Order in respect of Vee Realties India Limited[SAT Appeal No.:01/2017,]:134/2017]

WTM/PS/181/IMD/WRO-RLO/MAR/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999 In respect of – 1. Vee Realties India Limited (CIN: U66010CT2010PLC022098 / PAN : AADCV4412H) and its Directors, 2. Mr. PanchulalPandhareMotiram (DIN : 06854355) 3. Ms. RekhaNeware (DIN : 06854401), 4. Mr.NileshKeshoravGajbhiye (PAN: ATAPG3473A/ DIN : 06897209), 5. Mr. BuddhadasPremdasRamteke (PAN: AOYPR3305R/ DIN : 06954654), 6. Mr. Bhikam Chand Sahu (PAN : CJSPS3169R), 7. Mr. GaneshramVerma (PAN: ALYPV1311J), 8. Mr.Ramesh Kumar Sahu (PAN :CKAPS6595N), 9. Mr.PannaLalSahu (PAN : CYPS2984E), 10. Mr.KamleshVerma (PAN: AECPV6127M), 11. Smt.GayatriVerma (PAN: AGQPV1299J), 12. Mr. Udaksh Kumar Verma (PAN : AIEPV0678D) and 13. Mr.VedPrakshVerma (PAN: AJGPV6812J).

Date of hearing: September 07, 2015 Appearance: For noticees: Mr. Inderjit Paul, Advocate appeared on behalf of all the 13 noticees. For SEBI: Dr. AnithaAnoop, Deputy General Manager, Mr. U. Ramesh, Assistant Manager and Mr. T. Vinay Rajneesh, Assistant General Manager.

1. Securities and Exchange Board of India (“SEBI”), vide ex-parte interim Order dated December 02, 2014 (“the interim order”), prima facie observed that the fund mobilization activity of the company, Vee Realties India Limited (“the Company” or “VRIL”) is a Collective Investment Scheme in terms of section 11AA of the Securities and Exchange Board of India Act, 1992 (“the SEBI Act”). It was alleged that the Company did not obtain a certificate of registration as required under section 12(1B) of the SEBI Act and regulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 (“the CIS Regulations”) prior to the launch and operating such schemes and also contravened regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ("the PFUTP Regulations").

2. In order to protect the interest of investors who had subscribed to such schemes launched and carried out by the Company and also to prevent the Company and its directors from further carrying with their fund mobilization activity in the nature of CIS without registration from SEBI, the Company, and its 12 Directors, were directed:  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 VRIL;  not to dispose of or alienate any of the properties or assets owned or acquired directly or indirectly through money raised by VRIL;  not to divert any fund raised from public at large which are kept in bank account(s)and/or in the custody of VRIL;

3. The interim directions came into force with immediate effectand are to be in force till further orders. The Company and its 12 directors (collectively referred to as “noticees”) were advised that they may file their response to the interim order and if they so desire, also seek an opportunity of personal hearing.

4. The interim orders sent to the noticees were delivered. Thereafter, Mr. Inderjit Paul, Advocate, vide letter dated December 22, 2014 wrote to SEBIstating to represent the Company and sought for time of 15-20 days so that he could collect appropriate material for filing the reply. This request was allowed by SEBI. 5. The Company, subsequently filed a letter dated January 12, 2015 through its Advocate, inter alia submitting the following: (a) The Company was working on the concept of micro saving based on real estate services for the public to provide livelihood based real estate services to the rural and urban poor people. (b) The Company is a responsible institution working for poor to reinforce their efforts to rise, remain above the poverty line. The Company has set quantitative and qualitative targets for itself. (c) The Company believed that “poor are bankable”, they have “credit discipline” and have potential to improve income and productivity and can make profit. (d) The Company plans to scale up its operations to reach maximum poor families. (e) The Company is backed with customers from a variety of backgrounds, making it one of the versatile organizations. (f) The existing board, management and promoters of the Company have years of extensive management experience in the field of finance, real estate and credit. (g) The Company has a plan for facilitating regular savings to its customers and has introduced “Saving with Flexibility” to inculcate the saving habit in its customers. The vision of the Company is to offer flexible financial services to all groups of the people and create a self-sufficient sustainable ecosystem for its customers. (h) The products and services of the Company are being promoted by thousands of experienced, specialized customer advisors, helping the customer to choose the best plans depending upon their requirements. (i) The Company is successfully operational in the State of Chhattisgarh, Maharashtra and Madhya Pradesh. There were no complaints from investors alleging mis-management or mis-utilisation of funds of customers.

(j) The poor require savings for both production and consumption purposes. Production saving may be of three types – short term (upto 15 months), medium term (from 15 months to 5 years) and long term (for periods above 5 years). (k) The Company has discharged its obligations by conducting audit under the Companies Act, 1956 as well as Income Tax Act, 1961, filing of returns with the Income Tax Department as well as RoC, maintaining books of accounts as per Accounting standards and compliances made with the respective authorities. (l) The photocopies of audit report, income tax return, TDS return and returns with RoC were already placed with SEBI. (m) The payment plans of the Company are totally based on micro-saving only for the upliftment of poor to help them making an asset in the shape of their shelter or land for agriculture and its activities are not subject to the provisions of the SEBI Act and CIS regulations. SEBI should appreciate the allegation that the Company is involved in activities of collecting monies from general public under guaranteed returns in future is not according to the facts and proposition of law. (n) The Company also stated that due to a number of bogus criminal proceedings launched against Mr. KamleshVerma (a former director) of the Company, most of the documents were in the possession of the local police at Rajnandgaon (Chhattisgarh). (o) The Advocate also mentioned that he had applied to the police station for release of documents and requested SEBI to allow time upto the second week of February 2015 for filing another written submission.

6. Thereafter, vide letter dated February 12, 2015, the Advocate requested SEBI for extension of time till the second week of April 2015 citing his illness. This request was also accepted. However, vide letter dated April 25, 2015, the Advocate made another request for extension of time by 15 days. Vide this letter, the Advocate stated that more than 40% of the payments have been refunded and the relevant papers were with Mr. KamleshVerma and that such information would be known when this director is produced before the Court.

7. In view of the repeated extension of time and in order to proceed with the matter and also for adhering with the principles of natural justice, the noticees were afforded an opportunity of personal hearing on July 16, 2015. This hearing was rescheduled to July 29, 2015 and thereafter to August 17, 2015. The Advocate made a request for adjournment vide e-mail dated August 16, 2015 on the ground that his younger brother is hospitalized. However, this request was rejected as sufficient opportunity was already granted. This rejection was communicated to the Advocate vide SEBI‟s email dated August 17, 2015 and the Advocate was advised that the matter would be proceeded with based on the material available on record. Thereafter, the Advocate again reiterated his request and sought for a last opportunity. Considering the same, the noticees were afforded a final opportunity of hearingon September 07, 2015.

8. On the date of personal hearing (i.e. September 07, 2015), the Advocate, Mr. Inderjit Paul appeared for all the noticees and stated that the Company had filed its reply dated January 12, 2015 and requested for liberty to file written submissions within a period of 10 days. The request was allowed and the personal hearing was concluded.

9. Thereafter, vide letter dated October 05, 2015, the Advocate for the noticees requested for perusing the entire case file of SEBI pertaining to the matter and for obtaining photocopies of the entire file. With respect to this request, SEBI had vide letter dated October 15, 2015, forwarded copies of documents that were relied on in the matter, while passing the interim order. The Advocate was specifically advised to file his written submissions within a period of 10 days from the date of receipt of documents. It is noted from the India Post tracking system that the above said SEBI letter containing documents were delivered on the Advocate on October 20, 2015. However, till date, he has not filed any written submissions. As adequate opportunities and time have already been afforded, I am of the considered view that the matter could be proceeded with on the basis of material available on record.

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

11. I note that the Company was incorporated on October 12, 2010 and as per its MoA, the main objectives of the Company inter alia was “to carry on the business of builders, contractors, erectors, construction of buildings, houses, as also to carry on the business activities as developers of land, colonies, sheds, buildings, structures, to develop the sites and plots to carry on the business activities of acquirer, purchaser…”. It is noted from the Brochure/scheme related documents that the Company had offered various „Project Payment Plans‟ (referred to as “Scheme”) for soliciting money from general public towards “Expression of Interest for Provisional Booking of Unit in Agricultural Projects/Residential Housing Projects/Commercial Projects”. The Company had offered the following plans under its schemes – (a) Installment plans, (b) Regular incentive plans, (c) Single payment plan, (d) Guaranteed rental plans and (e) Single payment with regular incentive plans etc. These plans had different tenures ranging from 1 year to 15 years. The Company had offered as many as 19 plans for soliciting money from general public, as mentioned below: PROJECT PAYMENT PLANS Plan No. Nature of Plan Tenure of plan (Years) 101 Installment Plan 1 102 Installment Plan 3 103 Installment Plan 4 105 Installment Plan 5 106 Installment Plan 6 107 Installment Plan 7 108 Installment Plan 1 (Monthly, Qtly) 200 Single payment 1 201 Single Payment 6 202 Single payment 8 203 Single payment 10 204 Single payment 15 205 Guaranteed Rental Plan 6 207 Single payment 6

208 Single payment plan 8 209 Single payment with regular 10 incentive 210 Single payment bonus 15 211 Single payment 1 212 Monthly guaranteed non- 6 recoverable plan

As an illustration, payment plans pertaining to one Installment Payment Plan and Single Payment plan are reproduced below: Installment payment Plans for 3 years (Plan No.102) Monthly Qtrly Half Yearly Requisite Aprox. (`) (`) (`) (`) booking Appreciate value (`) value (`) 100 291 574 1139 3600 4300 200 582 1148 2278 7200 8600 300 873 1722 3417 10800 12900 400 1164 2296 4557 14400 17200 500 1455 2870 5696 18000 21500 600 1746 3444 6835 21600 25800 700 2037 4018 7974 25200 30100 800 2328 4592 9113 28800 34400 900 2619 5166 10252 32400 38700 1000 2910 5740 11392 36000 43000 Single Payment Plans for 6 years (Plan No – 207) Requisite Booking Approx. Appreciated Value Value (`) (`) 100000 203000 150000 304500 200000 406000 250000 507500 300000 609000 350000 710500 400000 812000 450000 913500 500000 1015000

It is noted that an „approx. appreciated value‟ at the end of the term is also indicated in the payment schedule(s).

12. The customer who evinces interest in subscribing to the plans of the Company, is made to execute a document known as the “Expression of Interest form for Provisional Booking of Unit in an Agricultural Projects/Residential Housing Projects/Commercial Projects”. Relevant clauses of this document are worth noting: i. "I/We, the Applicant, understand that M/s.Vee Realties India Limited (hereinafter referred to as the “Company), has conceived, planned and engaged in business for real estate (i.e. agricultural land/crops projects and developing residential housing projects and developing ,constituting of multiple of agricultural land and dwelling units on plots, multi-complexes etc) pursuant to the development rights acquired from the owners of the said land vide duly registered agreements collectively known as “Vee Realties India Limited” in proposed projects in India (herein after referred to as Project).

ii. I/We, the Applicant(s) has/have made this Expression of Interest for the provisional allottment of a agricultural/residential/commercial unit with full knowledge of and subject to all the laws, bye-laws, notifications, rules and regulations applicable to the area where the company‟s project is proposed to be situated, and which have been fully understood by me/us.

iii. I/We, the applicant(s), has/have made the Expression of Interest with full knowledge that the plans for the company‟s project applied for will be located not yet sanctioned by the competent authority and that in case, for any reaons(s), the same are not sanctioned or cancelled or revoked at any point of time and the company shall refund all the amounts received.

iv. I/We, request that I/we may be provisionally registered for allotment of Unit in Agricultural projects/Residential Housing Projects / Commercial Projects in Vee Realties India Limited under your Down Payment/Installment Payment plans. In case the Unit is not allotted to me/us for any reasons, the amount deposited shall be refundable to me/us subject to company‟s plan within 30 days from the date of notice regarding rejection of my/our application.

v. The applicant agrees and undertakes that he/she/they shall not withdraw this Expression of Interest for any reasons before completion of two years from the date of Expression of Interest. In case applicant withdraws this Expression of Interest after two years due to any reasons before stipulated time period as per prescribed company‟s plan, the earnest money deposted by the applicant shall be refundable after deucting statutory charges. In case of Down Payment Plans, the staturory charges are 30% of the Earnest Amount. In case of Installment Payment Plan, applicant can withdraw his/her Expression of Interest only if he/she has paid 50% of Earnest Amount as stipulated in Company‟s plan. If Applicant withdraws his/her Expression of Interest, the initial amount paid by the Applicant shall be refundable after deducting statutory charges @50% of the amount paid by the Applicant to the company.

vi. The company shall have the right to effect suitable and necessary charges, alterations, modifications, adjustments, variations, amendments and or the lay out plan of the building or block of buildings, if and when found necessary, which alterations may involve all or any of the following changes (included but not limited to) viz. change in position of residential/commercial unit, change in the number of residential/commercial unit or change in its dimensions or change in the location of the building or change in its area.

vii. The applicant(s) agrees that he/she/they/it shall pay the price of the residential/commercial unit and such other charges calculated on the basis of super area, which understood to include pro-rata share of the common areas in the projects and proportionate share of the other common facilities, as specifically provided Buyer‟s Agrement, which may be located anywhere in the said proposed resdential/commercial complex, at the sole discretion of the company.

viii. I/We agree and note that the provisional allotment of unit/provisional registration as Beneficiary in company‟s projects is entirely at the sole and absolute discretion of the company. I/we further undestand that mere issue of receipt in acknowledgement of money tendered with this application does not guarantee definite allotment of plot in company‟s projects.

ix. I/We agree to sign and execute, as and when required, agricultural crops/development agreement/house buyer‟s agreement and other related documents as prescribed in the company‟s standard formats.

x. In case of delay of 30 days in making payment by the applicant to the company as per the schedule of payments as per plan, the company shall have the right to terminate the Registration of Expression of Interest/Allotment/Agreement and forfeit the Earnest Money/Initial amount. The company shall also entitle to charge interest @24% p.a. from the date of installment(s), as per the schedule of payments, till the date of payment.

xi. The applicant(s) hereby authorizes and permits the company to raise finance/loan from any financial institution/bank by way of mortgage/charge/securitization of his/her/theiri respective commercial unit of the receivable, if any accruing or likely to accrue therefrom, subject to the commercial unit being made free of any encumbrances at the time of execution of sale deed in favor of applicant."

13. The Company has also prescribed a set of „general terms and conditions‟ forming part of the aforesaid document. These terms and conditions state as follows: i. "This application does not constitute any offer or definite allotment/registration as beneficiary and shall become definite only after due acceptance of the same by the company in writing and shall be subject to terms and conditions stipulated by the company at the time of acceptance.

ii. The registration of this application and subsequent allotment of agricultural /residential/commercial unit or registration as beneficiary is at the sole discretion of the company and in case the Unit is not allotted or registration as beneficiary is not accepted for any reason whatsoever, the applicant shall not raise any objection or claim damages. ('Emphasis added')

iii. While the company has made its best efforts to show/depict the designs of the various units/business proposals in all its marketing and communication material like brochure, leaflets, etc. the same may change due to design or any other constraint.

iv. The amount received towards EOI Form to book a specific type of unit or to register as beneficiary in projects will not guarantee an allotment/registration to the applicant. In case the company is not able to allot unit/register as beneficiary as desired/specified by the applicant, the company will offer closest equivalent of the said type of Unit/project.

v. On confirmation from the company on availability of the Unit/proposal, the amount paid against this EOI Form will be treated as amount paid towards booking/registration. The date of confirmation of allotment/registration by company by way of issuance of Allotment Letter/Intimation of beneficiary registration will be considered as booking/registration date.

14. After the customer executes the scheme related documents and opts for the plan and tenure, the Company issues an acknowledgement letter called the “Acknowledgement/Intimation Letter”. This documents inter alia prescribes the following:

"We welcome you to the growing family of Vee Realties India Limited. In response to your Expression of Interest, we are pleased to inform you that you have been provisionally registered with the company for the booking of units of land in the proposed projects of our esteemed organization. The booking and allotment of units of land in proposed project of our esteemed organization shall be governed by the applicable provisions of law and subject to the terms and conditions of Expression of Interest".

15. I also note the following observations made in the interim order:

“j) From the audited financial statements of VRIL for FY 2010-11, 2011-12 and 2012-13, it is observed that the amounts mobilized under the „Schemes‟ have been recorded in the relevant Balance

Sheets. The same is indicative from the Trade Payables (Advance from customers). Further, the VRIL has acquired some assets in the aforementioned financial years and shown as Inventories. The details are tabulated as under: Liabilities 31.03.2011(`) 31.03.2012(`) 31.03.2013(`) Trade Payables 1,81,92,735 4,78,62,425 7,95,86,449 (Advance from customers) Assets 31.03.2011 31.03.2012 31.03.2013 Inventories 1,02,56,473 3,20,45,614 5,46,44,295 k) As per the reply of VRIL dated May 24, 2014, VRIL has collected an approximate amount of `22,41,75,885/- from as many as 1,65,291 investors as on May 24, 2014 under its various schemes.

l) It is also noted from Annexure-II of VRIL‟s letter dated May 15, 2014 that VRIL stated to have refunded 710 investors on maturity of the plans along with the amounts assured under the said plans. However, the actual amount of investment and assured maturity amount cannot be determined from the said list as such details are not clearly provided.

m) Further, it is also noted from Annexure-II of VRIL‟s letter dated May 24, 2014 that VRIL stated to have refunded `26,23,122/- to 229 investors on maturity of the plans along with the amounts assured under the said plans.

n) Vide letter dated May 15, 2014, VRIL has also stated that it has land bank at various places viz., Dongargah (plot size:63815sq.ft.), Gandai, Chhuikhadan(plot size:150282 sq.ft.), Chaweli, Ghumka (plot size:365904 sq.ft.), Kusmi, Dongargaon (plot size:827640 sq.ft.), Chhuikhadan (plot size:3484800 sq.ft.), Khairagarh (plot size:348480 sq.ft.), Chandrapur (plot size:130680 sq.ft.).”

16. Before proceeding further, I note that the Company has not produced any sale deed to prove its stated object of carrying on real estate transactions. As per its submissions, the Company has stated it is into micro-financing and assists the rural and urban poor people in „savings‟ and has devised the plans as enumerated and alleged in the interim order. The Company has submitted that it has mobilized around Rs.22.41 crore from 1,65,291 investors as on May 24, 2014 under its various schemes.

17. In the background of such scheme related information and the submissions of the Company, it becomes necessary to refer to the provisions of section 11AA of the SEBI Act in order to determine whether the schemes/plans launched and carried out by it is a “Collective Investment Scheme”. The said provision is reproduced below: “Collective investment scheme. 11AA. (1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) or sub-section (2A) shall be a collective investment scheme: Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under sub-section (3), involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme.

(2) Any scheme or arrangement made or offered by any person under which,— (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement;

(ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement;

(iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors;

(iv) the investors do not have day-to-day control over the management and operation of the scheme or arrangement (2A)Any scheme or arrangement made or offered by any person satisfying the conditions as may be specified in accordance with the regulations made under this Act.

(3) Notwithstanding anything contained in sub-section (2) or sub-section (2A), any scheme or arrangement— (i) made or offered by a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912) or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State; (ii) under which deposits are accepted by non-banking financial companies as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); (iii) being a contract of insurance to which the Insurance Act, 1938 (4 of 1938), applies; (iv) providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952); (v) under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956); (vi) under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society under section 620A of the Companies Act, 1956 (1 of 1956); (vii) falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund Act, 1982 (40 of 1982); (viii) under which contributions made are in the nature of subscription to a mutual fund; (ix) such other scheme or arrangement which the Central Government may, in consultation with the Board, notify,] shall not be a collective investment scheme”.

18. The first condition, under section 11AA(2) of the SEBI Act, is that the contributions or payments made by the investors by whatever name called are pooled and utilized for the purposes of the scheme or arrangement. The Company has not disputed the veracity of the scheme related documents such as Brochures, Agreement, and Acknowledgement letter. The Company has admitted of launching plans in order to assist poor people in saving money. These plans are made under the garb of selling plots/units of land and provisional booking of units of agricultural, residential and commercial projects. Therefore, it is proved without doubt that the Company has mobilized the payments/contributions from its customers and utilized the same for the purposes of the scheme. I have already noted that each of the payment plans launched by the Company for mobilizing money from public has the inherent provision of payment of “appreciated value” on the “booking value” after the end of the tenure of the plan. The customer is made to execute the agreement (expression of interest), wherein the plan is chosen and entered.

I find it pertinent to mention here that while acknowledging the fact that the customer had entered into the „Expression of interest‟, the Company in its Acknowledgment/Intimation letter, while recording details like –date of EOI, payment& plan tenure, requisite booking value, initial amount, payment frequency, mode of payment, number of instalments, last date of opted plan tenure, date of last instalment, unit size (sq.yds.), approx. appreciable value, nominee‟s name and address, it nowhere mentions the exact details of the land which the customer intended to purchase under any plan. I also note that the Company vide its letter dated May 15, 2014 had stated that most of its valuable customers prefer to receive the appreciated value at the end of the tenure.The Company has also indicated that the “application form” would not confer any definite allotment of units on the customer. Therefore, it becomes clear that the customers were lured to make investments/contribution with a view to receive return at the end of the term as per the plans opted by them. The Company has also informed that as of May 2014, it had collected Rs.22.41 crore from 1,65,291 investors under its various schemes.

In view of the above, I conclude that the first condition under section 11AA(2) is satisfied by the „scheme‟ of the Company.

19. The second condition under section 11AA(2) of the SEBI Act is that the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement. As mentioned above, all the plans of the Company have indicated that a customer would be entitled for “approx. appreciated value”, which is higher in value compared to the initial contribution or the value of instalments paid by the customer under the plans. As an example, if the customer/investor contributes Rs.1,00,000/- in “Single Payment Plan (No.207) for a period of 6 years, the approx. realizable value on maturity is Rs.2,03,000/-. The value of money returned is more than the initial contribution. Likewise, if a customer opts for the 5 years plan (60 months) under “Installment Plan (Plan No.105) and contributes Rs.72,000/- payable in monthly, quarterly, half yearly or yearly installments of Rs.1,200/-, Rs.3,492/-, Rs.6,888/- and Rs.13,670/-respectively, the “approx. realizable value” on completion of the tenure of the plan is Rs.1,00,200/-. The Company has submitetd that the plans devised by it are for providing an avenue for savings under the provisional booking of units of a agricultural/residential/commercial project. I also note that the Company, in its Brochure, has indicated that it offers 5% special incentive to a customer at the end of the term, under the Single Payment in Guaranteed rental Income Plan. The Company has also represented that it offered 0.5% special incentive to a senior citizen. In view of the above reasons, I conclude that the second conditon is also satisifed by the „scheme‟.

20. The third and fourth conditions under section 11AA(2) are that the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors, and the investors do not have day-to-day control over the management and operation of the scheme or arrangement. With respect to these conditions, I observe the following:

(a) Clause 2 of 'Expression of Interest Form' states that "I/We agree and note that the provisional allotment of unit/provisional registration as Beneficiary in company‟s projects is entirely at the sole and absolute discretion of the company. I/we further understand that mere issue of receipt in acknowledgement of money tendered with this application does not guarantee definite allotment of plot in company‟s projects".

(b) It is also stated in the general terms and conditions forming part of 'Expression of Interest' that "This application does not constitute any offer or definite allotment/registration as beneficiary..."

(c) Clause 5 of the 'Expression of Interest Form' states that "VRIL shall have the right to effect suitable and necessary charges, alterations, modifications, adjustments, variations, amendments and or the lay out plan of the building or block of buildings, if and when found necessary, which alterations may involve all or any of the following changes (included but not limited to) viz. change in position of residential/commercial unit, change in the number of residential/commercial unit or change in its dimensions or change in the location of the building or change in its area."

From the features of the „scheme‟, it can therefore be noticed that the Company/its management have the sole right to manage the contribution or property/investment forming part of the scheme and the investors do not have any day-to-day control over the management and operation of the scheme or arrangement. I accordingly conclude that the „scheme‟ satisfies the third and fourth conditions stipulated in section 11AA(2)of the SEBI Act.

21. From the above findings and observations, I conclude that the „scheme‟ offered by the Company with a promise of „approx. assured value‟ satisfies all the four conditions specified in section 11AA (2) of the SEBI Act and therefore qualify as a Collective Investment Scheme as defined under the said section read with the CIS Regulations. I also refer to the following observation of theHon‟bleSupreme Court in the matter of PGF Limited vs. UoI and another (ref. MANU/SC/0247/2013):

"…..the Parliament thought it fit to introduce Section 11AA in the Act in order to ensure that any such scheme put to public notice is not intended to defraud such gullible investors and also to monitor the operation of such schemes and arrangements based on the regulations framed under Section 11AA of the Act."

The requirement of registration and regulation of collective investment schemes as mandated under section 11(2)(c) and 12 of the SEBI Act therefore assumes much importance. The Hon'ble Supreme Court further observed "Inasmuch as the said Section 11AA seeks to cover, in general, any scheme or arrangement providing for certain consequences specified therein vis-a-vis the investors and the promoters…….,”. The Hon‟bleSupreme Court further observed "A reading of sub-Section (3) of Section 11AA also throws some light on this aspect, wherein it is provided that those institutions and schemes governed by sub-clause (i) to (viii) of sub-Section (3) of Section 11AA will not fall under the definition of collective investment scheme. ........... Therefore, by specifically stipulating the various ingredients for bringing any scheme or arrangement under the definition of collective investment scheme as stipulated under sub- Section (2) of Section 11AA, when the Parliament specifically carved out such of those schemes or arrangements governed by other statutes to be excluded from the operation of Section 11AA, one can easily visualize that the purport of the enactment was to ensure that no one who seeks to collect and deal with the monies of any other individual under the guise of providing a fantastic return or profit or any other benefit does not indulge in such transactions with any ulterior motive of defrauding such innocent investors and that having regard to the mode and manner of operation of such business activities announced, those who seek to promote such schemes are brought within the control of an effective State machinery in order to ensure proper working of such schemes."

22. To launch or carry on the activity of CIS and mobilize public funds from such schemes, it is mandatory under law to obtain a certificate of registration from SEBI. Section 12(1B) of the SEBI Act mandates that no person, shall sponsor or cause to be sponsored or carry on or caused to be carried on any CIS unless it obtains a certificate of registration from SEBI in accordance with the CIS Regulations. Regulation 3 of the CIS Regulations provides that no person other than a Collective Investment Management Company which has obtained a certificate under the said regulations shall carry on or sponsor or launch a 'collective investment scheme'. A person can launch or sponsor or cause to sponsor a collective investment scheme only if it is registered with SEBI as a Collective Investment Management Company. Therefore, the launching/ floating/ sponsoring/ causing to sponsor any 'collective investment scheme' by any 'person' without obtaining the certificate of registration in terms of the provisions of the CIS Regulations is in contravention of section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations. The Company does not have a certificate of registration as mandated under law and has launched CIS without obtaining certificate of registration from SEBI, thereby contravening the provisions of section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations. Therefore, having concluded that the activities of the Company are CIS in terms of section 11AA of the SEBI Act and that the same were carried out without obtaining registration from SEBI, suitable enforcement action should necessarily follow in the interest of investors.

23. I also note that in terms of regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and includes illegal mobilization of funds by sponsoring or causing to be sponsored or carrying on or causing to be carried on any collective investment scheme by any person. This provision in the above Regulations has been brought into effect from September 06, 2013. The Company has stated that it has mobilized Rs.22.41 crore as of May 2014. Accordingly, it could be held that by mobilizing public funds through CIS without obtaining registration from SEBI as required under section 12(1B) of the SEBI Act read with regulation 3 of the CIS Regulations, after the provision coming into force, the Company has contravened the above provision. .

24. Therefore, havingconcluded that the activities of the Company are CIS in terms of section 11AA of the SEBI Act and that the same were carried out without obtaining registration from SEBI, suitable enforcement action should necessarily follow in the interest of investors. In view of such unregistered CIS activities carried on by the Company, it becomes necessary to issue suitable directions in the interest of investors and the securities market. In this regard, regulation 65 provides for various directions by SEBI. The said provision is reproduced below for reference:

“65. The Board may, in the interests of the securities market and the investors and without prejudice to its right to initiate action under this Chapter, including initiation of criminal prosecution under section 24 of the Act, give such directions as it deems fit in order to ensure effective observance of these regulations, including directions: (a) requiring the person concerned not to collect any money from investors or to launch any [collective investment scheme]; (b) prohibiting the person concerned from disposing of any of the properties of the [collective investment scheme] acquired in violation of these regulations; (c) requiring the person concerned to dispose of the assets of the [collective investment scheme] in a manner as may be specified in the directions; (d) requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite interest or otherwise, collected under the [collective investment scheme]; (e) prohibiting the person concerned from operating in the capital market or from accessing the capital market for a specified period.”

25. As the Company is carrying out unregistered CIS activities, it becomes necessary to direct the Company to wind up the CIS and refund its investors‟ money or assets along with requisite interest along with other necessary directions. The Company in its submissions has submitted that it had refunded 40% of the monies mobilized by it from customers. As per the interim order, the Company has stated that it had refunded Rs.26 lakh to 229 investors. In this regard, I note that the Company has not provided information regarding the the amounts mobilized after May 2014. Further, for the claim of making refunds, it has not submitted any verifiable proof to SEBI. Though the Advocate sought time (stating that the same was available with noticee KamleshVerma, who is stated to be in police custody) for producing the details/proof, he has not done so till date. In view of the same, the veracity of the claim regarding refunds is not supported.

26. Regarding the directors of the Company, the interim order has observed as follows:

“b) As per the MCA21 Portal, the present Directors of VRIL are Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye and Mr. Buddhadas Premdas Ramteke. However, it is noted from the reply of VRIL dated April 07, 2014 that Mr. Bhikam Chand Sahu, Mr.GaneshramVerma, Mr. Ramesh Kumar Sahu, Mr.PannaLalSahu were stated to be present Directors. Further,Mr.KamleshVerma, Smt.GayatriVerma, Mr.Udaksh Kumar Verma and Mr.Ved Prakash Verma were the past directors”.

As per the information available in the MCA portal, Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye and Mr. Buddhadas Premdas Ramteke are the present directors of the Company. Further, the date of appointment and resignation, if any, of all the persons mentioned as directors in the interim order are mentioned below:

Noticee Original date of Date of resignation appointment as director Mr.Panchulal Pandhare 28.3.2014 Continuing Motiram Ms. Rekha Neware 28.03.2014 Continuing Mr.Nilesh Keshorav Gajbhiye 12.06.2014 Continuing Mr. Buddhadas Premdas 22.08.2014 Continuing Ramteke Mr. Bhikam Chand Sahu Not Available in MCA Not Available in MCA Mr.GaneshramVerma Not Available in MCA 22.08.2014 Mr. Ramesh Kumar Sahu Not Available in MCA Not Available in MCA Mr.PannaLalSahu Not Available in MCA 28.03.2014 Mr.KamleshVerma Not Available in MCA Not Available in MCA Smt.GayatriVerma Not Available in MCA Not Available in MCA Mr.Udaksh Kumar Verma Not Available in MCA Not Available in MCA Mr.VedPrakshVerma Not Available in MCA Not Available in MCA

As noted above in this Order, the above persons have not filed any response despite affording adequate time and opportunities for doing so. Regarding the liability of the above persons, I note that – (a) In terms of section 291 of the Companies Act, 1956, the board of directors of a company shall be entitled to exercise all such powers and do all such acts and things as the company is authorized to exercise and do. Therefore, the board of directors shall be responsible for the conduct of the business of a company and liable for any non-compliance of law and such liability shall devolve on individual directors. Accordingly, a director who is part of a company‟s board shall be responsible and liable for all acts carried out by a company unless exemptions are provided. The present case involves a Company that has mobilized public funds from gullible investors through its unregistered collective investment schemes. In this regard, the following observations made by the Hon‟ble High Court of Madras in MadhavanNambiar vs Registrar of Companies (2002 108 Comp Cas 1 Mad) are important to note: “13. …. A director either full time or part time, either elected or appointed or nominated is bound to discharge the functions of a director and should have taken all the diligent steps and taken care in the affairs of the company.

14. In the matter of proceedings for negligence, default, breach of duty, misfeasance or breach of trust or violation of the statutory provisions of the Act and the rules, there is no difference or distinction between the whole-time or part time director or nominated or co-opted director and the liability for such acts or commission or omission is equal. So also the treatment for such violations as stipulated in the Companies Act, 1956.”

(b) The directors have not filed any submissions in their defence. Further, it appears that the Company has not updated the information regarding the dates of joining and resignation of few of the directors, as mentioned above. The Company was incorporated on October 12, 2010. From the submissions of the Company, it can be inferred that it commenced mobilizing monies under the scheme thereafter. Therefore, the persons who were the directors from such date would be liable for the contravention as found against the Company. Further, the present management/board of directors shall also be responsible for winding up of schemes and for making refunds as directed in this Order.

(c) I therefore, find the Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke and past directors Mr. Bhikam Chand Sahu, Mr.GaneshramVerma, Mr. Ramesh Kumar Sahu, Mr.PannaLalSahu, Mr.KamleshVerma, Smt.GayatriVerma, Mr.Udaksh Kumar Verma and Mr.Ved Prakash Verma, liable for the contraventions committed by the Company in launching and operating unregistered CIS and contravening regulation 4(2)(t) of the PFUTP Regulations.

27. In view of the foregoing, in the interest of investors and the securities market, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 and Sections 11(1), 11B and 11(4) thereof and regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999, hereby issue the following directions:

(a) Vee Realties India Limited and its directors Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke and past directors Mr. Bhikam Chand Sahu, Mr.GaneshramVerma, Mr. Ramesh Kumar Sahu, Mr.PannaLalSahu, Mr.KamleshVerma, Smt.GayatriVerma, Mr.Udaksh Kumar Verma and Mr.Ved Prakash Verma, shall abstain from collecting any money from the investors or launch or carry out any Collective Investment Schemes including the scheme which have been identified as a Collective Investment Scheme in this Order.

(b) Vee Realties India Limited and its directors Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke shall wind up the existing Collective Investment Schemes and refund through „Bank Demand Draft‟ or „PayOrder‟, the moneycollected by the said company under the schemes with returns which are due to its investors as per the terms of offer within a period of three months from the date of this Order and thereafter within a period of fifteen days, submit a winding up and repayment report to SEBI in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999, including the trail of funds claimed to be refunded, bank account statements indicating refund to the investors and receipt from the investors acknowledging such refunds.

In case the Company has made refunds as claimed in its submission, it shall produce the proof for such repayment as directed above and also submit a certificate from Chartered Accountant as directed in sub-paragraph (d) below.

(c) Vee Realties India Limited, its promoters and its directors Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke, shall not alienate or dispose off or sell any of the assets of the Company except for the purpose of making refunds to its investors as directed above.

(d) After completing the aforesaid repayments in terms of sub-paragraph (b) above, the Company,Vee Realties India Limited shall file a certificate of such completion with SEBI, within a period of 15 days, from two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. For the purpose of this Order, a peer reviewed Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by the Institute of Chartered Accountants of India („ICAI‟).

(e) Vee Realties India Limited and its directors Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke and past directors Mr. Bhikam Chand Sahu, Mr.GaneshramVerma, Mr. Ramesh Kumar Sahu, Mr.PannaLalSahu, Mr.KamleshVerma, Smt.GayatriVerma, Mr.Udaksh Kumar Verma and Mr.Ved Prakash Vermaare also directed to provide a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/ securities, if held in physical form.

(f) Vee Realties India Limited and its directors Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke and past directors Mr. Bhikam Chand Sahu, Mr.GaneshramVerma, Mr. Ramesh Kumar Sahu, Mr.PannaLalSahu, Mr.KamleshVerma, Smt.GayatriVerma, Mr.Udaksh Kumar Verma and Mr.Ved Prakash Vermaare restrained from accessing the securities market and are prohibited from buying, selling or otherwise dealing in securities market for a period of 4 years.

(g) In the event of failure by Vee Realties India Limited and its directors Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke and past directors Mr. Bhikam Chand Sahu, Mr.GaneshramVerma, Mr. Ramesh Kumar Sahu, Mr.PannaLalSahu, Mr.KamleshVerma, Smt.GayatriVerma, Mr.Udaksh Kumar Verma and Mr.Ved Prakash Verma, to comply with the above directions, the following actions shall follow:

- Vee Realties India Limited and its directors Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke and past directors, Mr. Bhikam Chand Sahu, Mr.GaneshramVerma,

Mr. Ramesh Kumar Sahu, Mr.PannaLalSahu, Mr.KamleshVerma, Smt.GayatriVerma, Mr.Udaksh Kumar Verma and Mr.Ved Prakash Verma, shall remain restrained from accessing the securities market and would further be prohibited from buying, selling or otherwise dealing in securities, even after the period of4 yearsof restraint imposed in sub-paragraph (f) above, till all the Collective Investment Schemes of the Companyare wound up and all the monies mobilized through such schemes are refunded to its investors with returns which are due to them.

- SEBI would make a reference to the State Government/ Local Police to register a civil/ criminal case against the Company, its promoters, directors and its managers/ persons in-charge of the business and its schemes, for offences of fraud, cheating, criminal breach of trust and misappropriation of public funds;

- would also make a reference to the Ministry of Corporate Affairs to initiate appropriate action as deemed fit.

- SEBI would make a reference to the Ministry of Corporate Affairs to restrain above-mentioned noticee directors from being directors in other companies.

- SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and regulations framed thereunder against the Company and others responsible.

28. This order shall come into force with immediate effect.

29. This Order shall be without prejudice to the right of SEBI to initiate prosecution proceedings under Section 24 and adjudication proceedings under Chapter VIA of the Securities and Exchange Board of India Act, 1992 against Vee Realties India Limited and its directors Mr.Panchulal Pandhare Motiram, Ms. Rekha Neware, Mr.Nilesh Keshorav Gajbhiye, Mr. Buddhadas Premdas Ramteke and past directors, Mr. Bhikam Chand Sahu, Mr.GaneshramVerma, Mr. Ramesh Kumar Sahu, Mr.PannaLalSahu, Mr.KamleshVerma,

Smt.GayatriVerma, Mr.Udaksh Kumar Verma and Mr.Ved Prakash Vermaincluding other persons who are in default, for the violations as found in this Order.

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

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Date: March 03, 2016 Place: Mumbai