SEBI directs winding up of Cinema Capital Venture Fund over “gross mismanagement”

The Securities and Exchange Board of India (SEBI) has ordered the winding up of Cinema Capital Venture Fund (CCVF) and the recovery of investor money, citing "gross mismanagement of investors’ funds" and "fraudulent activities" that continued even after an earlier penalty imposed in 2019..The order, issued on April 30, 2025, under Sections 11, 11B, and 15 of the SEBI Act, found that CCVF and its affiliates failed to liquidate the assets of its scheme nearly a decade after its scheduled termination and continued to breach key regulatory provisions relating to venture capital funds, alternate investment funds, and investor protection..Cinema Capital Venture Fund was registered with SEBI as a Venture Capital Fund in 2008, with a scheme tenure of five years, extendable by two. Its final closure date was November 14, 2015. However, SEBI found that even by October 2023, the fund had failed to liquidate outstanding investments.“The Fund did not wind up the scheme and distribute the proceeds accruing to its investors even after the expiry of its tenure... and even after the passing of the Adjudication Order, the scheme is still to be wound up,” SEBI said.Only ₹7.93 crore of the ₹175 crore raised had been returned to investors. ₹2.47 crore worth of investments were still pending liquidation, according to the order.SEBI noted that the Fund’s conduct demonstrated lethargic indifference and reckless negligence toward its fiduciary obligations and the interests of its investors..SEBI’s investigation revealed that the fund had routed ₹94 crore as interest-free loans and advances to investee companies, its own trustee, directors, and staff - without disclosing this in its Private Placement Memorandum (PPM). ₹1.63 crore was written off as bad debts, and ₹62.5 lakh remained outstanding as of October 31, 2023.“Providing loans and advances to investee companies at no interest cost is against the said investment strategy and not in the interest of Fund’s investors,” the SEBI noted.It further found that ₹103 crore had been invested in three associate companies—Kinesis Films, Stellar Films, and Waterfront Films—all controlled by the fund’s trustee and directors. This was in violation of Regulation 12(c) of the SEBI's Venture Capital Fund Regulations.“By investing in the investee companies that are its associates, the Fund neither conformed to its disclosed investment objective nor did it comply with the investment restrictions prescribed," the SEBI held. .Citing violations under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, the regulator further concluded that the Fund made promises in its PPM that it never intended to fulfil.“Promise that the Fund and the investment manager made through its IM namely; – ‘focus to invest in portfolio companies to derive attractive returns for its investors’ and that ‘the money would not be used to invest in associates’ was made without any intention of performing it,” the SEBI said. “Essentially by giving interest free money to its investee companies, Trustee and staff and then writing them off as bad debts, the Fund had no intention of making good of its investment objective,” the regulator added..Key Directions by SEBI.1. Winding up of Scheme and Investor Exit- Deadline to wind up the scheme and providing investors an exit: July 31, 2025.- Two independent valuations to determine asset value (higher to be used).- Investors can choose between an in-specie distribution (stake in underlying assets), or a cash payout based on Net Asset Value.- Final compliance report (certified by a Chartered Accountant) due by August 21, 2025..2. Disgorgement of Unauthorized Fees: Noticees 7 and 8 (Urmila Gupta and Amrit Lal Suri) to refund ₹5 lakh to SEBI’s Investor Protection and Education Fund (IPEF) within 45 days..3. Monetary Penalties Imposed- Total Penalty: ₹1.1 crore (jointly on Noticees 2 to 8): ₹1 crore (under Section 15HA of SEBI Act) for fraudulent/ unfair trade practices in addition to ₹10 lakhs (Section 15HB) for Venture Capital Fund regulation violations.4. Market Ban on Key OfficialsNoticees 2–8 barred for three years from:- Acting as directors or key managerial personnel in SEBI-registered entities (AIFs, mutual funds, etc.).- Engaging in any investment/ fund management activity involving public money.Those affected by this ban are Cinema Capital Advisory Private Limited, Cinema Capital Contributory Company Private Limited, Samir Gupta, Shashanka Ghosh, Binay Mandal, Urmila Gupta and Amrit Lal Suri..[Read Order]