Order in respect of M/s. HBN Dairies and Allied Ltd

WTM/PS/15/CIS/NRO/JULY/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER IN THE MATTER OF HBN DAIRIES AND ALLIED LIMITED Under Sections 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulations 65 and 73 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999 Date of Hearing: July 11, 2013 Appearances: For Noticee: Ms. Anju Jain, Advocate Mr. Hitesh Sachar, Advocate Mr. Pankaj Jain, FCA Mr. Sunil Arora, FCA Ms. Shreya Bhandari, PCS For SEBI: Mr. Narendra Rawat, Deputy General Manager Ms. Jyoti Sharma, Assistant General Manager Mr. Pradeep Kumar, Assistant Legal Adviser 1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') on receipt of certain complaints, noticed that a company, HBN Dairies and Allied Limited (hereinafter referred to as 'HBN') is illegally collecting money from the public. SEBI issued a letter dated February 09, 2009, advising HBN to furnish certain information/ documents including applications forms, brochures, sample agreements, balance sheets, profit and loss accounts, details of the past and present directors, details of funds mobilized under various schemes in order to ascertain whether it was carrying on the activities of a 'collective investment scheme' (hereinafter referred to as 'CIS') thus attracting the provisions of Section 12(1B) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'the SEBI Act') and SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as 'CIS Regulations').

2. HBN applied to SEBI for registration as CIS in the meantime. SEBI vide its letter dated July 23, 2010, sought certain documents/ details from HBN, in order to process its application for registration. However, the requisite information was not forthcoming, and SEBI sent reminders to HBN vide letters dated September 22, 2010 and December 02, 2010. HBN vide its letter dated December 23, 2010, submitted that it does not wish to initiate the activities covered under the CIS and withdrew its application for registration.

3. However, SEBI vide its various letters again advised HBN to submit the desired information asked vide letter dated February 09, 2009. In reply to these, HBN vide its letter dated December 20, 2011, requested for time to furnish the information/ documents as sought for. Further, vide letter dated January 05, 2012, HBN submitted copies of the audited balance sheets for the 2009-2010 and 2010-2011. Vide another letter dated March 21, 2012, HBN submitted that it do not have any brochures/ application forms for any schemes.

4. On consideration of the documents available on record, SEBI having prima facie found that the scheme/ arrangement of HBN are in the nature of CIS, issued a show cause notice (hereinafter referred to as 'SCN') dated November 16, 2012 to HBN and its directors namely Mr. Harmender Singh Sran, Mr. Satnam Singh Randhawa, Mr. Amandeep Singh Sran, Mr. Gajraj Singh Chauhan, Mr. Manjeet Kaur Sran, Ms. Jasbeer Kaur, Mr. Rakesh Kumar Tomar, Mr. Sukhdev Singh Dhillon and Ms. Sukhjeet Kaur (hereinafter collectively referred to as 'noticees') advising them to show cause as to why the appropriate directions under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') should not be issued against them for the alleged violations. The SCN indicated that the noticees may send their replies within 21 days from the receipt of the SCN failing which it shall be presumed that noticees do not have any explanation to offer and the proceedings will be concluded ex parte on the basis of the material available on record.

5. No reply was received from the noticees. However, before proceeding further in the matter, an opportunity of personal hearing was granted to all the noticees before SEBI on July 11, 2013 at Mumbai. Further, the venue of the hearing was changed to New Delhi, upon the request of the noticees. In the meantime, the noticees namely HBN, Mr. Harmender Singh Sran, Mr. Amandeep Singh Sran, Mr. Manjeet Kaur Sran and Ms. Jasbeer Kaur vide letter dated July 09, 2013, submitted a common reply which was taken on record.

6. The submission of the noticees in brief are: a. The present management of HBN consists of Mr. Harmender Singh Sran, Mr. Amandeep Singh Sran, Mr. Manjeet Kaur Sran and Ms. Jasbeer Kaur. Other noticees as named in the SCN have ceased to be the directors of HBN and their names may be dropped from the present proceedings. b. The scheme/ plans are not in the nature of CIS. The money is provided by the customers of HBN to facilitate its business. The said amounts are not solely utilized for the purpose of purchase and rearing of cattle and maintenance of dairy farms but a part of this amount is also used for investment in acquisition of fixed assets and investment of properties through its subsidiary/ associate companies. c. The customer entering into an agreement with HBN is entitled to assured returns on the payments so made, as per the plans. d. The customer is given the option to buy the live stock from HBN. e. The property always remains with the HBN. Therefore, the condition of day to day participation of the customer does not arise.

7. On the date fixed for personal hearing the authorized representatives (of HBN, Mr. Harmender Singh Sran, Mr. Amandeep Singh Sran, Mr. Manjeet Kaur Sran, Ms. Jasbeer Kaur and Mr. Gajraj Singh Chauhan) namely Ms. Anju Jain, Advocate, Mr. Hitesh Sachar, Advocate, Mr. Pankaj Jain, FCA, Mr. Sunil Arora, FCA and Ms. Shreya Bhandari, Practising Company Secretary appeared and made oral submissions. During the personal hearing, the noticees submitted that the money is being taken as trade deposits and have admitted of giving assured returns for its schemes. It was also admitted that it has deposits of worth 1,100 crore, collected from the public and expressed its intentions of repaying the amounts collected to public.

8. Without going into the merits of the case, I note from the submission of the noticees made vide their reply dated July 09, 2013, that they wish to wind up the schemes and repay the investors. The noticees have sought reasonable time from SEBI to file a scheme of repayment to its customers/ stakeholders and also to make the repayment to its customers as per the scheme. A further request to permit them to repay the amounts collected to the public was again made during the personal hearing. The representatives of the noticees have also submitted a list of the major assets of the HBN group companies enclosed as Annexure A with the order.

9. I note that the interest of investors is the first and foremost mandate for SEBI. I have considered the request of HBN and I am inclined to grant an opportunity to the noticees, to submit an arrangement for quicker reimbursement of monies to the investors.

However, this cannot be at the risk of HBN continuing with its money collection activities/ alienation of its assets.

10. In view of the above, I, in exercise of the powers conferred upon me in terms of Section 19 read with Sections 11(1), 11(4) and 11B of the SEBI Act, 1992 and Regulation 65 of CIS Regulations, hereby issue the following directions:

a. HBN and its directors Mr. Harmender Singh Sran, Mr. Satnam Singh Randhawa, Mr. Amandeep Singh Sran, Mr. Gajraj Singh Chauhan, Mr. Manjeet Kaur Sran, Ms. Jasbeer Kaur, Mr. Rakesh Kumar Tomar, Mr. Sukhdev Singh Dhillon and Ms. Sukhjeet Kaur, shall not solicit or collect any further money/ investments from investors/ customers into its schemes or launch or carry out any money collection schemes. b. HBN and its aforesaid directors shall submit to SEBI, a reasonable proposal including firm time lines with regard to the manner in which it proposes to wind up its schemes and make payments along with the returns which are due to its investors. This proposal shall be submitted within a period of 30 days from the date of this Order. c. HBN and its aforesaid directors shall not dispose of any of the properties including the properties mentioned in Annexure A, except for the purpose of winding up of its schemes and repaying the money to its investors/ customers with returns that have been promised to them, as directed at paragraph 10b above.

11. The above directions shall come into force with immediate effect.

12. This order is without prejudice to any action that might be taken by SEBI in respect of the schemes operated by HBN Dairies and Allied Limited including the action contemplated under the show cause notice dated November 16, 2012.

PLACE : New Delhi PRASHANT SARAN DATE : July 12, 2013 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA