You are on page 1of 28

WTM/PS/146/IMD-CIS/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 SCHEME) REGULATIONS, 1999
In the matter of SAI PRASAD CORPORATION LIMITED
In respect of:
1. Sai Prasad Corporation Limited [PAN: AAQCS7428B],
2. Mr. Balasaheb K. Bhapkar [PAN: AFIPB3674A],
3. Mr. Shashank B. Bhapkar [PAN: AQHPB8639H] and
4. Ms. Vandana B. Bhapkar [PAN: AFIPB3675B].
------------------------------------------------------------------------------------------------------------------Date of Hearing:

March 17, 2015, July 27, 2015 and August 19, 2015

Appearances:
For Noticees:

Mr. Madhav M. Joshi, Advocate.


Mr. Amit Desai, Chartered Accountant.

For SEBI:

Dr. Anitha Anoop, Deputy General Manager.


Mr. N. Murugan, Assistant General Manager.
Ms. Meetu Agarwal, Assistant General Manager.
------------------------------------------------------------------------------------------------------------------1.1

Sai Prasad Corporation Ltd. (hereinafter referred to as "SPCL" or company) was


incorporated under the Companies Act, 1956 (CIN: U70102PN2011PLC141639) on
December 14, 2011 and is having its registered office in Empire Estate, Building CB
1, Office No. 202 & 203, Mumbai Pune Road, Chinchwad, Pune, Maharashtra
411019.

1.2

Securities and Exchange Board of India (hereinafter referred to as "SEBI") had


received certain complaints on September 23, 2013, alleging that Sai Prasad group of
Companies including Sai Prasad Properties Ltd. (SPPL) and Sai Prasad Foods Ltd.
(SPFL) and SPCL were collecting money from public in the nature of "collective
investment scheme". The complainants also forwarded details of schemes, brochures,
application form etc. with respect to the schemes/plans offered by SPCL.
Page 1 of 28

1.3

On enquiry, SEBI, prima facie found that SPCL is engaged in fund mobilizing activities
from the public, which is in the nature of a Collective Investment Scheme without
obtaining a certificate of registration from SEBI. Therefore, SEBI, vide an interim exparte Order dated July 22, 2014 (hereinafter referred to as interim order) issued certain
directions against Sai Prasad Corporation Ltd. and its directors, namely, Mr. Balasaheb
K. Bhapkar, Mr. Shashank B Bhapkar and Mrs. Vandana B. Bhapkar (hereinafter
collectively referred to as noticees).

2.1

Prima facie findings/Allegations: The noticees were mobilising funds under the
camouflage of JV Participation Subscription Structures (JVPSS) from the public by
way of three different schemes either with lump-sum or installment payment. They
are:

Installment Participation Structure/ schemes (quarterly, half yearly and yearly


payments varying from 48-98 months - 4 schemes; termed as AC to DC)

One time Participation Structure/ schemes (3 schemes for 5, 7 and 9 years; termed
as EC to GC),

2.2

Yearly Income Participation Structure/ scheme (for 6 years JC).

An illustrative plan from each category is shown in the following tables below:
JV Participation Subscription Structure AC for 48 months/ 4 Yrs
Total
Participat
ion (Rs.)

JV Participation value up to 4
yrs

HLY

YLY

48,000
96,000
1,44,000
1,92,000
2,40,000

3,000
6,000
9,000
12,000
15,000

5,985
11,970
17,955
23,940
29,925

11,960
23,920
35,880
47,840
59,800

Expected Sum of
Participation on
JV Completion
(Rs.)

Financial
Assistance in case
of accidental
Death (Rs.)

63,360
1,26,720
1,90,080
2,53,440
3,16,800

75,000
1,50,000
2,25,000
2,50,000
2,50,000

One Time Participation Structure EC for 5 Yrs:


Participation
(Rs.)
10,000
50,000
1,00,000
2,00,000
5,00,000

Expected Sum of Participation on


JV Completion (Rs.)
19,500
97,500
1,95,000
3,90,000
9,75,000

Page 2 of 28

Financial Assistance in case of


accidental Death (Rs.)
15,000
75,000
1,50,000
2,50,000
2,50,000

Participation Subscription Yearly Income Structure JC for 6 Yrs:


Total
Participation
(Rs.)
3,000
6,000
9,000
12,000
15,000
1,02,000

2.3

Net Payable
on Every
Year
60
120
180
240
300
18,870

Expected Sum of
Participation on JV
Completion (Rs.)
5,000
10,000
15,000
20,000
25,000
1,02,000

Financial Assistance in
case of accidental Death
(Rs.)
7,500
15,000
22,500
30,000
37,500
1,53,000

The investors who are interested to invest in the said JV Participation Subscription
Structure are required to file a Co-venturer Application Form before executing the
JV Agreement for Project Participation with SPCL. The Company, issues "JV
Participation Certificate" to the "Co-venturers"/investors. The money termed as
participation value is to be utilised for the projects of the Company. At the end of
the completion of the projects/term period of participation, whichever is earlier,
expected sum of participation value or estimated returns would be payable to the coventurers in the said project.

2.4

The Company also offered units of land as collateral security for realization of amount
in the said project(s) and issued letter of allocation of land with a ratio of Rs. 12000
of participation equal to 500 sq.ft of undivided land.

2.5

It was also alleged that SPCL stated that its property shall be used exclusively for the
business of SPCL and the "co-venturers". As per SPCL, the "co-venturer"/investors shall
not have any right, title and interest in connection with property or project. Once
repayment of participation value is made to the "co-venturer"/investor, the agreement
shall cease to exist automatically.

2.6

It was agreed by SPCL with its investors that in case the Company is unable to repay
participation value, then the Company would help the joint venturer to dispose off the
allocated land at the written request of the co-venturer through the process of law.

2.7

The scheme of SPCL included that the Company would look after the financial side
of the projects as well as the administration of the business. The co-venturers/
investors shall not have any right on the shares or share capital of the Company or to
interfere with the projects other than the participated project or the management and
the policies of the Company.

Page 3 of 28

2.8

SPCL, for the purpose of soliciting funds from the public, opened a number of
"Associate Service Centers" spread across 19 States of the country including the states
of Maharashtra, Gujarat, Orissa, Tamil Nadu, Rajasthan, Karnataka, Jharkand,
Chattisgarh, Madhya Pradesh etc. SPCL is also providing financial assistance in case
of accidental death to participants.

2.9

In view of the above attributes of the scheme, it was alleged that the contributions
were collected from the investors under the Schemes launched by the Company and
the same is pooled and utilized in JPVSS under the pretext for the development of its
land. The investments were made by the investors with a view to receive returns from
the schemes. The property, contribution or investment forming part of the
Schemes/Plans were managed by SPCL on behalf of investors and the investors did
not have any day-to-day control over the management of the schemes. As stipulated
under section 11AA of the Securities and Exchange Board of India Act, 1992 for
collective investment schemes, SPCL is required to get a certificate of registration from
SEBI 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). However, no registration was sought by the noticees from SEBI.

2.10

The mobilization of funds from the public, was also prima facie found to be 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 (hereinafter
referred to as PFUTP Regulations). SPCL and its directors were alleged to be
responsible for the illegalities.

2.11

Reference was also made in the interim order to the SEBIs orders dated July 17, 2013,
in the matter of SPPL and SPFL wherein, SEBI, inter alia, had directed, Mr. Balasaheb
K. Bhapkar, Mr. Shashank B. Bhapkar and Mrs. Vandana B. Bhapkar who are also
directors of SPCL "not to collect any more money from investors under the existing
schemes; not to launch any new schemes or plan", until further orders, in view of the
prima facie, findings therein that they are running 'collective investment schemes',
without obtaining a certificate of registration from SEBI. It was further recorded in
the interim order that Mr. Balasaheb K. Bhapkar, Mr. Shashank B. Bhapkar and Mrs.
Vandana B. Bhapkar are continuing to collect funds from the public, through SPCL,
wantonly flouting the directions issued by SEBI on July 17, 2013.
Page 4 of 28

2.12

In view of the prima facie findings on the violations, vide the said interim order dated
July 22, 2014, the noticees were directed:-

a) not to collect any money from investors from its existing "JV Participation
Structure"/scheme;
b) not to launch any new schemes or plans or float any new companies to raise fresh
moneys;
c) to immediately submit the full inventory of the assets owned by SPCL out of the
amounts collected from the "co-venturers"/investors under its existing "JV
Participation Structure"/schemes;
d) not to dispose of any of the properties or alienate the assets of the existing "JV
Participation Structure"/scheme;
e) not to divert any funds raised from public at large, kept in bank account(s) and/or in
the custody of the company;
f) to furnish all the information sought by SEBI with regard to scheme wise list of
investors and their contact numbers and addresses along with the details of amount
mobilized and refunded.
3.1

The noticees, in the said interim order, were advised to file their replies within a period
of 15 days from the date of receipt of the interim order and also to indicate whether
they wish to avail an opportunity of personal hearing in the matter.

4.1

Service of the interim order: The copy of the interim order was sent to the noticees vide
letters dated July 23, 2014 through registered post. The said letters have not come back
undelivered.

5.1

Opportunity of personal hearing and Inspection of documents: SEBI vide letters dated January
22, 2015, intimated that the noticees will be given an opportunity of being heard on
February 23, 2015 at the time and the venue mentioned therein. SPCL vide letter dated
February 16, 2015 sought for the adjournment of hearing. While granting the request
for adjournment, SEBI vide letter dated February 24, 2015 intimated that the noticees
would be given another opportunity of hearing on March 17, 2015. However, SPCL
vide letter dated March 16, 2015 sought for the adjournment of personal hearing on
the ground that it has appointed a new counsel, Mr. Madhav Joshi and the counsel
requires time for perusing the documents pertaining to the matter.

Page 5 of 28

5.2

SEBI also received on March 16, 2015 two letters one dated March 13, 2015 and other
dated March 15, 2015 both from Mr. Madhav Joshi stated to be on behalf of SPCL
and its directors, seeking inspection of files. Though vakalatnama on behalf of SPCL
was forwarded by the counsel, no vakalatnama was enclosed on behalf of the directors.
Though adjournment of hearing slotted on March 17, 2015 was sought, Mr. Madhav
Joshi assisted by Mr. Amit Desai appeared before me on March 17, 2015, on behalf of
SPCL and its three directors. Mr. Madhav Joshi undertook to file vakalatnama on
behalf of the three directors. The three directors subsequently vide separate letters
dated June 22, 2015 informed SEBI that Mr. Madhav Joshi is their authorized
representative.

5.3

In the said personal hearing on March 17, 2015, request was made for inspection of
the documents relied on in the current proceedings. The said request was granted and
the representatives were intimated that another opportunity of hearing would be
granted on April 08, 2015. Pursuant to the said request, on March 25, 2015, the first
opportunity of inspection was scheduled, which was adjourned to March 27, 2015 at
the request of SPCL. On March 27, 2015, the inspection was availed. Mr. Madhav
Joshi, authorized representative of SPCL and Mr. Deepak D. Tawar and Mr.
Dnyaneshwar Jachak stated to be representatives of SPCL carried out the inspection.
The photocopies of following documents were inspected by them.
a. Correspondence between SPCL/its directors and SEBI
b. 2 complaints received by SEBI on September 23, 2013(with enclosures);
c. letter dated March 03, 2014 from Income Tax department and
d. Excerpts (relevant to SPCL) from Inspection Report by SEBI in the matter of group
companies, Sai Prasad Foods Ltd, and Sai Prasad Properties Ltd.

5.4

It is noted that vide letter dated March 26, 2015, SEBI had once again intimated Adv.
Madhav Joshi with copies marked to the noticees that the opportunity of hearing had
been scheduled on April 8, 2015.

5.5

Thereafter, SPCL vide its letter dated April 06, 2015, filed objection before SEBI
saying that they would like to inspect the original documents as SEBI had provided
only the photo copies of documents on the previous date. It was also mentioned that
the copy of the two complaints and Inspection Report of SEBI was incomplete. SPCL
annexed the details of the documents inspected and copies thereof provided by SEBI.
Page 6 of 28

5.6

On the same date, i.e., on April 6, 2015, Mr. Madhav M Joshi, through e-mail, once
again sought for adjournment of the hearing scheduled on April 8, 2015 by three
weeks, on the ground that the records relating to the case held by the previous counsel
for SPCL, Shri Kamal Agarwal was received by him very recently. SPCL also sought
for adjournment of the personal hearing, through e-mail dated April 6, 2015 signed by
Shri Deepak Tawar annexing a letter from SPCL dated April 4, 2015, on the same
ground mentioned by its counsel and on the further ground that it seeks the cross
examination of all the complainant/s. SPCL vide the said letter dated April 4, 2015
also sought for the details of the complainants in order to enable it for cross
examination of the complainants. The hard copies of the letter of SPCL dated April 4,
2015 and April 6, 2015 (signed by Mr. D.V. Jathak) were later received by SEBI on
April 13, 2015 and April 9, 2015 respectively.

5.7

As on April 08, 2015, the inspection of original documents were not taken, the said
hearing was rescheduled and the noticees were intimated about the same vide e-mail
dated April 08, 2015.

5.8

As far as the request for cross examination is concerned, SEBI vide letter dated June
11, 2015 rejected the request for cross examination on the ground that the interim
order was passed relying upon the documents provided by SPCL itself.

5.9

As far as the request for inspection of original documents are concerned, SEBI
intimated vide e-mail dated June 12, 2015 (enclosing the letter dated June 12, 2015
addressed to Mr. Madhav Joshi), the authorized representative of SPCL that it would
be granted another opportunity for inspection of the original documents on June 18,
2015. Thereafter, SEBI vide subsequent e-mail dated June 16, 2015 reconfirmed the
authorized representative, with a copy to the Company, that the date of inspection is
June 18, 2015. However, vide return e-mail dated June 16, 2015, the authorized
representative, i.e., Adv. Madhav M Joshi requested for three weeks adjournment for
inspection on the ground that his case is fixed for hearing at Pune Court on June 17,
2015. SPCL also vide letter dated June 16, 2015 sought for adjournment of inspection
by two or three weeks, on the ground that the date is not suitable for it, as some of the
responsible officers of the company are out of station. Thereafter, Adv. Madhav Joshi
vide e-mail dated July 01, 2015 stated that he is out of station for personal reasons and
the date of inspection can be fixed on or after July 13, 2015. Pursuant to that, SEBI
Page 7 of 28

vide letter dated July 02, 2015 intimated SPCL and its directors that it had scheduled
another opportunity of inspection of documents on July 08, 2015. Vide the said letter
the noticees were intimated that they shall be given final opportunity of hearing
scheduled on July 27, 2015. It was further intimated that written submission, if any,
should be submitted on the date of hearing.
5.10

On July 8, 2015, the representative of SPCL, namely, Adv. Madhav M Joshi, Mr.
Sushant Raut and Mr. Dnyaneshwar Jachak inspected the original documents and
inspected the following documents.
i. Inspection report by SEBI in the matter of group companies- Sai Prasad Foods Ltd.
and Sai Prasad Properties Ltd. (for inspection carried out on January 13, 2014).
ii. A Complaint dated 22.06.13, received by SEBI on 29.10.13.
iii. Letter dated December 04, 2013 from Adv. Vishnu Sharma to SEBI.

5.11

However, Adv. Madhav M Joshi, Mr. Sushant Raut also requested for another
inspection preferably to be held on July 10, 2015. Subsequently, SPCL vide e-mail
dated July 09, 2015 requested for the copies of the following letters.
i. Letter from Income Tax Department dated July 24, 2013,
ii. Letter from Income Tax Department dated February 27, 2014,
iii. Letter from Income Tax Department dated February 28, 2014,
iv. Letter from Income Tax Department dated March 20, 2014,
v. A copy of the report dated June 28, 2013 of DDIT (INV), Unit- II (2), annexed to
the letter dated July 24, 2013.

5.12

Pursuant to the request made on July 8, 2015, SEBI granted another opportunity of
inspection to the authorized representative of SPCL, Mr. Madhav Joshi who made
inspection of the original documents on July 10, 2015 on behalf of SPCL. The portions
relating to the SPCL in the documents at serial no. 1 to 4 in original was inspected by
Mr. Madhav Joshi. It is noted that the document at serial No.5 was not provided by
the ITD to SEBI along with letter dated July 24, 2013 and therefore, the same was not
available in the file. SEBI also gave the authorized representative of SPCL the copies
of the record of proceedings of inspection held on July 8, 2015 and July 10, 2015.
SPCL vide letter dated July 17, 2015 sent a letter to SEBI enclosing its earlier letter
dated July 09, 2015 to SEBI and recording the fact of inspection on July 08, 2015 and

Page 8 of 28

July 10, 2015 by its authorized representatives. The said letter dated July 17, 2015
further stated that its counsel requested for the copies of the documents mentioned in
the said letter dated July 09, 2015 but the same were not given by SEBI. SPCL stated
that without those documents, it would not be possible for SPCL to file a detailed
reply to SEBI. Not giving of copies of these documents would result in violation of
the principles of natural justice. It further stated that after the receipt of the copies of
those documents, additional time would be required by SPCL to prepare a detailed
reply to the allegations made by SEBI. In view of that, SPCL requested for the
adjournment of personal hearing fixed on July 27, 2015 and sought for the same to be
fixed after SEBI gives the documents requested by SPCL. In response to SPCL letter
dated July 17, 2015, SEBI vide e-mail dated July 24, 2015 (sent at 12:15 PM) enclosed
a letter from SEBI dated July 24, 2015 addressed to the Company, intimating that the
copy of the documents sought by SPCL in its letter dated July 9, 2015 are not even
referred to in the interim order dated July 22, 2014 and therefore, there would be no
breach of principles of natural justice by not giving those documents. The SEBI letter
had further confirmed that the opportunity of hearing scheduled on July 27, 2015,
shall be the final opportunity and advised SPCL to avail the opportunity of hearing.
5.13

However, SPCL instead of confirming its presence for the personal hearing, vide
return e-mail dated July 24, 2015 (received by SEBI at 5 PM) again raised the issue of
cross examination of the complainants referring to its earlier letter dated April 4, 2015
sent to SEBI on the subject matter. It may be noted that SEBI had, vide letter dated
June 11, 2015 already rejected the request of cross examination of the complainants.
SEBI immediately through e-mail sent at 5.42 PM, enclosed its reply letter dated July
24, 2015, intimating SPCL that the decision of SEBI in respect of cross examination
of complainants had been already communicated to it.

5.14

Subsequently, on July 27, 2015, Mr. Madhav M Joshi appeared before me on behalf of
all the noticees. He filed two applications. In the first application, in addition to the
request for adjournment, request was made for copies of :-

a. Letters from Income Tax department dated March 20, 2014, February 27, 2014,
February 28, 2014, and July 24, 2013.
b. Report dated June 28, 2013 of DDIT annexed to the letter dated July 24, 2013.

Page 9 of 28

5.15

In the second application, request was made for cross examination of complainants
who have made complaints dated June 22, 2013, September 14, 2013 and complaint
received by SEBI on 23 September, 2013 (Inward Number 107657). The details of any
other complaint which SEBI seeks to rely upon in the present proceedings was also
sought vide the said second application. The authorized representative further sought
to keep in abeyance the present proceedings till complainants are made available for
cross examination. It was indicated in the personal hearing that no reliance is placed
on the complaints in the present proceedings and therefore, there is no need for cross
examination. In the said personal hearing, on request of the Counsel, next date of
hearing was scheduled on August 19, 2015. SEBI vide letters dated August 4, 2015
forwarded the copies of the record of proceedings of personal hearing held on July 27,
2015 to all the noticees.

5.16

As reply to the said SEBI letter dated August 4, 2015, SPCL vide letter dated August
17, 2015, stated that after the last hearing held on July 27, 2015, SPCL had preferred
an Appeal No. 362 of 2015, before Honble Securities Appellate Tribunal (SAT)
challenging SEBIs communication dated June 11, 2015 whereby the application made
by SPCL for registration under SEBI (CIS) Regulations, 1999 had been rejected.
Enclosing the copy of the order dated August 3, 2015 passed by Honble SAT, it was
stated by SPCL that Honble SAT has allowed SPCL to make application to SEBI for
registration, within six weeks from the date of order. SPCL stated that it was in the
process of making an application for registration. It requested for the adjournment of
the hearing scheduled on August 19, 2015, which was not granted. For the personal
hearing on August 19, 2015, no one had appeared for the noticees.

5.17

From the above discussion, it is clear that the noticees have been adopting delaying
tactics. Considering the same, I am of the opinion that sufficient opportunities of
personal hearings have been granted to the noticees, which they have failed to avail.
In view of the same, I proceed on the basis of the material available on record.

6.1

The Reply of the noticees: The noticees have not submitted any reply on the merits
disputing the allegations recorded in the Interim order. However, SPCL had filed
replies prior to the interim order vide reply dated October 30, 2013 and an undated
letter received by SEBI on December 5, 2013, April 16, 2014, June 25, 2014. The case
of SPCL as submitted in its various replies in a nutshell is as follows:
Page 10 of 28

6.2

SPCL does not conduct any collective investment activity. Therefore, section 11AA of SEBI Act,
does not apply.

6.3

The company was incorporated on December 14, 2011. The company has the main object of developing
residential and commercial projects either individually or through joint ventures with any company/
firm/ individual/ consultant. The capital for these projects are taken from Project participation in the
form of joint venture. The said person providing joint venture participation in joint venture project
is not investor but only a joint venture associate. SPCL has not issued any brochure and the
same is published by the co-venturers.

6.4

The contribution made by the associate is treated as capital of the joint venture. The joint venture is
a special combination of the company and the associates wherein the profit is sought for a specific
venture even without active partnership between the parties.

6.5

The funds so collected have been deployed in the committed/subscribed projects. The estimated project
returns are approximately 12%. The estimated returns are expected and they are not promised. The
refund of the participation amount is paid to the co-venture through participation subscription structure
of the company. If there is any loss in the joint venture project the same has to be borne by the joint
venture associate on pro-rata basis. SPCL has always fulfilled its commitments with its joint venture
associates.

6.6

When the project size is expanded, the associate has the discretion for refund of his project participation.
If someone wants to exit the joint venture at any point of time, they can exercise the option.

6.7

There is no insurance business conducted by SPCL in the legal sense of the term. However, in case of
the death or accidents happening to the associate, the participation/contribution is refunded to the
associate/nominee.

6.8

There is no diversion of fund from the committed projects. There is no complaint against SPCL
launched by any associate.

6.9

The company is also in the business of manufacture and distribution of commodities and runs the
business of food processing, horticulture, fruit, far and agricultural development and real estate. The
Company has various projects in Maharastra (224.1 acre) and Karnataka (18.03 Acre). Various
ongoing projects and farm development activities requiring timely investment have been hampered.

7.1

I have considered the allegations, replies and materials on record. On perusal of the
same, the following questions arise for consideration. Each question is dealt with
separately under different headings.
Page 11 of 28

1. Whether noticees are entitled to the copies of documents as sought by it and whether it is entitled to

cross examine the Complainants?


2. Whether the noticees have launched and are running the arrangement/scheme as alleged?
3.

Whether the major attributes of the arrangement fall within the definition of collective investment
schemes as defined in section 11AA of SEBI Act?

4. If so, whether the noticees have violated Section 12(1B) of the SEBI Act and Regulation 3 of the

CIS Regulations and Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade
Practice Relating to Securities Market) Regulations, 2003.
8.1

Whether noticees are entitled to the copies of documents as sought by it and


whether it is entitled to cross examine the Complainants?

8.2

SPCL vide e-mail dated July 9, 2015 and in the application filed before me at the time
of personal hearing on July 27, 2015, requested for the copies of the following letters
a. Letters from Income Tax department dated March 20, 2014, February 27, 2014,
February 28, 2014, and July 24, 2013.
b. Report dated June 28, 2013 of DDIT annexed to the letter dated July 24, 2013.

8.3

As stated earlier SPCL also had made a request for cross examination of complainants
who have made complaints dated June 22, 2013, September 14, 2013 and complaint
received on 23 September, 2013.

8.4

The principles of natural justice are the cardinal principle to be followed in quasijudicial proceedings. In a case where an adverse action is proposed to be taken against
the noticees, on the basis of the facts alleged against them, then the documents which
evidence the facts alleged, should be given to those persons, so that they get an
opportunity to rebut the evidence against them. Therefore, whether any copy of
document is to be given to those persons, depend on the fact of whether such
documents are relied upon in order to substantiate any adverse findings against them.
In this backdrop, I find that none of the documents whose copies were sought by the
noticee through the letter dated July 9, 2015 and the application filed at the time of
personal hearing, were even mentioned in the interim order. It is clear that the interim
order does not rely upon the documents sought by the noticee mentioned at para 8.2.

8.5

These documents are also not relied upon in the present proceedings. I further note
that that the copy of the record of proceedings of personal hearing held on July 27,

Page 12 of 28

2015 recording the fact that these documents are not relied upon, were given by SEBI
vide its letters dated August 4, 2015 to all the noticees.
8.6

In the same way, SPCL and its directors are entitled for the cross examination of the
Complainants only when their complaints are relied upon in the proceedings. The
allegations that constitutes the violation of the Section 11AA of SEBI Act are
supported on the basis of the documents submitted by SPCL itself. Para 5 of the
interim order clearly identifies the material on record submitted by SPCL vide its letter
dated April 16, 2014. Complaints dated June 22, 2013, September 14, 2013 and
complaint received by SEBI on 23 September, 2013 have not been relied upon in the
interim order and they are also not relied upon in the present proceedings. In view of
that, SPCL is not entitled for cross examination of complainants as sought by it.

8.7

It is noted that SPCL vide the said letter dated April 4, 2015 had earlier sought for the
details of the complainants in order to enable it for cross examination of the
complainants. SEBI vide letter dated June 11, 2015 rejecting the said request,
reconfirmed the authorized representative of SPCL that though the complaints against
SPCL received by SEBI may have led SEBI to initially examine the matter, the interim
order was passed relying upon the documents provided by SPCL itself.

8.8

Inspite of SEBIs letter dated June 11, 2015 rejecting the request of SPCL for cross
examination, vide e-mail dated July 24, 2015, SPCL again raised the issue of cross
examination of the complainants referring to its earlier letter dated April 4, 2015 sent
to SEBI. SEBI had immediately through return e-mail on the same day enclosing its
reply letter dated July 24, 2015, again reiterated that documents other than complaints
have been relied upon in this matter which are already available with the Company.

8.9

I further note that inspite of SEBI having clearly mentioned in the Record of
proceedings of Inspection on July 10, 2015, that Income Tax Department has not
annexed the Report dated June 28, 2013 along with the letter dated July 24, 2013, Adv.
Madhav Joshi again raised the issue of non-granting of copy of the said report in his
application at the time of personal hearing.

8.10

Therefore, it is clear that SPCL has been agitating the same issue again and again,
intending to stall the proceedings from reaching its logical end. The re-agitation of the
same issue over and over again by SPCL only shows that it is trying to delay the
adjudication of issues on merits.

Page 13 of 28

9.

Whether the noticees have launched and are running the arrangement/scheme as
alleged?

9.1

SPCL vide letter dated April 16, 2014 submitted that the brochure is being published
by the co-venturers and not by the Company and it has no control over the brochure.
Therefore, the authenticity and genuiness cannot be attributed to the Company. A
copy of the brochure stated to be published by a co-venturer is enclosed as Annexure
A to the said reply. I note that SEBI vide letter dated October 11, 2013 sought from
the Company various documents including the brochures/ offer documents. SPCL
did not provide any information required vide letter dated October 11, 2013. It did
not deny at that point of time, that it has not published any such brochures. SEBI once
again, vide letter dated March 20, 2014, inter alia, sought for the certified copy of
brochure. It may be noted that the then Authorised Representative of SPCL, Mr.
Vishnu Sharma vide his letter dated March 27, 2014 had written to SEBI only sought
for time. Even at that point of time, SPCL did not deny that it has not published any
such brochures.

9.2

For the first time in its letter dated April 16, 2014, SPCL denied that it published any
brochures. On examination of the said Anneuxre A, I find that the main objective of
company mentioned in the brochure is exactly the same as mentioned in in its letter
dated April 16, 2014. By no stretch of imagination, it is possible to accept that the so
called co-venturer would publish on his own a brochure before he makes any
contribution to the Company. It is highly unreasonable to expect, a co-venturer
would publish a brochure to the public describing the different schemes of the
Company, his own eligibility to become a joint venture participant, detailing the terms
and conditions with which he makes contribution and detailing the consequences of
discontinuity of his contribution, nomination and other details and more particularly,
detailing his expected sum of participation on JV Completion. The language and
tenor of the said brochure clearly indicates that the said document has been designed
in such a way that it is a publication by the Company to the general public and not by
the so called co-venturer to prospective co-venturers.

9.3

SPCL also enclosed a co-venturer application form (Annexure B to reply dated April
16, 2014) which is to be filled and signed by the co-venturers. SPCL vide the said reply
dated April 16, 2014 also enclosed a copy of joint venture participation certificate

Page 14 of 28

(annexure C), copy of agreement for project participation (annexure D). On perusal
of copies of these documents submitted by SPCL and other material on record, I
find that:a) The company had received money from the public through various schemes. From

the brochure submitted by the company, it is clear that Company has brought out
various plans as mentioned in its brochure and as alleged in the SCN cum interim
order. It may be noted that illustrative schemes, such as, JV Participation Subscription
Structure AC for 48 months/ 4 Yrs, One Time Participation Structure EC for 5Yrs and
Participation Subscription Yearly Income Structure JC for 6 Yrs are also mentioned in the
Annexure A-brochure produced by the Company vide its reply dated April 16, 2014.
b) SPCL has mobilized an amount of Rs.137.12 crores from the investors during the

year 2012-2013 as shown in the balance sheet as on March 31, 2013. Perusal of Note
No.7-2 appended to the said balance sheet, further shows that the said amount of Rs.
137.12 crores is reflected as Project Participation Contribution under the head
other long term liabilities" in the Balance Sheet as on March 31.2013. SPCL also
admitted the collection of the said amount by producing the summery of joint venture
participation-scheme wise, year wise as annexure F to the reply dated April 16, 2014.
On perusal of the said annexure F, it is clear SPCL has admittedly collected Rs. 478.35
crores during the financial year 2013-14. As such SPCL admittedly collected an
amount of Rs. 615. 47 crores under the nomenclature of Joint Venture Participation.
c) On perusal of the copy of the Co-venture application form (Annexure B) and the

Agreement for project participation (annexure C) produced by the SPCL vide its
reply dated April 16, 2014, it is clear that the investors who are interested to invest in
the said JV Participation Subscription Structure are required to file a Co-Venturer
Application Form before executing the JV Agreement for Project Participation
with SPCL.
d) On perusal of various clauses of Agreement for Project Participation submitted by

SPCL vide its reply dated April 16, 2014 annexed as Annexure D(hereinafter referred
to as Annexure D), I further find that :
i.

at the end of the completion of the said projects/term period of participation,


whichever is earlier, expected sum of participation value or nearby there off would

Page 15 of 28

be payable to the co-venturers in the said project of the company as prescribed in


the terms and conditions, rules and regulations of the structure. (clause 7)
ii.

SPCL also offered units of land as collateral security for realization of amount in
the said project(s) and issued letter of allocation of land with a ratio of Rs. 12,000
of participation equal to 500 sq.ft of undivided land subject to the discretion of the
Company to alter this ratio depending on promotion cost/ value of land at the time
of agreement. The Company vide the said clause also has discretion to alter the area
of allocation depending on the availability of land at the time of agreement. (Clause
9)

iii.

co-venturer" shall not have any right, title and interest in connection with property
of the Company (Clause 3)

iv.

once repayment of participation value is made to the "co-venturer"/investor, the


agreement shall stand cancelled automatically. (Clause 15)

v.

In case the company is unable to repay participation value, then the company would
help the co-venturer to dispose off the allocated land at the written request of the
co-venturer through the process of law.(Clause 10)

vi.

The company would look after the financial side of the projects as well as look after
the administration of the business.

The co-ventures/investors shall not have

any right on the shares or share capital of the company or to interfere with the
projects other than the participated project or the management and the policies of
the company.(clause 3)
9.4

In view of the above material on record I find that noticees have launched and are
running the arrangement/scheme as alleged.

10.

Whether the major attributes of the arrangement fall within the definition of collective
investment schemes as defined in section 11AA of SEBI Act?

10.1

Though, SPCL disputed that the arrangement run by it is not falling within the
definition of collective investment scheme, it vide letter dated June 25, 2014 stated
that it accepts SEBI as regulator after passing of the interim order.

10.2

Without prejudice to that submission, I proceed to consider now whether the four
conditions mentioned in section 11AA(2) of SEBI Act are satisfied in the instant
arrangement. Section 11AA of SEBI Act reads as follows:

Page 16 of 28

"(1) Any scheme or arrangement which satisfies the conditions referred to in subsection (2) or
[sub-section (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 the exemptions from CIS 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 solely 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
ii. under which deposits are accepted by non-banking financial companies
iii. being a contract of insurance
iv. providing for any scheme, Pension Scheme or the Insurance Scheme framed under the
Employees Provident Fund
v. under which deposits are accepted under section 58A of the Companies Act, 1956
vi. under which deposits are accepted by a company declared as a Nidhi or a mutual benefit
society
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."
10.3

Perusal of the above section shows that any arrangement or scheme to be considered
as collective investment scheme has to satisfy the four conditions mentioned in section
11AA(2) of SEBI Act and the same should not fall within any of the exceptions
mentioned in section 11AA(3) of SEBI Act.

10.4

Regarding the first requirement of pooling of the contributions and utilization of the
same for the scheme, SPCL termed the contribution as project participation and the
same is treated as capital of the joint venture. As per SPCL the capital providers in
the said joint venture are co-venturer or joint venture associate and not investor.

Page 17 of 28

The essence of the argument of the Company is that the arrangement falls within the
ambit of joint venture and not collective investment schemes.
10.5

Therefore, the question as to the attributes of such joint venture is firstly considered.
In this regard, reference may be made to the observation of the Hon'ble Supreme
Court of India in New Horizons Ltd. Vs Union of India (1995(1) SSC 478) as quoted in
M/S. Gammon India Ltd vs Commnr. Of Customs, Mumbai (decision dated 6 July, 2011)
regarding the nature of a joint venture. The Hon'ble S.C. observed "The expression
'Joint venture'connotes a legal entity in the nature of a partnership engaged in the
joint undertaking of a particular transaction for mutual profit or an association of
persons or companies jointly undertaking some commercial enterprise wherein all
contribute assets and share risks. It requires a community of interest in the
performance of the subject matter, a right to direct and govern the policy in
connections therewith, and duty, which may be altered by agreement, to share both in
profit and losses"

10.6

In the instant scheme, though contended by SPCL that joint venture is a special
combination of the company and the associates wherein the profit is sought for a
specific venture even without active partnership between the parties in its reply dated
April 16, 2014, on perusal of the copy of the Annexure D, I find that there are no
clauses providing for profit sharing or participation in losses on the basis of
"community of interest" as stated by Hon'ble Supreme Court. Further the so called
project is not at all identified or described in any of the joint venture. SPCL uses
the same Agreement for Project Participation for all its so called different projects.
There is no mention of any percentage of profits to those joint-venturers. Though
the Company vide is Reply dated April 16, 2014 stated that if there is any loss in the joint
venture project the same has to be borne by the joint venture associate on pro-rata basis, the
Company did not provide any proof to substantiate this. Instead the very fact that Clause 10 of
Annexure D, provides for disposing of the land in case the company is unable to repay
participation value, further shows that there is no sharing in the loss made by the
Company. There is absolutely no need for this clause, if the joint venturer is required
to participate in loss.

10.7

It is more of an arrangement that provides for expected monetary return in the under
the name of "Expected Sum of Participation on JV Completion", specified in the
Page 18 of 28

various "JVPSS"/schemes, Under the instant "JVPSS"/Scheme offered by SPCL,


there is also no element of shared control. As mentioned in clause 3 of the Annexure
D, SPCL exercises complete managerial and administrative control over the "JVPSS"/
scheme offered therein. Therefore, I find that claim of SPCL that it is running Joint
Venture Participation" is unsubstantiated.
10.8

In view of this, the argument of the company that there is no pooling of contributions,
since the legal nature of money received is only project participation from jointventurers and hence the same does not fall within the meaning of contributions
of the investors, within the meaning of section 11AA(2) of SEBI Act., cannot be
accepted. Section 11AA (2)(1) stating that the contributions, or payments made by
the investors, by whatever name called, makes it very clear that the terminology of
the contributions of the investors does not matter. As a matter of law, what matters is
whether such contributions envisages pooling and utilization for the purpose of the
scheme or arrangement within the parameters of Section 11AA(2). The fact that the
expected sum of participation value on joint venture is not dependent on the
performance of any joint venture but is dependent on the amount of money invested
and the period for which it stay invested, shows that contribution collected by SPCL
is pooled together by the company for giving the investors the monetary return termed
by the Company as expected sum of participation value on joint venture. The reply
in this regard by the Company stating that the funds so collected have been deployed in the
committed/ subscribed projects has not been substantiated by SPCL and therefore has no
credence. Further the same has been utilized for the purpose of scheme, irrespective
of any such subscribed projects. The fact that the Company, as stated in clause 3 of
the other terms and conditions mentioned in the brochure submitted vide its reply
dated April 16, 2014, indicated that the return will be dependent on the success of the
project is contradicted by its further assertion in the terms and conditions mentioned
in the Annexure B (co-venture application form) submitted by the Company along
with its letter dated April 16, 2014 which (at serial number 08) states that the CoVenturer(s) shall be repaid on expected sum of participation of Term only. The JV Participation
Certificate also finds mention of the expected sum of participation of JV
Completion.

Page 19 of 28

10.9

Further the fact that investors do not have discretion to cancel the arrangement, at any
point of time, and take back their money indicates that the money contributed by the
investors stay pooled. Though in its reply dated April 16, 2014 stated that when the
project size is expanded, the associate has the discretion for refund of his project participation. If
someone wants to exit the joint venture at any point of time, they can exercise the option, there is no
such clause in the Annexure D to that effect. Instead, clause 13 of the Annexure D which
mentions cancellation does not indicate the said cancellation can be exercised by
investor. Further I note the fact that the consequences of cancellation in terms of
returnability of the amount so far paid, is not mentioned anywhere in the Agreement
or other documents submitted by the Company. However, brochure submitted by the
Company mentions the eventuality of discontinuing the contributions by investor. As
per the eventuality, the discontinued payment will be returned with additional amounts
(except in case the discontinuation is within a year of its joint venture period) only
after the expiry of the term of agreement. This clearly shows that although the
company pleaded that the investor has discretion to cancel, the same is not borne out
by records. Therefore, it cannot be said that the investor has any right of cancellation
exercisable at any point of time.

10.10

As regards, the second requirement, that contributions/payments were made by the


investors with a view to receive profits, income, produce or movable or immovable
property from such scheme, I have already noted earlier, as per clause 7 of Annexure
D, that the company agreed with the investor that it would pay an expected sum of
participation on JV completion/ on maturity.

10.11

For example as mentioned in para 10.8 in respect of various JVPSS/schemes


offered by SPCL, if an investor invested Rs 48,000/- in JV Participation Subscription
Structure AC, monetary return of Rs. 63,360/- in the name of Expected Sum of
Participation on JV Completion is offered on the lapse of 48 months. This is in
addition to the financial assistance of Rs. 75,000 in case of accidental death. In the
same way, an investor who has made an investment of Rs. 10,000/- in the scheme
titled as "One Time Participation Structure EC for 5 Yrs, the Company agreed a
monetary return of Rs. 19,500 in the name of Expected Sum of Participation on JV
Completion. This amount is paid in additional to the financial assistance of Rs. 15,000
in case of accidental death. In this way, depending upon the quantum of amount

Page 20 of 28

invested and the period of investment, varying amounts are offered as returns in
different plans as stated in the abovementioned tables mentioned in para 2.2.
10.12

Thus, I find that in the instant scheme, contributions/payments were made by the
investors with a view to receive income from such scheme.

10.13

As regards the third requirement that the property, contribution or investment


forming part of the scheme, whether identifiable or not, is managed on behalf of the
investors, and the fourth requirement that the investors do not have the day to day
control over the management and operation of the scheme, the noticees vide reply
dated April 16, 2014, did not take any specific stance.

10.14

On examination of clause 3 of the Annexure D, I find that the company has stated
that it would look after the financial side of the projects as well as the administration
of the business. The said clause also provides that the co-venturer shall look into the
aspects of development of specific project. It also provided in the said clause that the
co-venturer can interfere with the project in which he is participating. In respect of
other projects where he is not participating any co-venturer does not have any right
in the management and policies of the company. Seemingly this clause is couched in
such a language, so that an argument can be advanced that the investor also has
contractual obligation of developing the specific project in which he participates.

10.15

However, as found earlier, except for identifying a project as AC BC, CC, DC,
EC,FC, GC, and JC, there is no description of any project. There is nothing to
suggest how these different projects can be identified by the investor, so that he can
look into the aspect of development or interfere with said projects. The sheer
impossibility of identifying the said projects, makes those developmental rights
exist only on paper without any possibility of usage by investor. Further as found
earlier in para 9.3 (d) (ii) the letter of allocation of land is in respect of undivided
land. It would be highly inconceivable how an investor would be able to exercise his
developmental rights over his unascertained share in the undivided land. It also
raises the suspicion such clauses have been inserted by SPCL to advance the case that
the schemes do not fall within CIS. In view of that, I find that the investor do not have
any right or day-to-day, control over the management and operation of the scheme or
arrangement.

Page 21 of 28

10.16

As far as the management of the contribution of the investor is concerned, the said
money is to be utilized for the purpose of return termed as expected sum of
participation value. The investor also does not have discretion to take away his money
at any time until the period of expiry of the term. The said money is managed by SPCL
in order to provide monetary return.

Therefore, it is clear such contribution is

managed on behalf of the investor. The property of SPCL also stands as "collateral
security which will be sold by SPCL if it is unable to repay the participation value
further shows that property of SPCL is also managed on behalf of the investor.
10.17

Hence I find that the instant arrangement/scheme satisfies the third and fourth
conditions for CIS schemes.

10.18

In view of the satisfaction of the all the four conditions, I find that the instant
arrangement/schemes falls within the definition of collective investment schemes. 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
noticees are in the nature of CIS in terms of section 11AA(1). In this regard, it would
be relevant to place 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. 6572
of 2004):
"Therefore, the paramount object of the Parliament in enacting the SEBI Act itself and in
particular the addition of Section 11AA was with a view to protect the gullible investors
most of whom are poor and uneducated or retired personnel or those who belong to middle
income group and who seek to invest their hard earned retirement benefits or savings in such
schemes with a view to earn some sustained benefits or with the fond hope that such investment
will get appreciated in course of time. Certain other Section of the people who are worstly
affected are those who belong to the middle income group who again make such investments
in order to earn some extra financial benefits and thereby improve their standard of living
and on very many occasions to cater to the need of the educational career of their children.
38. Since it was noticed in the early 90s that there was mushroom growth of attractive schemes
or arrangements, which persuaded the above vulnerable group getting attracted towards such
schemes and arrangements, which weakness was encashed by the promoters of such schemes
and arrangements who lure them to part with their savings by falling as a prey to the sweet
coated words of such frauds, 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. ...
... ...
40. It will have to be stated with particular reference to the activity of the PGF Limited,
namely, sale and development of agricultural land as a collective investment scheme, the
implication of Section 11AA was not intended to affect the development of agricultural land
Page 22 of 28

or any other operation connected therewith or put any spokes in such sale-cum-development
of such agricultural land. It has to be borne in mind that by seeking to cover any scheme or
arrangement by way of collective investment scheme either in the field of agricultural or any
other commercial activity, the purport is only to ensure that the scheme providing for
investment in the form of rupee, anna or paise gets registered with the authority concerned and
the provision would further seek to regulate such schemes in order to ensure that any such
investment based on any promise under the scheme or arrangement is truly operated upon in
a lawful manner and that by operating such scheme or arrangement the person who makes
the investment is able to really reap the benefit and that he is not defrauded ... ... It is,
therefore, apparent that all other schemes/arrangements operated by all others, namely, other
than those who are governed by sub-section 3 of Section 11AA are to be controlled in order
to ensure proper working of the scheme primarily in the interest of the investors.
... ...
42. Therefore, in reality what sub-section (2) of Section 11AA intends to achieve is only to
safeguard the interest of the investors whenever any scheme or arrangement is announced by
such promoters by making a thorough study of such schemes and arrangements before
registering such schemes with the SEBI and also later on monitor such schemes and
arrangements in order to ensure proper statutory control over such promoters and whatever
investment made by any individual is provided necessary protection for their investments in
the event of such schemes or arrangements either being successfully operated upon or by any
misfortune happen to be abandoned, where again there would be sufficient safeguards made
for an assured refund of investments made, if not in full, at least a part of it.
... ... In the light of our above conclusions on this ground it will have to be held that Section
11AA is a valid provision, not suffering from any infirmity, as it does not intrude into the
specific activities of sale of agricultural land and its development.
... ...
It is needless to state that 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.
... ....
53. We, therefore, hold that Section 11AA of the SEBI Act is constitutionally valid. We
also hold that the activity of the PGF Limited, namely, 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 and consequently the
order of the second respondent dated 06.12.2002 is perfectly justified and there is no scope
to interfere with the same. In the light of our above conclusions, the PGF Limited has to
comply with the directions contained in last paragraph of the order of the second respondent
dated 06.12.2002 ... ..."
11.

If so, whether the noticees have violated Section 12(1B) of the SEBI Act and
Regulation 3 of the CIS Regulations and Regulation 4(2)(t) of the SEBI
Page 23 of 28

(Prohibition of Fraudulent and Unfair Trade Practice Relating to Securities


Market) Regulations, 2003 :
11.1

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. The prohibition is
on every person. 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.

11.2

I find that the noticees have launched and are carrying on collective investment
schemes, without obtaining certificate of registration from SEBI. Therefore, the
noticees have contravened the provisions of Section 12(1B) of the SEBI Act and
Regulation 3 of the CIS Regulations.

11.3

In respect of the allegation of violation of reg. 4(2) (t) of SEBI (Prohibition of


Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations,
2003 (FUTP Regulations, 2003), it may be noted the FUTP Regulations was amended
with effect from Sept 06, 2013 and clause (t) to reg. 4(2) was inserted which reads as
follows:4. Prohibition of manipulative, fraudulent and unfair trade practices
(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves
fraud and may include all or any of the following, namely
(a)

"(t) 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."
11.4

Subsequent to the introduction of reg. 4(2) (t) of FUTP Regulations, 2003, the illegal
mobilisation of funds by means of collective investment schemes are deemed to be
fraudulent. The company carrying on unregistered collective investment schemes and
all those persons who are directors as on the date of introduction of reg. 4(2) (t) of

Page 24 of 28

FUTP Regulations, 2003 will be liable for action, for violation of reg. 4(2) (t) of FUTP
Regulations, 2003. In the present case, on perusal of summary of joint venture
participation-scheme wise, year wise enclosed as annexure F to the reply dated April
16, 2014, I find that SPCL has admittedly collected Rs. 478.35 crores during the
financial year 2013-14. Therefore, the directors as on Sept 06, 2013 and the company
have violated reg. 4(2) (t) of FUTP Regulations. Mr. Balasaheb K Bhapkar, Mr.
Shashank B Bhapkar and Mrs. Vandana B Bhapkar being directors as on Sept 06, 2013
and company have violated this provision.
11.5

In respect of the reference in the interim order, that SEBI has already passed orders
dated July 17, 2013, against Mr. Balasaheb K. Bhapkar, Mr. Shashank B. Bhapkar and
Mrs. Vandana B. Bhapkar, in the matter of SPPL and SPFL directing them "not to
collect any more money from investors under the existing schemes; not to launch any
new schemes or plan", until further orders, in view of the prima facie findings therein
that they are running 'collective investment schemes', without obtaining a certificate
of registration from SEBI and further reference that these directors are continuing
to collect funds from the public, through SPCL, wantonly flouting the directions
issued by SEBI on July 17, 2013, I find that as stated in previous para, SPCL and its
three directors have collected Rs. 478.35 crores during the financial year 2013-14 in
violation of SEBI orders dated July 17, 2013. In this regard, I further find that SPCL
has made a false assertion vide its letter dated June 25, 2014 to SEBI that no new
scheme has been started subsequent to July 17, 2013 till date of the letter.

11.6

I further note that, SPCL vide letter dated June 25, 2014 gave an undertaking to SEBI
to return the money at the earliest, and give the details of money already returned to
SEBI on every fifteenth day of every month giving. However, no such report has been
filed with SEBI.

11.7

I find from the material on record that Mr. Balasaheb K. Bhapkar, Mr. Shashank B.
Bhapkar and Mrs. Vandana B. Bhapkar are the directors of SPCL. I note that the
above directors were on the Board of the Company during the time the Company had
been collecting monies. Therefore, they are responsible for the violations along with
the Company.

11.8

I further note that SPCL had vide letter dated March 30, 2014 sought an opportunity
to register its joint-ventureship agreements under Chapter IX of SEBI (CIS)
Regulations as collective investment schemes. It also sought to regularize its jointPage 25 of 28

ventureship agreements in the interest of its joint venture partners. The same was
rejected by SEBI vide its letter dated June 11, 2015. As stated earlier Appeal No. 362
of 2015 was filed by SPCL challenging SEBIs letter dated June 11, 2015. Honble
SAT has allowed SPCL to make application to SEBI for registration, within six weeks
from the date of order. I find that pursuant to the observation made by Honble SAT
in Appeal No. 362/2015, no application for registration was received by SEBI till date.
11.9

In view of the violation committed by such directors and the company, they are liable,
to wind up the scheme and repay the amount collected along with the company with
promised returns, to be restrained from collecting any money from the investors or
launch or carry out any Collective Investment Schemes, or restrained from accessing
the securities market or to be prohibited from buying, selling or otherwise dealing in
securities market and therefore necessary consequential directions are required to be
passed by SEBI to that effect.

12.1

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) Sai Prasad Corporation Ltd (PAN- AAQCS7428B) and its directors, Shri Balasaheb
K. Bhapkar (PAN-AFIPB3674A), Shri Shashank B Bhapkar (PAN-AQHPB8639H)
Mrs. Vandana B. Bhapkar (PAN -AFIPB3675B), are restrained from collecting any
money from the investors or launch or carry out any Collective Investment Schemes
including the schemes which have been identified as a Collective Investment Schemes
in this Order.
b) Sai Prasad Corporation Ltd and its directors, Shri Balasaheb K. Bhapkar, Shri
Shashank B Bhapkar, Mrs. Vandana B. Bhapkar, are restrained from accessing the
securities market, and are prohibited from buying, selling or otherwise dealing in
securities market, for a period of four years.
c) Sai Prasad Corporation Ltd and its directors, Shri Balasaheb K. Bhapkar, Shri
Shashank B Bhapkar, Mrs. Vandana B. Bhapkar shall wind up the existing Collective
Investment Schemes and refund through Bank Demand Draft or Pay Order, the
money collected by the said company under the schemes with returns which are due
to the investors as per the terms of the offer, within a period of three months from
Page 26 of 28

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.
d) Sai Prasad Corporation Ltd and its directors, Shri Balasaheb K. Bhapkar, Shri
Shashank B Bhapkar, Mrs. Vandana B. Bhapkar,

shall not alienate or dispose off or

sell any of the assets of Sai Prasad Corporation Ltd except for the purpose of making
refunds to its investors as directed above.
e) Sai Prasad Corporation Ltd and its directors, Shri Balasaheb K. Bhapkar, Shri
Shashank B Bhapkar, Mrs. Vandana B. Bhapkar, are also 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.
12.2

In the event of failure by Sai Prasad Corporation Ltd and its directors, Shri Balasaheb
K. Bhapkar, Shri Shashank B Bhapkar, Mrs. Vandana B. Bhapkar, to comply with the
above directions
a) Sai Prasad Corporation Ltd and its directors, Shri Balasaheb K. Bhapkar, Shri
Shashank B Bhapkar, Mrs. Vandana B. Bhapkar

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 years of restraint
imposed in paragraph 12.1 (b) above, till all the Collective Investment Schemes are
wound up and all the monies mobilized through such schemes are refunded to its
investors with returns which are due to them.
b) SEBI would make a reference to the State Government/ Local Police to register a
civil/ criminal case against Sai Prasad Corporation Ltd and its directors, 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
c) SEBI would make a reference to the Ministry of Corporate Affairs, to initiate the
process of winding up of the company, Sai Prasad Corporation Ltd.

Page 27 of 28

d) SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules
and regulations framed there-under.
13.

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 Sai Prasad Corporation Ltd
and its directors, Shri Balasaheb K. Bhapkar, Shri Shashank B. Bhapkar, Mrs. Vandana
B. Bhapkar, including other persons who are in default, for the violations as found in
this Order.

14.

This order shall come into force with immediate effect.

15.

Copy of this Order shall be forwarded to the stock exchanges and depositories for
necessary action.

Date : February 01, 2016


Place : Mumbai

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

Page 28 of 28