The Securities and Exchange Board of India has imposed a penalty of ₹25 lakh on three directors of Citrus Check Inns Limited for failing to comply with regulatory directions that prohibited the company from collecting fresh money from investors.
The penalty has been imposed jointly and severally on Omprakash Basantlal Goenka, Prakash Ganpat Utekar and Venkatraman Natarajan under Section 15HB of the SEBI Act, 1992.
According to the adjudication order dated August 31, 2026, the material available in the present proceedings showed receipts of only ₹50,000 from two investors after SEBI’s prohibitory directions. However, the regulator concluded that the company’s large and decentralised collection network created the potential for wider, unquantifiable harm to small investors.
The case demonstrates that the monetary value of a transaction is not the only factor considered in regulatory enforcement. Once SEBI issues a binding direction, companies and their directors must take active and demonstrable steps to ensure Compliance throughout the organisation.
The Background of the Citrus Case
SEBI passed an interim order against Citrus Check Inns and its directors on June 3, 2015. The directions were confirmed through another order dated August 24, 2015.
Among other restrictions, Citrus and its directors were directed:
- Not to collect fresh money from customers or investors
- Not to launch any new schemes or plans
- Not to raise money through other group companies
- Not to establish new entities for collecting public funds
- Not to dispose of assets acquired through investors’ money
- Not to divert funds collected from the public
- To provide information and an inventory of assets to SEBI
The directions took immediate effect and were binding on the company and its directors.
SEBI later alleged that despite these restrictions, Citrus, its directors or related group entities continued receiving money from investors.
An adjudication order passed on December 28, 2018, imposed a penalty of ₹50 lakh jointly and severally on Citrus and five of its directors for violating the 2015 directions.
Why the 2018 Penalty Was Reconsidered
Omprakash Goenka, Prakash Utekar and Venkatraman Natarajan challenged the 2018 order before the Securities Appellate Tribunal.
They argued that the original show-cause notice, hearing notices and adjudication order had not been properly served on them. At the relevant time, they were reportedly in Central Jail, Nashik, while notices were sent to the company’s address and an email account controlled by the insolvency resolution professional.
They stated that they became aware of the proceedings only after receiving demand and attachment notices in December 2024.
On June 15, 2026, SAT set aside the 2018 adjudication order in relation to these three directors and remanded the matter to SEBI for fresh consideration.
The tribunal’s decision did not exonerate them on the merits. It required SEBI to reconsider the matter after providing a proper opportunity to respond and be heard.
SEBI consequently issued the relevant documents, accepted their written responses and conducted a personal hearing in July 2026.
The Directors’ Defence
The directors argued that the proceedings had become unnecessary because their personal assets were already attached and under the supervision of a committee appointed by the Supreme Court.
They stated that the recovery, sale of assets and distribution of money to investors were already underway. In their view, imposing an additional monetary penalty would reduce the corpus available for investor repayment.
They also maintained that the alleged breach was limited. The available record referred to a total collection of ₹50,000 from two investors rather than a new large-scale mobilisation of funds.
According to the directors, Citrus operated through 51 branches in Maharashtra and depended on a substantial network of collection agents. They claimed that certain instalments may have continued because of existing auto-debit instructions or actions taken independently by collection agents.
They further argued that no evidence showed that they had expressly instructed agents to continue collecting money after the SEBI restrictions.
Prakash Utekar and Venkatraman Natarajan also claimed that they were non-executive directors and were not involved in the company’s daily operations or fund-mobilisation activities.
Why SEBI Rejected the “Inadvertent Collection” Argument
SEBI noted that its interim and confirmatory orders were issued approximately three months apart. The directors therefore had sufficient time to communicate the restrictions across the company’s collection network and establish systems to prevent further receipts.
The regulator found that the directors had not produced records showing what steps they took to stop agents from collecting money after the orders were passed.
The absence of a specific instruction to continue the collections did not resolve the issue. For SEBI, the more important question was whether the company and its directors had actively implemented the prohibition.
The relationship between Citrus and its collection agents was not disputed. Since the company relied on those agents to obtain payments from customers, SEBI concluded that it was responsible for ensuring that they received and followed the regulatory instructions.
A decentralised business model can make compliance more difficult, but it does not remove the obligation. Where operations depend on branches, agents or third parties, a regulated entity must build a communication and monitoring process capable of implementing legal directions across the network.
Were the Directors Truly Non-Executive?
SEBI also rejected the argument that Prakash Utekar and Venkatraman Natarajan were merely non-executive directors with no responsibility for the company’s activities.
Records from the Ministry of Corporate Affairs identified the three individuals as promoter-directors. The company’s Memorandum and Articles of Association were signed by them, indicating their association with Citrus from its inception.
The Articles of Association also gave the directors powers relating to the management of the company and the raising of funds.
SEBI further noted that the company’s profit and loss statements had been signed by Utekar and Natarajan. In the regulator’s view, this indicated their awareness of Citrus’s fund-mobilisation activities.
Although MCA Form 32 described the directors as non-executive, SEBI found no clear separation of functions between executive and non-executive roles. Based on their powers, shareholding, historical association and participation in the company’s financial reporting, it held them responsible for its conduct.
The order reinforces that a director’s liability is determined by their actual role and responsibilities—not solely by the designation appearing in corporate records.
Why ₹50,000 Still Led to a ₹25 Lakh Penalty
SEBI acknowledged that the available material did not quantify any disproportionate gain made by the directors or the precise loss suffered by investors in relation to the present violation.
Only receipts aggregating to ₹50,000 were specifically available on record.
However, the company reportedly operated through a large network of agents dealing with numerous small investors. SEBI observed that continued collection through such a decentralised structure could have created widespread financial harm that was difficult to quantify.
The regulator also considered that the directors had been involved in another company, Royal Twinkle Star Club Limited, which had operated an unregistered collective investment scheme and faced separate regulatory directions.
SEBI therefore held that the violation attracted Section 15HB, which covers failures to comply with provisions or regulatory directions where no separate penalty has been prescribed.
After considering the facts and mitigating circumstances, it imposed a penalty of ₹25 lakh on the three directors, payable jointly and severally within 45 days.
“Jointly and severally” means SEBI may recover the total amount from the noticees collectively or, where legally permissible, from any one or more of them until the entire penalty is paid.
The Wider Compliance Lesson
The Citrus order highlights a basic but often overlooked principle: receiving a regulatory direction is only the beginning of compliance.
A company must translate the direction into operational action. This may require suspending payment systems, disabling auto-debit arrangements, notifying customers, instructing agents in writing, obtaining acknowledgements and monitoring bank accounts for continued receipts.
Directors should also preserve evidence of every action taken. If a payment is received accidentally, it should be identified, stopped, refunded where appropriate and reported with a clear supporting record.
Without evidence of these controls, an organisation may struggle to establish that a violation was genuinely accidental.
Shunyatax Global Insights
The Citrus case shows that even a relatively small transaction can create significant regulatory exposure when it occurs after a binding order.
Businesses should maintain a documented response process for regulatory notices, covering internal communication, third-party agents, banking controls, board oversight and ongoing monitoring.
If you or your business is facing challenges involving regulatory directions, investor funds, corporate governance or compliance documentation, Shunyatax Global can provide professional guidance to help you respond with greater clarity and confidence.
📞 +91 94615 14198
Disclaimer: This article is based on SEBI’s adjudication order dated August 31, 2026. It is intended for general information and does not constitute legal, financial or investment advice.