Order in the matter of Ally Multi-Trade India Pvt. Limited and its directors[SAT Appeal No.:508/2015]

WTM/PS/47/CIS-NRO/AUG/2015 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 and Regulation 4(2) (t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 In the matter of Ally Multi-Trade India Private Limited In respect of: 1. Ally Multi-Trade India Private Limited [PAN: AAJCA7016J] 2. Mr. Chetan Yashwant Thakur [PAN: ABNPT7551R] 3. Mr. Vijay Dattaram Chavan [PAN: ACVPC1342G] and 4. Dr. Suryakant Sambu Bhosle [PAN: AGXPB8179J] Date of Hearing: May 06, 2015 Appearance: Mr. Chetan Thakur, Director, Mr. Sreejit Nair, Partner, Legal Catalyst. For SEBI: Mr. Manish Vashist, Assistant General Manager, Mr. Pradeep Kumar, Assistant General Manager. 1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) had, vide an interim ex-parte Order dated July 22, 2014 (‘the interim order’), prima facie found that one Ally Multi-Trade India Private Limited (hereinafter referred to as ‘the Company’ or ‘Ally’) is engaged in fund mobilizing activities from the public, which is in the nature of Collective Investment Scheme (hereinafter referred to as 'CIS') as defined in Section 11AA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘the SEBI Act’), without obtaining a certificate of registration from SEBI as required under Section 12(1B) of the SEBI Act and Regulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as ‘the CIS Regulations’). Further, the fund mobilisation activity of the Company was also alleged to be in violation of the Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.

2. The interim order was issued in order to protect the interest of investors, safeguard the assets/ property acquired by the Company by using the funds collected from the investing public and also to prevent the Company from further carrying on with its existing fund mobilizing activities through the alleged CISs. It directed Ally and its directors namely Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle (hereinafter collectively referred to as the ‘noticees’):

“● not to collect any fresh money from investors under its existing scheme; ● not to launch any new schemes or plans or floating any new companies to raise fresh moneys; ● to immediately submit the full inventory of the assets owned by AMTIPL; ● not to dispose of any of the properties or alienate the assets of the existing scheme; ● not to divert any funds raised from public at large, kept in bank account(s) and/or in the custody of the company; ● to furnish all the information/details sought by SEBI within 15 days from the date of receipt of this order, including, i. Details of amount mobilized and refunded till date, ii. Scheme wise list of investors and their contact numbers and addresses” The aforesaid directions came into force with immediate effect and the noticees were advised to file their reply within a period of twenty one (21) days from the date of receipt of the interim order and also to indicate whether they wish to avail an opportunity of personal hearing in the matter.

3. The interim order was forwarded to the Company and its directors vide letters dated July 31, 2014 and these were asked to submit the details of the amount mobilised and refunded and scheme wise list of investors and their contact numbers and addresses. The letters issued to Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle were duly delivered at the available address. The Company through its Chairman cum Managing Director, Mr. Chetan Yashwant Thakur replied to the interim order vide letter dated August 16, 2014. Vide this letter, the Company submitted the complete list of investors along with the respective addresses, details of assets owned by the Company, details of amount mobilised and refunded till August 16, 2014. The submissions in brief are as under:

a. The Company had changed its name to Ally Housing & Development Pvt. Limited on October 07, 2013. b. The Company and its directors after receiving the order have decided not to collect any fresh money from the investors under existing schemes and not to launch any new scheme or plans.

c. There is an error in the expected return offered to a customer by the Company.

4. The noticee namely Mr. Suryakant S. Bhosle vide his letter dated September 06, 2014, submitted the reply to the interim order while stating that he had joined the Company as a Director on June 11, 2013 and had resigned on November 08, 2013. He also forwarded the copies of ‘Form 32’, in support of the submissions.

5. Thereafter, SEBI vide its letter dated October 13, 2014, asked the Company to submit the copies of the sale deeds of its properties, copies of bank statements highlighting the amounts refunded to the investors and list of investors who have been refunded by the Company. The Company vide its letter dated October 22, 2014, submitted the details as asked. SEBI vide another letter dated March 11, 2015, asked the Company to submit the status of refund. In the meantime, the Company vide letter dated March 07, 2015 requested for issuing directions/ instruction for initiating the steps of winding up and repayment of the amounts, without any delay and default. Vide the said letter, the Company also requested for an opportunity of personal hearing. The Company vide its another letter dated March 17, 2015 submitted that the repayment to the investors were not completed as it was restricted from selling or alienating the immovable assets. The Company along with this letter submitted the details of the investors who have been satisfactorily paid back and submitted that the contributors/ investors are ready and willing to take back the amount. They requested that they may be allowed to sell immovable property and repay the investors.

6. Thereafter, SEBI granted an opportunity of personal hearing to the Company and its directors on May 07, 2015. An intimation regarding this was sent vide letter dated April 09, 2015, wherein the Company was also asked to submit the details/ information with regard to the deposits/ withdrawal transaction in its bank account and a clarification on failure to comply with the interim directions. The Company through its advocate vide e-mail dated May 05, 2015, requested for preponing of the personal hearing to May 06, 2015. The requested was considered and the personal hearing was preponed to May 06, 2015. On the date fixed, the noticee, Mr. Chetan Yashwant Thakur appeared along with Mr. Sreejit Nair, partner, Legal Catalyst and submitted a letter addressed to the Adjudicating Officer, SEBI along with a copy of consent application addressed to the Enforcement Department, SEBI. A perusal of the submitted documents revealed that the same pertained to a different and independent proceeding. Upon this, it was explained to the noticees that the instant proceedings are separate. Thereafter, no further submissions were made by the noticees during the personal hearing.

The other noticees namely Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle failed to turn up for the personal hearing inspite of due intimation. Considering the reasonable opportunity afforded to these noticees for making the submissions in the matter, I find it appropriate to proceed with the matter based of the material available on record.

7. I have considered the interim order issued in the matter and the material available on record. The main allegation as against Ally is that the plans/ schemes operated by it were in the nature of CIS and that the Company was offering these schemes without obtaining registration from SEBI in contravention of the provisions of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations read with Section 11AA of the SEBI Act. The directors of Ally were also alleged to be responsible for the illegal conduct of the business of the Company. The issue that now arises for my consideration is: Whether Ally was operating a CIS without obtaining registration from SEBI?

8. Whether Ally was operating a CIS without obtaining registration from SEBI?

a. I note that the Company was incorporated on July 25, 2011. The directors of the Company are Mr. Chetan Yashwant Thakur and Mr. Vijay Dattaram Chavan.

b. As per the sample brochure provided by Ally vide its letter dated September 17, 2013, it has various plans/ schemes i.e. SPS plan (Single Payment Scheme), 2 years IPS (Installment Payment Scheme), 3 years IPS plan and 5 years IPS plan. The Company also provides ‘Life Protection Scheme’ (hereinafter referred to as ‘LPS’) as an affection towards the scheme holders. These schemes have been elaborately discussed in the interim order. A sample of such plans has been brought out below:

Table A 5 years IPS Plan Plot Initial Monthly Quarterly Half Yearly Optional LPS area in Payment Yearly Refund sq.ft. Amount

750 18,000 300 870 1,740 3,480 25,020 25,000 1,000 24,000 400 1,160 2,320 4,640 33,360 25,000 1,250 30,000 500 1,450 2,900 5,800 41,700 25,000 2,500 60,000 1,000 2,900 5,800 11,600 83,400 1,00,000 3,750 90,000 1,500 4,350 8,700 17,400 1,25,100 1,00,000 5,000 1,20,000 2,000 4,800 11,600 23,200 1,66,800 1,00,000 7,500 1,80,000 3,000 8,700 17,400 34,800 2,50,200 1,00,000 10,000 2,40,000 4,000 11,600 23,200 46,400 3,33,600 1,00,000 12,500 3,00,000 5,000 14,500 29,900 58,000 4,17,000 1,00,000

Table B Single Payment Plan Plot Area Initial 3 years 5 years 8 years LPS in Sq.ft. payment 200 5,000 7,500 10,000 15,000 25,000 400 10,000 15,000 20,000 30,000 25,000 600 15,000 22,500 30,000 45,000 25,000 1,000 25,000 37,500 50,000 75,000 50,000 2,000 50,000 75,000 1,00,000 1,50,000 50,000 4,000 1,00,000 1,50,000 2,00,000 3,00,000 1,00,000

It is seen that the plans of the Company were for different time periods, the minimum monthly installment in the 'IPS Plans' was in the range of ₹300 to a maximum amount of ₹5,000 and the said plans had also provided the ‘optional refund amount’.

I have perused the brochure, which on top mentions ‘investment opportunity’. The important clauses in the brochure are as under: “● The Investor can purchase a percentage of undivided, right, title and interest in agricultural land depending upon his capacity and desire to invest by making an initial payment of 25% of the price of the right, title and interest in the land. The balance being payable at his option upon the investor seeking conveyance. The balance being payable at his option upon the investor seeking conveyance. This amount of 25% of the price can also be paid by instalments. ● Ally Provides to the investor an option of executing a conveyance in his favour at the end of Three, Five & Eight years as the case may be, upon payment of the balance amount being 75 % of the price of the right, title and interest in the land and costs towards, stamp duty registration and administration charges etc. at a predetermined price. ●In the event the Investor is not satisfied about the appreciation in the price of the portion of land agreed to be purchased by him, he has an option to cancel the understanding and obtain a full return of investment along with assured returns … … … Life Protection Scheme LPS is an affection of the company towards the scheme holders to pay a minimum sum of ₹25,000/- or maximum of sum of Rs.1,00,000/- per person having multipale schemes certificate. … LPS benefits will not be allowed on discontinued/ not in force certificate as on date of accident. …”

c. Another document is the ‘application form’. The same is a pre-printed document asking for the details of the name, address of the investor, nominee, bank details of the investor, the plan name, date of commencement and ‘optional refund amount’.

On the reverse side of the 'application form' there are certain terms and conditions. The same are mostly similar in all the three plans, except a few. I have perused the ‘terms and conditions’ from the reverse side of the ‘application form’, the relevant clauses of the same are as under: “1. The investor agrees to purchase the (IPS) holding, of percentage of undivided right, title and interest in agricultural land situated … upon the payment of the sum … being 25% of the total price of the right, title and interest in the land on or before the execution of the Understanding but not later than the end of the period … 2. At the end of the agree term … the investor shall notify Ally in writing at least 60 days in advance of his desire to purchase the land by executing and registering a Deed of Conveyance or of his desire to cancel this understanding. 3. Upon the investor notifying Ally of this intention to purchase the land by executing and registering a Deed of conveyance, the same shall be done …. In such an event if the conveyance contemplated is restricted by any law then in force, the investor shall be entitled to a refund of the amount paid by him together with the amounts set out … as a fair return on his investment.

The investor shall on or before the Conveyance make payment of the balance amount being 75% of the price of the right, title and investment in the land together with costs towards stamp duty …. 4. In the event the investor fails to notify as above it shall be deemed that the investor is not desirous of purchasing the said undivided right, title and interest in the said land. 5. Upon the investor notifying not to purchase the said undivided right, title and interest in the said land or upon his failure to notify at all the investor shall be paid a refund of the amount paid by him together with the amounts set out … as a fair return on his investment, within 60 days of the expiry of the agreed term. The investor shall not raise any grievance as to the amount received so land as the same are in accordance with the amounts set out … 6. It is agreed and clarified that the possession of the said land shall vest with Ally at all times. The investor shall not be entitled at any time to seek a partition of his holding. 7. Such investor who desires to immediately notify that is on or before 30 days of the execution hereof his desire not to acquire undivided right, title and interest the amount paid him shall be returned in installment set out in Table …, subject to however the investor having paid the entire 25% amount payable by him. … 9. In the event, the investor desires to transfer his rights herein to any third person, the investor must notify Ally of his intention of the same.

However, Ally reserves the right of preemptive purchase of at the price notified by Ally from time to time for such purchase. … 11. In the event, the investor fails to make any payments as may be due by him to Ally, this understanding shall stand terminated without reference to the investor and all amounts paid till then shall be refunded at the end of the agreed term. … 12. Notwithstanding …, if the investor desires to continue with this understanding despite the expiry of the grace periods referred to above. Ally at its discretion may treat this understanding as subsisting upon an additional payment calculated at of 2.5% per month on the amount unpaid for the term of delay beyond the grace period. …

14. Upon the end of the agreed term or earlier determination, no amounts shall be payable to the investor unless the investor shall had over the Certificate of Holding in original to Ally duly discharged by endorsing his signature thereon. … 15. Acceptance of Application: Application will be accepted according to the following rules and conditions. a) Application will be issued at the Customer Service Centre of the company on Payment of Rs.20/- and an amount equal to one registration value. The application should be filled in legible writing, should be completed filled in and should be signed by the applicant or the parent in case the applicant is minor. … b) The instalments of registered members have to be paid on before the agreed dates. c) The collection charges or money order charges have to be borne the agree dates. e) Payments made by a Demand Draft or Crossed Amount payee cheques, should be drawn in favour of Ally Multi Trade India Pvt. Ltd…. Formal and valid receipt will be passed only after realization of cheques. ….” I note that the terms and conditions on reverse side of the application form mentions about the receipt, however, the Company has failed to provide the copies of the same.

d. Another document is ‘Memorandum of Understanding’ between the Company and its investors. The clauses of the same are almost similar to the ‘terms and conditions’ as stated on the reverse of the ‘application form’, except one clause i.e. “If investors agree to purchase in agriculture land as per his share the share shall be undivided in the entire agricultural land & full right of the agriculture purpose & its activities has been exclusively right of Ally Multi Trade India Pvt. Ltd. Investor shall get forthcoming income from agriculture activities as per his share.” It is seen that the same bears the signature of Mr. Chetan Yashwant Thakur and Mr. Vijay Dattaram Chavan.

e. The last document is 'Certificate of Membership’ which contains the name and address details of the customer, nominee details, land holding number, date of commencement, period, full amount payable, mode of payment, booking amount payable, booking amount due date, date of last payment, date of optional refund, optional refund payable, percentage of holding, location. The same reads as under:

“Certified that the person named herein is entitled to the percentage of undivided right, title and interest in the land set out herein and is subject to the Terms and Conditions printed overleaf.” It is noted that the Company has not provided the copy of the terms and conditions as referred to be on the reverse of the ‘Certificate’.

f. From the discussion above, it is observed that Ally was inviting applications from the customers/ investors for obtaining percentage of undivided right, title and interest in agricultural land on payment of 25% of the total price. I also note the following:

i. The Company gave the right to purchase the portion of an undivided interest in the agricultural land by making a payment of 25% of the total price. The possession of the plot always remained in the hands of Ally. Further, the Company has not produced any sale deeds showing the transfer of land in favour of the customer. ii. The Company had put strict conditions for transferring of the land wherein the investor intending to purchase the land had to notify about the same, 60 days prior to the expiry of the term of the plan to Ally. On failure, it was presumed that the investor is not desirous of purchasing the undivided right, title and interest in the land and only the guaranteed assured returns with refund of investment amount was paid on completion of the term as more specifically mentioned in the brochure and ‘certificate of membership’ as ‘optional refund payable’. iii. On purchase of such right the investors will get only undivided interest in the land and he/ she only gets the income from the agricultural activities as per the share. iv. The investor was not entitled to any payment unless the certificate of holding is handed over in original to the Company. v. The Company has not submitted the copy of the receipt though the same find specific mention in the ‘application form’. vi. The Company had reserved the pre-emptive right of purchase in case the investor desires to transfer the rights to any third party.

From the observations as noted above, it can be inferred that the transactions of the Company were not in the nature of real estate transactions rather it can be said to be an investment scheme. g. Having considered the above, now I proceed to deal with the charges levelled against Ally. The allegation levelled against Ally is that it is operating CIS without obtaining registration from SEBI. Before proceeding further in the matter, it is necessary to note the background of CIS Regulations and how the provisions came to be framed. Several entities were mobilizing huge money by issuing various instruments and offering very high rates of return inconsistent with the normal rate of returns and then misutilising these funds, for the purposes not disclosed at the time of inviting the investments, thereby not only causing loss to the investors who lost their life savings to such unscrupulous entities, but also eroding the confidence of the general public. Considering the high element of risk associated with such schemes, the Government of India felt that it was necessary to set up an appropriate Regulatory framework to regulate such entities.

Hence, in order to protect the interest of the investors and to ensure that only legitimate investment activities are carried on, vide press release dated November 18, 1997, the Government of India communicated its decision that schemes through which instruments such as agro bonds, plantation bonds, etc., are issued by the entities, would be treated as Schemes under the provisions of the SEBI Act and directed SEBI to formulate Regulations for the purpose of regulating these CISs. It was against this background that Section 11AA of the SEBI Act and the CIS Regulations came to be framed. Thereafter, several press releases and newspaper advertisements/ notices were issued by SEBI from time to time in the leading newspapers bringing to the notice of the investors and the persons concerned, the various instructions issued by SEBI/ Central Government from time to time in respect of the functioning of the CIS. The press releases further stated that instruments such as agro bonds, plantation bonds should be treated as CIS coming under the SEBI Act. All the companies having such activities were required to file information with SEBI.

Moreover, general public was also informed that no person can sponsor or cause to be sponsored any new CIS and thereafter raise further funds. Meanwhile, a committee was formed to examine and finalize the draft regulations for CIS to structure a comprehensive regulatory framework. Subsequently, the notification of CIS Regulations was issued on October 15, 1999. As per the CIS Regulations, any person who has been operating a CIS at the time of commencement of the CIS Regulations was required to make an application to SEBI for the grant of registration under the provisions of the regulation, within a period of two months from the date of the notification. No entity was allowed to run a CIS scheme without obtaining the Certificate of Registration from SEBI.

h. The definition for ‘collective investment scheme’ was inserted in the SEBI Act, 1992, vide the Securities Laws (Amendment) Act, 1999 w.e.f. February 22, 2000. According to the definition, CIS means any scheme or arrangement which satisfies the conditions specified in Section 11 AA of the SEBI Act, which provides as under:

"(1) Any scheme or arrangement which satisfies the conditions referred to in subsection (2) or [sub-section (2A)]1 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 the exemptions from CIS sub-section (3), involving a corpus amount of one hundred Crore rupees or more shall be deemed to be a collective investment scheme.]2 (2) Any scheme or arrangement made or offered by any [person]3 under which, (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement; (ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement; (iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; (iv) the investors do not have day to day control over the management and operation of the scheme or arrangement.

[(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 ii. under which deposits are accepted by non-banking financial companies iii. being a contract of insurance iv. providing for any scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund v. under which deposits are accepted under section 58A of the Companies Act, 1956 vi. under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society 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." The term ‘securities’ in section 2(h) of the Securities Contracts (Regulation) Act, 1956 was amended vide the Securities Laws (Amendment) Act, 1999, w.e.f. February 22, 2000, to include units or any other instrument issued by any collective investment scheme to the investors in such schemes.

1 Inserted by Securities Laws (Amendment) Ordinance, 2014 2 Inserted by Securities Laws (Amendment) Ordinance, 2014 3 Substituted for 'company' by The Securities Laws (Amendment) Ordinance, 2014 i. Let me now, proceed to test the characteristics of the impugned schemes/ plans floated and carried on by the Company against the four conditions under Section 11AA(2) of the SEBI Act.

i. The first condition 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. Ally took the contribution/ investments of the investors in accordance with its plans as detailed above for the purchase of portion of an undivided interest in agricultural land by making a payment of 25% of the total price. The amounts paid by the investors remain with the Company till the end of the term. At the end of the term of the plan, the investor is required to notify the Company his intention to purchase the land by executing and registering a deed of conveyance. In case the investor does not express the intention to purchase the land, then the investor is paid a refund of the amount together with the returns, as stated in the brochure.

It is noted that the certificate issued by the Company mentions about the land details, however, the interest in the undivided agricultural land remains unidentifiable. The customer does not get any right in such land till the expiry of the term when he has to exercise his option to purchase the land. In case the customer expresses the intention to purchase the land, then, he has to pay the balance amount i.e. 75% of the price of the land together with the stamp duty, registration and administrative charges. From the 'Terms and Conditions' as noted on the reverse side of 'application form' contains no details as to when the sale deed will be executed in favour of the customers and actual possession of the plot is given to the customers. Also the ‘memorandum of association’ finds mention that in case the investor agrees to purchase the land, the share will be undivided and all rights for agriculture will remain with the Company and the investor will get income from the agriculture activities as per his share. These are sufficient to find that the 'contributions, or payments made by the investors, are pooled and utilised by Ally for the purposes of the scheme or arrangement', the scheme being to accept contributions/ payments in the name of sale of land. Thus, satisfying the first condition as stipulated in Section 11AA(2)(i) of the SEBI Act.

ii. The second condition 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 discussed above, the investors made payments towards the plans promoted by Ally. The brochure itself assured the investors of 'Optional Refund Amount' which meant nothing but profits as detailed in Table A and B above. The 'certificate' issued by the Company also finds mention about the optional refund payable. Further, as per the brochure of the Company, the customers were also provided with ‘Life Protection Scheme’ as an affection by the Company. The same is also a benefit. The same makes it clear that the investors/ customers made contribution/ payment with a view to receive the profits/ income/ property/ return on their investments that may accrue to them as applicable, thus attracting the second condition as stipulated in Section 11AA(2)(ii) of the SEBI Act.

iii. The third condition is that the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors. The fourth condition is that the investors do not have day to day control over the management and operation of the scheme or arrangement. As per the terms and conditions on the reverse side of ‘application form’, the possession of the land shall vest with Ally at all times, the same shows that the property, contribution and investment pertaining to the plan are managed by the Company. It can be said that the investor has no role in the development/ management of the land. The investor also did not manage his investments in the plans rather his investments were managed and utilized by the Company, which in the end offered ‘optional refund amount’. Further, the Company only gives the right on a portion of an undivided land. Likewise, the customer, before transferring his rights to any third person was required to notify Ally and the Company had reserved the right of pre-emptive purchase at the price notified by it. The above discussion makes it clear that the contribution, investment and property, if any, pertaining to the plan were managed by the Company. The investor does not manage his investments in the scheme rather his investments are managed and utilized by the Company as per its own discretion and the investor does not have day to day control over the plot of land as the same remained in the custody/ use of Ally.

j. As all the four conditions specified under section 11AA(2) of the SEBI Act are satisfied in this case, the schemes/ plans promoted, launched, carried on and operated by the Company are in the nature of CIS in terms of section 11AA(1). In this regard, I place my reliance on the observations of the Hon'ble Supreme Court, made in the matter of PGF Limited & Ors. Vs. Union of India & Anrs. (Civil Appeal No. 6572 of 2004):

"Therefore, the paramount object of the Parliament in enacting the SEBI Act itself and in particular the addition of Section 11AA was with a view to protect the gullible investors most of whom are poor and uneducated or retired personnel or those who belong to middle income group and who seek to invest their hard earned retirement benefits or savings in such schemes with a view to earn some sustained benefits or with the fond hope that such investment will get appreciated in course of time. Certain other Section of the people who are worstly affected are those who belong to the middle income group who again make such investments in order to earn some extra financial benefits and thereby improve their standard of living and on very many occasions to cater to the need of the educational career of their children. 38. Since it was noticed in the early 90s that there was mushroom growth of attractive schemes or arrangements, which persuaded the above vulnerable group getting attracted towards such schemes and arrangements, which weakness was encashed by the promoters of such schemes and arrangements who lure them to part with their savings by falling as a prey to the sweet coated words of such frauds, 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. ... ... ...

40. It will have to be stated with particular reference to the activity of the PGF Limited, namely, sale and development of agricultural land as a collective investment scheme, the implication of Section 11AA was not intended to affect the development of agricultural land or any other operation connected therewith or put any spokes in such sale-cum-development of such agricultural land. It has to be borne in mind that by seeking to cover any scheme or arrangement by way of collective investment scheme either in the field of agricultural or any other commercial activity, the purport is only to ensure that the scheme providing for investment in the form of rupee, anna or paise gets registered with the authority concerned and the provision would further seek to regulate such schemes in order to ensure that any such investment based on any promise under the scheme or arrangement is truly operated upon in a lawful manner and that by operating such scheme or arrangement the person who makes the investment is able to really reap the benefit and that he is not defrauded ... ... It is, therefore, apparent that all other schemes/arrangements operated by all others, namely, other than those who are governed by sub-section 3 of Section 11AA are to be controlled in order to ensure proper working of the scheme primarily in the interest of the investors. ... ...

42. Therefore, in reality what sub-section (2) of Section 11AA intends to achieve is only to safeguard the interest of the investors whenever any scheme or arrangement is announced by such promoters by making a thorough study of such schemes and arrangements before registering such schemes with the SEBI and also later on monitor such schemes and arrangements in order to ensure proper statutory control over such promoters and whatever investment made by any individual is provided necessary protection for their investments in the event of such schemes or arrangements either being successfully operated upon or by any misfortune happen to be abandoned, where again there would be sufficient safeguards made for an assured refund of investments made, if not in full, at least a part of it.

... ... In the light of our above conclusions on this ground it will have to be held that Section 11AA is a valid provision, not suffering from any infirmity, as it does not intrude into the specific activities of sale of agricultural land and its development. ... ... It is needless to state that as per the agreement between the customer and the PGF Limited, it is the responsibility of the PGF Limited to carry out the developmental activity in the land and thereby the PGF Limited undertook to manage the scheme/arrangement on behalf of the customers. Having regard to the location of the lands sold in units to the customers, which are located in different states while the customers are stated to be from different parts of the country it is well-neigh possible for the customers to have day to day control over the management and operation of the scheme/arrangement. In these circumstances, the conclusion of the Division Bench in holding that the nature of activity of the PGF Limited under the guise of sale and development of agricultural land did fall under the definition of collective investment scheme under Section 2(ba) read along with Section 11AA of the SEBI Act was perfectly justified and hence, we do not find any flaw in the said conclusion. ... ....

53. We, therefore, hold that Section 11AA of the SEBI Act is constitutionally valid. We also hold that the activity of the PGF Limited, namely, the sale and development of agricultural land squarely falls within the definition of collective investment scheme under Section 2(ba) read along with Section 11AA (ii) of the SEBI Act and consequently the order of the second respondent dated 06.12.2002 is perfectly justified and there is no scope to interfere with the same. In the light of our above conclusions, the PGF Limited has to comply with the directions contained in last paragraph of the order of the second respondent dated 06.12.2002 ... ..." 9. An entity needs to be registered with SEBI in order to run the CIS activities. 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. Ally has clearly 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. I note that Ally has launched a CIS without obtaining certificate of registration from SEBI, it has contravened the provisions of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations. Further, such illegal mobilisation of funds from the public is clearly in violation of the Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.

10. I note that the interim order was issued against the Company and its directors namely Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle. As per the details taken from the 'MCA 21' portal of Ministry of Corporate Affairs, Mr. Chetan Yashwant Thakur and Mr. Vijay Dattaram Chavan are the present directors of the Company. These persons are continuing as directors of the Company and are responsible for carrying on unregistered CIS activities. From the documents available on record, I note that the noticee namely Dr. Suryakant Sambu Bhosle in his submissions vide letter dated September 06, 2014 has said that he had joined the Company on June 11, 2013 and had resigned on November 08, 2013. I have considered his submissions, however, the same does not absolve him from the charge levied in the interim order as the Company was incorporated on July 25, 2011 and since then it had mobilised funds from the investors. Therefore, I have no hesitation in holding that Ally and its directors namely Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle were engaged in the illegal fund mobilising activity by floating/ sponsoring/ launching, unregistered/ unauthorised CIS, as defined in the Section 11AA of the SEBI Act.

11. Having considered the above, I also note that the Company had offered lucrative commissions/ incentives and performance bonuses to its agents/ sales executives which were mainly linked to the collection in order to increase the sale of its plans to the investors.

12. I note that the Company has submitted the details of its investors along with the amounts mobilised vide its letters dated October 31, 2013 and August 16, 2014. I have seen such lists and find certain discrepancies in the amounts mentioned. On a sample basis, I have selected the names of Ms. Anandi Dasharath Wad and Mr. Amjad Aslam Khan who had invested with the Company under the ‘Single Payment Plan’. It is seen that the list provided with the letter dated October 31, 2013, showed the amounts as ₹26,000 and ₹1,19,000 received from them, respectively. However, the list provided along with letter dated August 16, 2014, showed the different amounts for these two customers as ₹31,500 and ₹1,30,000.

Further, as per the details submitted vide letter dated August 16, 2014, the Company had mobilised ₹2,33,35,330 during January 25, 2012 and August 16, 2014. The amount refunded till August 16, 2014 was stated as ₹23,69,778. Later the Company vide its letter dated October 22, 2014, submitted that it had refunded ₹28,34,680 and the detail earlier submitted was wrongly typed. I have seen the repayment details as submitted by the Company and note the following on sample basis: i. The investor namely Ms. Bharati Bharat Parate is shown to have been repaid ₹28,320 in the details as submitted vide letters dated October 22, 2014 and March 17, 2015, however, from the list of investors as submitted vide letter dated August 16, 2014, the amount of mobilization from her is shown as ₹70,440. ii. The investor namely Ms. Darshana Nilesh Patil is shown to have been repaid ₹2,00,000 in the refund details submitted along with the letter dated March 17, 2015, however, her name is not appearing in the list of investors as submitted vide letter dated August 16, 2014. iii. Vide letter dated October 22, 2014, of the Company, the investors namely Mr. Jagdish Narayandas Thakker and Ms. Pushpaben Jagdish Thakkar have been shown to have repaid amounts of ₹84,690 each, however, as per the details submitted vide letter dated August 16, 2014 (by the company) the amount mobilized from these were ₹39,000 and ₹72,000 respectively. The Company has not made any submission on such differences The above details raises serious doubt over the claim of repayment and the details as submitted by the Company.

13. As per the details submitted vide letter dated August 16, 2014, the Company had mobilised ₹2,33,35,330 during January 25, 2012 to August 16, 2014. Further, from the letters of the Company dated October 22, 2014 and March 17, 2014, it is noted that the Company made certain refunds after passing of the interim order. From the same, it can be inferred that the Company has circumvented the directions issued vide interim order dated July 22, 2014 i.e. “not to collect any fresh money from investors under its existing scheme and not to divert any funds raised from public at large, kept in bank account(s) and/or in the custody of the company”. In this regard, SEBI is directed to look into the matter expeditiously and initiate appropriate action against the Company and its defaulting directors at the earliest.

14. In view of the observations made in this Order, 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. Ally Multi-Trade India Private Limited [PAN: AAJCA7016J] and its directors namely Mr. Chetan Yashwant Thakur [PAN: ABNPT7551R], Mr. Vijay Dattaram Chavan [PAN: ACVPC1342G] and Dr. Suryakant Sambu Bhosle [PAN: AGXPB8179J] 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. Ally Multi-Trade India Private Limited and its directors namely Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle are restrained from accessing the securities market and are prohibited from buying, selling or otherwise dealing in securities market for a period of four (4) years. c. Ally Multi-Trade India Private Limited and its directors namely Mr. Chetan Yashwant Thakur and Mr. Vijay Dattaram Chavan 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. d. Ally Multi-Trade India Private Limited and its directors namely Mr. Chetan Yashwant Thakur and Mr. Vijay Dattaram Chavan shall not alienate or dispose off or sell any of the assets of Ally Multi-Trade India Private Limited except for the purpose of making refunds to its investors, as directed above. e. Ally Multi-Trade India Private Limited and its directors namely Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle 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. f. Ally Multi-Trade India Private Limited and its directors namely Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle to comply with the above directions, the following actions shall follow:

- Ally Multi-Trade India Private Limited and its directors namely Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle 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 four (4) years of restraint imposed in paragraph 14(b) above, till all the Collective Investment Schemes of Ally Multi-Trade 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. - SEBI would make a reference to the State Government/ Local Police to register a civil/ criminal case against Ally Multi-Trade 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 - SEBI would make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the company, Ally Multi-Trade India Private Limited. - SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and regulations framed thereunder.

15. 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 Ally Multi-Trade India Private Limited and its directors namely Mr. Chetan Yashwant Thakur, Mr. Vijay Dattaram Chavan and Dr. Suryakant Sambu Bhosle, including other persons who are in default, for the violations as found in this Order.

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

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

DATE : August 26, 2015 PRASHANT SARAN PLACE : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA