Interim Order in the matter Step Up Marketing Private Limited

Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999 in the matter of Step Up Marketing Private Limited ( PAN : AAZFS6704Q ) and its Directors, viz., Harjit Singh Dhariwal (PAN: ADJPD2284P) and Raghbir Kaur (DIN:00362477). 1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") received a complaint dated June 03, 2013 against Step Up Marketing Pvt. Ltd. (hereinafter referred to as "SUMPL") alleging raising of money under its schemes "Real Step Pashupalan and Real Step Breeding Farm for sale, breeding, rearing & keeping of livestock ".

2. As a matter of preliminary inquiry, vide letter dated June 28, 2013 SEBI sought information from the complainant such as brochure, application forms, Copies of agreements, etc., if available regarding the operations of aforesaid schemes. The said letter was duly served, however SEBI has not received any response / reply to the said letter.

3. Thereafter, SEBI, vide its letter dated October 03, 2013, sought the following details / documents from SUMPL in order to ascertain whether or not SUMPL is carrying on 'Collective Investment Schemes' in terms of Section 11 AA of the SEBI Act, 1992 (hereinafter referred to as "SEBI Act") : i. Number of plans/schemes launched/proposed, ii. Structure of such plans/schemes, iii. Terms and conditions of each Plans/Schemes launched by SUMPL, iv. Details of the Plan(s)/Scheme(s) wise amount collected along with the number of investors under such Plans/Schemes as on September 30, 2013, v. Copies of application forms that are required to be submitted by the investors/applicants to participate in SUMPL 's plans/schemes and copies of brochures pertaining to SUMPL's schemes / projects, vi. Sample copies of the agreements that are required to be entered into by investors/applicants with SUMPL at the time of joining SUMPL's Projects/Schemes and certificates issued to the investors who subscribe to such schemes, vii. Memorandum and Articles of Association ("MoA and AoA") of SUMPL as filed with concerned Registrar of Companies ("RoC"), viii. Annual Returns / Balance Sheets and Profit and Loss Accounts of SUMPL since incorporation as filed with the concerned RoC, ix. Details of past and present promoters/directors/Key management personnel of SUMPL.

4. In response to the aforesaid letter, SUMPL vide letter dated November 19, 2013, inter-alia, furnished the following documents: i. Application forms for purchase of livestock, ii. Sample copy of Goat keeping Certificate, iii. Sample agreement for Goat-Keeping iv. Location of current or proposed projects along with the profit& loss statement, v. MoA and AoA of SUMPL as filed with RoC, vi. List of Promoters of SUMPL, vii. Copy of Annual return of SUMPL, viii. Details of the Directors of SUMPL.

5. SUMPL has also made the following submissions in the aforesaid letter : a) SUMPL is engaged in rearing of livestock mainly goats etc. for its customers. Along with the rearing of the livestock, SUMPL has also been selling livestock to the customers for a consideration wherein the purchaser has the option of keeping the purchased livestock with SUMPL for breeding and rearing purposes only for a period of 3.5 years as per the terms and conditions laid down in the application form given to the purchaser at the time of purchase of the livestock. In case the purchaser of the livestock decides to keep the same with SUMPL for rearing, a Certificate of Goat keeping would be issued by SUMPL bearing a registration number against the goats which purchaser opted to keep with them.

b) The livestock of the purchaser was kept with SUMPL, solely for the purpose of rearing, as per the terms and conditions mentioned in the application form and agreed upon by the purchaser at the time of the purchase of the goats. c) SUMPL does not issue any instruments in the form of bonds, shares or any other financial instruments. It has not introduced any kind of investment scheme in the regular course of business and its area of business was mainly limited to the breeding and keeping of the goats kept with them by the purchasers. d) The complainant has not invested any amount for investment purposes, as alleged. The amount given by the complainant to SUMPL was solely for the purposes of purchase of goats and as the complainant chose to keep the purchased goats with SUMPL for rearing purpose as per the terms and conditions in the application form, accordingly the goat keeping certificates were issued against the keeping and rearing of the purchased goats. SUMPL has in no way issued any investment scheme or issued any kind of instruments against the same as alleged by the complainant in its complaint or otherwise. e) The location of current project and proposed development is Village Gulalpur, Tehsil Dhanora, Dstrict J.P. Nagar, Uttar Pradesh

6. I have carefully considered the material available on record, correspondence exchanged between SEBI and SUMPL, along with the documents contained therein and information furnished by the complainant, submissions made by SUMPL, etc. In this context, the issue for determination is whether the mobilization of funds by SUMPL under its schemes "Real Step Pashupalan and Real Step Breeding Farm for sale, breeding, rearing & keeping of livestock "falls under the ambit of ‘collective investment scheme’ in accordance with Section 11AA of the SEBI Act, 1992 (hereinafter referred to as "SEBI Act").

7. On an examination of the material available on record, it is prima facie observed that:

a) SUMPL (CIN: U51909HR2002PTC34910) was incorporated on June 13, 2002 having its registered office at SCF – 67 & 68, Sector 16A, Opposite Nehru College, Faridabad, Haryana. Its Directors are Harjit Singh Dhariwal (PAN: ADJPD2284P) and Raghbir Kaur (DIN : 00362477).

b) As per the MoA of SUMPL, one of its other object is "to carry on the business as dealers in and purchasers of dairy farms garden produce of all kinds and in particular milk, cream, butter, ghee, cheese, poultry, eggs, fruits, vegetable oils, vegetable ghee, porkpies, sausages, prawns, potted meat, table delicacies and to purchase, acquire, keep maintain, breed, sell or otherwise dispose of all kinds of cattles, cows buffaloes, pigs, poultry and live and dead stock of all description".

c) SUMPL is engaged in the activities of trading of livestock carried out by Real Step Pashupalan – a unit of SUMPL ( herein after referred to as "RSP Scheme" ) and breeding, rearing and keeping of livestock carried out by Real Step Breeding Farms – another unit of SUMPL ( herein after referred to as "RSBF Scheme" ); There are two separate Application Forms that are required to be filled by the applicant one in respect of purchase of livestock (i.e. one Goat ) and the other in respect of Goat Keeping;

d) The purchaser has the option of keeping the purchased livestock with SUMPL for breeding and rearing purposes for a period of three and half (3½) years. In case the applicant exercises the option to keep the purchased livestock with SUMPL, the applicant is mandated to sign on both the aforesaid application forms ( i.e. application form for the purchase of livestock (i.e. one Goat) and application form in respect of Goat Keeping) which indicate its agreement to the terms and conditions in regard to activities carried out under both schemes.

e) The terms and conditions of the "RSBF Scheme" as mentioned in the application form is reproduced as under: 1. The applicant hereby is an independent Goat (s) Owner ("IGO") who wants to keep his /her Goat(s) with RSBF for keeping and breeding purposes. The RSBF promises to pay/give approx. 40% of the breeding produce ( i.e. offspring of the particular Goat provided by the IGO at the end of 3 ½ years as selected by the applicant. Rest approx. 60% shall be kept by RSBF for profit, rearing & keeping purpose. 2. The RSBF shall not in any circumstances /event be liable for payment of any damages in case of failure to perform any acts stated herein above wherein the said failure of as possible occurred due to unforeseen reasons such as war, earthquake and any other natural calamities, etc. and any other reasons incidence beyond control of the contractor 3. The IGO shall not be paying any charges for the feeding, insurance, mediation, rearing or any other keeping purpose at all. 4. The IGO can visit the RSBF to see the keeping progress of his/her Goat (s) at his /her own cost with prior appointments only.

5. The IGO hereby agrees that he/she is not at all in any circumstances eligible to receive any monitory benefits /payments before 3 ½ years of surrendering his/her Goat (s) at RSBF. 6. The IGO hereby agrees that he/she shall not demand any monetary proceeds /payments from the RSBF before 3 ½ years of surrendering his /her Goat(s). If IGO demands so, it shall only constitute a violation /breach of the terms and conditions, by virtue of which all the rights of the applicant pertaining to the said Goat (s) and the amount if any, receivable by the IGO from the RSBF shall be terminated automatically & the IGO will have no claim whatsoever against the RSBF. 7. The IGO hereby declares that he/she has kept his/her Goat(s) with RSBF without any force, pressure, and influences from anyone whosoever. 8. Only the RSBF is entitled to take all the benefits such as subsides, financial, tax exemptions and all other such benefits likely to be provided by the Government /state government or any other organization 9. RSBF reserves the right to amend, change or modify the terms and conditions time to time and all the updated terms will be posted on. 10. The IGO must claim his/her Goat(s) after completion of 3 ½ years, within 6 months. After 6 months he /she will not liable to claim any Goat (s) and benefits.

8. The features of the so-called "RSP and RSBF schemes for sale, breeding, rearing & keeping of livestock "offered by SUMPL have to be considered in light of the provisions of Section 11AA of the SEBI Act. The aforesaid Section 11AA, which provides for the conditions to determine whether a scheme or arrangement is a 'collective investment scheme', reads as under :

"(1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) shall be a collective investment scheme. (2) Any scheme or arrangement made or offered by any person under which,— (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement; (ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement; (iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors;

(iv) the investors do not have day to day control over the management and operation of the scheme or arrangement.”

9. It is noted that when the activity of trading of livestock (RSP Scheme) is viewed in conjunction with the activity of Breeding, Rearing and Keeping of Livestock (RSBF Scheme) that an element of scheme in line with Section 11AA of the SEBI Act becomes apparent. In this regard, the scheme of "RSP and RSBF schemes for sale, breeding, rearing & keeping of livestock " offered by SUMPL is examined as under : (i) The contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement; SUMPL as part of its operations is accepting money from the applicant/ purchaser(s) along with application form for purchase of livestock under its "RSP scheme". It is noted from the application form that an amount of ` 6,900/-by way of demand draft is mandated for joining the scheme. It is noted from the submissions of SUMPL that if an applicant/ purchaser exercises the option of keeping the livestock with the company for breeding and rearing purpose, they have to make a separate application form for Goat Keeping under "RSBF Scheme". The applicant/purchasers of "RSBF Scheme" were given goat keeping certificates in respect of keeping and rearing of the purchased goats. The said certificate indicates SUMPL’s willingness to make arrangements/tie-ups towards keeping the livestock for breeding and keeping purposes at its “Associates Farms”. At the end of three and half (3½) years, the “Associates Farms” will return maximum upto four (04) Goats to the respective owners. The consideration for the services rendered by SUMPL is indicated in the form of retention / keeping the rest of the kids i.e. offspring of the particular Goat provided by Independent Goat Owner (IGO), by the “Associates Farms” for breeding, insurance, feeding medication, profits and other keeping purposes. SUMPL's Balance Sheet as on March 31, 2010 states that an amount of `21,91,061/- had been received as advance from the Customers. It is noted from the application forms that an amount of `6,900/- is pooled from each applicant/purchaser of RSP Scheme. As the contributions received from the investors/purchasers under its schemes are pooled for the purpose of the schemes, prima facie it appears that the instant 'schemes' satisfies the first condition stipulated in Section 11AA(2) of the SEBI Act.

(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; It is noted from the terms and conditions of the application form for "RSBF Scheme" that SUMPL enable returns ( breeding produce ) at the ratio of 40:60 between "RSBF" and the applicant/purchaser. It also confers an option to the applicant/purchaser(s) to surrender the Goat(s) and receive benefits on completion of three and half (3½) years under "RSBF Scheme"(Clause 1). Besides this, it is noted from the complainant's letter dated November 22, 2012 addressed to the SUMPL that a demand had been made to handover of a certain number of goats kept under supervision or to refund amount pertaining to the such number of goats at prevailing market price as per the schemes. The same corroborates the aspect of optional redemption of certificate issued by "RSBF Scheme" at prevailing market price clearly indicates returns while contributions are accepted. In light of the aforesaid, prima facie the nature of benefits receivable by the applicant / purchaser at the end of the term of their contractual relationship under "RSBF Scheme" indicates an element of return for which money has been provided by the investors to SUMPL.

Hence, the second condition, which stipulates 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 as stipulated in second condition in Section 11AA (2) of the SEBI Act is also fulfilled. (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. As per the terms and conditions stated on the application form for Goat Keeping, an applicant/purchaser unconditionally authorize "RSBF Scheme" to take all the necessary and appropriate decision as regards breeding, rearing and other keeping purposes in respect of applicant's Goat(s). As regards payment of any charges for feeding, insurance, medication, rearing or any other keeping purpose of Goat(s), SUMPL manage the same for and on behalf of purchasers/investors. Sole entitlement to the accretions i.e. ownership and physical custody of the offspring etc. of the said Goat(s) is with SUMPL.

Similarly, benefits routinely linked to ownership such as subsidies, financial, tax exemptions and all other such benefits likely to be provided by the government/ state government or any other organization are solely conferred upon SUMPL. In light of foresaid and as per the terms, the management of goats under the said schemes is solely conferred on SUMPL. In these facts and circumstances, it is clear that SUMPL manages the property, contribution or investment forming part of "RSP and RSBF schemes for sale, breeding, rearing & keeping of livestock "on behalf of its Applicant/purchaser.

As per the terms and conditions of application form for "RSBF Scheme", it appears that SUMPL is solely managing the affairs of its schemes and the investors do not have any say whatsoever. This can be seen from the following clauses viz., Clause 6 states "the IGO hereby agrees that he/she shall not demand any monetary proceeds /payments from the RSBF before 3½ years of surrendering his /her Goat(s). If IGO demands so, it shall only constitute a violation /breach of the terms and conditions, by virtue of which all the rights of the applicant pertaining to the said Goat (s) and the amount if any, receivable by the IGO from the RSBF shall be terminated automatically & the IGO will have no claim whatsoever against the RSBF."As per Clause 9 "RSBF reserves the right to amend, change or modify the terms and conditions time to time". Clause 10 states that "the IGO must claim his/her Goats(s) after completion of 3½ years, within 6 months. After 6 months he/she will not be able to claim any Goat (s) and benefits". In view of above, it is clear that the Applicant/purchaser do not have day to day control over the management and operation of the scheme of "RSP and RSBF schemes for sale, breeding, rearing & keeping of livestock ". I, therefore, find that the instant 'Schemes' satisfies the third and fourth condition stipulated in Section 11AA(2) of the SEBI Act.

10. In this context, it may be relevant to refer to the observations made by the Hon’ble Supreme Court of India in P.G.F. Limited & Ors. Vs. UOI & Anr. (MANU/SC.0247/2013), wherein it was stated: “...sub-section (2) of Section 11AA, which defines a collective investment scheme disclose that it is not restricted to any particular commercial activity such as in a shop or any other commercial establishment or even agricultural operation or transportation or shipping or entertainment industry etc. The definition only seeks to ascertain and identify any scheme or arrangement, irrespective of the nature of business, which attracts investors to invest their funds at the instance of someone else who comes forward to promote such scheme or arrangement in any field and such scheme or arrangement provides for the various consequences to result therefrom.”

11. In light of the above analysis and examination, it appears that the activity of fund mobilization by SUMPL camouflaged in "RSP and RSBF schemes for sale, breeding, rearing & keeping of livestock" with a resultant promise of returns when considered in light of its peculiar characteristics and features, as discussed in the preceding paragraphs, prima facie satisfies all four conditions specified in Section 11AA (2) of the SEBI Act and hence falls within the ambit of 'Collective Investment Schemes' as defined under Section 11AA of the SEBI Act.

12. I note that in terms of Section 12(1B) of the SEBI Act, "no person shall sponsor or cause to be sponsored or cause to be carried on a 'collective investment scheme' unless he obtains a certificate of registration from the Board in accordance with the regulations”. Regulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as "CIS Regulations") also prohibits carrying on CIS activities without obtaining registration from SEBI. Therefore, the launching/ floating/ sponsoring/causing to sponsor any 'collective investment scheme' by any 'person' without obtaining the certificate of registration in terms of the provisions of the CIS Regulations is in contravention of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations. In this regard, I note that SUMPL has not obtained any certificate of registration from SEBI under the CIS Regulations for its fund mobilizing activity from the public, under the instant 'Schemes' offered by it.

13. I also find that the fund mobilizing activity of SUMPL through its "RSP and RSBF schemes for sale, breeding, rearing & keeping of livestock ", prima facie, amounts to a fraudulent practice in terms of Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ("PFUTP Regulations").

14. Protecting the interests of investors is the first and foremost mandate for SEBI and therefore, steps have to be taken to ensure that SUMPL does not collect further funds under its schemes and no investors are defrauded. From the materials available on record, it is observed that Harjit Singh Dhariwal (PAN : ADJPD2284P) and Raghbir Kaur (DIN No. 00362477) are the present Directors who were in charge of and responsible for the day to day affairs of SUMPL. Further, in order to safeguard the assets/property, acquired by SUMPL and its Promoters/Directors using the funds collected from the investing public until full facts and materials are brought on record and a final decision is taken in the matter, it is incumbent on SEBI to take preventive action by way of an immediate measure. In the light of the same and as SUMPL failed to submit complete details/information as sought by SEBI, I find no other alternative but to take recourse through an interim order against SUMPL and its Directors for preventing them from further carrying on with its existing fund mobilizing activity by launching ‘collective investment scheme’ without registration from SEBI in accordance with law.

15. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11(1), 11B and 11(4) of the SEBI Act, 1992 read with Regulation 65 of CIS Regulations and PFUTP Regulations, hereby direct SUMPL and its Directors viz., Harjit Singh Dhariwal (PAN : ADJPD2284P) and Raghbir Kaur (DIN : 00362477) : • not to collect any fresh money from investors under its existing schemes; • not to launch any new schemes or plans or float any new companies to raise fresh moneys; • to immediately submit the full inventory of the assets including land obtained through money raised by SUMPL; • not to dispose of any of the properties or alienate the assets including land obtained directly or indirectly through the money raised by SUMPL; • not to divert any funds raised from public at large, kept in bank account(s) and/or in the custody of SUMPL; • to furnish all the information/details sought by SEBI within 15 days from the date of receipt of this order, including, i. Details of amount mobilized and refunded till date, ii. Scheme wise list of investors and their contact numbers and addresses, iii. PAN of Directors of SUMPL and iv. Audited accounts for the past three years.

16. The above directions shall take effect immediately and shall be in force until further orders.

17. This order is without prejudice to the right of SEBI to take any other action that is deemed fit to be initiated against SUMPL and its Directors in accordance with law.

18. The prima facie observations contained in this Order are made on the basis of the materials available on record. In this context, SUMPL and its abovementioned Directors may, within 15 days from the date of receipt of this Order, file their reply, if any, to this Order and may also indicate whether they desire to avail themselves an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard.

Place: Mumbai S. RAMAN Date: August 22, 2014 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA