The Delhi High Court on Monday asked the market regulator to take charge of the winding up of the fraud-hit Arihant Mangal (Growth) Scheme, launched by CRB Capital Markets Ltd more than three decades ago.
Justice Pratibha M. Singh dissolved the Special Committee formed in 2013 that had been overseeing the mutual fund scheme, noting that it had failed to properly discharge its duties, and directed the Securities and Exchange Board of India (Sebi) to assume full responsibility for completing the winding up.
Singh directed Sebi to form a Special Cell to take control of all records, pending proceedings, and remaining funds, and mandated a forensic audit of the mutual fund scheme.
The winding up is now to be completed within one year.
Mandatory forensic audit
“In view of the circumstances and the manner of distribution adopted by the Special Committee, the Court permits Sebi to conduct a forensic audit of all records, bank accounts, and documents pertaining to the Arihant Mangal Growth Scheme,” the order notes.
The scheme, launched in 1994 by CRB promoter Chain Roop Bhansali, collected ₹229.28 crore from 19,396 investors, including 19,324 individuals and 72 institutional investors, during its subscription period from 19 August to 20 September 1994. Investigations revealed that large portions of the funds were diverted to promoters, their relatives, and related companies, instead of benefiting investors.
The CRB Group, comprising a mutual fund, merchant bank, and NBFC, quickly became a notable player in India’s financial markets.
However, Sebi inspections soon revealed regulatory violations, mismanagement, and systemic deficiencies, leading to a 1996 prohibition against CRB launching new schemes.
Concurrently, the RBI filed a winding-up petition against CRB Capital Markets Ltd, and Sebi initiated a trust petition against CRB Trustees Ltd. and associated entities.
In 1997, the Bombay High Court appointed a provisional administrator (P.A.) to manage the fund and approved partial repayments to small investors holding up to 10,000 units at a NAV of ₹4.95 per unit.
The case was transferred to the Delhi High Court in 2007.
Following the P.A.’s death in 2012, the Delhi High Court formed a 3-member Special Committee in 2013, comprising a retired district judge, a Sebi nominee, and a nominee from the ex-management, to oversee the formal winding up and reimburse investors proportionally.
However, the committee’s functioning came under scrutiny. The court found it unlawfully disbursed ₹131.9 crore (62% of the total ₹211 crore disbursed) to the CRB Group—including Bhansali, his relatives, and sister companies—in violation of a 1999 Bombay High Court order.
It also failed to maintain transparency, disclosing these payments only after a 2023 court order. Investigations revealed that CRB-connected nominees influenced the committee’s decisions, provided office premises, and deputed staff, while both the chairman and Sebi nominee failed to prevent payments to CRB-related entities.
The Delhi High Court has now mandated that Sebi’s Special Cell take over all responsibilities, complete a forensic audit within three months, and ensure a fair disbursement of the remaining funds to all investors, restoring transparency and accountability in the long-delayed winding-up process.
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