In its first clampdown against art funds raising money from public without regulatory approval, markets watchdog Sebi on Tuesday asked Osian's Art Fund to wind up its 'collective investment scheme' and refund the investors' money with 10 per cent interest within three months.

Sebi also said it will initiate proceedings against Osian's and its promoters, directors and other top executives for "possible offences of fraud, cheating, criminal breach of trust and misappropriation of public funds" if a winding up and repayment report is not submitted within three months.

In its final order against Osian's after a probe that continued for about six years, Sebi also cited the high-profle Sahara case, wherein two unlisted companies of the Sahara group were asked by the Supreme Court to refund to investors over Rs 24,000 crore raised through issue of certain bonds.

Besides, Osian's Connoisseurs of Art Private Limited, which had raised Rs 102.4 crore from 656 investors for one of its art fund schemes, has also been restrained by Sebi from accessing the capital market and from dealing in securities market till it winds up its collective investment schemes and refunds the investors' money.

The total money raised across various Osian schemes could not be ascertained.

The order - the first against an art fund - may also have bearing on many other entities, which could be raising money from the investors without required approvals from Sebi and other regulators.

Sebi had begun its probe in 2007 after noticing that Osian's was soliciting contribution in the nature of investments from the investors under the scheme of 'Art Fund' with an objective to invest in the art works.

In order to understand the nature of activities of the company and to examine whether they would fall within the ambit of Sebi Act and Sebi (Collective Investment Scheme) Regulations, the regulator had first sought clarifications from the entity in June 2007.

Osian's said it has sponsored a fund by the name Osian Art Fund as a private trust formed under the Indian Trust Act and it had launched a 'Scheme Contemporary -1' which involved pooling of investments from investors with the objective to generate income and capital growth from portfolio of investment and management in the art works.

Prima-facie, Sebi observed that the company's activities were in the nature of 'collective investment schemes' and therefore required a registration with Sebi.

In an advisory issued in February 2008, Sebi had said that 'Art Funds' were 'collective investment schemes' and had advised investors against investments in such Funds operating without a certificate of registration from Sebi.