BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER

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1 WTM/PS/81/CIS-NRO/NOV/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999 and Regulation 4(2) (t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 In the matter of Servehit Housing and Infrastructure India Limited In respect of: 1. Servehit Housing and Infrastructure India Limited [PAN: AANCS0417R], 2. Mr. Sukhmander Singh [PAN: BUZPS4365J], 3. Mr. Rajender Kumar [PAN: BCIPK4911M], 4. Mr. Balbir Singh Saini [DIN: ], 5. Mr. Satish Kumar [PAN: BDSPK2187C] and 6. Mr. Surjeet Kumar [PAN: BOLPK7786M]. Date of hearing: April 20, 2015 and May 08, 2015 Appearance: For Noticees: Mr. Sukhmander Singh, Director, Mr. Rajender Kumar, Director, Mr. Satish Kumar, Director. For SEBI: Mr. Mohd. Atif Alvi, Deputy General Manager Mr. N. Murugan, Assistant General Manager, Mr. Pradeep Kumar, Assistant General Manager, Ms. Treasa Kuriala, Assistant General Manager. 1. Securities and Exchange Board of India (hereinafter referred to as SEBI ) had, vide an interim ex-parte Order dated October 31, 2013 ( the interim order ), prima facie found that one Servehit Housing and Infrastructure India Limited (hereinafter referred to as the Company or Servehit ) is engaged in fund mobilizing activities from the public, which is in the nature of a Collective Investment Scheme (hereinafter referred to as 'CIS') as defined in Section 11AA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act ), without obtaining a certificate of registration from SEBI as required under Section 12(1B) of the SEBI Act and Regulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as the CIS Regulations ). The interim order was issued in order Page 1 of 17

2 to protect the interest of investors, safeguard the assets/ property acquired by the Company by using the funds collected from the investing public and also to prevent the Company from further carrying on with its existing fund mobilizing activities through the alleged CISs. Such Order directed Servehit Housing & Infrastructure India Limited and its directors namely Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Kumar and Mr. Surjeet Kumar (hereinafter collectively referred to as the noticees ): not to collect any more money from investors under the existing schemes; not to launch any new schemes or plans; not to dispose of or alienate any of the properties or assets owned or acquired in respect of or in pursuance of the plans or schemes or earmarked/ allotted to the investors under the plans/ schemes. not to divert any fund raised from public at large which are kept in bank account(s) and/ or in the custody of SHIIL. to immediately submit the full inventory of the assets owned by SHIIL out of the amounts collected from the 'customers'/investors under its various schemes. 2. The interim order, came into immediate effect and the noticees were advised to file their reply within a period of fifteen (15) days from the date of receipt of the interim order and also to indicate whether they wished to avail an opportunity of personal hearing in the matter. The interim order further stated that the order shall be treated as a show cause notice by the Company and its directors and they may show cause as to why appropriate directions under the SEBI Act and CIS Regulations, including directions in terms of the Regulations 65 and 73 of the CIS Regulations, should not be taken against them. 3. The interim order was forwarded to the Company and its directors vide letters dated November 07, The Company vide its letter dated December 03, 2013, while replying to the interim order submitted the copies of the sale deeds for the land purchased by it and requested for a time of 30 days for submitting the balance sheets and detail of the customers. The Company while arguing the following, undertook to comply with the restrictions imposed vide the interim order: a. The case has been built up based on the complaint done with the malafide intentions. b. The rule book/ registration letter relied upon in the interim order did not belong to the Company. c. The Company was engaged in purchase and sale of property and do not run any CIS. The Company had purchased various properties over the years. Page 2 of 17

3 4. As no details were submitted by the Company, SEBI vide its letter dated April 09, 2014, issued a reminder to it for making the submissions. In reply, the Company vide its letter dated May 01, 2014, submitted the affidavit on behalf of the Company and the directors that they have complied with the directions issued. The Company submitted the full inventory of assets owned by it out of the amounts collected from the investors as on February 28, 2014 and the details of the persons from whom money was received/ money paid and the balance due as on February 28, The Company vide this letter also submitted that the Company is having sufficient funds i.e lakhs for meeting the liability of lakhs. 5. Before proceeding further, an opportunity of personal hearing was granted to the Company and its directors on August 08, An intimation regarding the same was sent to the noticees vide letters dated July 22, Vide this intimation, the Company was also asked to deliver the letters to the noticee namely Mr. Balbir Singh Saini, as the same had returned undelivered. The Company vide its letter dated August 07, 2014, confirmed the presence for the personal hearing. On the date fixed for the personal hearing, the noticees failed to turn up inspite of confirmation. Later the Company vide its dated August 08, 2014, requested for another opportunity of personal hearing. 6. SEBI vide its dated September 18, 2014, had asked the Company to submit the copies of the registration papers of the cars and the certificate issued to the land valuer, by the concerned Government authority. The Company vide its letter dated September 19, 2014, submitted the details as asked by SEBI. Thereafter, one more opportunity of personal hearing was granted to the noticees on April 20, On the date fixed the noticees namely Mr. Sukhmander Singh and Mr. Rajender Kumar appeared for the personal hearing and made oral submissions. Mr. Sukhmander Singh appeared for the Company also and undertook to submit appropriate letter of authority. Mr. Sukhmander Singh submitted that the Company had purchased the land after collecting the funds from the customers and has not executed any sale deed in favour of the customers. It was said that the money was collected from investors and Davali office of the Company was destroyed in fire. It was also submitted that the noticee namely Mr. Balbir Singh is in custody relating to some matter. During the course of personal hearing, the noticees were asked to submit the following: Page 3 of 17

4 a. copy of all the balance sheets from the date of incorporation till b. list of the investors along with the name, address, place where the plot was allotted. c. copies of the executed registered sale deed, if any. The noticees requested for another opportunity of personal hearing. The request of the noticees was considered and another opportunity of personal hearing was granted to the noticees on May 08, The noticees were directed to submit the details as asked before May 08, Thereafter, SEBI vide respective letters all dated April 23, 2015, intimated the date of personal hearing to the noticees. Vide these letters the Company and the said noticees were also asked to submit the list of all the investors along with their name, address, place where the plot has been allotted and the amount mobilized from each customer towards the plot, copies of the executed registered sale deeds, copy of balance sheets, profit and loss statement and annual returns filed since the date of incorporation of the Company, details of the land owned by the Company and details of regulatory approval obtained by the Company. 8. On May 08, 2015, the noticees namely Mr. Sukhmander Singh and Mr. Satish Kumar appeared for the personal hearing and submitted the list of the investors who had not been repaid, income tax details and balance sheets for the years 2010, 2011, 2012 and Mr. Sukhmander Singh requested for time for submitting the balance sheets for the year ending The noticees were granted one week s time to submit the complete details, however, no details have been submitted by them. 9. I note that reasonable opportunities have already been afforded to the Company and its directors for making the submissions in the matter and that except Mr. Sukhmander Singh, Mr. Satish Kumar and Mr. Rajender Kumar, none had turned up for the personal hearing. I note that granting further opportunities will delay the proceedings and the matter may be proceeded further, on the basis of the material available on record. 10. I have considered the interim order issued in the matter and the material available on record. The main allegation as against Servehit is that the schemes/ plans operated by it were in the nature of CIS and that the Company was offering these schemes without obtaining registration from SEBI in contravention of the provisions of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations read with Section 11AA of Page 4 of 17

5 the SEBI Act. The directors of the Company were also alleged to be responsible for the illegal conduct of the business of the Company. The issue that now arises for my consideration is: Whether Servehit was operating a CIS without obtaining registration from SEBI? 11. Whether Servehit was operating a CIS without obtaining registration from SEBI? a. I note that the Company was incorporated on April 24, I have seen the documents submitted by the Company vide letter dated February 03, 2011, i.e. the sample agreement booklet and certificate. The sample agreement booklet contains the application form, agreement, special power of attorney, will, etc. It is seen that the application form is a pre-printed document asking for the name and address details of the investor, nominee details, plan details (i.e. number, area, term, consideration and expiry date), payment details, etc. The relevant portion of the same reads as under: I hereby apply for purchase of plot(s) and development and maintenance of the same under your Cash Down Payment Plans/ Instalment Payment Plans The general terms and conditions with the said application form are as under: 2. The land shall be allotted in the name of customer, in the case of Cash Down Payment Plans, after receipt of full payment within a reasonable period generally not exceeding 270 days and in the case of Installment Payment Plans, within a reasonable period generally not exceeding 90 days after the final receipt of 50% of total amount of instalments. Subject to the foregoing, the land ownership would be ordinally transferred in the name of Customer within a reasonable period after allotment. 3. In case of Instalment Payment Plans, if Customer makes a default by not paying one or more instalment(s) for a period of 12 consecutive months from the due date, such default shall be treated as Breach of Agreement. 4. If such breach occurs before allotment of plot(s), the payments received under plan before the allotment shall be refundable after the expiry of 12 months from the date of the last instalment on furnishing specific written request there for by the customer, after deducting 6.25% of total consideration comprising various costs and other incidental expenses, if any, and shall be subject to the following terms and conditions. a) In case of Servehit commits a breach of Agreement by not allotting the said property in favour of customers in the manner agreed to, Customers shall be entitled to terminate the agreement, in which event Servehit shall refund the amounts paid by the Customer together with simple 12.5% per annum from the date of agreement. b) In case, Servehit commits a breach of Agreement by not completing the development of the aforesaid property in the manner agreed to, Customer(s) shall be entitled to terminate Agreement, in which event Servehit shall refund the amountspaid by the customer(s), after deducting the cost of land, registration expenses and other incidental expenses, and the Page 5 of 17

6 balance amount, would be refunded together with simple 12.5% per annum from the date of agreement. c) It is clearly understood by the parties to the Agreement that Servehit shall not be liable to pay any cost/ expenses damage whatsoever, in any case other than those specified in Clauses (a) and (b) herein above. 5. Under Cash Down Payment Plan the Customer(s) has the facility to opt before the allotment of said property in his/ her favour. This option can be exercised by the customer(s) by submitting a specific written request to Servehit to the effect. The payment received under said plan shall be returnable immediately to Customer(s) after deducting 20% of consideration comprising various costs and other incidental expenses and shall be subject to the following terms and conditions. 6. If Customer, after duly subscribing to any plan of Servehit, fails or refuses to submit necessary document, papers, photographs/to complete the necessary formalities and execute the documents required for the purpose of effective transfer and maintenance of his/ her/ their Plot(s) by Servehit the same shall be construed as a case of opting out. In the event of such failure or refusal, shall be entitled to invoke the terms of the aforesaid Team No.5 and appropriate 205 of Consideration, Comprising various costs and incidental expenses. Servehit shall give 60 days notice to the concerned Customer for compliance, before his/ her/ their case is treated as a case of Opting out and dealt with accordingly. 9. The Customer shall be owner in possession of the said property at all times. Servehit shall enter upon the said property only for the limited purposes of rendering the services of development and maintenance of the said property per the terms of the terms of the agreement between customer and Servehit in that regard. Servehit shall have no rights whatsoever over the said property as a manager/ tenant nor shall servehit be deemed to be manger/ tenant. 10. Cost of plot includes, the Cost of land, development charges, other inputs, saplings, plants, trees, crops, planting expenses, maintenance and other miscellaneous expenses. 11. The Customer has the right to retain or sell the said property as he/she may deem fit or expiry of the tenure of this agreement.to facilitate easy, liquidity, Servehit provides to customer(s) the marketing services for the sale of developed property shall submit an application in writing atleast 180 days before the expiry of the term authorising company to see his/ her said developed property at such price as may mutually be agreed upon. This may be noted that company provides such marketing services at the end of the tenure of this agreement. The payment of such consideration amount to customers is linked with transfer if ownership of the said developed property in favour of any body(ies). corporate, unit, person(s) as the case may be. 12. Servehit shall have first charge in the said property on account of its unpaid instalments for service/ development charges and for other incidental expenses incurred by Servehit. The said property cannot, in any other manner be sold, assigned, mortgaged, pledged or alienated without obtaining No DUES CERTIFICATE, from the company in case of Instalment Payment Plan. 13. The management of Servehit reserves the right of discontinuation/ change/ amend/ modify or alter prospectively any of the rules/ regulations and plans and introduce new plans at any time at its sole discretion with or without any notice. 14. In Case of joint sale deeds, the title deeds, pertaining to the sale of the said property shall be kept in the safe custody of trustees(s) appointed by Servehit for the purpose. A certified copy of the said title deed, issued by the sub-registrar or by the public notary as may be feasible or practicable, shall be made available to the customer (First Applicant only in case of Joint Applicant) by the said Trustee(s). The name and address of Trustee(s) shall be informed to the Customer (First Applicant only in case of joint applicant) by the letter of Page 6 of 17

7 Allotment. The customer have the liberty to verify the title deeds at the office of Trustee(s) during the normal working hours on any working day, after furnishing formal written request therefor 15 days in advance. b. Another document in the set is Agreement. The relevant clauses of the same are as under: Whereas Servehit is engaged in the business of real estate and development and maintenance of agricultural land at various place. Whereas Servehit organizes the sale of agricultural land of different sizes, to prospective buyers and undertakers the development and maintnance of the same. Whereas Servehit in the process of making arrangements/ has made arrangements for purchasing/ procuring the land of various plans launched by Servehit with clear and marketable titles. And Whereas the Customers by means of an Application, which is the Basis of this Agreement and Which contains the salient terms and conditions of the various Plans, has/ have expressed his/ her/ their desire of buying the said agricultural land. And Whereas the Customers has/ have requested servehit to arrange for the sale of the agricultural land (hereinafter referred to as the SAID Property) in his/ her/ their favour, and to develop for the sale of SAID PROPERTY in favour of the CUSTOMER, and to develop and maintain the same by rendering various services as aforesaid. 1. SALE OF PLOTS The customer shall be entitled for allotment of said property, and subsequent transfer of title and possession of the same in his favour by means of registered sale deed within such period, after receipt, by Servehit, of full consideration in case of Cash Down Payment Plans/ 50% of the consideration in case of Instalment Payment Plan, as have set out in terms and conditions contained in the Application Form. Since fragmentation into smaller size of Plot(s) Lands may not be practicable, feasible or permissible under the relevant Revenue laws, the Customer shall have the requisite share alongwith other allotees/ transferees in a particular piece of land, Servehit shall execute/ procure execution and Registration of sale deeds/ deeds ensuring the title and interest of allottees/ transferees in the joint holdings with other Customers. Accordingly, symbolic possession of the plots shall be handed over all the Customer immediately after Registration of the relevant sale deed so as to enable servehit to implement this Agreement during the relevant period. in the matter contemplated hereinbelow. The right, tital, and interest of the customer to the land herein demised, shall remain inviolate, subject to the reciprocal rights and obligations of the customer herein and servehit. 3. DEVELOPMENT AND MAINTENANCE Servehit shall have the right to develop and maintain the SAID PROPERTY in consultation with Agro-Consultants and experts, and CUSTOMER shall not ordinarily interfere, with the method and mode of development and maintenance of the SAID PROPERTY, including survey demarcation fencing, clearing, cultivation, planting and raising crops, trees, plants, saplings etc. use of fertilizers and pesticides, irrigation, harvesting and all other activities allied or incidental thereto, The customer shall have the right to tender suggestions in regard to development and maintenance of the SAID PROPERTY. 4. CONSIDERATION The customer shall pay, in aggregate, sum of Rupees. only) as per payment schedule or plan opted for by him, towards Consolidation for the acquisition, sale, development and maintenance of the aforesaid property by Servehit, and for such other expenses as may be allocable, apportionable, or appropriable to the SAID PROPERTY. 5. POSSESSION The Customer shall be owner in possession of the said property at all time. Servehit shall enter upon the said property only for the limited purposes of rendering the services of development and maintenance of the said property as per the terms of the agreement between the customer and Servehit in that regard. Servehit shall have no rights whatsoever over the said property as a manager/ tenant nor shall Servehit be period of plan opted for by the CUSTOMER, However, Servehit shall have first charhe on said property on-account of its unpaid instalments for services/ development charges and Page 7 of 17

8 for other incidental expenses incurred by Servehit. The said property cannot, in any other manner be sold, assigned, mortgaged, pledged or alienated without obtaining NO DUES CERTIFICATE, from Servehit in case Instalment payment plans. 6. IRRIGATION SYSTEM Servehit shall provide such irrigation system, as if may deem appropriate, which part of the overall irrigation system of plans, depending upon the nature of soil, crop pattern of the SAID PROPERTY. 9. SALE OF PRODUCE Unless specifically directed by the Customer, Servehit shall be responsible for arranging the sale of the produce, if any out of SAID PROPERTY, on behalf of the CUSTOMER, For the purposes of arranging the sale of produce as atoresaid Servehit shall have the sole direction to decide as to whether the produce shall be sold to the wholesale market and/ or to semi-wholesale market, and/ or to one or more marketing company of servehit, or may decide to sell it to any other market which Servehit may consider appropriate for the sale of a particular grade of the produce. 10. SALE PRICE The task of sale of the produce, undertaken by Servehit, under the provision of the aforesaid clause 9, shall be subject to the condition that depending upon the grade of the produce harvested from the SAID PROPERTY, market conditions and other relevant factors, Servehit, may decide to sell produce at such price which if it may deem fit and reasonable in the circumstances prevailing at that point of time. The net sale proceeds, so obtained by Servehit from the sale of the said produce, shall be accepted as final by the customer and no dispute shall be raised in respect of the same. 11. NET SALE PROCEEDS It is agreed that during course of development of allotted/ sold plots(s) of land no saleable produces from the land under development is foreseen, the CUSTOMER shall not make any claim for any produce during the period of first six years, thus, only CUSTOMER who have opted for the plots beyond the period of six years would have the right to be credited with sale proceeds of the produce, pertaining to the period beyond six years, after deduction of the direct/ indirect harvesting, marketing, transportation costs, market taxes and levies etc. and service charges amounting to 5% of the gross proceeds. 12. CUSTOMER S OWNERHSIP OF PROPERTY The CUSTOMER shall be the absolute owner-in-possession of the said property and saplings, plants, trees, crops, thereon, and the produce out of it, as set out in clause 11. The CUSTOMER shall not have an claim over common facilities provided by Servehit, such as irrigation, pipeline, drainage systems, and electrical lines etc. which may be passing through the said property, whether overground or underground. Servehit shall ensure that the said common facilities run along the boundary of the SAID PROPERTY. 13. LAND TAX AND PUBLIC DUES Servehit shall pay the land tax and other public dues/lecies, payable in respect to the SAID PROPERTY to the appropriate authorities for and on behalf of the CUSTOMER and Servehit shall be entitled to get the same reimbursed from the CUSTOMER. 14. ACCOUNTS Servehit shall keep accounts with reference to the income and expenditure incurred/ to be incurred pertaining to the development and maintenance of the entire project sire, which includes the SAID PROPERTY. The CUSTOMER shall have to accounts, pertaining to the said project site during the normalworking hours on any working day after giving a notice of his intention to do so 15 days in advance, 15. WASTAGE Both Servehit and the CUSTOMER agree that in the process of arranging for the sale of the produce if any pursuant to the aforesaid clause 9, there eill normally be percentage of wastage at that time of harvesting, and handling before the delivery/sale. Servehit shall keep such percentage of wastage at such nominal levels as practicable and this shall be applicable to every harvest in general without any reference to the produce harvested. 21. OPTING OUT This facility is available only under cash dawn payment plans before the allotment of SAID PROPERTY favour of CUSTOMER(S). under this scheme, CUSTOMER can exercise his Page 8 of 17

9 option to opt out of plan, on his submission of specific written request to Servehit to that effect. The payments received under the said plan shall be refundable immediately to CUSTOMER after deduction 20% of consideration comprising various costs and othet incidental expenses and shall be subject to the following terms and conditions: 22. FAILURE/ REFUSAL TO COMPLETE NECESSARY FORMALITIES If CUSTOMER after duly subscribing to any plan of Servehit fails or refuses to submit necessary documents, papers, photographs/to complete the necessary formalities and execute the documentsrequired for the purposes of effective transfer and maintenance of the SAID PROPERTY by Servehit the same shall be construed as case of opting out, In the event of such failure or refusal,servehit shall be entitled to invoke the terms of the aforesaid clause 21, and appropriate 20% of consideration, comprising various costs and incidental expenses. Servehit shall give 60 days notice to the concerned CUSTOMER For compliance before his case is treated as a case of opting out and dealt with accordingly. 23. AGREEMENT PERIOD The parties to the Agreement clearly understand that all the provisions in this Agreement, pertaining to the rights and obligations of the parties subsequent of the registration of the SAID PROPERTY shall become Operative only after the actual registration of the said property and that this Agreement shall stand automatically terminated upon the expiry of the period of plan opted for by the CUSTOMER, and after such termination Servehit shall hand over possession of the said developed property to the Customer and shall have no rights whatsoever over the said property. Servehit shall remove all its machinery and equipments from the said property within 60 days after the expiry of the nature of Agreement and relinquish its temporary occupation from the SAID PROPERTY. 24. SALE OF DEVELOPED PROPERTY The CUSTOMER has the right to retain or sell the SAID PROPERTY, as he/ she may deem fit, on expiry of the tenur of this Agreements To facilitate easy liquidity, Servehit provides to Customer(S) the marketing services for sale of deceloped plots. In case the CUSTOMER decides to avail of Servehit aforesaid services, he/ she must notify Servehit to that effect at least 180 days before the expiry of period of the Agreement. The sale can be made only at the end of the tenure of this Agreement at such price which maybe mutually agreed between the parties. Customer intending to avail Servehit Marketing Service for selling/ disposing off his/ her said developed property shall submit an application in writing atleast 180 days before the expiry of the termauthorising company to sell his/ her said developed property such price as may mutually be agreed upon. This may be noted that Servehit provides such marketing services at the end of the tenure of this Agreement. 27. CUSTODY OF TITLE DEEDS In case of joint sale deeds, the title deeds pertaining to the sale of the SAID PROPERTY shall be kept in the safe custody of Trustee(s) appointed by Servehit for the purpose. A certified copy of the said title deed, issued by the sub-registrar by apublic notary, as may be feasible or practicable, shall be made available to the Customer (First Applicant only in case of applicants) by the said (Trustee(s). the nameand address of Trustee(s)shall be informed to the CUSTOMER (First Applicant only in case of joint applicants) by the letter of Allotment. The CUSTOMER shall have the liberty to verify the title deed at the office of Tustee(s) during the normal working hours on any working day after furnishing a formal written request therefor 15 days in advance. c. The next document is a Special Power of Attorney. The same is a pre-printed document containing the space for name, address. The same reads as under: I do hereby appoint my attorney to do the following acts, deeds and things in my name & on my behalf in respect of the Plot measuring sq. yds, comprised in survey no.. in respect of which a sale deed has to be executed & registered in my favour:- 1. To be present before sub-registrar or Registrar for getting sale deed in respect of above said Plot executed in my favour and getting the same registered. 2. To do all such things as may be necessary for such execution and registration. 3. To apply to the revenue authorities for the mutation of said sale Plot in my name. Page 9 of 17

10 4. To take possession of the said Plot from the vendor or his/ her nominee/ agent/ attorney in such manner as may be required in the circumstances or as may be appropriate To appoint advocate or revenue agent for pursuing the legal cases. And I hereby agree to retify all acts, deeds or assurances done or executed or made by the said attorney pursuant to the power hereby conferred in him/ her as if the same were done or made by me personally. I note that by signing the Special Power of Attorney, the customer gives his right to do various acts and deeds. d. Another document is the Registration Letter. I have perused the sample Registration Letter submitted by the Company. It is a pre-printed document containing the space for name, date of commencement, payment plan number, term, consideration/ plot size, mode of payment, expiry date of agreement, nominee details, estimated realisable value at the end of term, etc. The relevant part of the same reads as under:... In response to your application, we are pleased to inform you that you have been registered for the PLOT(s) booked by you as per details furnished hereunder. The terms of booking and allotment shall be governed by the terms of Rule Book, agreement and General Terms and Conditions printed overleaf. I note that the Registration Letter is more in the nature of a statement, recording the investment made by the customer and the appreciated value available (estimated realisable value) at the end of the term. It is also seen that the Registration Letter refers to the rule book, however, the Company has not submitted a sample of it. e. From the discussion above, it is observed that Servehit was inviting applications from the customers for the purchase of plot and development/ maintenance of the same. Servehit had various plans broadly classified as cash down payment plans and installment payment plans. Under the cash down payment plan, the land had to be allotted to the customers within a reasonable period generally not exceeding 270 days after receipt of full payment by the Company. Under the installment payment plan, the land had to be allotted within a period not exceeding 90 days after the final receipt of 50% of total amount of instalments by the Company. I also note the following: i. As per the agreement, the Company was in process of making arrangement for purchasing/ procuring the land of various plans. Page 10 of 17

11 ii. Development was an integral part of the plan/ scheme of the Company. A customer cannot enter into an agreement with the Company unless he gives the development rights to it. iii. The land is possessed by the Company till the expiry of the plan/ scheme. The customer is said to be the owner of the plot after execution of the sale deed, however, no sale deed has been placed on record to show that the Company had executed sale deeds. iv. Customer does not get any claim over the common facilities provided by the Company. The sale of produce along with wastage is retained by the Company. v. The Company had provision for joint sale deed and it had provided the marketing services for the sale of developed plots to its investors. vi. Servehit had reserved its right to discontinue/ change/ amend/ modify/ alter prospectively the rules/ regulations and plans. vii. The Company had extended the facility of 'opting out' only to the customers under the cash down payment plan. viii. The sample Special Power of Attorney as submitted by the Company suggests that all the acts and deeds relating to the transaction are taken care by the Company, itself. ix. The Company promises estimated realisable value at the end of term. From the above, it can be inferred that the transactions of the Company were more in the nature of investment scheme. The Company in its submissions has admitted of receiving 1.54 Crore from the investors. f. Having considered the above, now I proceed to deal with the charge levelled against the Company that it is operating CIS without obtaining registration from SEBI. Let me now, proceed to test the characteristics of the impugned schemes/ plans floated and carried on by the Company against the four conditions under Section 11AA(2) of the SEBI Act. i. The first condition is that the contributions, or payments made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement. The Company had invited the investors to subscribe to one of the plans offered for the purchase of land. The customers/ investors by way of an application apply for the purchase of land. The Company takes the contribution/ investments of the customers in accordance with its plans/ schemes for the purchase of land/ plot. Page 11 of 17

12 It is noted that at the stage of application form and agreement, the Company do not identify the land to be sold to the customer. The 'agreement' only states that the Company has made arrangements for purchasing/ procuring the land', the same suggests that Servehit on the date of agreement only makes arrangements for procuring the land. The registration letter also does not identify the land. It only provides for the size of the plot and the estimated realisable value at the end of term of the land/ plot which had to be allotted. As per the available records, the Company had promised to allot the land to the customers under the cash down payment plan within a period generally not exceeding 270 days after the receipt of full payment by the Company. As regards, the installment payment plan, the land had to be allotted within a period of 90 days after the final receipt of 50% of total amount of instalments by the Company. These facts suggest that the Company pools the investment made by the customers, with an aim/ object of carrying out the overall scheme/ plan. These are sufficient to find that the 'contributions, or payments made by the investors, are pooled and utilised by Servehit for the purposes of the scheme or arrangement', the scheme being to accept contributions/ payments in the name of sale of land. Thus, satisfying the first condition as stipulated in Section 11AA(2)(i) of the SEBI Act. ii. iii. The second condition is that the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement. The sample registration letter as submitted by the Company provides for the estimated realisable value at the end of terms on the investment made. The same shows that the investment/ contributions were made with a view to earn profits. The same makes it clear that the customers/ investors had made the contribution/ payment to the Company with a view to receive the profits/ income/ property/ return on their investments that may accrue to them as applicable, thus attracting the second condition as stipulated in Section 11AA(2)(ii) of the SEBI Act. The third condition is that the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors. The fourth condition is that the investors do not have day to day control over the management and operation of the scheme or arrangement. I note that the Company retains the right to develop and Page 12 of 17

13 maintain the land/ plot. The irrigation systems, sale of produce, wastage, etc. are taken care of by the Company. The same suggests that the customer/ investor does not manage his investment in the plan/ scheme rather his investments were managed and utilized by the Company and the contribution, investment and property, if any, pertaining to the schemes/ plans were managed by the Company. The Company by its reply to the interim order had submitted that the customer may not have day to day control over the development activities of the land. As earlier stated the land remains in the possession of Servehit. As per the agreement, only symbolic possession of the plots shall be handed over to the customers after the sale deed. In view of the same, the customer/ investor did not have any day to day control over the management and operation on the land/ plot. Further, the day to day control over the management and operations of such plans were also looked after by the Company and its directors. I note that the Company has not submitted even a single sale deed. Thus, the scheme of the Company also satisfies the third and fourth conditions under Section 11AA (2) of the SEBI Act. g. As all the four conditions specified under section 11AA(2) of the SEBI Act are satisfied in this case, the schemes/ plans promoted, launched, carried on and operated by the Company are in the nature of CIS in terms of section 11AA(1). In this regard, I place my reliance on the observations of the Hon'ble Supreme Court, made in the matter of PGF Limited & Ors. Vs. Union of India & Anrs. (Civil Appeal No of 2004): as per the agreement between the customer and the PGF Limited, it is the responsibility of the PGF Limited to carry out the developmental activity in the land and thereby the PGF Limited undertook to manage the scheme/arrangement on behalf of the customers. Having regard to the location of the lands sold in units to the customers, which are located in different states while the customers are stated to be from different parts of the country it is well-neigh possible for the customers to have day to day control over the management and operation of the scheme/arrangement. In these circumstances, the conclusion of the Division Bench in holding that the nature of activity of the PGF Limited under the guise of sale and development of agricultural land did fall under the definition of collective investment scheme under Section 2(ba) read along with Section 11AA of the SEBI Act was perfectly justified and hence, we do not find any flaw in the said conclusion therefore, hold that Section 11AA of the SEBI Act is constitutionally valid. We also hold that the activity of the sale and development of agricultural land squarely falls within the definition of collective investment scheme under Section 2(ba) read along with Section 11AA (ii) of the SEBI Act Section 12(1B) of the SEBI Act mandates that no person, shall sponsor or cause to be sponsored or carry on or caused to be carried on any CIS unless it obtains a certificate of Page 13 of 17

14 registration from SEBI in accordance with the CIS Regulations. The Company has clearly failed to do so. Regulation 3 of the CIS Regulations provides that no person other than a Collective Investment Management Company which has obtained a certificate under the said regulations shall carry on or sponsor or launch a 'CIS'. A person can launch or sponsor or cause to sponsor a CIS only if it is registered with SEBI as a Collective Investment Management Company. Therefore, the launching/ floating/ sponsoring/ causing to sponsor any 'collective investment scheme' by any 'person' without obtaining the certificate of registration in terms of the provisions of the CIS Regulations is in contravention of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations. 13. Further, in terms of Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and includes illegal mobilization of funds by sponsoring or causing to be sponsored or carrying on or causing to be carried on any CIS by any person. This provision in the above Regulations has been brought into effect from September 06, Accordingly, it could be held that by mobilizing public funds through CIS without obtaining registration from SEBI as required under Section 12(1B) of the SEBI Act read with Regulation 3 of the CIS Regulations, the Company and its directors have contravened the above said provision. 14. I note that the interim order was issued against the Company and its directors namely Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Kumar and Mr. Surjeet Kumar. All these persons except Mr. Rajender Kumar and Mr. Satish Kumar continue to be the directors of the Company and are responsible for carrying on the unregistered CIS activities. The noticee namely Mr. Rajender Kumar during the course of personal hearing on April 20, 2015, had submitted that he had resigned from the Company. I have seen the relevant Form 32 and note the date of resignation of Mr. Rajender Kumar as August 01, From the available details, it is also noted that the noticee namely Mr. Satish Kumar had resigned from the Company on March 20, I note that the resignations of Mr. Rajender Kumar and Mr. Satish Kumar does not absolve these from the charges levelled in the interim order, in the light of the incorporation of the Company on September 24, 2009 and the period during which these were the directors of the Company. Therefore, I have no hesitation in holding that Servehit and its directors namely Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Kumar and Mr. Surjeet Kumar were engaged in the illegal fund mobilising activity by Page 14 of 17

15 floating/ sponsoring/ launching, unregistered/ unauthorised CIS, as defined in the Section 11AA of the SEBI Act. In view of the above findings and observations made in this Order and the violations committed by the Company, it becomes necessary for SEBI to issue appropriate directions in order to protect the interest of investors and also to secure the interest of the securities market. 15. In view of the observations made in this Order, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 and Sections 11(1), 11B and 11(4) thereof and Regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999, hereby issue the following directions: a. Servehit Housing and Infrastructure India Limited [PAN: AANCS0417R] and its directors, namley Mr. Sukhmander Singh [PAN: BUZPS4365J], Mr. Rajender Kumar [PAN: BCIPK4911M], Mr. Balbir Singh Saini [DIN: ], Mr. Satish Kumar [PAN: BDSPK2187C] and Mr. Surjeet Kumar [PAN: BOLPK7786M] shall abstain from collecting any money from the investors or launch or carry out any Collective Investment Schemes including the scheme which have been identified as a Collective Investment Scheme in this Order. b. Servehit Housing and Infrastructure India Limited and its directors, namley Mr. Sukhmander Singh, Mr. Balbir Singh Saini and Mr. Surjeet Kumar shall wind up the existing Collective Investment Schemes and refund the money collected by the said company under the schemes with returns which are due to its investors as per the terms of offer within a period of three months from the date of this Order and thereafter within a period of fifteen days, submit a winding up and repayment report to SEBI in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999, including the trail of funds claimed to be refunded, bank account statements indicating refund to the investors and receipt from the investors acknowledging such refunds. c. Servehit Housing and Infrastructure India Limited and its directors, namley Mr. Sukhmander Singh, Mr. Balbir Singh Saini, and Mr. Surjeet Kumar shall not alienate or dispose off or sell any of the assets of Servehit Housing and Infrastructure India Limited except for the purpose of making refunds to its investors as directed above. d. Servehit Housing and Infrastructure India Limited and its directors, namley Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Page 15 of 17

16 Kumar and Mr. Surjeet Kumar are directed to provide a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/ securities, if held in physical form. e. Servehit Housing and Infrastructure India Limited and its directors, namley Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Kumar and Mr. Surjeet Kumar are restrained from accessing the securities market and are prohibited from buying, selling or otherwise dealing in securities market for a period of four (4) years. f. In the event of failure by Servehit Housing and Infrastructure India Limited and its directors, namley Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Kumar and Mr. Surjeet Kumar to comply with the above directions, the following actions shall follow: - Servehit Housing and Infrastructure India Limited and its directors, namley Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Kumar and Mr. Surjeet Kumar shall remain restrained from accessing the securities market and would further be prohibited from buying, selling or otherwise dealing in securities, even after the period of four (4) years of restraint imposed in paragraph 15(e) above, till all the Collective Investment Schemes of Servehit Housing and Infrastructure India Limited are wound up and all the monies mobilized through such schemes are refunded to its investors with returns which are due to them. - SEBI would make a reference to the State Government/ Local Police to register a civil/ criminal case against Servehit Housing and Infrastructure India Limited, its promoters, directors and its managers/ persons in-charge of the business and its schemes, for offences of fraud, cheating, criminal breach of trust and misappropriation of public funds; and - SEBI would make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the company, Servehit Housing and Infrastructure India Limited. - SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and regulations framed thereunder. 16. This order shall come into force with immediate effect. Page 16 of 17

17 17. This Order shall be without prejudice to the right of SEBI to initiate prosecution proceedings under Section 24 and adjudication proceedings under Chapter VIA of the Securities and Exchange Board of India Act, 1992 against Servehit Housing and Infrastructure India Limited and its directors, namley Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Kumar and Mr. Surjeet Kumar, including other persons who are in default, for the violations as found in this Order. 18. With respect to the contravention of Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, SEBI may examine whether to initiate appropriate proceedings under Sections 11(4) and 11B of the SEBI Act read with Regulation 65(e) of the CIS Regulations and Chapter VI A of the SEBI Act against Servehit Housing and Infrastructure India Limited and its directors, namley Mr. Sukhmander Singh, Mr. Rajender Kumar, Mr. Balbir Singh Saini, Mr. Satish Kumar and Mr. Surjeet Kumar. 19. Copy of this Order shall be forwarded to the stock exchanges and depositories for necessary action. Date: November 4 th, 2015 Place: Mumbai PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Page 17 of 17