The petitioner had moved the court claiming that the rights of several million residents of India were adversely affected due to malfunctioning, fraud, misrepresentation and other wrongful and/or illegal activities of various timeshare companies.
Timeshare properties are those in which multiple parties hold right to use the property during their allotted period of time. Such properties are usually resorts/ vacation units and various companies use such properties during their allotted period.
“Most of the Timeshare companies have a corpus accumulated through pooling of investors’ fund of over ₹100 Crores and they would fall under the definition of CIS as a scheme or arrangement in section 11AA(1) of the SEBI Act”, the petitioner argued.
The plea, therefore, sought regulation of the timeshare companies as CIS. Alternatively, the petitioner requested the Court to issue directions to SEBI to formulate suitable legislation to regulate timeshare companies.
SEBI, on the other hand, contended that timeshare was an investment in a holiday scheme which gave an entitlement to a holiday and that the schemes of all timeshare companies could not ipso facto be said to be falling within the definition of CIS under the SEBI Act and the CIS regulations.
“All timeshare companies cannot be considered as CIS unless they satisfy the conditions mentioned in section 11-AA and that will have to be interpreted and analyzed according to the facts and circumstances of each scheme,” the market regulator contended.
SEBI also informed the Court that only after it receives any complaint, would it ascertain whether a scheme between the investor and the so called timeshare company is a CIS or not.