Interim order in the matter of Merlin Agri Projects India Limited

WTM/GM /SEBI/ERO/IMD/27/JUNE/2017

SECURITIES AND EXCHANGE BOARD OF INDIA INTERIM ORDER CUM SHOW CAUSE NOTICE UNDER SECTIONS 11(1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992, IN THE MATTER OF –

Sr. No. Noticees PAN DIN/CIN Company 1. MERLIN AGRI PROJECTS AAHCM3265H U01403WB2011PLC163518 INDIA LTD. Directors 2. PINKU MAJHI AWHPM3088K 6630315 3. TAPAS MANDAL AWDPM4024F 6514807 4. MADHU SUDAN SINHA BCXPS8099F 6514806 5. PALLAB DAS NA 3559039 6. SUBRATA PAL AJCPP2532K 3559038 7. AMIYA KOLEY ARXPK1255B 5162288 8. DIPTIMAN SARKAR BIIPS6691A 3559034 9. RAJ KUMAR GHOSH AKPPG3596C 3528858 10. MIR AMIRUL ALI AMJPM6984G 3528860 11. SARAT BANDAPADHYA AJTPB4533F 3302622 12. APARES MISRA AQNPM2329K 6514794 13. BARINDRA NATH KOLEY AJEPK9164G 6514800 14. BABLU KUMAR ROUTH AKUPR1928A 6514796 15. ARGHA PAN ANZPP9326Q 6514795 16. AMARNATH SADHUKHAN AXKPS8554J 6630313 17. AMIT KUMAR PAL AUEPP4783H 6630314 Promoter 18. TOUHID ALAM AGMPA8959J

The aforesaid entities are hereinafter referred to by their respective names or collectively as “the Noticees”.

1. Securities and Exchange Board of India ("SEBI") was in receipt of complaints in relation to money mobilization by way of issue of shares by Merlin Agri Projects India Limited ("MAPIL"). Copies of certificates of redeemable preference shares (RPS) allegedly issued by MAPIL were also received by SEBI.

2. Based on the complaints received, SEBI sought information pertaining to the collection of money by MAPIL. Details of the correspondence and replies are as under: (i) SEBI issued letters dated December 30, 2015 to MAPIL and its directors namely, Madhu Sudan Sinha, Tapas Mandal and Pinku Majhi requesting them to furnish the information regarding mobilization of funds from public. (ii) Letter sent to the company was returned undelivered with remark “Left without address”. (iii) All the directors in their letters dated January 11, 2016 requested to grant eight weeks’ time to submit the information sought for. (iv) Reminders dated March 09 2016 were sent to the company’s registered address and its three directors. The letter sent to the company returned undelivered with remark “Left without address”. The above named three directors in their letter dated March 21 2016) submitted the following: a. Copy of audited annual accounts and annual returns of the company for 2011-12, 2012-13 and 2013-14. b. Name, address occupation of all the directors and key managerial personnel of the company c. Name and PAN of the company d. Copies of Form 2 filled with the ROC e. Details of allottee (v) A site visit was conducted on March 26, 2016 at the registered office address of MAPIL. However, the company could not be located at the said address. (vi) Another reminder dated June 13, 2016 was sent to the company and its directors requesting them to furnish the information regarding fund mobilization during 2012-13. The letter sent to the company was returned undelivered with remark “Left without address”. The directors in their letter dated July 08, 2016 submitted that they are helpless and unable to furnish the information/documents regarding fund raising during 2012-13. (vii) In addition, a letter dated June 13, 2016 was sent to the auditor of the company, which was delivered. However, no reply was received from the auditor.

3. Details pertaining to MAPIL were procured from the MCA21 portal and they are as under : i) Date of Incorporation : 08/06/2011 ii) Type of the company : Public and Unlisted iii) CIN : U01403WB2011PLC163518 iv) PAN : AAHCM3265H v) Registered Office Address : AT- M.V. Apartment, 36, G. T. Road, Parbihata, Sripally, P.S.- Burdwan, WB 713103 vi) Correspondence Address: same as above.

4. As per the Form 2 submitted by the company, the details of Preference shares allotted during 2011-12 are as under: Year Date of Type of Security No. of persons to Total Amount Allotment whom issued (Rs.) 06.09.2011 14 10,20,000 2011-12 15.11.2011 Redeemable 22 16,01,000 Preference Share of 15.12.2011 6 5,50,000 Rs. 10 31.03.2012 10 14,30,000 Total 52 46,01,000

5. Further, SEBI received investor complaints where the investors have submitted copies of money receipts and postdated cheque (PDC) issued by the company. The complainant furnished copies of RPS certificates issued by the company. The details of the certificates are given below: Year Type No of Allottee* Amount (Rs.) 2012-13 Redeemable Preference Share of Rs. 10/- each 4 4,77,000

6. It is further realized that the names of the allottees as per Form 2 (MCA 21) are different from the names in the complaints received by SEBI. Thus, it appears that in addition to the allottees disclosed in Form 2, the company has also made allotments to the complainants. Accordingly, the total number of allottees is given below: Year Type No of Allottee Amount (Rs.) 2011-12 56 46,01,000

2012-13 Redeemable Preference 4* 4,77,000 Share of Rs. 10/- each Total 50,78,000

7. From the above table, it is seen that MAPIL has issued RPS to more than 49 persons in F.Y. 2011-12. Hence, MAPIL appears to have made a public issue of RPS. Till date, no information has been received from MAPIL or its Directors regarding mobilization of funds in F.Y. 2012-13. From the contents of brochure/application form issued by the company purportedly for private placement of securities, it is seen that the offers were made to general public rather than to select individuals. The details of offer / plans are as under: DIAMOND PLAN

PLAN A B C D E Issue Price Minimum 100 1000/- 1000/- 1000/- 1000/- 1000/- Preference Shares @ Rs. 10/ each Redemption Period 3 Years 5 Years 7 Years 10 Years 14 Years Redemption Amount 500/- 1000/- 2000/- 4000/- 10000/- Total Redemption Amount 1500/- 2000/- 3000/- 5000/- 11000/-

PLATINUM PLAN PLAN A B C Issue Price Minimum 100 Preference Shares @ Rs. 10/ each 20000/- 10000/- 10000/- Redemption Period 1 Years 3 Years 5 Years Redemption per Month 135/- 105/- 125/- Final Redemption Bonus Amount Nil 500/- 1000/-

ISSUES FOR DETERMINATION 8. In the context of the details of the offer and allotment of preference shares mentioned in the Table at paragraph 6 above (hereinafter referred to as "the offer and allotment of preference shares"), the issue for determination in the instant matter is whether or not such mobilization of funds by MAPIL is in accordance with the provisions of the Companies Act, 1956 read with the provisions of the SEBI Act, 1992.

RELEVANT PROVISIONS OF LAW AND PRIMA FACIE FINDINGS 9. Section 67 of the Companies Act, 1956 deals with the conditions or circumstances under which an offer of shares/debentures by a company would be construed as one made to the public. Extracts of the relevant provisions of section 67 of the Companies Act, 1956, dealing with offer of shares or debentures to the public, are reproduced as under: "Construction of reference to offering shares or debentures to the public, etc. 67. (1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (2) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (3) No offer or invitation shall be treated as made to the public by virtue of sub-section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances- (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation. Provided that nothing contained in this sub-section shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more: Provided further that nothing contained in the first proviso shall apply to non-banking financial companies or public financial institutions specified in section 4A of the Companies Act, 1956 (1 of 1956).”

10. For ascertaining whether the offer and allotment of preference shares by MAPIL would fall within the scope of Section 67 of the Companies Act, 1956, the number of persons to whom offer was made by the Company is crucial. In terms of the first proviso to section 67(3), an offer of shares or debentures made to fifty persons or more would constitute an offer to the public. In this regard, it is observed from the documents obtained from MCA, that MAPIL has offered and allotted RPS to at least 56 persons amounting of Rs. 46,01,000 during 2011-12 and 4 persons amounting of Rs.

4,77,000/- during 2012-13. Details of the offers made by the company relating to issue of securities remain unavailable due to non-cooperation on the part of the directors of the company. However, on the basis of complaints received, and available information recorded above, the offer and allotment of preference shares by MAPIL prima facie qualifies to be construed as an offer made to the public in terms of section 67(3) of the Companies Act, 1956.

11. From the above, it will follow that such a public issue makes it imperative for MAPIL to comply with the mandate of Section 73 of the Companies Act. Relevant extract of Section 73 of the Companies Act, 1956 is reproduced as under: "Allotment of shares and debentures to be dealt in on stock exchange. 73. (1) Every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange. (1A) ... (2) Where the permission has not been applied under subsection (1) or such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money. ....” (emphasis supplied)

12. As the offer and allotment of preference shares is, prima facie, a public issue in accordance with the provisions of the Companies Act, 1956, the same will attract the requirement for such shares to be dealt on a recognised stock exchange in terms of Section 73 of the Companies Act, 1956, as stated above. I find that MAPIL is prima facie in breach of the provisions of Section 73 as well.

13. Further, in connection with a public issue, Section 56 of the Companies Act, 1956 mandates that the prospectus issued by a company shall state the matters specified thereunder and Section 60 of the Companies Act, 1956 mandates registration of such prospectus with the ROC. I find that there is no evidence on record to indicate that MAPIL has complied with the provisions of Sections 56 and 60 of Companies Act, 1956, in respect of the offer and allotment of Preference Shares. In view of the same, I find that MAPIL is prima facie in breach of the provisions of Sections 56 and 60 of the Companies Act, 1956 in connection with the subject offer and allotment of preference shares.

14. In terms of Section 73(2), the company and every director who is an officer in default is jointly and severally liable for repayment of the money raised in breach of provisions of section 73(1). Further, in terms of Section 62 of the Companies Act, every person who inter alia is a director of the company at the time of the issue of the prospectus and every person who is a promoter of the company, are liable to pay compensation to every person who subscribes for any shares or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein. As per the information available on the MCA Portal, the details of the directors of MAPIL, including the dates of appointment/cessation as directors, are as under: Original Current Name of the date of Date of S.No DIN PAN Designat Present Residential Address person in full appointm cessation ion ent CHOTOBAHARKULI, SADHUPALLI, PINDIRA, 1 PINKU MAJHI 6630315 AWHPM3088K Director 15/06/2013 - KALNA, BURDWAN, West Bengal - 712146, INDIA HAT BAHADURGANJ, TAPAS PATUL, BALAGARH, 2 6514807 AWDPM4024F Director 01/03/2013 - MANDAL HOOGHLY, West Bengal - 712514, INDIA VILL-WEST MANASPUR, MADHU SUDAN P.O.- MANASPUR, 3 6514806 BCXPS8099F Director 01/03/2013 - SINHA BANDEL, HOOGHLY, West Bengal - 712123, INDIA VILL + P.O.- NALIKUL, P.S.- 4 PALLAB DAS 3559039 NA Director HARIPAL, HOOGHLY, West 08/07/2011 23/05/2012 Bengal - 712407, INDIA PALLA ROAD, MEMARI, 5 SUBRATA PAL 3559038 AJCPP2532K Director BURDWAN, West Bengal - 08/07/2011 21/02/2012 713151, INDIA KUSHODANGA, BAKULIAGRAM, KALNA, 6 AMIYA KOLEY 5162288 ARXPK1255B Director 12/12/2011 21/02/2012 BURDWAN, West Bengal - 713409, INDIA

BEJPARA, P.R.- BELUN DIPTIMAN DHAMASIN, P.S.- PANDUA, 7 3559034 BIIPS6691A Director 08/07/2011 07/03/2013 SARKAR HOOGHLY, West Bengal - 712149, INDIA DASGHARA, RAJ KUMAR DHANIAKHALI, 8 3528858 AKPPG3596C Director 08/06/2011 07/03/2013 GHOSH HOOGHLY, West Bengal - 712302, INDIA BAHADURPUR, MIR AMIRUL 9 3528860 AMJPM6984G Director JAMALPUR, BURDWAN, 08/06/2011 07/03/2013 ALI West Bengal - 713408, INDIA BHATTACHARYA PARA, SARAT DASHGHARA - 2, 10 3302622 AJTPB4533F Director 08/06/2011 07/03/2013 BANDAPADHYA DHANIAKHALI, West Bengal - 712402, INDIA RAMNAGAR, KALNA, 11 APARES MISRA 6514794 AQNPM2329K Director BURDWAN, West Bengal - 01/03/2013 04/05/2015 713409, INDIA GOPINATHPUR, BARINDRA KINKARBATI, HARIPAL, 12 6514800 AJEPK9164G Director 01/03/2013 05/12/2013 NATH KOLEY HOOGHLY, West Bengal - 712407, INDIA HAULI PURBA,BHANJIPUR, BABLU KUMAR 13 6514796 AKUPR1928A Director TARAKESHWAR, 01/03/2013 05/12/2013 ROUTH HOOGHLY, West Bengal - 712410, INDIA PANCHPARA, NARAYANPUR, 14 ARGHA PAN 6514795 ANZPP9326Q Director 01/03/2013 24/12/2013 PATRASAYER, BANKURA, West Bengal - 722206, INDIA BAGNAPARA, KALNA, AMARNATH 15 6630313 AXKPS8554J Director BURDWAN, West Bengal - 15/06/2013 04/05/2015 SADHUKHAN 713501, INDIA BADYAPURA DAKSHINAPARA, AMIT KUMAR 16 6630314 AUEPP4783H Director BAIDYAPUR BAIDYAPUR, 15/06/2013 04/05/2015 PAL KALNA, BURDWAN, West Bengal - 713122, INDIA S/o Nazrul Islam, Vill- Dumkalkuthi Post-Domkal 17 Touhid Alam AGMPA8959J Promoter PS Dolkal Dist Murshidabad PIN 742303

15. From the above table, it is noted that directors and promoter in the table above were the directors / promoters of MAPIL at the time of the issue and allotment of RPS and directors at serial no. 1 to 3 are also presently responsible for the affairs of MAPIL.

DIRECTIONS 16. From the information available with SEBI and details downloaded from MCA portal, it can be reasonably inferred that the money mobilization activity on the part of MAPIL is potentially placing investors at risk. In the light of the facts in the instant matter, I find this to be a fit case to pass interim directions against MAPIL and the above named Directors and promoter. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11, 11(4) and 11B of the SEBI Act, 1992 hereby issue, with immediate effect, the following directions, which shall remain in force until further orders:- i. MAPIL and the above named Directors and promoter shall not access the securities market or buy, sell or otherwise deal in the securities market, either directly or indirectly, or associate themselves with any listed company or company intending to raise money from the public; ii. MAPIL and the above named Directors and promoter shall neither dispose of, alienate or encumber any of its/their assets nor divert any funds raised from public through the offer and allotment of preference shares; iii. MAPIL and the above named Directors and promoter shall co-operate with SEBI and shall furnish all information/documents in connection with the offer and allotment of preference shares sought vide letters dated June 13, 2016.

17. The preliminary findings contained in paragraphs 10, 12 and 13 of this Order are made on the basis of the complaints received and information obtained from MCA portal. MAPIL and the above named Directors and promoter are hereby called upon to show cause as to why suitable directions/prohibitions under Sections 11, 11(4), and 11B of the SEBI Act should not be issued/imposed, including the following directions, namely:- i. That the Noticees shall jointly and severally refund the money collected through the offer and allotment of preference shares, with an interest of 15% per annum (the interest being calculated from the date when the repayments became due in terms of Section 73(2) of the Companies Act, 1956 till the date of actual payment), supported by a certificate of two independent Chartered Accountants to the satisfaction of SEBI (to be submitted to SEBI within 7 days of completion of the refund); and ii. That the Noticees shall be restrained / prohibited from accessing the securities market by issue of prospectus / offer document / advertisement and buying, selling or otherwise dealing in securities in any manner whatsoever, directly or indirectly, for a period of four years from the date of effecting the refund as directed above.

18. The Noticees, may, within 21 days from the date of receipt of this interim order -cum-show cause notice, file their respective replies. The Noticees are directed to furnish an inventory of their assets in their reply. In the event the Noticees intend to avail an opportunity of personal hearing, they may do so by seeking a confirmation in writing from SEBI for the same within 90 days from the date of receipt of this Order. In the event of the Noticees failing to file replies or requesting for an opportunity of personal hearing within the said 90 days, the preliminary findings at paras 10, 12 and 13 of this Order and directions at para 17 (i) and (ii) above shall become final and absolute against the Noticees automatically, without any further orders. The Noticees shall comply with the directions at para 17(i) above within a period of 90 days from the date of this Order becoming final. Upon the expiry of the period of 90 days from the date of this Order becoming final and if the Noticees fail to comply with the directions at para 17 above, SEBI may initiate appropriate enforcement action under SEBI Act, 1992 including Recovery, Adjudication or Prosecution in addition to making a suitable reference to State Government / Local Police.

19. This Order is without prejudice to any other action that SEBI may initiate under securities laws, as deemed appropriate.

20. Copy of this Order shall be forwarded to the recognized stock exchanges and depositories for information and necessary action. A copy of this Order may also be forwarded to MCA/concerned RoC for their information and necessary action with respect to the directions imposed on company and directors.

DATE: JUNE 23, 2017 G. MAHALINGAM PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA