Enn Bee Plantations faces probe

NEW DELHI, February 3: Even as the Government is taking steps to regulate plantation investment schemes, yet another instance of deceptive t...

NEW DELHI, February 3: Even as the Government is taking steps to regulate plantation investment schemes, yet another instance of deceptive trade practice has come to light. The MRTP Commission has found prima facie evidence against Enn Bee Plantations for misleading investors and raising Rs 103 crore from them last year.

The Commission today ordered that a notice of inquiry be issued against the firm based on the preliminary investigation report filed by the investigative wing of the commission. The bench of S Chakravarti and R K Anand of the Commission heard asked that further investigations be carried out to ascertain the losses which investors are likely to face because of the practices indulged in by the plantation company. K S Yadav, assistant director general MRTP represented the investigative wing of the Commission at the hearing of the case.

This probe has come at a time when the Securities and Exchange Board of India is busy formulating guidelines for such plantation schemes. The originalcomplaint in this case was filed by an Agra-based investor forum, Udyami Upbhokta Vikas Parishad. During the preliminary investigation of the company it was found that the company has not utilised the funds collected from the investors according to its own stated plan. The Bhopal-based company appears to have siphoned off the funds and illegally used the term `agro-bonds’ to describe the units which were issued to the investors.In its advertisements the firm had said that an investment of Rs 10,000 would earn the investors Rs 10 lakh after 21 years.

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The company claimed that these figures were based on a project report prepared by the Madhya Pradesh Consultancy Organisation.

A study of the project report found that the firm had not adhered to its structure. For an area of 3812 acres, the project report mentioned that the licence fee should be Rs 6 crore. But Enn Bee paid Rs 42,35 crore towards licence fees. The firm was to spend Rs 6 crore on site development, but the actually only Rs 2 crore was spent.The MRTP investigators suspect that the money collected by the promoters from investors was used in acquiring land on licence basis from companies in which the directors of Enn Bee are involved.

Also the firm was supposed to keep Rs 18.35 crore as maintainance funds and Rs 33.28 crores for other work such as fumigation and planting. But the company was found to have a cash and bank balance of only Rs 9.30 crore.

Another financial fact which is likely to upset the returns promised by the company is the cost of collection of funds from the investors. According to the project report only Rs 1.10 core was to be spent on this. But the firm ended up spending more than Rs 18 crore in collecting the money.

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The investigators says that under the scheme, the investors do not have any right over the land and neither does Enn Bee and this has not been publicised in their ads. This amounts to a deceptive and unfair trade practice under Section 36A of the MRTP Act.

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