Confirmatory Order in the matter of Hit Kit Global Solutions Limited

UNDER SECTIONS 11, 11(4), 11A AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

IN THE MATTER OF S. NO. NAME PAN 1 HIT KIT GLOBAL SOLUTIONS LTD AAACR2929Q

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”), in the interest of investors, vide its letter dated August 7, 2017 took pre-emptive interim measures under section 11(1) of Securities and Exchange Board of India Act, 1992 (“SEBI Act”), in respect of certain listed companies identified as “shell companies” by the Ministry of Corporate Affairs including Hit Kit Global Solutions Ltd. (hereinafter referred to as “HKGSL” / “Company”). In view of the said objective, SEBI vide the said letter dated August 7, 2017 also placed the scrip of HKGSL in the trade to trade category with limitation on the frequency of trade and imposed a limitation on the buyers by way of 200% deposit on the trade value, so as to alert them while trading in the scrip. The said measures were initiated by SEBI pending final determination after verification of credentials and fundamentals of the company by the exchanges, including by way of audit and forensic audit if necessary. The measures also envisaged, on the final determination, delisting of the company from the stock exchange, if warranted. By virtue of these measures, trading in the scrip was not suspended, but was allowed under strict monitoring so that investors could take informed investment decisions till SEBI and Stock Exchanges complete their detailed examination of such companies.

2. Aggrieved by the aforesaid letter dated August 7, 2017 issued by SEBI, HKGSL filed an appeal No. 192 of 2017 before the Hon’ble Securities Appellate Tribunal (hereinafter referred to as “SAT”). The Hon’ble SAT vide order dated August 17, 2017, allowed HKGSL to withdraw the appeal with liberty to pursue the representation

Order in the matter of Hit Kit Global Solutions Ltd.

filed before SEBI against the said letter dated August 7, 2017. Hon’ble SAT directed SEBI to dispose of the representation of HKGSL as expeditiously as possible and in any event within a period of three weeks from August 17, 2017. Hon’ble SAT also held that passing of any order on the representation made by the appellant would not preclude SEBI from further investigating the matter and initiate appropriate proceedings if deemed fit.

3. Pursuant to the decision of Hon’ble SAT that the communication of SEBI dated August 7, 2017 is in the nature of quasi-judicial order, in the interest of natural justice, an opportunity of personal hearing was granted to HKGSL on August 28, 2017. The authorized representative of HKGSL had appeared for the said hearing.

4. Thereafter, SEBI vide Interim Order dated September 7, 2017 (hereinafter referred to as “Interim Order”), had modified, subject to para 21 of the interim order, the actions envisaged in SEBI’s letter dated August 07, 2017 and the consequential actions taken by Stock Exchanges, against HKGSL as under:

i. The trading in securities of HKGSL shall be reverted to the status as it stood prior to issuance of letter dated August 7, 2017 by SEBI. ii. Stock Exchange shall appoint an independent auditor to conduct forensic audit of the financials of HKGSL to establish their genuineness. iii. The limitation on the transfer of shares held by the Promoters and Directors as mentioned in para 1(b) of SEBI’s letter dated August 07, 2017 is removed. iv. The other actions envisaged in SEBI’s letter dated August 07, 2017 in para 1 (d) as may be applicable, and the consequential action taken by Stock Exchanges shall continue to have effect against HKGSL.

5. The prima facie observations in the Interim Order are as under:

1) The financials of the company are dominated by "Long term Loans and advances" of Rs. 9.65 crore as on March 31, 2016 as against the networth of Rs. 9.73 crore as on March 31, 2016. From the loans and advances certain amounts of Rs. 5.84 crore has been shifted to Capital work-in progress and Rs. 3.87 Crore has been shifted to other current assets in year 2016-17 as shown in Balance sheet of FY 2016-17.

2) It is noted from the submissions of the company that in FY 2015-16 it had the made a profit of Rs. 11 lakhs from sale of investment of Rs. 4.81 crore made in shares of Shree Gajratna Corporation Pvt. Ltd. which is "Other income" for the company. However, in the audited financial results of the company for the financial year 2015-16, the amount of Rs. 11.00 lakhs is not reflected in the Statement of Profit & Loss Account for the year ended March 31, 2016 under Income – Other Income, which is reflected as "Nil". Further, the Cash flow statement of the Company for the year ended March 31, 2016, does not reflect this transaction of sale of shares of Shree Gajratna Corporation Pvt. Ltd.(SGCPL) under the head "cash flow from investment activity".

3) In addition to above, the company has also submitted that “The Sales shown in the financial statements comprises of fresh vegetables as explained in point no. 8 above". This indicates that the amount of Rs. 11 lakhs from the sale of shares of SGCPL is prima facie not reflected in their Statement of Profit & Loss Account for the year ended March 31, 2016 and the amount of Total Income and Profit of the company to that extent is understated. Further, the company has also not stated the dates on which this advance was given, the investment was sold and the parties to which the advance is given and investment is sold. Also, the "Articles of Agreement" dated January 31, 2016, as stated in the response of the company, through which such advance for purchase of land is given is not provided for verification.

4) In view of the above, I find that there is a lack of clarity with regard to the above transaction of the company relating to shares of SGCPL and the information provided by the company to justify the same is inadequate.

5) As regards the explanation sought from the company with respect to Rs. 3.87 Crore given towards development and construction (Joint Venture), it has not provided details pertaining to date of payment, parties to whom advance has been given, contracts entered into in this regard, etc. Also, no documentary evidence of payment or the final term sheet as stated by the company has been submitted.

6) Further, the advance of Rs. 3.87 crore is also appearing under the head "Long Term Loans and Advances – Other advances" from financial year ended 31.03.2015 and in the Balance sheet for the year ended March 31, 2015 and March 31, 2014, the head " Long term Loans and advances shows almost the same amount. Hence, from the above balance sheets, it prima facie appears that the amount has been carried forward from the financial year 2013-14. The authenticity of this advance also could not be verified as no supporting documents to this effect were provided by the company. The amount of advance appears to have been paid more than 3 financial years ago for the said JV by the company. In this regard, since the amount of Rs. 3.87 crore, has not been fructified for more than 3 financial years, prima facie there arises a suspicion regarding the authenticity of the said transaction.

7) With regard to the explanation sought from the company with respect to Rs. 100.00 lakhs of advance for the procurement of second hand and used water 'Lift Irrigation' equipments, the company has not provided details regarding date of payment and party to whom advance has been given. Also, no documentary evidence of payment of advance has been submitted.

8) Further, the advance of Rs. 100 lakhs is also appearing under the head "Long Term Loans and Advances – Other advances" from financial year ended 31.03.2015 and in the Balance sheet for the year ended March 31, 2015 & March 31, 2014, the head " Long term Loans and advances” shows almost the same amount. Hence, from the above balance sheets, it prima facie appears that the amount has been carried forward from the financial year 2013-14.

9) The amount of advance appears to have been paid more than 3 financial years ago for the said purchase of irrigation equipment by the company. The authenticity of this advance also could not be verified as no supporting documents to this effect were provided by the company. In this regard, since the amount of Rs. 100 lakhs has not been fructified for more than 3 financial years, prima facie there arises a suspicion regarding the authenticity of the said transaction.

6. Vide said interim order, SEBI had advised HKGSL to file its reply/objections to the said interim order within 21 days from the date of receipt thereof and also indicate in its reply whether it desires to avail an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard.

7. Vide email dated September 7, 2017, a copy of interim order was forwarded to HKGSL. Subsequently, a physical copy of interim order was also sent to HKGSL in its address on record, and the same was delivered.

8. HKGSL submitted its reply/objections to the Interim order vide letter dated September 26, 2017 and also requested that an opportunity of hearing may be granted on October 05, 2017 11.30 am. Vide letter dated October 10, 2017, HKGSL again requested to schedule the hearing on October 30, 2017 at 11.30 am. In that regard, SEBI vide letter dated October 16, 2017, communicated to HKGSL that hearing has been scheduled on October 31, 2017 at 3.00 p.m.

9. HKGSL vide letter dated October 27, 2017, requested SEBI to re-schedule the hearing to October 30, 2017 or November 06, 2017 or November 08, 2017 at 4.00 pm, however the said request was not acceded to. On the scheduled date of hearing i.e. October 31, 2017, HKGSL failed to attend the hearing and instead, vide a letter dated October 31, 2017, again requested SEBI to adjourn the hearing to November 06, 2017 or November 08, 2017.

10. Thereafter, vide letter dated November 06, 2017, SEBI communicated to HKGSL that hearing in the matter has been re-scheduled to December 19, 2017 at 3:00 p.m. on the said date of hearing, the authorized representatives of HKGSL appeared and made, inter alia, the following submissions:

i) There is no prima facie case for appointment of forensic auditor in respect of Hit Kit Global Solutions Ltd. ii) SEBI can only intervene when there is a reasonable belief of misrepresentation of accounts or that there is an illegal activity going on in the company. iii) Direction of a forensic audit also has to be backed by documents. iv) Hit Kit Global Solutions Ltd as a company is regularly being audited. v) Income Tax authorities and other authorities have not found anything adverse against the company. vi) In respect of the land mentioned in the interim order, it was submitted that a project is going on the said land. In respect of the said land, a term sheet was entered into earlier and the agreement was entered into subsequent to passing of the interim order.

11. During the hearing, the company sought permission to file additional reply in the matter along with underlying documents, bank statements cross-referencing the relevant entries therein, and other supporting documents. As requested by the company, it was granted 15 days’ time to file the above.

12. HKGSL submitted its written submissions on January 08, 2018 and stated that “in order to explain our case more conspicuously and to dispel any suspicions of whatsoever nature, we hereby request the Hon’ble Whole Time Member, to give us an opportunity of hearing in the matter.” The said request of the company was not acceded in light of the fat that an opportunity of hearing has already been granted and thereafter, sufficient time to file written submissions along with supporting documents has also been granted to the company.

13. Subsequently, clarification with respect to certain land documents was sought from the company vide mail dated March 20, 2018 stating that “In the reply dated January 08, 2018, the company has attached Extract of Land Record (Namuna 8) by Gram Panchayat confirming possession of land together with structure standing thereon. In this regard, you are requested to also provide the 7/12 extract for the Gut no. 151, 155A, 158 and also the Namuna 8 in the name of HitKit Global Solutions Ltd. as company vide reply dated March 26, 2018 submitted the computerized copies of the Namuna 8 and 7/12 extract for the land in Lonavala.

14. Further, to cross verify the bank statements submitted by the company along with its reply dated January 08, 2018, information was also sought from the relevant bank.

15. The summary of documents submitted by HKGSL is as under:

Sr. Date of Documents submitted No. submission 1. September 26, i. Financial Table for period FY 2012-13 to FY 2016-17 2017 showing the bifurcation of Long term loans and advances ii. JV between SGCPL and HKGSL dated September 15, 2017 for development of land in Lonavala iii. Share purchase agreement dated 10.03.2014 between Mr. Anup Mittal and HKGSL for purchase of 312000 shares of SGCPL iv. Board resolution dated 10.03.2014 enabling the purchase of shares of SGCPL v. Articles of agreement for purchase of land – Lonavala with Sunnidhi Infrastructure Developers Pvt Ltd.(SIDPL) dated January 30, 2016 vi. Receipt showing payment details extract from “Articles of Agreement” vii. Purchase order for procurement of irrigation equipment dated December 07, 2013 2. January 08, i. Extract of Land Record (Namuna 8) issued by Gram 2018 Panchayat – Lonavala ii. Articles of agreement for purchase of land – Lonavala with Sunnidhi Infrastructure Developers Pvt Ltd.(SIDPL) dtd January 30, 2016 iii. MOU dated March 31, 2014 between HKGSL, Engineers India Associates and Township Developers – Land in Borivali Mumbai iv. Bank statement highlighting payment of certain advance made in 2015-16. v. Bank statement highlighting payment of purchase consideration of shares of SGCPL along with ledger account vi. Photocopy of 143(3) order dated 15.11.2016 passed by IT department for A.Y. 2014-15 vii. Summons u/s 131 dated 05.09.2017 issued by Deputy Director IT. 3. March 26, 2018 Computer generated: i. Namuna 8 of land in Lonavala ii. 7/12 of land in Lonavala

16. The finance table submitted by HKGSL is as under: Ite Party name Purpose 31.3.13 31.3.14 31.3.15 31.3.16 31.3.1 m 7 No. 1 Sun Nidhi Irrigation 95.00* 100.00** NIL** Constructio equipment * n co to be used in Constructio n project at Pune 2 Sun Nidhi Irrigation -- 100.00 NIL** Constructio equipment n co for resort project near Lonavala 3 Sun Nidhi PMC -- 25.95* NIL** Constructio n co 4 Webnet Project 70.72* NIL** --infoways ltd managemen (receive t software d back in Ite Party name Purpose 31.3.13 31.3.14 31.3.15 31.3.16 31.3.1 m 7 No. FY13- 14) 5 Engineers Real estate 399.74 395.00** 387.00** Nil* India projects at * * * Associates PUNE 6 SGCPL Investment - 387.95 NIL** in JV * 7 Miscellanea Business 49.14* NIL** 1.01* 1.00*** 1.00** us parties purpose (received * less than back in Rs. 11akhs FY 13-each 14) 8 SIDPL Purchase 450.00 NIL** of land * 9 Apple Other 30.45* NIL ** capital advances (received managemen back in t ltd FY 13- 14) 10 Brook Multi Investment 174.09* NIL ** Trade in shares of (set off construction angst company share purchase in FY 13- 14) Total 724.71 490.00 488.01 964.90 1 Round off 725 490.00 488 965 1 to *Fresh advances given during the year ** Advances given in the earlier year either received back or deployed towards acquiring investment/CWIP/current asset during the year. ***Advances carried forward from previous year

17. The replies of the company to the findings of the Interim Order, made vide communications dated September 26, 2017, January 08, 2018 and March 26, 2018 are summarized as under:

I. Observations in Interim Order: The financials of the company are dominated by "Long term Loans and advances" of Rs. 9.65 crore as on March 31, 2016 as against the net worth of Rs. 9.73 crore as on March 31, 2016. From the loans and advances certain amounts of Rs. 5.84 crore has been shifted to Capital work-in-progress and Rs. 3.87 Crore has been shifted to other current assets in year 2016-17 as shown in Balance sheet of FY 2016-17.

Company reply: i. In the FY 12-13, the company had endeavored to enter into the real estate sector because firstly the government policies were providing impetus to the growth to the sector and secondly the real estate activities were in tune with the activities pursued by the company since its incorporation and IPO. The company had planned investments in real estate projects by making long term advances of Rs.725 lakhs as in at Balance Sheet 31.3.2013. ii. On analysis of the Financial Table for the period FY 12-13 to FY 16-17, it can be seen that in the FY 15-16, Long term loans and advances are stated at Rs.965 lakhs deployed towards investment and acquiring real estate projects as at 31.3.16 vis-a-vis the Net Worth of Rs.973 lakhs as at 31.3.16, and small amount of Rs.8 lakhs (i.e. Net Worth 973 less Advances 965 = 8 lakhs) are deployed in working capital margin in retailing business activities of fresh vegetables iii. It is pertinent to note that all throughout the financial period of preceding five years under scrutiny, the company has maintained a Zero Debt Status. There is no erosion of capital, at any point of time, during the said period of five years the company has not recorded any unforeseen losses other than small operational loss in one or two financial years. It can be observed from the close analysis of the financial table that Long term loans and advance stated at Rs. 965 lakhs as at 31.3.16 have been utilized in the FY 16-17 for acquiring of Capital Work in Progress of Rs. 584 Lakhs (Articles of Agreement dated 30.1.2016 and purchase order for procurement of irrigation equipment) and Rs.387.95 lakhs investment in Joint Venture under the head Other Current Asset as at 31.3.17 as observed in para 16 (1) of the said order. It is pertinent to note that in the current FY 17-18, the said amount of Rs. 387.95 lakhs has been duly invested in Joint Venture entity (A.O.P.) in the name and style of M/s. Engineers India Associates vide Joint

Venture Deed executed on 15.9.2017, thereby making full use of limited resources at the disposal of the company.

II. Observations in Interim Order:  It is noted from the submissions of the company that in FY 2015-16 it had the made a profit of Rs. 11 lakhs from sale of investment of Rs. 4.81 crore made in shares of Shree Gajratna Corporation Pvt. Ltd. which is "Other income" for the company. However, in the audited financial results of the company for the financial year 2015- 16, the amount of Rs. 11.00 lakhs is not reflected in the Statement of Profit & Loss Account for the year ended March 31, 2016 under Income – Other Income, which is reflected as "Nil". Further, the Cash flow statement of the Company for the year ended March 31, 2016, does not reflect this transaction of sale of shares of Shree Gajratna Corporation Pvt. Ltd.(SGCPL) under the head "cash flow from investment activity".  In addition to above, the company has also submitted that “The Sales shown in the financial statements comprise of fresh vegetables as explained in point no. 8 above". This indicates that the amount of Rs. 11 lakhs from the sale of shares of SGCPL is prima facie not reflected in their Statement of Profit & Loss Account for the year ended March 31, 2016 and the amount of Total Income and Profit of the company to that extent is understated.  Further, the company has also not stated the dates on which this advance was given, the investment was sold and the parties to which the advance is given and investment is sold. Also, the "Articles of Agreement" dated January 31, 2016, as stated in the response of the company, through which such advance for purchase of land is given is not provided for verification. In view of the above, I find that there is a lack of clarity with regard to the above transaction of the company relating to shares of SGCPL and the information provided by the company to justify the same is inadequate.

Reply of Company dated 23.09.2017: iv. In FY 2013-14, company had purchased 312000 equity shares of Shree Gajratna Corporation Pvt Ltd (SGCPL) for a total consideration of Rs.480.85 lakhs in two tranches (i)184000 equity shares from the nominee shareholder of Hazoor Multi Projects and (ii) 128000 equity shares from the nominee shareholder of Brook Multi Trade, on 10.3.2014 (Share Purchase Agreement dated 10.3.14 for purchase of 312000 shares with enabling Board Resolution dated 10.3.14), v. (Tranche 1) Total purchase consideration of Rs.278.73 lakhs paid to erstwhile shareholders of SGCPL Hazoor Multi Projects and said consideration of Rs.278.73 lakhs were paid from 10.3.2014 to 31.3.2014. (Ledger A/c, FY13-14 showing payments made for purchase of shares). Tranche 1 shares were divested in June 2015 (FY15-16) at a sale price of Rs.290.05 lakhs to SIDPL, thereby yielding a surplus of Rs. 11.32 lakhs net off acquisition cost of Rs.278.73 lakhs, as stated in the Company's earlier submission dated 4.9.17. (Ledger A/c, FY 15-16 showing receipts on sale of shares). vi. (Tranche 2) Total purchase consideration of Rs.202.12 lakhs paid to erstwhile shareholder of SGCPL Brook Multi Trade, out of which, Rs. 174.09 lakhs were set off against advances paid to Brook Multi Trade during FY 12-13 and balance amount of Rs.28.02 lakhs was paid as full and final payment Rs.0.66 lakhs on 20.3.14 and Rs.27.37 lakhs on 21.3.14.

(Ledger A/c, FY13-14 showing payments made for purchase of shares). Tranche 2 shares were divested in June 2015 (FY15-16) at a sale price of Rs.190.80 lakhs to the arranger party (Anup Mittal) thereby making a loss of approx. Rs.11.32 lakhs net off acquisition cost of Rs.202.12 lakhs. (Ledger A/c, FY 15-16 showing sale of shares). vii. In the earlier submission dated 4.9.17, it was mentioned that company "a profit of Rs. 11.00 lakhs appx. on divestment of share and to adhere to the deadline given by SEBI vide their email dated 29.8.17, that “You are requested to provide the above information at the earliest, latest by Sept 04, 2017 morning." and the very fact that the company had also made a loss of Rs. 11.32 lakhs on divestment of second tranche, was missed out and overlooked, which was just an error of omission and without any intention to mislead the authorities. In view of the above submission and looking at the insignificant materiality of the information, Hon'ble Whole Time Member would be pleased to pardon the error and consider it as amendment to the earlier submission dated 4.9.17 to that effect. viii.

It is evident from the above submission that Total Income/Other Income and Profit of the company to that extent was not understated as mentioned in para 16(3) of the said order and that the Statement of Profit & Loss Account for the year ended March 31, 2016 shows a true and fair view of the financials of the company. ix. The observation regarding Cash Flow Statement as at 31.3.16 reflecting under the head "cash flow from investing activities" as Nil was in accordance with generally accepted accounting principles and Accounting Standard-3 (AS-3) issued by the ICAI as the cash inflow on disposal of investment and the cash outflow on purchase of investment were reported on a net basis as defined in AS-3, in the Cash Flow Statement as at 31.3.16. The sale of investment of SGCPL shares and the purchase of investment of land acquired in the said FY15-16 were "investing activities" as defined under AS-3. Hence cash inflow of Rs.480.85 lakhs on disposal of investment were net off against the cash outflow of Rs.480.85 lakhs on purchase of investment of land, (Rs. 450 lakhs investment in land, plus Rs. 25.95 lakhs PMC fees as capital expenses for land refer Articles of Agreement dated 30.1.16 annexed hereinabove and Rs. 4.90 lakhs incidental capital expenses aggregating to Rs.480.85 lakhs).

Accordingly the "Cash flow from investing activities" in Cash Flow Statement as at 31.03.20116 shown as NIL in terms of AS- 3. x. The land was purchased from SIDPL and the advance of Rs. 450 lakhs was paid during the FY 2015-16, i.e., Rs. 160 lakhs were paid from 3.10.15 to 31.12.15 and Rs. 290 lakhs were adjusted against the amount receivable from SIDPL against sale of shares of SGCPL to them (Receipt showing payment details extract from "Articles of Agreement" … in reply to para 16(3) of the said order). xi. The investment in shares of SGCPL was sold to SIDPL and details of the sale of investment are given in our reply herein above to para 16(2) of the said order. ("Articles of Agreement" dated January 30, 2016 for purchase of land … in para no. 11(c) of … reply).

xii. Vide reply dated January 08, 2018, a. Item No (8) advance of Rs.450.00 lakhs given for purchase of land (page no. 5 of Articles of Agreement dated 30.01.2016) showing payment of Rs. 160.00 lakhs through bank is annexed for ready reference and corresponding entry of Rs. 160.00 lakhs duly highlighted in Bank Statement in yellow color and balance amount of Rs.290.00 lakhs shown as Receipt in page no.5 duly highlighted in yellow color of Articles of Agreement dated 30.01.2016, which was adjusted against the amount of Rs.290.00 lakhs receivable on account of sale of shares to Sun-Nidhi Infrastructure Developers Pvt Ltd (Land Seller vide Articles of Agreement dated 30.01.2016). b. Extract of Land Record (Namuna 8) issued by Gram Panchayat confirming the possession of the land together with the structure standing thereon, is recorded in the name of the company Hit Kit Global Solutions Ltd, in respect of Plot no. 1, 2 and 3 of the sanctioned Layout having Gut no. 151, 155A, 158, Village Pethshahur, Taluka Mulshi, Ambavne, purchased vide Articles of Agreement dated 30.01.2016 by highlighting therein the description of the land in clause no.(a) on page no.2 of the said agreement.

III. Observation in Interim Order:  As regards the explanation sought from the company with respect to Rs. 3.87 Crore given towards development and construction (Joint Venture), it has not provided details pertaining to date of payment, parties to whom advance has been given, contracts entered into in this regard, etc. Also, no documentary evidence of payment or the final term sheet as stated by the company has been submitted.  Further, the advance of Rs. 3.87 crore is also appearing under the head "Long Term Loans and Advances – Other advances" from financial year ended 31.03.2015 and in the Balance sheet for the year ended March 31, 2015 and March 31, 2014, the head " Long term Loans and advances shows almost the same amount. Hence, from the above balance sheets, it prima facie appears that the amount has been carried forward from the financial year 2013-14. The authenticity of this advance also could not be verified as no supporting documents to this effect were provided by the company. The amount of advance appears to have been paid more than 3 financial years ago for the said JV by the company. In this regard, since the amount of Rs. 3.87 crore, has not been fructified for more than 3 financial years, prima facie there arises a suspicion regarding the authenticity of the said transaction.

Reply of Company: i. Please refer to para no. 11(c) of our reply confirming that the advance of RS.387.95 lakhs was given to SGCPL for investment in Joint venture in FY15-16 (refer Financial Table annexed herein above) directly by Engineers India Associates out of the advance given to them by the Company for the purpose of another real estate project. Subsequently in the FY16-17 it was shown under the head Other Current Assets- Investment in Joint Venture and finally the Joint Venture between Hit Kit Global Solutions Ltd and Shree Gajratna Corporation Pvt. Ltd have been formed vide execution of Joint Venture Deed on 15.9.2017. ii. Please refer to para no. 11(c) of our reply confirming that the advance of RS.387.95 lakhs has not been carried forward from the FY 13-14 but was given to SGCPL as advance for investment in Joint venture in FY15-16 and it was directly paid by Engineers India Associates against the advance given to them by the Company for the purpose of another real estate project as the said Project could not be implemented in time as envisaged. Therefore it is evident from the fact that the investment of Rs. 387.95 lakhs has been fructified into Joint Venture AOP within 2 years of investment. Therefore leaving no room for any kind of suspicion regarding the authenticity of the transaction. It is pertinent to note that the gestation period of real estate projects are normally 3-4 years and are long term projects providing substantial revenue to the company on implementation of the project, (copy of Joint Venture Deed annexed). iii. Vide letter dated January 08, 2018, the company has stated that Item no. (5) of the Flow Chart - Advance given for Real estate project for amount of Rs. 395 lakhs in F.Y. 2013-14 (MOU dated 31.3.2014 annexed for ready reference) given out of brought forward amount of Rs. 399.74 from earlier years and corresponding entry of Rs. 4.74 lakhs received back in F.Y. 2013-14 duly highlighted in Bank Statement in green colour and corresponding entry of Rs. 8 lakhs received back in F.Y. 2014- 15 duly highlighted in Bank Statement in green colour. Item No. 6 an amount of Rs. 387.95 shown as Advance for investment in JV resort project in FY 2015-16 out if the advance of Rs. 387.00 lakhs shown in Item no. 5 in FY 2014-15 brought forward from earlier years highlighted in green colour in Flow Chart.

IV. Observation in Interim Order:  With regard to the explanation sought from the company with respect to Rs. 100.00 lakhs of advance for the procurement of second hand and used water 'Lift Irrigation' equipments, the company has not provided details regarding date of payment and party to whom advance has been given. Also, no documentary evidence of payment of advance has been submitted  Further, the advance of Rs. 100 lakhs is also appearing under the head "Long Term Loans and Advances – Other advances" from financial year ended 31.03.2015 and in the Balance sheet for the year ended March 31, 2015 & March 31, 2014, the head " Long term Loans and advances” shows almost the same amount. Hence, from the above balance sheets, it prima facie appears that the amount has been carried forward from the financial year 2013-14.  The amount of advance appears to have been paid more than 3 financial years ago for the said purchase of irrigation equipment by the company. The authenticity of this advance also could not be verified as no supporting documents to this effect were provided by the company. In this regard, since the amount of Rs. 100 lakhs has not been fructified for more than 3 financial years, prima facie there arises a suspicion regarding the authenticity of the said transaction.

Reply of Company: In the FY 2013-14, Rs. 95 lakhs was given as advance to Sunnidhi Construction Co. for the procurement of second hand water lift Irrigation' equipments through tenders/auctions (Purchase order annexed) to be used for the projects, then proposed to be undertaken in association with SGCPL, when the Company had invested in the shares of SGCPL in the same FY 2013-14, accordingly Rs.95 lakhs was shown under the head Long term advances as at 31.3.14 and pending the procurement Rs.100 lakhs (Rs.5 Lakhs were advanced in FY14-15) was continued to be shown under the head Long term advances as at 31.3.15, for the purpose of real estate project at Pune. Subsequently, in the FY 15-16, it was earmarked for the purpose of installation of the said irrigation equipment in resort project near Lonavala as there was invariable delay in implementation of Pune Project due to circumstances beyond our control. Subsequently, in FY 16-17, the same has been shown under Capital WIP for the said resort project. Therefore it is evident from the fact that the advance of Rs. 100 lakhs has been fructified into Capital WIP for resort project within 2 years period. Therefore, putting an end to all speculation and establishing the authenticity of the transaction.

Further, vide mail dated January 08, 2018, HKGSL submitted that, 1. Item no (1) of the Flow Chart - Advance given for Irrigation equipment amounting to Rs.95 lakhs in F.Y. 2013-14, to facilitate group farming for better cultivation of farm produce situated in Pune-Satara belt and to procure farm fresh vegetables, etc. directly from farmers for the retailing business activities of the company, duly highlighted in orange color in Flow Chart and corresponding bank entries duly highlighted in orange color. 2. Item No.3 an amount of Rs.25.95 Lakhs shown in F.Y.2015-16 given as advance vide clause No.2 page No.3 of Articles of Agreement dt:30.01.2016 (Page No.3 enclosed) duly highlighted in blue colour and corresponding entry of Rs.25.95 Lakhs duly highlighted in Bank Statement in blue colour.

Issue for consideration

Whether in light of the facts and circumstances of the case, the findings of the interim order and the submissions of the company in response thereto, the directions issued against the company vide the interim order need to be confirmed, revoked or modified in any manner?

18. Considering the above mentioned replies of HKGSL to the findings of the interim order, I observe the following:

Regarding shares of SGCPL a) In the reply dated Jan 08, 2018, HKGSL has submitted the bank statement highlighting the payment for purchase of shares from Ms. Priyanka Mittal (nominee of Hazoor Multi Projects Ltd.). From the bank statement (relevant excerpt produced below), it is observed that out of the payment of Rs. 278 lakhs, Rs. 105 lakhs was received from Aambey Valley Mountains Pvt. Ltd. (formerly known as Hazoor Aambey Valley Developers Private ltd) which is a 100 % subsidiary of Hazoor Multi Projects. Ltd (As per Annual Report of Hazoor

Multi Projects Ltd. for the period 2013-14), and around Rs. 180 lakhs was received from Webnet Infoways Ltd. (Promoter of HKGSL). Then approximately the same amount was transferred to Hazoor Multi Projects Ltd. on the same day / in a few days. (Bank statement snippet attached for reference). This circular movement of funds amongst connected parties prima facie raises a doubt on the genuineness of the transaction.

b) The share purchase agreement dated March 10, 2014 submitted by HKGSL regarding purchase of 3,12,000 shares of SGCPL from Mr. Anup Mittal worth Rs. 480 lakhs is not made on stamp paper and is also not a registered agreement which raises a doubt on its authenticity.

c) In the share purchase agreement regarding shares of SGCPL dated March 10, 2014, it is mentioned that "If the purchaser wants to dispose the investments within 18 months from the transaction date then seller shall arrange to repurchase the shares at purchase price within 3 months of intimation to sell the said shares to the seller". It is noted that the company sold the investment exactly after 15 months from the agreement in two tranches; one to Mr. Anup Mittal at a loss of Rs. 11 lacs approx. and the other to Sunnidhi Infrastructure developers Pvt. Ltd. for the exact same profit of Rs. 11 lacs (As per the ledger of Investment in SGCPL provided by the company) on June 17, 2016. However, no supporting documents for the sale transaction other than the ledger and unstamped, unregistered purchase agreement (where repurchase clause is mentioned) have been provided.

d) It is also noted that since the bonus shares in the ratio of 1:1 were issued by SGPCL, the value of its shares should have been reduced to half. The re-purchase of shares by Mr. Anup Mittal, who had sold them to HKGSL at around the same price at which he sold the shares to HKGSL (prior to the bonus issue), raises doubt as to the genuineness of the whole transaction.

e) From the above, it is observed that the fund moved in and out of the accounts of the company and connected parties for the aforesaid purchase and sale of shares. These transactions regarding the shares of SGPCL form a substantial portion of the company’s financials, and therefore, the suspicion regarding the genuineness of the said transactions and the authenticity of the financials of the company still remains.

Regarding payment of advance to Engineers India Associate and the joint venture for development and construction a) From the analysis of the documents and reply submitted by company dated September 26, 2017 and January 08, 2017, it appears that HKGSL had made an advance of Rs. 399.74 lakhs to “Engineers India Associate (EIA)”, a sole proprietorship of one of the directors of SGCPL (Shri Shrikant Upadhyay). The advance was paid in 2012-13 as per MOU dated March 31, 2014 entered between HKGSL, EIA and Township Developers Corp, for the formation of JV for development in a certain project in Borivali, Mumbai. However, as per the finance table submitted by HKGSL the advance is for Real Estate project for Pune. Thus, there is an apparent discrepancy between the documents submitted by the company and its submissions.

b) As per the terms of MOU, “if the Joint venture is unable to acquire the said property for any reasons then HKGSL will be entitled to refund of the monies invested along with simple interest of Rs. 24% p.a. payable by third party … (Township Developers Corp)”. In the reply dated September 26, 2017, HKGSL has mentioned that since the project for which the advance was given to EIA could not be implemented in the time envisaged, the amount of Rs. 387.95 lacs was transferred by EIA directly to SGCPL in 2015-16 for another JV for development of land in Lonavala. However, HKGSL has not provided any information as to receipt of interest on refund nor the same appears to have been accounted for in the books of account. As regards the claimed transfer of funds from EIA to SGCPL, no third party verifiable proof was provided by the company to show the cash flow.

c) It has been claimed by HKGSL that investment of Rs. 387.95 lacs has fructified into JV within 2 years of investment. This claim does not appear to be justified because even if it is accepted that EIA transferred the advance amount directly to SGCPL for another JV, the same was done because the earlier MOU did not yield any result for more than 2 years. Also, from the record provided by HKGSL, there is no information as to the receipt of interest on the advance paid to EIA by HKGSL as stipulated in the MOU. Further, it is noted from the reply of HKGSL that the claimed transfer of advance from EIA to SGCPL took place in 2015-16 but since then also, the execution of work for the purpose of which the JV was entered, has not taken place. It is also noted that the MOU in respect of the above claimed transfer of advance amount from EIA to SGCPL, was entered into only in September 2017. The above indicates that the amount of Rs. 387 lacs approx. stated to be given to EIA in FY 2012-13 has not fructified till date.

d) In view of the above, there is still a lack of clarity regarding the genuineness of the above transaction and the same needs to be inquired.

Regarding purchase order for irrigation equipment a) HKGSL has submitted only the purchase order dated December 07, 2013 issued by HKGSL to Sunnidhi Construction Co. for supply and installation of irrigation equipment. As per the purchase order, Rs. 100 lakhs was to be paid on identification of the equipment, and fixation of the procurement terms. Further, from the bank statements provided by company, it appears that HKGSL had given advance of Rs. 30 lakhs on December 07, 2013 which is the date of purchase order, and Rs. 70 lakhs was given in March – April 2014. This indicates that identification of the equipment, and fixation of the procurement terms has been complete since April 2014. However, no purchase invoice or documentary evidence as to the identification of the equipment, and fixation of the procurement terms has been provided by HKGSL for verification.

b) It is noted that the advance in 2013-14 was given for resort project in Pune and then the amount was shifted to Capital WIP in 2016-17 for a project in Lonavala. Hence it is prima facie incorrect to say that the advance of Rs. 100 lakhs has been fructified into Capital WIP for resort project within 2 years period, as the actual purchase of equipment has not yet taken place till date against the advance given in FY 2013-14. The transfer of advance to Capital WIP appears to be a mere book entry.

c) In light of the above, the suspicion regarding the authenticity of the above mentioned transaction still remains.

19. As highlighted above, there are apparent contradictions in the documents submitted by the company and its submissions. Also, the company failed to fully clarify all the details regarding utilization of the amounts appearing in its financials. Further, as pointed out above, HKGSL, has not submitted relevant third-party verifiable documents in support of its claims and has also failed to give plausible reasons/explanations in respect of many of the allegations / prima facie findings made in the interim order.

20. In view of the above, I find that the facts and circumstances of the case as brought out in the interim order, have not changed adequately, so as to justify the dis-continuation/ modification/ revocation of the directions passed in the interim order.

21. In addition to the above, the analysis of the documents submitted by the company pursuant to the interim order revealed the following points which also raise suspicion regarding misrepresentation of financials and / or misuse of funds by the company:

a. Regarding connected entities

The companies Hazoor Multiprojects Pvt. Ltd and Parle Software Ltd. have common address and common directors as per MCA website and hence are connected to each other Also, Hazoor Multi Projects Ltd. is subscriber to MOA of SGCPL and hence promoter of SGCPL. Brook Multi Trade Ltd. and SGCPL are connected through common directors. Hence, the above companies appear to be indirectly connected to each other.

b. Regarding delayed registration of the shares in the name of the company.

As per the MCA filings of SGCPL, it is observed that the date of registration of transfer of sale of shares by Ms. Priyanka Mittal and Mr. Anup Mittal is May 3, 2014. However, as per the Annual Report of HKGSL for year 2013-14, Ledger Account and Share Purchase Agreement, HKGSL has purchased shares and paid consideration for these shares in March 2014. Further, on September 24, 2014, SGCPL passed a resolution for issuing bonus shares in the ratio of 1:1 with record date as April 30, 2014. Since, HKGSL did not register transfer of shares before April 30, 2014, the bonus shares were allotted to Ms. Priyanka Mittal and Anup Mittal instead of HKGSL. Thus, the holding of HKGSL even after the issue of bonus shares was 3,12,000 instead of 6,24,000 shares since the 3,12,000 shares allotted under the bonus issue were still with Ms. Priyanka Mittal and Anup Mittal. This, prima facie, shows that HKGSL has not acted in the interest of shareholders by not registering the transfer of shares on time.

c. Regarding non-disclosure to the stock exchange

Further, from the annual report of HKGSL for the year 2013-14, it is observed that HKGSL has acknowledged the purchase of 3,12,000 shares of SGCPL (around 78% of the shareholding of SGCPL) for around Rs. 480 lakhs, however, SGCPL is not shown as subsidiary of HKGSL in F.Y. 2013-14. The resolution for purchase of the shares of SGCPL worth Rs. 480 lakhs was approved in Board meeting dated March 10, 2014. However, no disclosure of the board meeting was made on exchange website which was prima facie in non-compliance of Clause 36 of the Listing Agreement according to which all the events or material information which will have a bearing on the performance / operations of the company as well as price sensitive information shall be first disseminated to the stock exchanges as required under.

d. Regarding purchase of Land:

HKGSL acquired land in Lonavala by selling shares of SGCPL worth Rs. 480.85 lacs to Sunnidhi Infrastructure Developers Private Ltd. (SIDPL) amounting to Rs. 290.05 lacs and Rs. 190.80 to Mr. Anup Mittal. The sale proceeds receivable from SIDPL was adjusted against the purchase consideration as per the agreement dated January 30, 2016. HKGSL has provided bank statement highlighting the transactions showing the payment of balance purchase consideration to SIDPL. The highlighted entries were independently verified from the bank statements obtained from IDBI bank directly. Vide reply dated January 08, 2018, HKGSL submitted the possession letter dated April 20, 2016 whereby SIDPL has issued a No Objection and Consent to HKGSL to make necessary application to Gram Panchayat, Local authorities to obtain notation of the possession of land in name of HKGSL. It is noted that the said letter is not on the letter head of M/s Sunnidhi Infrastructure Developers Pvt. Ltd. From the 7/12 extract and Namuna 8 for the land provided by HKGSL it is observed that the structures standing on the plots is transferred in name of HKGSL but the ownership of land is still in the name of previous owner. From the 7/12 extract it is also observed that the original owners of land are Vijendra Ishwardas Garg and Rajendra Ishwardas Garg and not SIDPL. Vijendra Garg is the Director of Hazoor Multiprojects Ltd and Parle Software Ltd. (which are related parties) and also a past director of SGCPL and Aambey Valley Mountains Pvt. Ltd. (formerly known as Hazoor Aambey Valley Developers Private ltd). The above facts raise a suspicion as to the genuineness of transactions.

ORDER

22. In view of the foregoing, I, in exercise of the power conferred upon me under sections 11, 11(4), 11A and 11B read with section 19 of the Securities and Exchange Board of India Act, 1992 hereby confirm the directions issued against HKGSL vide interim order dated September 7, 2017.

23. Copy of this Order shall be forwarded to the recognized stock exchanges for information and necessary action. A copy of this Order shall also be forwarded to the Ministry of Corporate Affairs and Serious Fraud Investigation Office for their information.

Sd/-

DATE: May 21, 2018 MADHABI PURI BUCH PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA