Order in the matter of Agri Gold Farm Estates India Private Limited

WTM/PS/51/IMD-CIS/SRO-HLO/SEPT/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11(1), 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 and regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999

In respect of – 1. Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors, 2. Mr. Venkata Rama Rao Avvas (DIN: 00099695), 3. Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), 4. Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), 5. Mr. Savadam Srinivas(DIN: 00316971), 6. Mr. Moganti Bhanuji Rao (DIN: 00430884) and 7. Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611)

1. Securities and Exchange Board of India (“SEBI”), vide an ad interim ex-parte Order dated February 05, 2015 (“the interim order”) prima facie observed that the schemes offered by Agri Gold Farm Estates India Private Limited (“Company” or “Agri Gold” or “AGFEIPL”) inviting investments from public satisfied all the four conditions under section 11AA(2) of the SEBI Act, 1992 and therefore alleged to have launched or sponsored Collective Investment Scheme/s (“CIS”), without obtaining registration from SEBI as required under section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations. It was also alleged that the activity of illegal mobilization of funds by the Company through its schemes, 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 ("the PFUTP Regulations"). In order to protect the interest of investors and to prevent the Company and its directors from further carrying on with the fund mobilizing activities through the alleged CIS, the following directions were issued vide the interim order:

“22. In view of above, I, in exercise of powers conferred upon me under Sections 11(1), 11(4) and 11B of the SEBI Act read with CIS Regulations and PFUTP Regulations, hereby direct Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors viz., Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas(DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611): • 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 AGFEIPL; • not to dispose of or alienate any of the properties/assets obtained directly or indirectly through money raised by AGFEIPL; • not to divert any funds raised from public at large which are kept in bank account(s) and/or in the custody of AGFEIPL; • to furnish all the information/details sought by SEBI vide letters dated May 16, 2013 and August 14, 2013 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. Details of commission paid on amounts mobilised above, iv. Details of agents along with their addresses, etc., v. Audited Accounts for the last financial year and vi. PAN of AGFEIPL and aforementioned Directors.”

2. The interim order was passed without prejudice to the right of SEBI to take any other action that is deemed fit against the Company and its Directors, in accordance with law. The Company and its aforesaid directors were afforded opportunity to file their response to the prima facie observations contained in the interim order and also to indicate whether they wish to avail an opportunity of personal hearing in the matter. For sake of convenience, the Company and its directors, Mr. Venkata Rama Rao Avva, Mr. Avva Venkata Seshu Narayana Rao, Mr. Avva Hema Sundara Vara Prasad, Mr. Savadam Srinivas, Mr. Moganti Bhanuji Rao and Mr. Emmadi Sada Siva Vara Prasad Rao are collectively referred to as “noticees”.

3. The Company vide its response dated February 25, 2015, inter alia made the following submissions:

(a) In view of the interim directions, several of its real estate projects which included construction activities came to a halt. (b) During the past three years, there were several Police and other inquiries with respect to its business activities. (c) Based on a complaint for dishonor of cheque, the Police registered FIR against the Company and its directors for violations of RBI Act, 1934, Prize Chits and Money Circulation Scheme (Banning) Act, 1978, the APPDFE Act and the Indian Penal Code and raids were conducted in the residential premises of the some of its directors. These raids, search and seizure operations continued for more than a week. Police had collected information pertaining to the entire Agri Gold group and the information of customers and agents of the entire group were directly downloaded by the Police from the computer systems of the Company. (d) The Police action and media reports created panic amongst the customers and employees working in the real estate companies of the group, which hampered the day to day activities of the Company. (e) The Income Tax Department also conducted search and seizure operations in its Head Office and Branch offices and seized vital documents including Original title deeds of the entire group and several computers used for day to day operations.

(f) The Registration Department was also instructed by the Police Department of West Godavari and Nellore District not to deal with the properties of the group. Banks were also informed not to allow operation of bank accounts of the companies. These actions made the Company to forcefully default in its commitments to its customers including non-payment of utility bills and employee salaries. (g) While the Company was trying to submit details as required by SEBI by bringing data available in branches to Head Office, the Govt. of A.P. passed an interim order provisionally attaching the properties of the Company and its directors and had included all properties of other companies which were not in the business of real estate activities. (h) The action of various authorities was penal and took away the right of the Company to realize the sale revenue of its existing real estate projects to carry on its business, atleast to meet the day to day maintenance expenditure. (i) The Company requested SEBI to – o extend the time for submitting the details called for vide the interim order. o Furnish all data/material which is the basis for issuing the interim order.

o Relax the conditions to allow the Company to complete the on-going registration of properties to its customers o Allow it to carry out the business activities other than those specifically opined as CIS. o Allow it to operate bank accounts to avoid inconvenience to customers. o Permit the company to file reply after receipt of all information / material. o Grant personal hearing.

4. SEBI had furnished (vide its letter ref. no. SEBI-HLO/CIS/DT/ 1515/2015 dated April 15, 2015 to the Company) the investor complaints (both physical and electronic), replies received from the Company, Brochures of the Schemes submitted by the complainants and the Company. Further, the Company was granted time till April 30, 2015 to submit its response. However, no reply was received from the Company.

5. The noticees were afforded an opportunity of personal hearing on July 28, 2015, which was rescheduled to August 17, 2015 on the request of the Company. In the personal hearing held on August 17, 2015, the noticees were represented by Mr. KRCV Seshachalam, Advocate. Mr. Venkata Rama Rao Avva, Chairman and Director of the Company and Mr. Savadam Srinivas, Director were also present. The Advocate submitted that the Company had filed a writ petition before the Hon’ble High Court of Madras challenging the interim order passed by SEBI and that the same was not yet admitted. He also stated that a Public Interest Litigation was filed against the Company in the Hon’ble High Court at Hyderabad. He further submitted that the Company had filed a writ petition challenging the orders passed by the Govt. of Andhra Pradesh in attaching the properties of the Company. While stating that the Company had to deal with various litigations, FIRs and the action taken by the Govt. of Andhra Pradesh, the advocate requested that the matter be kept in abeyance for a period of 6 months and allow the Company to file its reply thereafter on the merits of the case. Considering the interest of investors in the alleged CIS schemes operated by the Company and the long period sought by the Advocate, the request was rejected. However, in the interest of justice, the noticees/advocate were offered an adjournment for one week when the learned advocate could argue on merits. The same was not acceptable to the learned advocate who insisted on an adjournment of six months. The learned advocate was advised to file their submissions and documents, if any, on the merits of the case within a period of one week. Accordingly, the personal hearing in the matter was concluded.

6. Meanwhile, the Company had filed a Writ Petition in W.P. No. 12310 of 2015 before the Hon’ble High Court of Judicature at Madras praying for a writ of certiorari to call for the records relating to the interim order and quash the same. The Company also filed a Miscellaneous Petition in M. P. No.3/2015 with a prayer for staying the personal hearing scheduled on July 28, 2015. The Hon’ble High Court admitted the writ petition on April 24, 2015 and on August 17, 2015 had finally disposed off the same with the following observations/directions: “5. A perusal of the order impugned would show that it is prima facie in nature. The enquiry is almost completed except filing written submissions. In a matter of this nature, touching upon Revenue and technical aspects involving economy, this court is expected to adopt a dignified reluctance to leave the issues open to be decided by the Statutory authority. Thus without going into the merits of the case, this Court directs the first respondent to pass appropriate final orders after considering the reply given already and to be given in the form of written submissions within a period of four weeks from the date of copy of this order. The Petitioner is at liberty to give written submissions to the first Respondent within a period of one week from the date of receipt of copy of this order. 6. Accordingly, the writ petition stands disposed of by directing the first respondent to pass final order on merits after considering the relevant materials. While considering the same, the first respondent shall consider the question of jurisdiction raised before it.”

7. Pursuant to the personal hearing, the noticees through their counsel, vide letter dated August 24, 2015 inter alia made the following submissions: (a) Various action taken by the Government of Andhra Pradesh: (i) The Govt. of Andhra Pradesh had invoked the provisions of the Andhra Pradesh Protection of Depositors of Financial Establishments Act, 1999 (“APPDFEA”) against the Company and its directors. (ii) Govt. of A.P. had filed criminal cases against the Company in several police Stations under the provisions of the Indian Penal Code, the APPDFEA, RBI Act and Prize Chit and Money Circulation (Banning) Act, 1978. (iii) A.P. Police raided the residences of Chairman, M.D. and Joint M.D. of the Company on January 04, 2015 and continued their search and seizure operations in the offices of the Company and seized documents, information etc. and issued several prohibitory orders to various persons restraining the operations of the business and bank accounts of the Company.

(iv) On February 20, 2015, the Govt. of A.P. issued GO MS No. 22 and 23 (HOME ARMS & SPF) under APPDFEA attaching the properties of the Company and its promoters and directors situated in the State of A.P. (v) On June 05, 2015, the Govt. of A.P. had issued another notification GO MS No. 73 attaching the properties of Agri Gold situated in other States – Telangana, Karnataka and Orissa under section 3 of the APPDFEA. (vi) On June 19th, July 3rd and July 13th of 2015, meetings of the Expert Committee were held. The Company’s representative participated and explained to the Committee the facts and circumstances that had taken place in the matter and brought to the notice of the Committee regarding the attachment of properties under the APPDFE Act. (vii) Various press reports appeared in Newspapers in August 2015 which mentioned that the Govt. of AP was all set to auction the assets of the Company which are under attachment. There was a direction from Chief Minister of AP to expedite the matters for refund of amounts to all customers of the Company. (b) Litigations by and against the Company: (i) The interim order was impugned in a writ petition filed before the Hon’ble High Court at Madras. (ii) W.P. No. 14503/2015 was filed before the Hon’ble High Court of Hyderabad inter alia seeking appointment of a Committee to oversee sale of properties and distribute the proceeds to the customers. SEBI is also a party in such petition. (iii) A Public Interest Litigation was filed by the Telangana Agrigold Customers Welfare Association before the Hon’ble High Court of Hyderabad and the same is pending. SEBI was made a party in the said matter.

(c) In view of the following factors, it was requested that the proceedings be adjourned as further orders by SEBI would not serve any real purpose: (i) Attachment of all relevant documents and certain properties of the Company and directors by the A.P. Police. (ii) Attachment of properties by the Govt. of AP under the APPDFE Act and further steps taken by the Govt. to sell the assets and pay to all the customers of the Company. (iii) Consent given by the Company to the Committee constituted by the Govt of AP to sell identified project properties for arranging the refund of advances to its customers.

(iv) Pendency of various litigations. (v) Balance of convenience in favour of the Company. (vi) Interim order still in operation against the Company.

(d) As further order, if passed, would be for winding up of the alleged schemes and distribution of proceeds to the investors and considering the balance of convenience, the proceedings can be adjourned as action has been initiated by the Govt. of AP.

(e) The Company could not file its reply on merits till now in view of the above litigation, police action and seizure of documents etc.

(f) Within a period of six months, clarity would emerge as to the sale of assets and distribution of proceeds to the customers. Any further order passed by SEBI may have an overlapping effect on the said proceedings and may complicate/delay the process of refunding the amounts to customers.

(g) The appearance of the counsel/representatives of the Company was to apprise the events that took place prior to and after the issuance of the interim order and not in the course of regular personal hearing on merits as the matter is sub-judice before the High Court. These submissions were filed to bring on record the oral submissions made in the hearing as the record of proceedings circulated by SEBI did not cover many of the above pleadings.

8. I have considered the interim order, the material available on record and the submissions made by the noticees in the personal hearing and reiterated in the submissions dated August 24, 2015. At the outset, I wish to deal with the submission of the Company that it appeared in the personal hearing to apprise the events and not to make submissions on merits. In this regard, I note that the interim order containing the prima facie observations/allegations against the Company and other noticees is served on the noticees. The interim order had clearly mentioned that they may file their response to such allegations within a period of 21 days and also indicate whether they wish to avail personal hearing. The Hon’ble High Court at Madras, vide Order dated August 17, 2015, granted liberty to the Company to file written submissions within a period of one week from the date of receipt of copy of the said order. Therefore, the Company had adequate opportunity to file their submissions on merits in the matter. It is their contention that the Police/Govt. of A.P. have seized the relevant documents. However, considering the interest of investors and to prevent further damage, SEBI has to proceed in the matter and cannot therefore wait indefinitely for a reply from the Company. Considering the interest of investors in the alleged CIS schemes operated by the Company and the long period sought by the Advocate, I am of the considered view that the matter could be proceeded with.

9. It is noted that the main objects of the Company, as per its Memorandum of Association (MoA) is “business of real estate i.e., purchasing/ developing/ marketing/selling of flats, apartment complexes, estate lands, farm lands/plots and agricultural operations etc.” The interim order has observed in paragraph 10(a) that “From the brochures/publicity materials submitted by AGFEIPL vide letter dated June 3, 2013, it is observed that AGFEIPL purchases large areas of land in different districts of Andhra Pradesh and develop such land as per the requirement of the customers and then sells such plots of land/flats to the customers. It is noted from the brochures submitted by one of the complainants that AGFEIPL has 162 branches in India out of which over 45 branches are in Karnataka and its land projects are operative across several districts in Andhra Pradesh/Telangana States”.

10. With respect to the Brochures of the Company furnished by the complainants, the interim order had observed that the Company had launched a Project termed as “owner’s pride”, for different periods of time and with different payment structures with different names, namely, - (a) Gold Line Project (Daily, 30 months period, 28 months collection, 750 days), (b) Green Shine Project (3 years), (c) Top Line Project (3 years), (d) Green Ways Project (5 years), (e) Silver Line Project, etc. The details of a few schemes are illustrated for reference and consideration: GOLD LINE PROJECT Project Code : GLP Swift Installments (SID) In ` Mode of payment Consideration Rs. x No. of days Estimated Land/ Value Development period 30 Commerical Benefit Plot size Cost of Land months Value Amount 400 sq.ft 7500 10 x 750 days 8400 900 800 sq.ft 15000 20 x 750 days 16800 1800 1200 sq.ft 22500 30 x 750 days 25200 2700 1600 sq.ft 30000 40 x 750 days 33600 3600 2000 sq.ft 37500 50 x 750 days 42000 4500 4000 sq.ft 75000 100 x 750 days 84000 9000 20000 sq.ft 375000 500 x 750 days 420000 45000 40000 sq.ft 750000 1000 x 750 days 840000 45000

SILVER LINE PROJECT Project Code : T.L.P Swift Instalments Monthly ( SIM) In ` Mode of payment Rs. x No. of days Development period 30 months 3 years 6 1/2 years 10 years Consideration SLP -1 SLP -2 SLP - 3 Land/ Value Plot size Cost of Land EVC Benefit EVC Benefit EVC Benefit 432 sq.ft 1000 1350 350 2000 1000 3500 2500 2160 sq.ft 5000 6750 1750 10000 5000 17500 12500 4320 sq.ft 10000 13500 3500 20000 10000 35000 25000 8640 sq.ft 20000 27000 7000 40000 20000 70000 50000 12960 sq.ft 30000 40500 10500 60000 30000 105000 75000 21600 sq.ft. 50000 67500 17500 100000 50000 175000 125000 43200 sq.ft 100000 135000 35000 200000 100000 350000 250000

GREEN SHINE - GSD 36 ( DAILY) Project Code : G. S. D 36 Swift Instalments Daily ( SID) In ` Mode of payment Consideration Rs. x No. of days Estimated Land/ Value Development period 30 Commercial Benefit Plot size Cost of Land months Value Amount 5 cents 10800 300 x 36 months 12200 1400 10 cents 21600 600 x 36 months 24400 2800 15 cents 32400 900 x 36 months 36600 4200 20 cents 43200 1200 x 36 months 48800 5600 25 cents 54000 1500 x 36 months 73200 7000 50 cents 108000 3000 x 36 months 146400 14000

TOP LINE PROJECT - TLP ( MONTHLY) Project Code : T.L.P Swift Instalments Monthly ( SIM) In ` Mode of payment Consideratio Rs. x No. of days Estimated Land/ n Value Development period 30 Commercial Benefit Plot size Cost of Land months Value Amount 200 sq.ft 3600 100 x 750 days 4100 500 400 sq.ft 7200 200 x 750 days 8200 1000 600 sq.ft 10800 300 x 750 days 12300 1500 800 sq.ft 14400 400 x 750 days 16400 2000 1000 sq.ft 18000 500 x 750 days 20500 2500 2000 sq.ft 36000 1000 x 750 days 41000 5000

GREEN SHINE - GSD 36 ( DAILY) Project Code : G. S. D 36 Swift Instalments Daily ( SID) In ` Mode of payment Consideratio Rs. x No. of days Estimated Land/ n Value Development period Commercial Benefit Plot size Cost of Land 30 months Value Amount 5 cents 10800 10 x 1080 days 12200 1400 10 cents 21600 20 x 1080 days 24400 2800 15 cents 32400 30 x 1080 days 36600 4200 20 cents 43200 40 x 1080 days 48800 5600 25 cents 54000 50 x 1080 days 61000 7000 50 cents 108000 100 x 1080 days 12000 14000 250 cents 5400000 500 x 1080 days 610000 70000 500 cents 1080000 1000 x 1080 days 1220000 140000

The Company has prescribed an Application Form to be filled in by its customer with respect to the alleged scheme. It is also noted that the Application Form and the ‘Customer Relations & Administrative Guidelines’ of the Company, state that wherever the word ‘principal’ is used, it shall be understood that it represents either the Company or the project promoter/developer of real estate/farm house land/farm plot venture whose ventures are being booked through the company and to whom the applicant has made his/her application through the company, as the case may be. The terms and conditions in the Application Form, as relevant are mentioned below:

(i) "...This application will be forwarded to the principal concerned along with the advance money paid by the applicant. The acceptance of the application is entirely at the discretion of principal and principal has right to reject any application without assigning any reason thereof...

(ii) The principal, may on being satisfied that it is necessary to do so, modify any of the terms and conditions/project and such modified terms and conditions/project shall be binding on the purchasers.

(iii) The plots will be allotted only on receipt of 100% advance/plot cost on first come first serve basis and the sale deed will be executed within the execution date mentioned in the receipt subject to the terms and conditions.

(iv) The applicant cannot withdraw his/her application after allotment of the plot is made without the written approval of the principal. Once the sale deed is executed the applicant will be treated as a purchaser. All the instalment monies paid to the company towards booking advances/ further instalments against the order for purchase of plot property will be transferred to the principal.

(v) In case, on receipt of full value of the plot as agreed and if the plots/flats are not available for whatever reasons in the existing offered project/layout/complex, principal will allot similar plot/flat in another project/venture having same cost and similar features as per the applied project/venture and offer the same within the stipulated date/agreed period of time. If the customer is not willing for such alternative offer, the principal will refund the total advance money to the customer along with some suitable/ reasonable and permissible compensation as liquidated damages but in any case the aggregate of both (advance plus compensation), shall not be more than the cost of the plot as indicated in the receipt issued where the discount is availed through offer price by the customer at the time of booking and in case of others the advance paid will be refunded along with a compensation calculated at 6% on the advance paid.

(vi) All payments must be made directly to the administrative office of the company or the authorized branch offices of the company or through a crossed demand draft, payable at Vijayawada. The company/principal shall be responsible only for the payments remitted at the authorised offices and the receipts issued by such offices only are valid.

(vii) The entire instalment amounts paid up to the full cost of the plot/property will be considered as advance payment until the sale deed is executed or possession of the property has been handed over to the customer.

(viii) On default of payment of three consecutive monthly instalments, it will be treated as breach of commitment by the customer and monies paid by the customer will be refunded by the principal within one month from the expiry of stipulated execution date as noted on the receipt after deducting the documentation/incidental expenses etc, which are quantified at 12% of the cost of the plot.

(ix) The property for which the application is made and the sale consideration is received in full or paid in lump sum i.e., out right payment and sale deed is executed, except in the cases where the company/ principal declares any inconvenience/ legal issues involved in the title or process, it has always been deemed to be considered that the sale is completed and that the physical possession of the property has been handed over to the purchaser and the said purchaser shall make all efforts to get the registration completed within the stipulated execution date.

(x) If the purchaser does not come forward to make the registration completed within the project period as noted in the application, for whatever reasons, it will be considered, that the purchaser is not a purchaser but a prospective purchaser and committed breach of contract and therefore there was no such deemed handing over of the property to the purchaser and the principal may refund the said consideration total monies to the customer.

(xi) The estate/land/plot etc., will be allotted in a particular Estate/project/layout which the Principal may announce from time to time subject to allotment on first come first served basis or as decided by the Principal from time to time. However, the applicants shall have no claim or right whatsoever in any particular venture/project (xii) In the event of the cost/ price originally fixed is found to be insufficient at a later date, an additional amount as decided by the principal shall have to be paid on or before registration of the property. However, if the purchaser is not agreeable, the amount paid will be refunded after deducting nominal charges, which deduction shall be not more than 5% of the total sale consideration.

(xiii) The company/ principal will consider group bookings/ orders for specific model of projects/ layouts/farms from distributors/ associations/societies/ groups on certain terms and conditions subject to advance payments at company’s discretion, on A-D-D model i.e., acquisition, development and delivery.

(xiv) If the company/principal fails to deliver the same, the company will then act as the sole arbitrator in settling the disputes between the parties.

(xv) The principal reserves its right to refund the amounts without any compensation whatsoever by terminating the agreement/contract, if it is satisfied that it is necessary or expedient to do so or if the circumstances so warranted at any time before the registration of the property.”

11. The interim order has also observed that the Company has several developmental projects viz., Fortune Tirumala- Tirupathi, Fortune Anantha- Anantapur, etc in different places/districts of Andhra Pradesh, Telangana and other states. These developmental projects/ventures have been given names as per the location of the property and widely advertised in media and website of the Company.

12. In order to conclude whether a Scheme is a CIS or not, it is necessary that such Scheme satisfies all the conditions prescribed under section 11A(2) of the SEBI Act. The four conditions are– 1. 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; 2. 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; 3. the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; 4. the investors do not have day to day control over the management and operation of the scheme or arrangement.

13. In the present case, the Company has launched various plans/schemes as mentioned in the interim order. The Company has solicited monies from the customers under lump-sum as well as instalment plans under its schemes. The interim order has observed “It is observed from AGFEIPL's ‘instalments remittance remembrance card’ issued to an investor of ‘Green Shine Project’, that details of the name of the investor, project name/code, offer price, cost of the plot, instalment amount, number of instalments, agent name, date of booking, etc are mentioned. However, the dimension of the plot or the precise details of the plot and details of the location/property are not specified anywhere in the said ‘instalments remittance remembrance card’. It is noted from the documents submitted by various complainants that AGFEIPL had not given any documents like sale agreements, brochures relating to the plot at the time of making the payment of sale consideration except a receipt. Furthermore, in all the complaints received by SEBI, there are only receipts issued by AGFEIPL but, no sale agreements indicating precise details of the plot, etc.”. In case of a pure real estate transaction, the Company would definitely sell an identified plot of land. Even as per the terms in the Application form, the Company can allot similar plot in another project/venture. The Company has stipulated “The estate/land/plot etc., will be allotted in a particular Estate/project/layout which the Principal may announce from time to time subject to allotment on first come first served basis or as decided by the Principal from time to time.

However, the applicants shall have no claim or right whatsoever in any particular venture/project.” The customer has no right to choose the property and the Company can unilaterally alter the same. No documents are provided to state that a customer pays in instalments/upfront payment for an identified plot. Considering the above discussion and the nature of the scheme/plans which promise a monetary return, it can be concluded that the Company is not into real estate business and has solicited investments from the public with a promise of monetary returns on their investments in accordance with the plans. The contribution or investment made by a purchaser or investor is in accordance with the various payment schedules offered under the projects for different time periods in the form of equal instalments or onetime payment towards purchase of plot of land of varying sizes. In view of the above, it is concluded that the Company has floated various schemes which promise monetary returns and that the payments made by the investors are pooled and utilized for the purpose of such scheme or arrangement.

14. The interim order has observed in paragraph 10(f) that - “It is seen from the Audited Annual Reports for the financial years 2009-10 to 2012-13 that AGFEIPL had turnover of `146.59 crores (FY 2009-10), `187.63 crores (2010-11), `117.08 crores (2011-12) and 87.48 crores (2012-13) from sale of plots. It is also seen from the audited financial statements of AGFEIPL that an amount of `873,64,10,015 (2009-10), `542,74,51,302 (2010-11), `447,09,12,091/- (2011-12) and `349,59,03,352/- (2012-13) is mentioned as 'Advance from customers for plots' under the head ‘Current liabilities & provisions’. The fixed assets mentioned in the audited financial statements as on March 31, 2013 is `213,15,65,920/-.”

Vide an amendment to section 11AA, with effect from July 18, 2013, a proviso was inserted which provided that pooling of funds under any scheme or arrangement {which is not registered with SEBI or is not covered under section 11AA(3)}, involving a corpus amount of Rs.100 crore or more shall be deemed to be a CIS. It is noted that the Company has mobilized more than Rs.100 crores during the financial years mentioned above. No details are available for 2013-14 and 2014-15. The Company is not authorized to launch or carry on CIS as it is not registered with SEBI. Considering the corpus of public funds collected by the Company and the admitted default in returning the monies to the customers, the activities of the Company may also be deemed to be collective investment scheme in terms of the proviso to section 11AA(1) of the SEBI Act.

15. The second condition under section 11A(2) is that the contribution or payments are made to such scheme or arrangement by the investors are with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement. From the schemes of the Company and the specific ones that are mentioned above, it is clear that in every plan, the Company has promised an “Estimated Commercial value” which includes the investment along with the monetary return to the customer. As an illustration, under the Green Shine plan, if a customer invests Rs.10800/-, he is eligible for Rs.12,200/-, which includes the benefit amount of Rs.1400/-. Every plan/sub-plan, has the fixed benefit promised to the customer. It is already established that the Company has not proved with the help of documents that its operations are in the nature of pure real estate business. It therefore becomes proved that the Company invites investments from the public under its schemes/plans with a promise of monetary return and therefore the second condition is satisfied.

16. 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 that investors do not have day to day control over the management and operation of the scheme or arrangement. The following clauses mentioned in the terms and conditions of the Application form clearly prove that the contribution or investment forming part of scheme or arrangement is managed by the Company and that the investors do not have day-to-day control over the management and operation of the scheme or arrangement:  " The principal, may on being satisfied that it is necessary to do so, modify any of the terms and conditions/project and such modified terms and conditions/project shall be binding on the purchasers.  In case, on receipt of full value of the plot as agreed and if the plots/flats are not available for whatever reasons in the existing offered project/layout/complex, principal will allot similar plot/flat in another project/venture having same cost and similar features as per the applied project/venture and offer the same within the stipulated date/agreed period of time".  The estate/land/plot etc., will be allotted in a particular Estate/project/layout which the Principal may announce from time to time subject to allotment on first come first served basis or as decided by the Principal from time to time. However, the applicants shall have no claim or right whatsoever in any particular venture/project".

The customers /investors do not at any stage have any role in the management of the property, contribution or investment forming part of the Schemes/ Plans. In view of the above, the 'Schemes' satisfy the third and fourth conditions stipulated in section 11AA (2) of the SEBI Act.

17. I also refer to and rely on the following observations made by the Hon’ble Supreme Court of India in the matter of PGF Limited & Ors. Vs. UoI & anr. (MANU/SC/0247/2013), “…It is imperative that the transaction of the PGF Limited vis-à-vis its customers have necessarily to be examined as to its genuineness by subjecting itself to the statutory requirement of registration with the second respondent followed by its monitoring under the regulations framed by the second respondent. All the above factors disclose that the activity of sale and development of agricultural land propounded by the PGF Limited based on the terms contained in the application and the agreement signed by the customers is nothing but a scheme/arrangement…….Such pooled funds and the units of land are part of such scheme/arrangement under the guise of development of land.”. It becomes evident that the Company has carried out CIS activity under the guise of real estate business. The most essential feature of a real estate transaction is a clearly distinguishable immovable property for a buyer and a document (registered sale deed) that evidences transfer of title on such property in favour of the buyer. It is thus clear that the schemes of the Company are not real estate transactions as claimed by the Company. The interim order has observed “It is also noted from the investor complaints received by SEBI that AGFEIPL neither transferred any land nor repaid the invested amount to many of the investors”.

18. In view of the above discussions and observations, the ‘scheme’ launched and operated by the Company under the guise of real estate business is in the nature of a Collective Investment Scheme as all the four conditions specified under section 11AA (2) of the SEBI Act are satisfied. Therefore, I find that the Company is engaged in the fund mobilizing activity from the public by floating/ sponsoring/ launching 'collective investment schemes' as defined in section 11AA of the SEBI Act.

19. 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. The Company has failed to do so. 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 has launched a CIS without obtaining certificate of registration from SEBI, thereby it has contravened the provisions of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations.

20. 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 (“the PFUTP Regulations”), 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. 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 and is therefore liable for action.

21. The Company by indulging in CIS activities, without registration from SEBI, has therefore contravened the provisions of section 12(1B) of the SEBI Act, regulation 3 of the CIS Regulations and regulation 4(2)(t) of the PFUTP Regulations. The Company has questioned the jurisdiction of SEBI upon it. The Hon’ble High Court at Madras has also directed SEBI to consider this question of jurisdiction. During the personal hearing, the Advocate for the noticees had subtly argued that when the Govt. of Andhra Pradesh has taken action under the State Act for protection of depositors and has attached its properties, how then SEBI could allege that the Company was carrying on CIS. It is already demonstrated above that the activities of the Company are in the nature of CIS and not real estate business as contended by it before SEBI as well as before the Hon’ble High Court. SEBI has been established to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto. In terms of section 11(1) of the SEBI Act, SEBI is empowered to take such measures as it thinks fit in order to uphold SEBI’s mandate under the SEBI Act.

Under section 11(2), the “measures” shall include registering and regulating the working inter alia of CIS. Section 11A of the SEBI Act provides necessary guidance to determine whether any scheme or arrangement is a CIS or not. It is also to be noted that units or any other instrument issued by any CIS to the investors in such schemes would be a “security” under section 2(h) of the Securities Contracts (Regulation) Act, 1956 and section 2(1)(i) of the SEBI Act. SEBI has also framed the CIS Regulations for stipulating conditions for registration of CIS and other related matters. Therefore, CIS is under the regulation and purview of SEBI under the securities laws. In view of the above and in the light of the finding that the Company has indulged in CIS activity, the Company would definitely be under the jurisdiction of SEBI. Further, SEBI shall be permitted under the law to take action if it finds that the provisions of the SEBI Act, rules and regulations framed thereunder have been violated by any person. In the present matter, as observed above, the Company has contravened the provisions of section 12(1B) of the SEBI Act, regulation 4(2)(t) of the PFUTP Regulations and regulation 3 of the CIS Regulations.

Therefore, there is no impediment on SEBI from taking action against the Company/noticees for such violations of the securities laws. If the noticees have violated any other law and action is taken against them by such authority, then the directions under this Order shall be read harmoniously in the interest of the investors.

22. The interim order has alleged that the Company has not furnished complete details regarding the schemes run by it, details of total number of investors, details of the amount collected and the amounts repaid/ land registered in the names of investors since the schemes came into operation. This information is not submitted till date. The Company has not submitted the required information so far. In its submissions, the Company has stated that its documents/records were seized by the Govt/Police/Income Tax Department and its properties were provisionally attached.

23. The interim order was also passed against the Company’s directors, Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas(DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611). As per the MCA website, the date when the said directors were appointed as Managing Director/Directors is mentioned in the table below:

DIN/DPIN/ Date of Full Name Present residential address Designation PAN Appointment 23-35-39, A. S. RAO STREET, LAXMI NAGAR, AVVA VENKATA 00099695 SATYANARAYANAPURAM, VIJAYAWADA, Director 19/03/2002 RAMA RAO 520011, Andhra Pradesh, INDIA VENKATASESHU 23-35-39, A.S.RAO STREET, LAKSHMI Managing 00101843 NARAYANARAO NAGAR, SATYANARAYANAPURAM, 19/12/2001 director AVVA VIJAYAWADA, 520011, Andhra Pradesh, INDIA

AVVA HEMA SRI SAI NILAYAM, 20-6-30/A, Ist LANE, 00101889 SUNDARA VARA RAMALINGESWARAPET, VIJAYAWADA, Director 19/03/2002 PRASAD 520003, Andhra Pradesh, INDIA FF-2, SIMHACHALAM ENCLAVE, SAVADAM KRISTURAJAPURAM ROAD, 00316971 Director 19/12/2001 SRINIVAS SUNNAPUBATTILU, VIJAYAWADA, 520008, Andhra Pradesh, INDIA FLAT NO 107 MERIDIAN SEASHELLS, NEAR BHANUJIRAO WALTAIR CLUB WALTAIR UPLANDS, 00430884 Director 26/09/2004 MOGANTI VISAKHAPATNAM, 530003, Andhra Pradesh, INDIA SADASIVA VARA 12-457/3-1, CHRISTANPET, N.H - 5, 00324611 PRASADA RAO TADEPALLI VILLAGE AND MANDAL, Director 26/09/2004 EMMADI GUNTUR DIST, 522515, Andhra Pradesh, INDIA

These directors continue in such position till date. Therefore, these directors are liable for the violations, which are continuing in nature, committed by the Company in operating CIS in terms of section 11AA of the SEBI Act, without obtaining registration from SEBI under section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations.

24. In view of the foregoing observations and findings, 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:

1. Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors viz., Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas (DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611) shall abstain from collecting any money from the investors or launch or carry out any Collective Investment Schemes including the schemes which have been identified as a Collective Investment Schemes in this Order.

2. Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors viz., Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas(DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611) shall wind up the existing Collective Investment

Schemes and refund the money collected 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.

3. Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors viz., Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas(DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611) 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. This direction shall be harmoniously read with the action/orders passed by the State of Andhra Pradesh and other authorities.

4. Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors viz., Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas(DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611) are 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.

5. Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors viz., Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas(DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611) are restrained from accessing the securities market and are prohibited from buying, selling or otherwise dealing in securities market for a period of 4 years.

6. In the event of failure by Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors viz., Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas(DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611) to comply with the above directions, the following actions shall follow: (i) Agri Gold Farm Estates India Private Limited (CIN: U45309AP2001PLC38237) and its Directors viz., Mr. Venkata Rama Rao Avva (DIN: 00099695), Mr. Avva Venkata Seshu Narayana Rao (DIN: 00101843), Mr. Avva Hema Sundara Vara Prasad (DIN: 00101889), Mr. Savadam Srinivas(DIN: 00316971), Mr. Moganti Bhanuji Rao (DIN: 00430884) and Mr. Emmadi Sada Siva Vara Prasad Rao (DIN: 00324611) 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 of 4 years of restraint imposed in sub-paragraph 5 above, till all the Collective Investment Schemes of Agri Gold Farm Estates India Private Limited are wound up and all the monies mobilized through such schemes are refunded to its investors with returns which are due to them. (ii) SEBI would make a reference to the State Government/ Local Police to register a civil/ criminal case against the Company, Agri Gold Farm Estates India Private Limited, 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; and (iii) SEBI would make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the company, Agri Gold Farm Estates India Private Limited. (iv) SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and regulations framed thereunder.

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

26. 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 Agri Gold Farm Estates India Private Limited and its Directors viz., Mr. Venkata Rama Rao Avva, Mr. Avva Venkata Seshu Narayana Rao, Mr. Avva Hema Sundara Vara Prasad,

Mr. Savadam Srinivas, Mr. Moganti Bhanuji Rao and Mr. Emmadi Sada Siva Vara Prasad Rao, including other persons who are in default, for the violations as found in this Order.

27. 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: September 14th, 2015 Place: Mumbai