Ponzi scheme: Recovery from Royal Twinkle Star Club, Citrus Check Inns to be delayed further

Suresh P Iyengar Mumbai | Updated on September 06, 2019 Published on September 06, 2019

Sale Monitoring Committee recommends auction of the assets through SEBI.


The arduous delay of more than two years to recover money from the ponzi scheme run by Royal Twinkle Star Club and Citrus Check Inns may get extended with (Retired) Justice JP Devadhar, the recently nominated head of Sale Monitoring Committee (SMC) recommending auction of the asset through SEBI rather than by SMC.

Incidentally, as Presiding Officer of Securities Appellate Tribunal in 2016, Devadhar allowed both these companies to carry out business subject to them being regulated by SEBI which had earlier passed strictures against the companies.

Duped over 18 lakh investors

Over 18 lakh investors lost about ₹ 8,000 crore in the holiday package scheme floated by these companies. In fact, it was one of the initial cases filed with NCLT Mumbai in 2017 when Insolvency and Bankruptcy Code was promulgated. However, the case landed at the doorsteps of the Supreme Court.

Responding to a BusinessLine questionnaire, Devadhar said right from the date of constituting SMC till date, it had collected about ₹14.76 crore due to the company and spent about ₹10.88 crore in that behalf.

"In view of this, I have requested the Apex court to consider the sale of the assets through SEBI instead of selling it through the SMC. The request is pending before the Apex court," he said.

However, CA Devendra Jain, Insolvency Resolution Professional of both the companies said, to claim that SMC has recovered only ₹15 crore in last two years without taking into account ₹23 crore lying in an escrow account is unfair. Moreover, liquidation started only after the Apex court order in February 2019, he said.

Recovery through attachment

Since being appointed as bankruptcy administrator in May 2017, about 100 properties worth over ₹3,000 crore of the defaulters have been attached.

Closer scrutiny of debtors books revealed a receivable of ₹150 crore other than attached assets. Of this about ₹15 crore was recovered to meet day-to-day expenses, he said.

"We have sold 15 properties and two investments worth of ₹23 crore which is lying in separate liquidation account," he said.

Of the total expenditure, major cost went to pay salaries of about 400 employees at about 52 branches. The number of staff has now been reduced to 20-25 and cost reduced to ₹15 lakh per month against ₹1 crore a month incurred during the initial period, he said.

Other major expenses include forensic audit of 88 associate companies by Deloitte for 10 years which involved 3 crore transactions through over 1,000 bank accounts, valuation of about 100 properties, legal expenses to fight about 100 different property cases at lower courts, 72 interlocutory applications at Supreme Court and NCLT, said Jain in response to BusinessLine questionnaire.

Resolution Professional fees were only ₹43 lakh for 27 months. To collect 18 lakh investors claims and verifying them itself is a mammoth task, he said,

Forensic audit

The forensic audit has revealed that some office-bearers of Citrus Welfare Society, which was instrumental in moving the case to the Apex court, have received over ₹250 crore for selling the ponzi schemes gullible investors. These office bearers who are members of CWS are now part of the SMC, he added.

The audit report also revealed that of the ₹8,245 crore collected through the ponzi schemes, about ₹2,962 crore was distributed as commission to the agents.

On the move to auction assets through SEBI, Jain said of total properties worth ₹3,000 crore seized by SEBI in PAN Card case, it was able to recover only about ₹100 crore from nine auctions.

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Published on September 06, 2019
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