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

Transcription

1 WTM/PS/159/IMD-CIS/WRO-ILO/FEB/2016 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 Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 In respect of 1. Skylark Land Developers & Infrastructure India Ltd. (CIN: U70100MP2010PLC023689; PAN: AAOCS3538A) and its Directors, 2. Mr. Dilip Kumar Jain (DIN: ; PAN: AEUPJ2034B), 3. Mr. Ram Shankar Yadav (DIN: ; PAN: AAUPY1604L), 4. Mr. Durga Prasad Yadav (DIN: ; PAN:ABAPY8539M), 5. Mr. Jaihind Kumar (DIN: ; PAN: ALAPK2141F), 6. Mr. Anand Kumar Gupta (DIN: ; PAN: AOKPG3680A) and 7. Mr. Santosh Kumar Pandey (DIN: ; PAN: ALZPP4993M) Date of personal hearing: August 21, 2015 Appearance For noticees: Mr. P.M. Mahapatra, Chartered Accountant and Mr. Subodh K. Gupta, Advocate appeared on behalf of the Company, Dilip Jain, Jaihind Kumar, Durga Prasad Yadav and Rama Shankar Yadav. For SEBI : Mr. Piyoosh Gupta, Regional Director, WRO-II, Dr. Deepali Dixit, Assistant General Manager, Mr. T. Vinay Rajneesh, Assistant General manager and Mr. Piyushkumar Mahajan, Manager. Date of personal hearing: August 21, 2015 Appearance For noticees: Mr. P.M. Mahapatra, Chartered Accountant and Mr. Subodh K. Gupta, Advocate appeared on behalf of the Company, Dilip Jain, Jaihind Kumar, Durga Prasad Yadav and Rama Shankar Yadav. For SEBI: Dr. Anitha Anoop, General Manager, Dr. Deepali Dixit, Assistant General Manager and Mr. T. Vinay Rajneesh, Assistant General Manager. 1. Securities and Exchange Board of India ( SEBI ), vide an interim ex-parte Order dated December 15, 2014 ( the interim order ), prima facie observed that the company, Skylark Land Developers and Infrastructure India Limited ( the Company or Skylark ) had launched Page 1 of 26

2 Collective Investment Schemes ( CISs ) without obtaining certificate of registration for carrying on such activity from SEBI as required under section 12(1B) of the SEBI Act, 1992 and regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1999 ( CIS Regulation ). The interim order had also alleged that illegal mobilization of funds from the public through such unauthorized CISs amounted to a fraudulent practice in terms of regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practice Relating to Securities Market) Regulations, 2003 ( the PFUTP Regulations ). In order to protect the investors, prevent the Company from further carrying on such unregistered CIS activity, to safeguard the assets acquired by the Company from public funds and also in view of the non-cooperation of the Company in furnishing information/documents as sought by SEBI during enquiry, the following directions were issued: 19. In view of the above, I, in exercise of the powers conferred upon me under Section 11(1), 11(4) and 11B of the SEBI Act, 1992 and Regulation 65 of CIS Regulations, hereby direct Skylark Land Developers and Infrastructure India Ltd. (PAN: AAOCS3538A )and its Directors, viz. Mr. Dilip Kumar Jain (PAN: AEUPJ2034B), Mr. Ram Shankar Yadav (PAN: AAUPY1604L), Mr. Durga Prasad Yadav (ABAPY8539M), Mr. Jaihind Kumar (PAN: ALAPK2141F), Mr. Anand Kumar Gupta (PAN: AOKPG3680A) and Mr. Santosh Kumar Pandey (PAN: ALZPP4993M): a. not to collect any fresh moneys from investors from its existing scheme; b. not to launch any new scheme/plan or float any new companies/firm to raise fresh moneys; c. not to dispose of any of the properties or alienate the assets of the existing scheme; d. not to divert any funds raised from public at large, kept in bank account(s) and/or in the custody of the company; e. to immediately submit the full inventory of the assets owned by Skylark Developers out of the amounts collected from the "customers"/investors under its existing schemes; f. to furnish all the information sought by SEBI( vide letter dated November 22, 2012), within 15 days of the receipt of this Order, including, i. scheme wise list of investors and their contact numbers and addresses, ii. the details of amount mobilized and refunded till date, iii. Sample copies of all the documents pertaining to scheme including the documents/agreements/ contracts executed with the "customers"/investors. 20. The above directions shall take effect immediately and shall be in force until further orders. Page 2 of 26

3 2. The interim order afforded opportunity to the Company and its directors Mr. Dilip Kumar Jain, Mr. Ram Shankar Yadav, Mr. Durga Prasad Yadav, Mr. Jaihind Kumar, Mr. Anand Kumar Gupta and Mr. Santosh Kumar Pandey (collectively referred to as noticees ) to file their submissions and also advised them to avail opportunity of personal hearing if they desired. 3. Copies of the interim order were forwarded to the noticees vide SEBI letter dated December 16, Reply dated January 16, 2015 (received on January 21, 2015) was received from Company, wherein the following were stated: a. The collection of money under the schemes by the company has been completely stopped before 10 days, prior to the receipt of this order. b. We further confirm that we have given effect to all the restrictions and directions issued under the impugned order and shall arrange to submit all the relevant information sought for by 7 th February c. Currently we are not mobilizing any fresh fund from investors through existing schemes or launching any new scheme/plan to raise fresh funds. 4. The Company filed its further reply vide letter dated February 12, 2015 (received on February 19, 2015) wherein it sought three weeks to submit information sought by SEBI through various communication and also submitted soft copy of the bank statement upto December 2014, Buyback/Refund sheet upto 31 st March 2013 and List of amount received against sale/allotment of land (year wise upto ). Finaicial Year Sales/Allotment of Land to Sales Return/Buy Back to Customers Customers Number of Amount Raised Number of Amount Transactions (Rs.) transactions Refunded (Rs.) ,96,65, ,28,85, ,05, ,22,65, ,32,770 Total ,48,15, ,37,770 * These collection figures are also in variance with the data given in balance sheets of the company as detailed in interim order. Page 3 of 26

4 5. The Company, vide letter dated April 13, 2015 sought personal hearing in the matter. Accordingly, in compliance with the principles of natural justice, an opportunity of personal hearing was afforded to the noticees on July 10, The schedule of this personal hearing was informed to the noticees vide SEBI letters dated May 27 and 28, In response, notice, Mr. Anand Kumar Gupta, vide his letter dated June 03, 2015, inter alia submitted as follows: (a) He was appointed as director in the Company during its inception after being convinced with the idea of the Company s Chairman to build this company in the field of housing and construction. (b) As he was not satisfied with the management, he had resigned on June 27, Since then he was neither connected with the Company nor did the Company provide him any information regarding its functioning. (c) He had not performed any role as a director during the tenure with the Company or afterwards. (d) He was relieved from the Company long before the passing of the interim order and has no access to the records of the Company. (e) This noticee therefore requested that his name be removed from the matter and assured that he would assist SEBI. 6. As there was no confirmation from the other noticees, SEBI made a public notice dated June 30, 2015 in newspapers (Time of India, New Delhi (English) and in Hindi in Economic Times, Nav Bharat, Dainik Bhaskar, Madhya Pradesh and Chhattisgarh editions) regarding the instant proceedings and the personal hearing scheduled on July 10, Vide dated July 07, 2015, noticee, Mr. Santosh Kumar Pandey made the following submissions: (a) He was a former director in the Company. (b) The Company came into existence on June 02, 2010 and that he became its director on August 02, 2010 when the Company s schemes were in existence. (c) He never participated in any meetings of the board of directors and due to certain personal constraints and unavoidable reasons, he had resigned from such position by submitting his Page 4 of 26

5 resignation letter dated October 07, 2011 to the board of directors. His resignation was accepted on November 12, 2011 and a letter dated November 12, 2011 was sent to him. (d) In the said letter, the Company had stated that there was no litigation/claim in any and that the other directors shall be solely responsible for any action. The noticee was also informed that Form-32 would be filed in three days with MCA. (e) The noticee did not have any knowledge about the work and conduct of the Company or any paper related to the Company. (f) The noticee is seriously ill and cannot appear in the hearing fixed on July 10, 2015 and requested SEBI to accept these submissions. He also stated that if any further information was needed, the same may be informed. (g) The noticee requested that the proceedings be withdrawn and if such objections are not satisfying, he would appear on the next day of hearing. 7. On July 10, 2015 (the date of personal hearing), Mr. P. M. Mahapatra, Chartered Accountant and Mr. Subodh K. Gupta, Advocate appeared on behalf of the Company, Dilip Jain, Jaihind Kumar, Durga Prasad Yadav and Rama Shankar Yadav. The representatives stated that the noticees engaged them on short notice and requested for further time for making submissions. The request was allowed. As the hearing was pursuant to the newspaper notice, the representatives were directed to provide complete address, contact telephone numbers, addresses of the above noticees. Noticee, Mr. Anand Kumar Gupta did not appear. 8. Another opportunity of personal hearing was afforded to the noticees - Company, Dilip Jain, Jaihind Kumar, Durga Prasad Yadav, Rama Shankar Yadav and Santosh Kumar Pandey on August 21, This schedule was informed to the noticees vide and SEBI letters dated July 16, Thereafter, Mr. Santosh Kumar Pandey, vide dated August 19, 2015, reiterated his earlier submissions and informed that he would not be able to attend the hearing on account of his wife s illness. A medical certificate was enclosed. He stated that another hearing may be fixed if necessary. As sufficient opportunities were afforded to this noticee and he has already filed his submissions along with documents and reiterated the same, I consider that further hearing may not be necessary. 9. On August 21, 2015, the date of further hearing, Mr. P. M. Mahapatra, Chartered Accountant and Mr. Subodh K. Gupta, Advocate appeared on behalf of the Company, Dilip Jain, Jaihind Kumar, Page 5 of 26

6 Durga Prasad Yadav and Rama Shankar Yadav. They submitted the Audited Financial Statement for the year ended March 2014 and Provisional Financial Statement for the year ended March The representatives made a request for copies of documents relied on in the matter. On informing that the documents relied upon were the same as furnished by the Company itself to SEBI, the representatives did not press this request. They requested for time of 3 weeks for filing written submissions and documents, if any. The request was allowed and the personal hearing was concluded. 10. Subsequently, the learned advocate representing the 5 noticees made a request for documents. In view of the repeated requests, copies of documents were forwarded vide SEBI letter dated November 04, 2015 to the learned advocate and was advised to furnish written submissions within a period of 15 days from the date of receipt of such documents. 11. The Company, vide letter dated September 30, 2015 (received in SEBI on October 12, 2015) inter alia submitted that it does not intend to cheat or defraud its investors and requested SEBI to permit it to repay the investors after selling lands/assets. No submissions were made on the merits of the matter for which liberty was sought in the personal hearing held on August 21, The allegations/observations made in the interim order were also not denied. In the said letter, the following were mentioned: Total no. of customers 20,789 Total collection upto crore Total land allotted crore Total refund/buyback crore Total liability 9.39 crore Total assets (lands, liquid assets, advances and assets with directors) available with Company crore 12. I have considered the interim order, the replies/submissions made by the concerned noticees and other material available on record. The allegation against the Company is that it had violated section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations by launching and carrying out CIS without registration from SEBI and that such activity was fraudulent in terms of regulation 4(2)(t) of the PFUTP Regulations. As mentioned above, the Company did not dispute any of the findings made in the interim order. It merely sought permission to repay the investors and represented that it has property/assets to repay the outstanding amounts due to investors. The Company has not Page 6 of 26

7 produced any proof regarding its claim of allotting lands (worth Rs.10 crore) or repaying Rs crore. At this stage, such claims cannot therefore be accepted. 13. I also note that the Company and its directors have not co-operated with SEBI during the investigations/enquiry that was carried out into the business activities of the Company. Important information as sought by SEBI, vide various letters including letter dated November 22, 2012 have not been furnished. In view of the same, SEBI was constrained to consider the following information/records furnished by the Auditors of the Company: a) Details of Skylark Developers and its Directors/Promoters, b) Certified copies (certified by Skylark Developers) of Memorandum and Articles of Association (MoA and AoA), c) Details of the places where the company has taken the premises on rent during financial , d) Certified copy of the Booklet/ "Application Form cum Agreement", e) Copies of "Registration Certificate" dated September 13, 2010 and "Allotment Letter" dated July 01, 2011 issued by the company to a customer, f) Certified copy of application cum agreement, g) Sample pamphlet and brochure of the company, h) Sample "Application cum Specimen Signature Card" of the field associates, i) Sample "Registration Certificate", j) Sample receipts issued by the company, k) Details of bank accounts of the company, l) Copy of cash balance certificate from the management as on March 31, 2011, 2012 and 2013, m) Copies of audited balance sheets as on March 31, 2011, 2012 and 2013, n) Details of land purchased during the account year , and along with the copy of land purchase documents. 14. I also note that the inquiry in the matter was pursuant to the Order dated July 13, 2012 passed by the Hon ble High Court of Madhya Pradesh (Gwalior Bench), in the matter of Dharmvir Singh and Anr. Vs. Union of India & Ors. [Writ petition No of 2010 (PIL)]. From the said Order, it is noted that the Hon ble High Court had directed the CBI to conduct enquiry with respect to the activities of various companies including Skylark. CBI had submitted Status Report to the Hon ble Court and Page 7 of 26

8 the observations of CBI made in respect of Skylark were mentioned in the Order of the Hon ble High Court. The interim order had referred to the same. As per the Order of the Hon ble High Court, the important findings/observations of the CBI in respect of Skylark Developers were as under: (i) The company came into existence on 2nd June 2010 and has its operations all India with offices at Gwalior, Delhi, Allahabad, Jaunpur, Pratapgarh, Banaras, Agra, Bhiwara, Surat and Vadodra. (ii) As per the company, the applicant/customer who is interested in purchase of a piece of plot from the company is required to fill up an application form in which the payment plan, area of land to be purchased and the payment period has to be reflected by the customer, besides giving his other details. Thereafter the agreement, available on the application itself, is executed between both the parties where the terms and conditions for purchasing the plot and breaches are also mentioned. After the execution, a registration certificate, which contains the details of the payment plan, size of the plot, mode of payment etc. is issued to the customer. The description of the land i.e. the location where the land will be allotted to the customer is not given/told to the customer till the stage of agreement. Once full payment (in case of cash down payment plan) or sixty percent of it (in the case of instalment plan) is received as per the plan, the available land with the company at that time is allotted to the customer within 365 days or 90 days of the date of payment, respectively. The allotment letter is thereafter issued which contains the exact details of land viz Khasra no, place and area etc. After the issuance of the allotment letter the sale deeds are registered in the name of the customer as per the payment plan within reasonable period. (iii) It was also stated that the company is presently having approximately 59 Bighas of land in and around Gwalior. The company had undertaken an agreement for another 90 Bighas of land at Gwalior district but since the company s office at Gwalior was sealed on 5th May 2011, the sale deeds of the same could not be executed. (iv) During enquiry, a complainant who had filed the refund claim against the company with District Collector was examined. He submitted that he had taken an RD on installment with the company and he was only informed that the plan was a simple investment plan and Page 8 of 26

9 that on completion of the plan, he will be getting the agreed upon amount as mentioned in the certificate issued by the company. (v) The genuinity of the sale deed in respect of the land owned by the company was verified from District Collector, Gwalior and it was found that the said land is in possession of the company but is underdeveloped. (vi) It was found that the company has its branches at 9 places viz. Gwalior, Gorakhpur, Varanasi, Jaunpur, Bhind, Mirjapur, Bhadoi, Sabalghar and Allahabad. The details of the customers, the plans under which the customers were issued certificates and the land issued to them could not be ascertained. The business report seized, revealed the collections at Gwalior from to , at Gorakhpur from to , at Varanasi from to , at Jaunpur from to , at Bhind from to , at Mirjapur from to , at Bhadoi from to , at Allahabad from to and Sabalgarh from to This means that the offices (Customer Service Centre) at all these places had started in either second half of 2010 or in The company has come into existence in June 2010 only and was sealed in May 2011 and was having 59 Bighas of land in its name before the initiation of its first agreement. (vii) As the duration of the operations of the company is less than a year (minimum period after which the company issues the allotment letters, it is not possible to say conclusively that whether the company would have allotted/transferred the land in the name of investors within the prescribed period or otherwise. 15. A copy of the C.D. provided by the Software service provider of the Company to SEBI containing investor data in tabular format (i.e. Name of investor, address, State, Scheme, Tenure, Installment amount, maturity amount, refund etc.) was also sent to company on April 20, 2015 and the same was also handed over to company during the personal hearing on July 10,2015. In response, the Company vide its reply dated August 20, 2015 has merely stated that the data in the CD is improper and vexatious information was used against it. It also stated that information could not be verified as the Police had seized all the data of the Company and requested SEBI to help the Company in Page 9 of 26

10 obtaining the seized data. In this regard, I note that the records/information were forwarded by none other than the Auditor of the Company. The Company has not disputed such documents. Considering the facts and circumstances of the case, the material furnished by the Company s Auditor, the CBI Report, I am unable to consider the request of the Company at this stage as it will only prolong the proceedings. 16. The Company is alleged of launching and carrying on collective investment schemes without obtaining from registration from SEBI. To categorize a scheme / plan as a collective investment scheme, the provisions of section 11AA of the SEBI Act, 1992 has to be satisfied. The provision is reproduced below: Collective investment scheme. 11AA. (1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) or subsection (2A) shall be a collective investment scheme: Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under sub-section (3), involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme. (2) Any scheme or arrangement made or offered by any person under which, (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement; (ii) 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; (iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; (iv) the investors do not have day-to-day control over the management and operation of the scheme or arrangement (2A) Any scheme or arrangement made or offered by any person satisfying the conditions as may be specified in accordance with the regulations made under this Act. (3) Notwithstanding anything contained in sub-section (2) or sub-section (2A), any scheme or arrangement (i) made or offered by a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912) or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State; Page 10 of 26

11 (ii) under which deposits are accepted by non-banking financial companies as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (iii) being a contract of insurance to which the Insurance Act, 1938 (4 of 1938), applies; (iv) providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952); (v) under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956); (vi) under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society under section 620A of the Companies Act, 1956 (1 of 1956); (vii) falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund Act, 1982 (40 of 1982); (viii) under which contributions made are in the nature of subscription to a mutual fund; (ix) such other scheme or arrangement which the Central Government may, in consultation with the Board, notify,] shall not be a collective investment scheme. 17. Regarding the alleged violations, I observe the following: (a) As per the memorandum of association, the main object of the company is to engage itself as real estate promoters, developers and project management association. The company vide its letter dated August 13, 2013 to the auditors have stated that The company is engaged in the business of purchase and sale of agriculture land and its development. The company acquires agriculture land from villagers either directly in their name or by taking possession of the agriculture land after entering into agreement with the villagers for purchase of agriculture land on paying the full amount of consideration to the seller and also getting an irrevocable power of attorney in favour of the representative of the company. (b) In furtherance of its business activity, the Company has circulated brochures/pamphlets. From the Brochure, the following is noticed: (i) Skylark Developers is engaged in the business of purchase/sale, development and maintenance of agricultural land. Skylark Developers collects money from the public through its various payment plans for the scheme of "purchase/sale, development and maintenance of agricultural land", The plans are broadly divided into, Regular Installment Plan (Plan No. 101 to 107 -period ranging between 3 to 15 years) and, Cash Down payment plan (Plan No. 51to 59 -period ranging between 2 to 15 years) Page 11 of 26

12 Unit A sample of these plans are given below:- Consideration Value Plan months (3 years) Instalments MLY. QLY. HLY. YLY. Estimated Realizable Value Unit Plan 52-36months (3years) Consideration Value Estimated Realizable Value (c) The application form and agreement to be submitted by the customer/investor with the Company is in the form of a booklet, which contains basic details of the applicant (like name, address etc.), plan details (giving plan number, number of land units, terms of plan, total consideration, lumpsum/regular installment plan, mode of payment), expected realizable value, application charges, expiry date of agreement), payment details etc. (d) Agreement : The Booklet contains the Agreement to be executed between the Company and its customer. Certain clauses which are relevant are reproduced below: "WHERE AS SKYLARK is engaged in the business of real estate and Development and maintenance or agriculture land and undeveloped land at various places. Page 12 of 26

13 WHERE AS SKYLARK organizes the sale of agricultural land of different sizes, to prospective buyers and undertakes the development and maintenance of the same. WHERE AS SKYLARK is in the process of making arrangement s/has made arrangements for purchasing /procuring the land, forming part of various plans launched by SKYLARK with clear and marketable titles. AND WHEREAS THE CUSTOMER has /have requested SKYLARK to arrange for the sale of the said agricultural land /undeveloped land (hereinafter referred as the said property) in his/her/their favour and to develop and maintain the same by rendering various services in accordance with the said plan. SALE OF LAND UNITS The customer shall be entitled for allotment of the said property and subsequent transfer of title and possession of the same in his favour by means of a registered sale deed within such period, after receipt by Skylark, of full consideration in case of Cash Down Payment Plans/60% of the consideration in case of installment payment plans,... Skylark shall have the right to develop and maintain the said property in consultation with experts, and customer shall not ordinarily interfere, with the method and mode of development and maintenance of the said property... The customer shall pay in aggregate sum of Rs ( Rupees only) as per payment schedule of Plan opted for by him towards Consideration for the acquisition sale development and maintenance of the aforesaid property of Skylark and for such allied expenses as my be allocable apportion able or appropriable to the said property.... The said property cannot, in any other manner be sold, assigned, mortgaged pledged or alienated without obtaining NO DUES CERTIFICATE from Skylark......To facilitate easy liquidity Skylark provides to customers marketing services for sale of the developed plots... The title deeds pertaining to the sale of this property shall be kept in the safe custody of the trustee (s) appointed by Skylark... The name and address of the trustee (s) shall be informed to the CUSTOMER by the letter of allotment. The CUSTOMER shall have the liberty to verify the title deed at the office of trustee (s) during the normal working hours on any working day, after furnishing a formal written request within 15 days in advance." Page 13 of 26

14 (e) From the copy of the Application Form dated August 30, 2011, executed by the Company with a customer, it is observed that - The investor had opted for 1000 land units for a total consideration of `1,00,000/-. The plan opted was for three years with a monthly payment of `2800/-. The "expected realizable value" after the term period was mentioned as `1,25,500/-. The location of the plot was not at all mentioned in "Application Form cum Agreement". (f) After execution of the Agreement, the Company issues a "Registration Certificate" to the customer/investor containing the following information: Details of the customer name/address and other details, Registration No. and date of commencement and Plan No. and term, Acknowledgment of receipt of the payment (lumpsum or installment) as per the plan opted by the customers/investors. Land unit(s) consideration, Periodicity and Mode of payment, Details of "Assured realizable Value" at the end of term and Date of Realizable value at the end of term, Amount of installment, Date of last installment, Installment due date. It is seen that the customer is promised an assured value and a realizable value, while recording the payments made by him under the scheme operated by the Company. (g) The Company also issues Allotment Letter. The relevant clauses of such document are as under:. SKYLARK LAND DEVELOPERS & INFRASTRUCTURE INDIA LIMITED reserves the right to change the location of this allotment, and allot you alternate site at the other place. Page 14 of 26

15 The allotment and the subsequent conveyance of the land unit (s) to you shall be only in conformity with the terms and conditions of application and agreement executed by you. A sum of Rs... (Rupees only) by you to SKYLARK LAND DEVELOPERS & INFRASTRUCTURE INDIA LIMITED under cash down payment plan no. has been appropriated by SKYLARK LAND DEVELOPERS & INFRASTRUCTURE INDIA LIMITED towards the cost which are to be met for procuring the said property and conveying to you developing the same planting the required saplings plants trees crops etc. and other ancillary expenses incidental thereto. The sale deed in respect of land units(s) allotted to you, shall be executed and registered shortly. Where, however, transfer of such land units of land is prohibited by law or otherwise not possible /feasible practicable. SKYLARK LAND DEVELOPERS & INFRASTRUCTURE INDIA LIMITED arrange for transfer of title of the said land unit(s) in favour of the customer in joint holding with other like customer. SKYLARK LAND DEVELOPERS & INFRASTRUCTURE INDIA LIMITED shall execute /procure execution of joint sale deed in favour of the said customers (including the customer) conveying the proportionate area of land unit(s) to them. Where the title of land unit(s) is transferred to Customer in joint with other customers by means of joint sale deed, the original sale deed shall be entrusted to custodial services company... Any dispute or difference whatsoever arising between the parties out of or relating to the construction meaning scope operation or agreement or the validity or the breach thereof shall be referred to any retired judicial officer who shall be appointed SKYLARK LAND DEVELOPERS & INFRASTRUCTURE INDIA LIMITED as the sole arbiter and shall be settled in accordance with arbitration and conciliation ". From the above, it can be noted that the Company reserves the right to change the location of the plot. Importantly, it is noted that the Company mentions about executing joint sale deeds of land units. (h) I also note the following from the interim order: j) It is relevant to note that both the aforesaid "Registration Certificate" dated September 13, 2010 and the "Allotment Letter" dated July 01, 2011 (furnished by the Auditor vide letter dated September 17, 2014), are found to have been issued by Skylark Developers to the same customer. Following facts have been noted from the aforesaid documents, As per the "Registration Certificate", the customer has made lump sum payment of `15,000/- for 3 years ("Cash Down Plan no. 52") with "assured realizable value" /return of `20,895/. Page 15 of 26

16 The location of plot is not mentioned on the "Registration Certificate". The "Allotment Letter" dated July 01, 2011 issued the customer shows allotment of a 150 sq. ft. land/plot in village Aron, Gwalior (MP). Precise particulars of the piece of land such as khata/khasra etc. are not mentioned in the "Allotment Letter", other than the name of the village. Interestingly, the said allotment letter also mentions that the company reserves the right to change the location of the allotment. The Registration Certificate" indicates that the customer has been "paid". This indicates that the specific land unit, (the details of which was mentioned in the "Allotment Letter") had not been transferred to the customer, as agreed upon by Skylark Developers in its "Agreement" and "Allotment Letter" (i.e the land would be transferred by way of a sale deed shortly). In the instant case, it is seen that the "customer"/investor has been repaid an amount of `20,895/- as the "assured realizable amount/return (as per "Plan No. 52"), as indicated in the "Registration Certificate", after the term period. This is contrary to what has been contended by Skylark in its letter dated April 02, 2014 (Paragraph No. 6 above) that "The company has to transfer the land by executing sale deeds in favour of the customers and the company does not promise assured return". (i) The interim order has noted that the Company has taken advance of Rs.4,29,90,507/- as of March 31, Further, the Company had an inventory of Rs.2,77,06,520/- as on March 31, 2013 (which included purchases during the year and deducted land allotments made and land/site expenses). The Company had paid huge amounts as commission during the year that ended March 2011, 2012 and The interim order has also noted the land purchased and development cost incurred by Skylark Developers during , and Further, as of March 2013, the Company had Rs.12,22,130/- as cash in its various bank accounts. (j) The scheme documents like registration letter, allotment letter and agreement does not mention the exact details of the plot/s which are to be purchased by the customer who applies. An assured amount ("assured realizable value at the end of the term"), which the customer is entitled to at the end of the term is mentioned in the said certificate. The Company also reserved the right to change the location of the said land stated to have been allotted to the investors and Page 16 of 26

17 that it could allot an alternate site at some other place. The Company has not produced any sale deed. The interim order has observed This indicates that the so-called "allotment of land" is mere ruse created to show that the company is doing land transactions. (k) From the foregoing features of the scheme/plans operated by the Company, it is to be seen whether the four conditions under section 11AA(2) of the SEBI Act are attracted. 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 has represented that it is engaged in the business of purchase, sale, development and maintenance of agricultural land and solicits and collects money from public under its various plans for the said purported scheme. The Company had devised various plans with varying tenure, instalments amounts and estimated realizable value. The Company is offering monthly, quarterly, half-yearly and yearly payments options along with lump sum payment plans as mentioned earlier while dealing with the scheme related documents of the Company. The Company has shown the monies mobilized from investors as Advance in its balance Sheets and has claimed to have purchased lands. The Company has also kept cash in bank accounts and paid hefty commissions as mentioned above. Therefore, it can be concluded that the Company has received payments from customers and pooled and utilized the same towards the scheme/arrangement, thereby satisfying the first condition under section 11AA(2) of the SEBI Act. (l) 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. A perusal of the brochure which illustrates the features of the plans clearly indicate that the customer is entitled to assured or estimated realizable value after the end of the tenure. Relying on the copy of the "Registration Certificate" issued by the Company to one of its customers, it is noted that the said customer having opted for "Plan CDP-52" (cash down payment plan), the "Land Unit Consideration" is mentioned as `15,000/- and the investor was entitled to an "assured realizable value" of `20,895/- after the term period of 3 years, i.e. he/she is entitled to an amount of `5,895/- as profit/return. I also note the following observation made by the CBI in its Report filed before the Hon ble High Court During enquiry, one more complainant who had Page 17 of 26

18 filed the refund claim against the company with District Collector was examined. He submitted that he had taken a RD on installment with the company and he was only informed that the plan was a simple investment plans that on completion of the plan, he will be getting the agreement upon amount as mentioned in the certificate issued by the company. It therefore becomes clear that the investor subscribes to the scheme of the Company only with a view to receive profits or return. Therefore, the second condition too is satisfied in this case. (m) The third and fourth conditions under section 11AA(2) are that the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors, and the investors do not have day-to-day control over the management and operation of the scheme or arrangement. Various statements made by the Company in its scheme related documents clearly point to the situation that the Company manages the property and contributions received from the customers and that their investors do not have any day to day control over the management and operation of the schemes. The following clauses gathered from the "Application cum Agreement" and "Allotment Letter" would support the above observations: Skylark reserves the right to change the location of this allotment, and allot you alternate site at the other place. Skylark shall carry out necessary preliminary works by conducting the survey, demarcation, clearing and other related jobs/ works on behalf of the customer. Skylark shall have the right to develop and maintain the said property in consultation with experts, and customer shall not ordinarily interfere, with the method and mode of development and maintenance of the said property. The customer shall pay in aggregate sum of Rs...( Rupees only) as per payment schedule of Plan opted for by him towards consideration for the acquisition sale development and maintenance for the aforesaid property of Skylark and for such allied expenses as my be allocable apportionable or appropriable to the said property. The said property cannot, in any other manner be sold, assigned, mortgaged, pledged or alienated without obtaining No dues certificate from the Skylark in case of Regular installment payment plans. Accordingly the third and fourth conditions under section 11AA(2) are also satisfied. Page 18 of 26

19 (n) The activities of the Company are not exempt under the clauses under section 11AA(3) of the SEBI Act. (o) From the above discussion, I conclude that the schemes offered by the Company with a promise of returns satisfy all the four conditions specified in Section 11AA (2) of the SEBI Act and therefore qualify as a Collective Investment Scheme as defined under the said section read with the CIS Regulations. (p) At this juncture, it is important to note that the Hon ble Supreme Court in the matter of PGF Limited vs. UoI and another (ref. MANU/SC/0247/2013, has observed "..the Parliament thought it fit to introduce Section 11AA in the Act in order to ensure that any such scheme put to public notice is not intended to defraud such gullible investors and also to monitor the operation of such schemes and arrangements based on the regulations framed under Section 11AA of the Act." The Hon'ble Supreme Court further observed "Inasmuch as the said Section 11AA seeks to cover, in general, any scheme or arrangement providing for certain consequences specified therein vis-a-vis the investors and the promoters.,. The Hon ble Supreme Court further observed - "A reading of sub-section (3) of Section 11AA also throws some light on this aspect, wherein it is provided that those institutions and schemes governed by sub-clause (i) to (viii) of sub-section (3) of Section 11AA will not fall under the definition of collective investment scheme.... Therefore, by specifically stipulating the various ingredients for bringing any scheme or arrangement under the definition of collective investment scheme as stipulated under sub- Section (2) of Section 11AA, when the Parliament specifically carved out such of those schemes or arrangements governed by other statutes to be excluded from the operation of Section 11AA, one can easily visualize that the purport of the enactment was to ensure that no one who seeks to collect and deal with the monies of any other individual under the guise of providing a fantastic return or profit or any other benefit does not indulge in such transactions with any ulterior motive of defrauding such innocent investors and that having regard to the mode and manner of operation of such business activities announced, those who seek to promote such schemes are brought within the control of an effective State machinery in order to ensure proper working of such schemes." Page 19 of 26

20 18. To carry out the activity of CIS and mobilize public funds from such schemes, it is mandatory under law to obtain a certificate of registration from SEBI. 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 registration from SEBI in accordance with the CIS Regulations. 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 'collective investment scheme'. A person can launch or sponsor or cause to sponsor a collective investment scheme 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. The Company does not have a certificate of registration as mandated under law and has launched CIS without obtaining certificate of registration from SEBI, thereby contravening the provisions of section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations. Therefore, having concluded that the activities of the Company are CIS in terms of section 11AA of the SEBI Act and that the same were carried out without obtaining registration from SEBI, suitable enforcement action should necessarily follow in the interest of investors. 19. I also note that 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 collective investment scheme 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, after the provision coming into force, the Company has contravened the above provision. 20. Therefore, having concluded that the activities of the Company are CIS in terms of section 11AA of the SEBI Act and that the same were carried out without obtaining registration from SEBI, suitable enforcement action should necessarily follow in the interest of investors. In view of such Page 20 of 26

21 unregistered CIS activities carried on by the Company, it becomes necessary to issue suitable directions in the interest of investors and the securities market. In this regard, regulation 65 provides for various directions by SEBI. The said provision is reproduced below for reference: 65. The Board may, in the interests of the securities market and the investors and without prejudice to its right to initiate action under this Chapter, including initiation of criminal prosecution under section 24 of the Act, give such directions as it deems fit in order to ensure effective observance of these regulations, including directions: (a) requiring the person concerned not to collect any money from investors or to launch any [collective investment scheme]; (b) prohibiting the person concerned from disposing of any of the properties of the [collective investment scheme] acquired in violation of these regulations; (c) requiring the person concerned to dispose of the assets of the [collective investment scheme] in a manner as may be specified in the directions; (d) requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite interest or otherwise, collected under the [collective investment scheme]; (e) prohibiting the person concerned from operating in the capital market or from accessing the capital market for a specified period. As the Company is carrying out unregistered CIS activities, it becomes necessary to direct the Company to wind up the CIS and refund its investors money or assets along with requisite interest along with other necessary directions. I also note that the Company has requested SEBI to permit it to repay investors and for permission to dispose off its assets/property for the purposes of repaying the investors. Considering that this request is made for the purposes of making refunds to the investors from whom mobilization was made, I find it appropriate and in the interest of investors to allow this request. 21. The interim order has been issued against Mr. Dilip Kumar Jain, Mr. Ram Shankar Yadav, Mr. Durga Prasad Yadav, Mr. Jaihind Kumar, Mr. Anand Kumar Gupta and Mr. Santosh Kumar Pandey, who are said to be the directors of the Company. My observations in this regard are as below: (a) Mr. Dilip Kumar Jain, Mr. Ram Shankar Yadav, Mr. Durga Prasad Yadav and Mr. Jaihind Kumar are the present directors in the Company. Mr. Dilip Kumar Jain, Mr. Ram Shankar Page 21 of 26

22 Yadav are appointed from the date of incorporation of the Company. The others too are appointed in July 2010, as can be seen from the information extracted from the MCA portal. IN/DPIN/PAN Full Name Present residential address Designation Date of Appointment DILIP JAIN 104 DEV KRISHNA APARTMENT, MOCHI OLI NAI SADAK, GWALIOR, , Madhya Pradesh, INDIA Director 02/06/ RAMA SHANKAR YADAV C-8, NEAR RAM VATIKA, GOVIND PURI, GWALIOR, , Madhya Pradesh, INDIA Director 02/06/ DURGA PRASAD YADAV MAHEWA, GOPALAPUR, NEWDIA, JAUNPUR, , Uttar Pradesh, INDIA Director 19/07/ JAIHIND KUMAR VILL. RAMRAYPUR, PO. GANGAPUR, VARANASI, , Uttar Pradesh, INDIA Director 19/07/2010 (b) Mr. Santosh Kumar Pandey has submitted that he became a director on August 02, 2010 and resigned on October 07, 2011 and such resignation was accepted on November 12, The noticee has submitted that he did not have any knowledge about the work and conduct of the Company or any paper related to the Company. The noticee also submitted that the Company had informed him that the other directors would be responsible for any action. (f) Mr. Anand Kumar Gupta had submitted that he was appointed as director in the Company during its inception and after not being satisfied with the management he had resigned on June 27, He further submitted that he was neither connected nor did the Company provide him any information regarding its functioning. He had not performed any role as a director during the tenure with the Company or afterwards. He was relieved from the Company long before the passing of the interim order and has no access to the records of the Company. (c) I have considered the said submissions. In terms of section 291 of the Companies Act, 1956, the board of directors of a company shall be entitled to exercise all such powers and do all such acts and things as the company is authorized to exercise and do. Therefore, the board of directors shall be responsible for the conduct of the business of a company and liable for any non-compliance of law and such liability shall trickle down to individual directors. Accordingly, a director who is part of a company s board shall be responsible and liable for all acts carried out by a company unless exemptions are provided. The present case involves a Page 22 of 26