SEBI Penalises 3 Directors Of Citrus Check Inns For Continued Investor Collections After Regulatory Ban

On 31 August, the Securities and Exchange Board of India (SEBI) imposed a Rs. 25 lakh penalty jointly and severally on three directors of Citrus Check Inns Limited for violating SEBI's directions issued in 2015.

Adjudicating Officer Medha Sonparote passed the order against Omprakash Basantlal Goenka, Prakash Ganpat Utekar and Venkatraman Natarajan. She held:

“It is not the case of the Noticees that they did not get enough time to comply with the SEBI Orders. The first Order of SEBI was in June 2015 and the second order was in August 2015, i.e. three months apart. There were enough opportunities for the Noticees to comply with the SEBI Orders.”

SEBI had, through an adjudication order dated 28 December 2018, imposed a Rs. 50 lakh penalty jointly and severally on Citrus Check Inns and its directors for violating its orders dated 3 June and 24 August 2015.

The three directors appealed before the Securities Appellate Tribunal, contending that the show cause notice, hearing notices and adjudication order had not been properly served on them.

On 15 June 2026, the Tribunal set aside the penalty against the three directors and remanded the matter to SEBI for fresh consideration.

During the fresh proceedings, the directors argued that the alleged collections were inadvertent and resulted from Citrus's decentralised collection agent network and pre-existing auto-debit arrangements. They submitted that only Rs. 50,000 had been collected from two investors and that there was no evidence of misappropriation or diversion of funds.

They also submitted that two of them were non-executive directors who were not involved in the company's day-to-day affairs. They relied on the ongoing recovery and restitution process for investors and submitted that their assets had already been attached and were under supervision.

SEBI noted that complainants Sunita Bharmu Patil and Chintamani H. Kale had each paid Rs. 25,000 through monthly instalments of Rs. 5,000 even after 3 June 2015, in violation of SEBI's directions.

Rejecting the directors' contention that the collections were attributable to practical difficulties, the Adjudicating Officer held that they had sufficient time to comply with SEBI's orders.

Further, she observed that the directors had not produced any evidence showing that they took steps to stop their agents from collecting further payments or otherwise ensuring compliance with SEBI's directions. She stated:

“Thus it follows that the principal shall be held for the acts of commission or omission of the agents, which is evident in this case, and especially where no records have been brought up by Noticees directing the agents to not collect moneys.”

On the liability of the directors, SEBI considered Section 27(1) of the SEBI Act, which deals with the liability of persons in charge of and responsible for the conduct of a company's business. The order observed:

“The fact that they had signed the financial statements of the Company indicates that they were aware of the Company's fund mobilisation activities given the facts as discussed in the foregoing prove to the contrary.”

SEBI also observed that although all Citrus directors were designated as non-executive directors in the Ministry of Corporate Affairs' Form 32, the document did not specify their respective functions. Therefore, it held that the directors could not be treated as non-executive directors merely on the basis of their designation in Form 32.

Accordingly, SEBI imposed a Rs. 25 lakh penalty jointly and severally on the three directors.