat”. State government challenged this in the Supreme Court, which in August 2009 restored the FIR, saying probe should continue. The court also said that City Limouzines be allowed to carry on with its business. In August 2009, the Enforcement Directorate raided the firm’s office for foreign exchange violations. A few days later, the firm instructed its investors not to deposit cheques issued as returns on investments.
