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WTM/PS/20/IMD-CIS/WRO-ILO/MAY/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
and regulation 65 of the Securities and Exchange Board of India (Collective Investment
Schemes) Regulations, 1999
In respect of
S. No.

1.

Name of noticee

PAN/DIN

1.

Garima Real Estate & Allied Limited

AADCG0853B

2.

Mr. BanwariLalKushwah

AAGPF1976L

3.

Mr. BalkishanKushwah

AVQPK4360A

4.

Mr. ShivramKushwah

02338542

5.

Mr. BanabarilalLodhi

01759136

6.

Mr. Bijendra Pal Singh

01781312

7.

Mr. Jitendra Kumar

06719377

Securities and Exchange Board of India (SEBI), vide ex-parte interim Order dated

November 24, 2014 (the interim order), prima facie observed that the fund mobilization activity of
the company, Garima Real Estate and Allied Limited (the Company or Garima) is a Collective
Investment Scheme in terms of section 11AA of the Securities and Exchange Board of India Act,
1992 (the SEBI Act). It was alleged that the Company did not obtain a certificate of registration as
required under section 12(1B) of the SEBI Act and regulation 3 of the SEBI (Collective Investment
Schemes) Regulations, 1999 (the CIS Regulations) prior to the launch and operation of such
schemes. The Company was also alleged to have contravened regulation 4(2)(t) of the SEBI
(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations,
2003 ("the PFUTP Regulations").

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2.

In order to protect the interest of investors who had subscribed to such schemes launched

and carried out by the Company and also to prevent the Company and its directors from further
carrying with their fund mobilization activity in the nature of CIS without registration from SEBI,
the Company and its past and present directors were directed as follows:
22. In view of the above, I, in exercise of the powers conferred upon me under Sections 11(1),
11B and 11(4) of the SEBI Act read with Regulation 65 of CIS Regulations, hereby direct
Garima Real Estate & Allied Limited and its past and present Directors viz., Mr.
BanwariLalKushwah (PAN-AAGPF1976L), Mr. BalkishanKushwah (PAN-AVQPK4360A),
Mr. ShivramKushwah (DIN: 02338542), Mr. BanabarilalLodhi (DIN: 01759136), Mr.
Bijendra Pal Singh (DIN: 01781312)and Mr. Jitendra Kumar (DIN: 06719377):(i) not to collect any fresh money from investors under its existing schemes;
(ii) not to launch any new schemes or plans or float any new companies to raise fresh moneys;
(iii) to immediately submit the full inventory of the assets including land obtained through money raised
by Garima;
(iv) not to dispose of or alienate any of the properties/assets obtained directly or indirectly through money
raised by Garima;
(v) not to divert any fund raised from public at large which are kept in bank account(s) and/or in the
custody of Garima.
(vi) to furnish all the information/documents sought by SEBI vide letter dated January 22, 2014,

within 15 days from the date of receipt of this order, including:

3.

i.

Scheme wise list of investors and their contact numbers and addresses;

ii.

PAN of the aforementioned Directors and

iii.

Details of agents along with address, money mobilized and commission paid.

The interim order came into force with immediate effect and is still in force. The Company

and its past and present directors, namely, Mr. BanwariLalKushwah, Mr. BalkishanKushwah, Mr.
ShivramKushwah, Mr. BanabarilalLodhi, Mr. Bijendra Pal Singh and Mr.

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Jitendra

Kumar(collectively referred to as noticees) were advised that they may file their response to the
interim order and if they so desire, also seek an opportunity of personal hearing.
4.

The interim order was forwarded to the noticees vide SEBI letters dated November 27,

2014. However, no reply was received from them within the time period advised in the interim
order. Thereafter, vide letter dated February 09, 2015, one Mr. A.K. Bansal, Advocate informed that
he represents the Company and requested for extension of time to file the reply on the ground that
he is suffering from ailments and undergoing medical treatment. However, no reply was received
thereafter. In view of the same, SEBI sent a reminder letter dated April 19, 2015 to the Company
advising the Company to provide the status of compliance with the interim order and status of
resolution of a complaint received in SEBI. There was no reply to this letter or to the interim order.
Subsequently, vide letter dated May 21, 2015, the Company and other noticees were advised to file
compliance report to the interim order and also the resolution status of the investor complaint. The
Company and other noticees were also informed that they were afforded an opportunity of personal
hearing on July 10, 2015 at the Local Office of SEBI at Indore. As the previous letters/notices were
undelivered on few of the noticee directors, SEBI had also issued a public notice in newspapers {in
Hindi in DainikBhaskar, Rajasthan/Navbharat Times, Delhi/DainikBhaskar, Madhya Pradesh and in
English in The Times of India, Rajasthan and Delhi, on June 30, 2015} regarding the instant
proceedings initiated pursuant to the interim order and the personal hearing fixed on July 10, 2015.
5.

In the personal hearing held on July 10, 2015, Mr. A.K. Bansal, Advocate appeared for the

Company and filed the Companys representation and requested that the same be taken on record.
Oral submissions were also made. As requested, liberty was granted to file additional submissions
and documents within a period of three weeks. There was no appearance by the other noticees. In
the representation of the Company filed by its Advocate, the following were inter alia submitted:
(a) The Company referred to SEBIs letter dated May 21, 2015 and stated that the investor has
no grievance against the Company and therefore the same was not an issue to be adjudicated
by the forum. Further, her complaint was due to some misunderstanding.

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(b) The Company had received an SCN dated August 22, 2014 issued by the Adjudicating
Officer and has filed a detailed reply dated September 15, 2014.
(c) In the said reply, the Company has submitted that it is not involved in any activity within the
meaning of CIS.
(d) It was also informed that the SCN was issued on the basis of the information allegedly
furnished by the Company vide purported letter dated December 05, 2013. However, the
said letter was not issued on behalf of the Company and the information contained therein
was false and not binding on the Company.
(e) The said letter was a forged and fabricated document and reliance on the same is not
warranted.
(f) Even after receiving the reply dated September 15, 2014, SEBI without taking the same into
consideration and appreciating the specific stand taken in the reply had passed the interim
order.
(g) The findings of SEBI in the interim order are solely based on the said forged letter dated
December 05, 2013. The documents furnished along with the said forged letter has nothing
to do with the Company and it seemed that someone with fraudulent intention has
mischievously created/fabricated documents and sent to SEBI.
(h) The Company vide letter dated February 09, 2015 sought time to furnish reply. It was
surprising that SEBI has not referred to the aforesaid reply dated September 15, 2014.
(i) In view of the above submissions, the Company firmly believes that the requirements of
SEBI letter dated May 21, 2015 have been satisfied. The Company is ready to furnish further
reply if required.
(j) The Company submitted that the SCN and the interim order have been issued solely on the
basis of the information which is false, forged and fabricated and therefore requested that
the same needs to be set-aside in the interest of justice.
As the Advocate had referred to the adjudication proceedings, he was specifically advised that the
present proceedings is pursuant to the interim order and he was asked to make submissions
pertaining to the charges made in the interim order.

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6.

Therefore, the Advocate for the Company, vide letter dated July 27, 2015, referred to the

proceedings of the personal hearing held in the matter on July 10, 2015 and requested SEBI to
forward copies of the following documents:
(a) Order passed in the proceedings held on July 10, 2015
(b) Copy of Order dated July 13, 2012 passed by the Honble High Court of MP in the matter of
Dharamvir Singh
(c) Copies of the purported letter mentioned in paragraph 5 of the interim order
(d) Documents submitted by the complainantincluding Career & Rule Book for agents
(e) Letter dated December 05, 2013 said to have been sent by Garima
(f) All documents mentioned in the SEBI letter dated August 22, 2014
(g) All documents mentioned in the interim order
(h) Copies of all documents in the records of SEBI pertaining to the matter.
7.

In response to the above letter from the Companys Advocate, SEBI vide letter dated

August 25, 2015 had forwarded the documents mentioned and relied on in the interim order and the
proceedings of the personal hearing held on July 10, 2015. The Advocate was again informed that
adjudication proceedings are separate proceedings and that the instant proceedings are pursuant to
the interim order. The Advocate was also advised to forward his reply.
8.

Considering that documents were supplied by SEBI and that the Company had not filed its

reply, it was afforded another opportunity of personal hearing on February 01, 2016. The schedule
of personal hearing was informed to the Company and its Advocate vide SEBI letters dated January
14, 2016. In response, the Advocate vide letter dated January 25, 2016 stated that they have made
sincere efforts to contact the directors of the Company and stated that they would be available at
their offices at Gwalior (MP). The Advocate requested that the personal hearing fixed on February
01, 2016 may be adjourned to some other date in order for him to take necessary instructions with
all records relevant to the hearing. He assured that he would contact the clients in a short time and
would proceed accordingly. In view of the request, the personal hearing was rescheduled to
February 16, 2016 and the Advocate was accordingly intimated. Thereafter, vide email dated
February 15, 2016, Mr. A.K. Bansal, Advocate stated that despite his best efforts he was not able to

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contact the Company and stated that they could be contacted at their address in New Delhi and
Dholpur, Rajasthan. He informed that unless and until he gets instructions from his client (i.e.
Company), he will not be in a position to attend the hearing scheduled on February 16, 2016. He
further stated that he trying to contact the right persons and then appear in the personal hearing.
9.

As the Company and its directors have not filed their written submissions despite adequate

opportunities, I do not find it reasonable to afford more time or opportunities to them. I


accordingly proceed to consider the case on its merits on the basis of material available on record.
10.

I have perused the interim order, the submissions made in the hearing, the representation of

the Company filed in the personal hearing. and other material available on record. The interim order,
on the basis of the material collected during the inquiry in the matter, has alleged that the Company
was offering collective investment scheme without obtaining a certificate of registration from SEBI
as mandated under section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations. The
Company is also alleged of contravening regulation 4(2)(t) of the PFUTP Regulations.
11.

Before proceeding into the merits of the matter, I wish to deal with the preliminary

contention of the Company/its Advocate that the Companys letter dated December 05, 2013 was
not issued by the Company and that the same was forged and therefore no reliance can be placed on
such letter or on the documents forwarded through it. As per the interim order, the Company, vide
the letter dated December 05, 2013 had forwarded the following documents:
a) MoA and AoA of the company as filed with the Registrar of Companies,
b) Details of the past and present directors of the company.
c) Brochures/offer document pertaining to the schemes/arrangements,
d) Copies of application forms
e) Sample copies of allotment letter issued to the investors who subscribe to the schemes
f) Sample copies of the agreement letter / contract required to be entered into by investor
/applicant under the schemes
g) Details of the scheme wise amount mobilized by Garima till date along with the number
of investors under the schemes

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h) Certified copy of audited financial statement for the FY 2009-10, 2010-11, 2011-12 and
2012-13, copies of IncomeTax Returns filed by Garimafor the last three financial years.
I have perused the aforesaid letter of the Company wherein it has forwarded the aforesaid
document. The Advocate for the Company has merely contended that the letter is forged without
stating the reasons why the documents cannot be relied. He has also submitted that the documents
enclosed with the said letter has nothing to do with the Company. However, he has not put forth
submissions with proof to show that how such documents cannot be treated as genuine or were
fabricated. I also note that SEBI vide letter dated January 22, 2014 had confronted the Company
with respect to the plans/schemes as stated by it vide letter dated December 05, 2013 and those
mentioned in the Career and Rule Book forwarded by the complainant. However, the Company
has not responded to such letter till date. The Company was also asked to provide the scheme-wise
amount mobilized by the Company along with number of investors and sample copy of application
form, registration certificate and agreement executed in respect of any two investors of each plan
offered by it. However, the Company till date has not provided such details. This letter was also
forwarded to the Companys Advocate who had at a later stage submitted that he is not able to
contact his clients. The Company has also not intimated any steps taken by them against the alleged
forgery.
SEBI letter dated January 22, 2014 had also advised the Company and its present and past directors
to inform
(a) Address of branch offices of the Company
(b) Name, address of each investor and amount deposited by them with plan details and date of
investment
(c) List of properties acquired by them
(d) List of properties transferred to investors, if any
(e) Details regarding refunds made if any
(f) Amount outstanding to each investor.

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The Company and its directors were also informed that it did not provide information regarding its
group company and that SEBI found that Garima Homes and Farm House Limited was its group
company.
In view of the above facts and circumstances, the contention of the Advocate regarding the letter
dated December 05, 2013 cannot be accepted.
12.

The relevant observations made in the interim order are reproduced here for reference:

(a) Garima (CIN: U70100MP2007PLC019955) was incorporated on October 29, 2007 having its
registered office at 403-Souraw Plaza, GoleKaMandir, Gwalior - 474001. Its present Directors are
Mr.BanabarilalLodhi, Mr.ShivramKushwah and Mr.Jitendra Kumar. As per the details furnished by
Garima two of its earlier Directors viz., Mr.BanwariLalKushwah and Mr.BalkrishanKushwah resigned from
the directorship with effect from July 20, 2010 and April 15, 2013 respectively.
(b) As per the brochures containing the schemes, the plans offered by Garima were Plan B1 (for 5 years), Plan B2
(for 5 years & 6 months), Plan B3 (for 8 years and 4 months), Plan C1 (for 6 years), Plan C2 (for 8 years
& 11 months) and Plan C3 (for 10 years and 6 months). Each plan offered investment in plot of land of size
from 800 sq. ft. onwards. Garima offers an exit option to the applicants after the expiry of terms of the
respective plans with a refund of estimated realizable value as per the opted plans. If the applicant opts to
continue with the plan at the end of 15 years(term) investor needs to make payment of specified amount for
effecting registration of plot. For instance, the details provided in respect of plan B1 is as under:Plot size
in sq. ft.

800
1200
1600
2000
2400

No of Instalments
Monthly Quarterly Half-yearly
60
20
10
110
220
330
440
550

325
650
975
1300
1625

640
1280
1920
2560
3200

Exit option 5 At the end of 15 yr. Payment due


years Estimated
for registration of plot
Yearly Realizable Value
5
in `
1265
2530
3795
5060
6325

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9400
18800
28200
37600
47000

993400 + Registration charges


1486800 + Registration charges
1980200 + Registration charges
2473600 + Registration charges
2967000 + Registration charges

(c) It is noted from the above table that Garima is collecting funds from the public under its various Lumpsum
Payment Plans and Instalment Payment Plans. The 'applicant'/investors who are interested in the aforesaid
schemes are required to execute an 'Application form along with an Agreement' with Garima. Upon execution
of the same, Garima issues a 'Registration Letter'.
(d) As per the details submitted by Garima vide letter dated December 05, 2013, Garima stated that an amount
of `55,22,35,396/- was collected under its Plans B1, B2, B3, C1, C2 and C3 from 1,08,791 investors and
repaid an amount of `45,87,20,787/-. Further, an amount of `9,35,14,609/- is stated to be the payment
outstanding towards 15,683 investors. There was no proof of repayment attached in this regard.
(e) Garima stated that no regulatory approvals were taken for accidental death/disability benefits to investors. It
also informed that no other scheme was floated by the company.
13.

The interim order has also observed the following with respect to the documents provided

by the complainant:
a) Nature of activity-Garima is stated to be engaged in buying and selling of land. It is contended that
company develops the land and shares the profit with its customers/investors. In case all the formalities are
completed, the land is later transferred to the customer. In case the customer does not want the land, money
will be returned as per rules/plans.
b) Branches: The head office of Garima is at 'Garima', Shri Kalyan Tower, Opp. Basant Talkies, Thatipur,
Gwalior (M.P.). It has various branches at Gwalior(M.P.), Dholpur (Rajasthan), Jaura (M.P.), Champa
(Chhatisgarh), Rajgarh (M.P.), Korba (Chhatisgarh), Raipur(Chhatisgarh), Shivpuri (M.P.), Bharatpur
(Rajasthan), Shahdol (M.P.), and Agra (U.P.).
c) Plans offered:-Garima is offering Plan B1 (for 5 years), Plan B2 (for 5 years and 6 months), Plan B3 (8
years and 4 months), plan B4 ( 3 years and 6 months), Plan B5 (for 6 years). The details of Plan B1 (for 5
years) is as under:Land
size
(sq. ft.)
132
264
396

Amount Monthly Quarterly


in `
60
20
6600
13200
19800

110
220
330

325
650
975

Halfyearly
10
640
1280
1920

Yearly
5

Expected cost
of land

A/R
Benefit*

1265
2530
3795

9400
18800
28200

9900
19800
29700

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528
660

26400
33000

440
550

1300
1625

2560
3200

5060
6325

37600
47000

39600
49500

d) It is noted that there were various plans launched by Garima such as plan D1(5 years), Plan D2(6 years),
Plan D3( 7 years), Plan D4(8 years), Plan E1(6 years), Plan E2( 7 years), Plan E3(8 years), Plan E4
(9 years). For example, the details of plan D1 and E1 are given below:Plan D1
Land size Amount Monthly Quarterly Half-yrly Yearly
(sq. ft.)
in `
60
20
10
5
240
11500
200
590
1160
2300
480
23000
400
1180
2320
4600
720
34500
600
1770
3480
6900
960
46000
800
2360
4640
9200
1200
57500
1000
2950
5800
11500

Expected cost
of land
17100
34200
51300
68400
85500

A/R
Benefit*

Expected cost
of land
15500
31000
46500
62000
77500

A/R
Benefit*

18000
36000
54000
72000
90000

Plan E1
Land size Amount Monthly Quarterly Half-yrly Yearly
(sq. ft.)
in `
72
24
12
6
200
10000
147
433
853
1667
400
20000
294
866
1706
3334
600
30000
441
1299
2559
5001
800
40000
588
1732
3412
6668
1000
50000
735
2165
4265
8335

18000
36000
54000
72000
90000

e) Apart from the above stated instalment payment plans, there were other lump-sum payment plans such as
Plan C1 (6 years), Plan C2 ( 8 years & 11 months), Plan C3 (10 years & 6 months), Plan C4 ( 1 year)
& Plan C5 special (6 years). For example, the details of plan C3 are as under:Plan C3
Land size (sq.
ft.)
20
100
200
400
1000
2000

f)

Amount
(Rs.)
1000
5000
10000
20000
50000
100000

Expected cost of land

A/R
Benefit*

4000
20000
40000
80000
200000
400000

1500
7500
15000
30000
75000
120000

Commission offered by Garima is tabulated as under:

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Rank
Agent
Field Officer
Development Officer
Organizer
Zonal Officer
Sr. Zo. Officer
Development Advisor
Inspector
Regional Manager
Zonal Manager
Executive Manager
Total commission

I
22
5
4
3
2
2
2
2
2
2
2
48

Plan B1, B2, B3, B5, D all, E all


Year
II
III
IV
10.5
7.27
5.25
0.5
0.5
0.5
0.5
0.5
0.25
0.5
0.5
0.25
0.5
0.5
0.25
0.5
0.5
0.25
0.5
0.5
0.25
0.5
0.5
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
14.75
11.52
8

V+
5.25
0.5
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
8

A/R
Benefit*
21000
21000
21000
30000
30000
30000
35000
40000
50000
80000
100000

*the details and nature of A/R benefits are not provided by Garima till date.
g) It is noted from the 'Rule book for agents' that Garima is offering very high commission which is as much as
48% in the first year to its agents and other officials for mobilisation from public opting for instalment Plans.
This amount reduces to 14.75% in 2nd year, 11.52% in 3rd year and 8% from 4th year onwards. In
respect of investors opting for lump sum payment and also for instalment plan of 3 years 6 months, the
commission structure is as under:-

Rank
Agent
Filed Officer
Development Officer
Organizer
Zonal Officer
Sr. Zo. Officer
Development Advisor
Inspector
Regional Manager
Zonal Manager
Executive Manager
Total

CI
6
1
1
1
0.5
0.5
0.5
0.5
0.5
0.5
0.5
12.5

C2
7
1
1
1
0.5
0.5
0.5
0.5
0.5
0.5
0.5
13.5

Other Plans
C3
9
1
1
1
0.5
0.5
0.5
0.5
0.5
0.5
0.5
15.5

C4
2
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
3

C5
6
1
1
1
0.5
0.5
0.5
0.5
0.5
0.5
0.5
12.5

B4
11
2.5
2
1.5
1
1
1
1
1
1
1
24

Accidental benefit :-Garima has created a joint venture social welfare fund, whose contribution is given by the company
only. In case the joint-venturer dies due to accident, compensation is offered out of said fund. This will be applicable
after 6 months from start of scheme. Further, maximum compensation shall not be more than `1,20,000/-.

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As mentioned above, these differences were brought to the notice of the Company for
reconciliation. However, the Company did not offer any clarification till date despite this being sent
to the Advocate for the Company.
14.

The interim order had also provided the following details:


A perusal of the annual reports of Garima for the financial years 2008-09, 2009-10, 2010-11, 2011-12 and
2012-13 shows the following: (in`)

As per balance
As on March
sheet
31, 2013
Liabilities includes
Advance for plot 9,64,32,481.25
booking
Assets includes
Inventories*
7,52,81,506.40

As on March
31, 2012

As on March
31, 2011

As on March
31, 2010

As on March
31, 2009

11,48,79,107.25

17,02,94,129.46

7,20,86,405.46

6,01,54,037.46

6,79,60,308.40

6,44,53,564.40

5,20,46,282

1,53,17,772

*It is noted that break up of inventory has not been provided in any of the balance sheet of Garima.
15.

In the light of the above facts and circumstances, whether the scheme/activity of the

Company is in the nature of CIS in terms of section 11AA of the SEBI Act. The provisions of
section 11AA are referred and reproduced herein 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;

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(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;
(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.

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16.

The first condition, under section 11AA(2) of the SEBI Act, 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.As per the application form, the Company is accepting monies under the
scheme of allotment/transfer of land units and development and maintenance under the lumpsum
payment plan/instalment payment plans. Therefore, it is clear that the monies/contribution from
the investors are pooled under the scheme and used for the purposes of the scheme. It is noted
from the copy of registration certificate issued to one of the investors that the land promised therein
is not identified or demarcated. Paragraph 11 of the terms and conditions of the sample registration
letter provided by Garima states that these plots which are developed by the company in various parts of the
country and will be of similar sizes (i.e. 800 sq. ft. & 1200 sq. ft. respectively). The plots would be numbered and
identified by the company and thereafter be allotted to the applicants, the said plot may be allotted to the applicants
anywhere and in any location, at the discretion of the management. It is noted from the financial statements
of Garima that funds received from the applicants/investors are pooled together as Advance for
Plot booking. As on March 31, 2013, Garima has collected `9,64,32,481.25 towards advance for
plot booking. As per the reply dated December 05, 2013, the Company had mentioned that it had
collected an amount of `55,22,35,396/- under its Plans B1, B2, B3, C1, C2 and C3 from 1,08,791
investors and repaid an amount of `45,87,20,787/-. Further, an amount of `9,35,14,609/- is
claimed to be the payment outstanding towards 15,683 investors.

In view of the above

observations, I find that the first condition mentioned above is satisfied. I accordingly conclude that
the aforesaid first condition under section 11AA(2)(i) of the SEBI Act is satisfied.
17.

The second condition under section 11AA(2) of the SEBI Act 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.
As mentioned above, each of the plans mentioned in the documents forwarded by the Company
vide letter dated December 05, 2013 and those forwarded by the complainant have represented that
the investor would receive a higher amount than that they have invested in the schemes at the end
of the tenure of such scheme. The interim order has made the following observations in this regard:

Page 14 of 24

It is noted from the Schemes/Plans offered by Garima that an investor who opts for Lump-sum Payment Plan or
Instalment Payment Plan to purchase land, an amount is indicated as 'estimated realizable value' if exit option is

exercised by an investor as per the said plan. Similarly, it is noted from the booklet of Garima titled Career & Rule
Book for agents (At page 18 para 5) that in lieu of the money deposited by the investors, Garima assures to give duly
registered land. In case the investor is not interested in the land, Garima guarantees the payment of money as per the
plan. Apart from the same Garimaalso offers Accidental benefit as compensation to investors. For instance, if an
applicant/investor opts for Plan B1 (mentioned at para 7(b) above)and invested ` 1265 per year for 800 sq. ft plot
for 5 years, at the end of 5 years the investor is offered an exit option at `9400. This implies `3075 (`9400-

`6325) is the profit. Similarly, it is noted from booklet of Garima titled Career & Rule Book for agents, wherein
the expected cost of land after certain period is tabulated. For example, in Plan B1, a plot of area 132 square feet
worth `6600 shall have expected cost of land increased to `9400 after 5 years. The difference is the expected profit for
the investor. Similarly, different returns have been offered in different plans launched by Garima.
I have perused such observations along with the documents and agree with the same. The Company
has also admitted collecting funds under its schemes. In view of the above observations, I hereby
conclude that the second condition is also met in this case.
18.

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. As per Clause 2(a) of the Proforma of Agreement the
Company has stipulated that Garima shall carry out necessary works by conducting the survey, demarcation,
clearing and related jobs/ works on behalf of the customer. Further, it shall procure and install bore wells, open bells
and other water points and install motors, pump sets and other facilities main pipelines, electrical installations and
temporary sheds/ structures required for the development of property. Garima shall keep accounts with reference to the
income and expenditure incurred /to be incurred, pertaining to the development and maintenance of the entire project
site, which includes the said property.

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As per clause 3 of proforma of agreement, it is stated Garima shall have the rights to develop and maintain
the said property in consultation with Engineers/ experts, customer shall not ordinarily interfere with the method and
mode of development and maintenance of the said property.
As per clause 14 of general terms & condition of registration letter, it is stated Garima shall have first
charge on said property on account of the unpaid instalments for services / development / maintenance charges and for
other incidental expenses incurred by Garima. The said property cannot, in any other manner be sold, assigned,
mortgaged, pledged or alienated without obtaining No dues certificate from the Garima by the applicant.
Paragraph 11 of the Rules & Regulations of the sample registration letter provided by Garima states
that these plots which are developed by the company in various parts of the country and will be of similar sizes (i.e.
800 sq. ft. & 1200 sq. ft. respectively). The plots would be numbered and identified by the company and thereafter be
allotted to the applicants, the said plot may be allotted to the applicants anywhere and in any location, at the discretion
of the management.. However, in the registration letter, the whereabouts of the land said to be allotted
to the investor is not mentioned. This would show that the Company is operating a scheme with
purchase of lands as the underlying. The Company has also not provided details of sale deeds it has
registered in favour of its investors.
From the features of the scheme, it can therefore be noticed that the Company/its management
have the sole right to manage the contribution or property/investment forming part of the scheme
and the investors do not have any day-to-day control over the management and operation of the
scheme or arrangement. I accordingly conclude that the scheme satisfies the third and fourth
conditions stipulated in section 11AA(2)of the SEBI Act.
19.

From theabove findings and observations, I conclude that the scheme offered by the

Company with a promise of return satisfies 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.

I also refer to the following observation of the

HonbleSupreme Court in the matter of PGF Limited vs. UoI and another (ref.
MANU/SC/0247/2013):

Page 16 of 24

"..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 requirement of registration and regulation of collective investment schemes as mandated under
section 11(2)(c) and 12 of the SEBI Act therefore assumes much importance. 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
Honble 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 subSection (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."
20.

To launch or carry on 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/

Page 17 of 24

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.
21.

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, 2013. 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.
22.

.
Therefore, havingconcluded 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
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:

Page 18 of 24

(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.
23.

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. As per the reply dated December 05, 2013, the
Company had mentioned that it had collected an amount of `55,22,35,396/- under its Plans from
1,08,791 investors and repaid an amount of `45,87,20,787/- and that an amount of `9,35,14,609/is claimed to be the payment outstanding towards 15,683 investors. However, the Company has not
proved the veracity of such claim of refunds with documents. It has also not submitted any
verifiable proof to SEBI. Therefore, the claim of refunds cannot be accepted at this stage.
24.

The interim order has issued directions against the past and present directors namely Mr.

BanwariLalKushwah, Mr. BalkishanKushwah, Mr. ShivramKushwah, Mr. BanabarilalLodhi, Mr.


Bijendra Pal Singh and Mr. Jitendra Kumar.
Of the above persons, Mr. BanabarilalLodhi, Mr. ShivramKushwah and Mr. Jitendra Kumar are the
present directors (as per data in MCA website accessed on May 02, 2016) of the Company.
The following table provides the details of the tenure of the above said 6 persons in the Company:
Sr.

Name of Director

Appointment Date

No.

Page 19 of 24

Cession Date

Mr. BanwariLalKushwah (01829943)

October 29, 2007

July 20, 2010

Mr. BalkishanKushwah (02338533)

November 17, 2007

April 15, 2013

Mr. ShivramKushwah (02338542)

November 17, 2007

Continues as a director

Mr. BanabarilalLodhi (01759136)*

July 06, 2010

Continues as a director

Mr. Bijendra Pal Singh (01781312)

October 29, 2007

November 20, 2007

Mr. Jitendra Kumar(06719377)

October 23, 2013

Continues as a director

*as per another form (View director details) from MCA portal, it is mentioned that this noticee was a
director in the Company from 29.10.2007 to 20.11.2007. However, as he is shown as a present director in
another MCA record, the same has been considered.
Regarding the liability of the above persons, I note that
(a) 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 being responsible for the
conduct of the business of a company shall be liable for any non-compliance of law and such
liability shall devolve on individual directors also. Accordingly, a director who is part of a
companys board shall be responsible and liable for all acts carried out by a company unless
exemptions are provided. The present case involves a Company that has mobilized public
funds from gullible investors through its unregistered collective investment schemes. In this
regard, the following observations made by the Honble High Court of Madras in
MadhavanNambiar vs Registrar of Companies (2002 108 Comp Cas 1 Mad) are important to note:
13. . A director either full time or part time, either elected or appointed or nominated
is bound to discharge the functions of a director and should have taken all the diligent steps
and taken care in the affairs of the company.
14. In the matter of proceedings for negligence, default, breach of duty, misfeasance or breach of
trust or violation of the statutory provisions of the Act and the rules, there is no difference or
distinction between the whole-time or part time director or nominated or co-opted director and the

Page 20 of 24

liability for such acts or commission or omission is equal. So also the treatment for such violations
as stipulated in the Companies Act, 1956.

(b) The Company was incorporated on October 29, 2007. SEBI on perusal of the Balance
Sheets from FY 2009-2010 till 2012-2013 has noted that amounts were mobilized by the
Company under Advance for plot booking. It can be said that the Company started
mobilizing funds under its schemes immediately after its incorporation. Therefore, the
persons who were the directors from such date would be liable for the contravention as
found against the Company. The interim order has stated that Mr. BanwariKushwah and
Mr. BalkrishanKushwah had resigned from the directorship with effect from July 20, 2010
and April 15, 2013 respectively.
(c) I therefore, find Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr. BanabarilalLodhi, Mr.
ShivramKushwah, Mr. Bijendra Pal Singh and Mr.Jitendra Kumarliable for the
contraventions committed by the Company in launching and operating unregistered CIS, in
violation of section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations and
contravening regulation 4(2)(t) of the PFUTP Regulations. The Company and the above
persons have also not provided the information sought by SEBI vide letter dated January 22,
2014 including the details such as scheme-wise list of investors and their contact numbers
and addresses and details of agents along with address, money mobilized and commission
paid. This is a breach of a direction issued vide the interim order.
25.

In view of the foregoing, in the interest of investors and the securities market, 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) Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.
BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra
Kumarshall abstain from collecting any money from the investors or launch or carry out any

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Collective Investment Schemes including the scheme which have been identified as a
Collective Investment Scheme in this Order.
(b) Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.
BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra
Kumarshall wind up the existing Collective Investment Schemes and refund through Bank
Demand Draft or PayOrder, the moneycollected by the said company under the schemes
with returns which are due to its investors as per the terms of offer within a period of three
months from the date of this Order and thereafter within a period of fifteen days, submit a
winding up and repayment report to SEBI in accordance with the SEBI (Collective
Investment Schemes) Regulations, 1999, including the trail of funds claimed to be refunded,
bank account statements indicating refund to the investors and receipt from the investors
acknowledging such refunds.
In case the Company has made refunds as claimed in its submission, it shall produce the
proof for such repayment as directed above and also submit a certificate from Chartered
Accountant as directed in sub-paragraph (d) below.
(c) Garima Real Estate & Allied Limited/its present management are permitted to sell the assets
of the Company only for the sole purpose of making the refunds as directed above and
deposit the proceeds in an Escrow Account opened with a nationalised Bank.
(d) After completing the aforesaid repayments in terms of sub-paragraph (b) above, the
Companyshall file a certificate of such completion with SEBI, within a period of 15 days,
from two independent peer reviewed Chartered Accountants who are in the panel of any
public authority or public institution. For the purpose of this Order, a peer reviewed
Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by
the Institute of Chartered Accountants of India (ICAI).
(e) Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.
BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra Kumarare

Page 22 of 24

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.
(f) Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.
BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra Kumarare
restrained from accessing the securities market and are prohibited from buying, selling or
otherwise dealing in securities market for a period of 4 years.
(g) In the event of failure by Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr.
BalkrishanKushwah, Mr. BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh
and Mr. Jitendra Kumarto comply with the above directions, the following actions shall
follow:
- Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.
BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra
Kumarshall remain restrained from accessing the securities market and would further be
prohibited from buying, selling or otherwise dealing in securities, even after the period of4
yearsof restraint imposed in sub-paragraph (f) above, till all the Collective Investment
Schemes of the Companyare wound up and all the monies mobilized through such
schemes are refunded to its investors with returns which are due to them.
- SEBI would make a reference to the State Government/ Local Police to register a civil/
criminal case against the Company, its promoters, directors and its managers/ persons incharge of the business and its schemes, for offences of fraud, cheating, criminal breach of
trust and misappropriation of public funds;
- SEBI would also make a reference to the Ministry of Corporate Affairs to initiate
appropriate action as deemed fit.

Page 23 of 24

- SEBI would make a reference to the Ministry of Corporate Affairs to restrain abovementioned noticee directors from being directors in other companies.
- SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and
regulations framed thereunder against the Company and others responsible.
26.

This order shall come into force with immediate effect.

27.

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 Garima Real Estate & Allied Limited, Mr.
BanwariKushwah, Mr. BalkrishanKushwah, Mr. BanabarilalLodhi, Mr. ShivramKushwah, Mr.
Bijendra Pal Singh and Mr. Jitendra Kumarincluding other persons who are in default, for the
violations as found in this Order.
28.

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

action.

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Date: May 03, 2016
Place: Mumbai

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