Order in the matter of Blessing Agro Farm India Limited[SAT Appeal No.73 /2016]

Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 and regulation 65 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999

In respect of –

S. No. Name CIN/PAN/DIN 1. Blessing Agro Farm India Limited CIN: U01210TN2009PLC070355 2. Mr. Innsaipillai Lurdpillai PAN: ACUPJ0102E Joseph Jeyaraaj DIN: 02430751 3. Mrs. Prakasam Sagaya Packia PAN: ALKPS4279C Santhi DIN: 02437679 4. Mr. Irudayaraj Manickam Pillai PAN: AJFPJ3454R Jeyabalan DIN: 02439369 5. Mr. Santhanapeter PAN: BQMPS1649Q DIN: 02430812

1. Securities and Exchange Board of India (“SEBI”) had conducted an examination into the business activities of the company, Blessing Agro Farm India Limited (“the Company” or “BAFIL”) for possible violation of the provisions of the Securities and Exchange Board of India Act, 1992 (“the SEBI Act”) and the SEBI (Collective Investment Schemes) Regulations, 1999 (“the CIS Regulations”).

2. On the basis of such examination, SEBI prima facie found that the Company had carried on Collective Investment Schemes (“CISs”) 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 carrying on such unregistered schemes amounted to a fraudulent practice in violation of regulation 4(2)(t) of the SEBI (Prohibition of Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (“the PFUTP Regulations”).

3. In order to prevent the Company and its directors, Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter (collectively referred to as “the noticees”) from carrying on with their unauthorised fund mobilization activities through its CIS and to prevent the investors from being defrauded and also protect the assets/properties of the Company, SEBI passed an ex-parte interim Order dated December 15, 2014 (“the interim order”) and directed the noticees - (i) not to collect any fresh money from investors under its existing schemes; (ii) not to launch any new schemes or plans or float any new companies to raise fresh moneys; (iii) to immediately submit the latest inventory of the assets including land obtained through money raised by BAFIL; (iv) not to dispose of or alienate any of the properties/assets obtained directly or indirectly through money raised by BAFIL; (v) not to divert any funds raised from public at large which are kept in bank account(s) and/or in the custody of BAFIL.

The interim order had also directed the Company to furnish the information on details of amount mobilized and refunded made till date, scheme wise list of investors and their contact numbers and addresses and amount invested as on date, and PAN of the aforementioned Directors.

4. The aforesaid directions came into force with immediate effect. The interim order also provided opportunity to the noticees to file their reply, if any, to the said Order and also advised the noticees that they may indicate whether they desire to avail themselves an opportunity of personal hearing within 21 days from the date of receipt of the said Order.

5. The Company, vide letter dated January 06, 2015, while seeking further time to furnish a detailed reply, submitted the following- (a) As per directions in paragraph 29 of the interim order, it has not collected fresh money from new investors under its existing plans; (b) It has not launched new schemes/plans.

(c) It would furnish a full inventory of assets owned by it. (d) It would not dispose of or alienate assets of existing scheme and would not divert funds received under the schemes. (e) It is in the process of obtaining a certificate from auditor on the amounts mobilized and refunded till date. (f) It is preparing scheme-wise list of investors, their addresses and amounts received from them.

6. Thereafter, the Company filed reply dated March 10, 2015, wherein inter alia the following submissions were made: i. The reply was filed on behalf of the Company and all its directors. ii. Noticee, IL Joseph Jeyaraaj being the Managing Director is in-charge of all acts and functions of the Company and is therefore responsible and aware of the facts and circumstances of the case. iii. The Company has been promoted by Mr. IL Joesph Jeyaraaj, who had been a legitimate business man involved in the manufacturing and supply of washing materials such as soaps and detergents under the brand name “Blessings” and also in the insurance business. iv. The Company was incorporated on January 02, 2009 with an authorized capital of Rs. 5 lakh and the following persons had subscribed to the memorandum and articles: (a) IL Joseph Jeyaraaj – 46,000 shares – Rs.4,60,000/- (b) P. Sagaya Pakiyasanthi – 1000 shares – Rs.10,000/- (c) MI. Jeyabalan – 500 shares – Rs.5000/- (d) J. Sagaya Santhi – 500 shares – Rs.5000/- (e) S. Mary Diviya Ranjani – 500 shares – Rs.5000/- (f) EL. Santana Peter – 1000 shares – Rs.5000/- (g) P. Josephine GnanaSelvi – 500 shares – Rs.5000/- Total – 50,000 shares – Rs.5,00,000/-.

v. The Company has the following main objects: (a) To carry on dairy business (b) To carry on the business of farming, agricultural and related activities (c) To carry on the business of real estate (d) To carry on the business of manufacturing and/or trading in drinking water, cleaning material etc (e) To carry on the business as insurance agents.

vi. After incorporation of the Company, its promoter Mr. IL Joseph Jeyaraaj transferred his proprietary business of manufacturing and supply of cleaning/washing material to the Company for a consideration of Rs.1,45,000/-. vii. The Company commenced its business on March 31, 2009 and started supplying milk. It generated a revenue of Rs.1,68,52,284/- during April 01, 2009 to March 31, 2010. viii. The Company simultaneously carried out activity as a corporate insurance agent and earned Rs.1,35,283/-. ix. The Company had also simultaneously commenced its business in real estate by purchase of 9.01 acres of waste lands at Sivaganga District, which were purchased with the amount of Rs.1,45,000/- which was received by its promoter as consideration for transfer of his business of manufacturing of washing/cleaning products to the Company. The promoter and managing director, Mr. IL Joseph Jeyaraaj took possession of the entire property on behalf of the Company. Thereafter, like in any genuine and legitimate real estate business, the Company did the following: (a) Made plots of various sizes in the land of 9.01 acres. (b) Proposed to sell the lands (c) However, people willing to purchase the plots showed their financial constraints (d) In view of the financial constraints of the local people, BAFIL proposed to sell the plots on instalment basis and prepared a Rule Book. The terms and conditions in the Rule Book are completely in favour of the customers and are as per the Transfer of Property Act, 1882 and BAFIL binds itself through The Indian Contract Act, 1872.

x. The company offers to sell the plots to public. The interested persons/customers from the public at large accept the offer by booking the plots in concerned schemes. The company is legally bound by as per the Indian Contract Act, 1872 to sell the proposed size of land as per the plan opted by the customer and hence the interest of the customer is protected. xi. The Company enters into another contract with the customer by allotting specific plot of land vide an allotment letter, which contains description of the plot. Thus, the Company comes under the purview of section 10 of the Specific Relief Act, 1963, and the customer interests are doubly safeguarded. xii. The Company while referring to its plans (1 year, 3 years, 5 years, 61/4 years plans) stated that it binds itself in a contract promising to transfer the plot of land in the beginning of the first year itself. xiii. BAFIL further promises to take the surrendered land in case the customer does not wish even at a later state. The customer is saved from the trouble of chasing the property dealers/agents. xiv. The customer becomes absolute owner of the allotted plots, once he pays all the instalments.

All the terms are disclosed upfront by BAFIL. BAFIL binds itself in a contract promising to transfer the plot of land after specified period to the customer, which was disclosed to the customer in the beginning of the first year itself. Hence, the interest and convenience of the customer is safeguarded. xv. BAFIL has clarified that in case of land acquisition, unforeseen circumstances or any other Government issues, wherein the company has to change the location of the plot allotted, then only it is done. The customer is entitled to claim the allotted plot from the company and in worst case scenario, the company promises to return the money. The choice is left with the customer. xvi. In accordance with Transfer of Property Act, 1882, BAFIL barred the customer to pledge, mortgage or use the registration letter as a security. xvii. BAFIL has only put standard clauses in the agreement and has provided provisions in case of default. xviii. With respect to charges in the interim order regarding pooling of money, following are stated : a) BAFIL is offering various instalment plans to its customers for purchase of plots on lump sum amount or in instalments basis within the term period.

The plans offered by BAFIL are Sale-Purchase agreements under Transfer of Property Act, 1882. BAFIL, by issuing a registration letter, binds itself under a contract and hence, cannot alienate and transfer the property. Customer can also have his right executed before the Court of Law, under Specific Relief Act, 1963 read with Code of Civil Procedure. b) BAFIL never charged for the development of the land as it charges only the cost of the land. It has been wrongly observed that as per the Rule Book, even after receipt of full payment, the allotment of a similar (unidentified) land is agreed within a period generally not exceeding 120 days. In Clause 12 of the Rule Book, it has been clearly mentioned by Company that the customer is free to take the land allotted, on completion of the term of the plan. In case of Instalment Schemes, BAFIL (as mentioned in clause 10 of Rule Book), after receipt of 50% of consideration amount, allots a specific plot of land to the customer with complete description of the plot, endorsing the right over his property. c) As a sale deed cannot be executed without payment of full consideration, after payment of 50% consideration, the right of specific performance is created in favour of the customer, which would be made absolute on payment of complete amount after the expiry of the term. d) It is incorrect to observe that as per the Allotment letter and Rule Book, BAFIL reserves that right to change the location of the land and allot an alternative site at any other place.

BAFIL had already given up the right to specified plot by issuing allotment letter to the customer and BAFIL is obliged to honour the contract as per law. In case, it does not honour the contract, the customer has right to get the allotted plot under the Specific Relief Act, 1963. e) It was incorrect to observe that the actual possession of property or any individual ownership right to the customer. BAFIL, after creating a right of the customer in the allotted plot of land, has taken the burden to maintain the same for the period of the term, opted by the customer and hands over the possession to the customer with absolute rights.

f) It was incorrect to observe that the customer is left with no choice but to take the return of monetary terms as mentioned in brochures of the Company. g) It is incorrect to observe that BAFIL is collecting funds for the customers and the contributions collected are pooled and utilised for the purpose of the transaction. BAFIL already created a right of customer on allotted plots of land and kept the amount collected as “Current Liabilities”. h) BAFIL is not using the contribution to purchase the lands instead the Company is involved in diversified business and money earned out of other business are being utilised to purchase lands.

Thus, the scheme in view of the above does not satisfy first condition of “pooling of contribution or payments”, as stipulated in section 11AA(2)(i) of SEBI Act.

xix. With respect to charges in the interim order regarding section 11AA(2)(ii), BAFIL has stated that : a) The scheme of BAFIL is a mere sale and purchase transaction of plots of land owned by the Company, whereby the customers get the lands offered by BAFIL, at the fair market value. b) The only facility provided by BAFIL to its customers, in view of their financial conditions, is that it offered to sell the plots on instalments. The Company creates right of the customer by issuing the ‘Registration Letter’ and thereafter issuing ‘Allotment Letter’. c) It was incorrect to observe that the attraction for the customers of the Company could be “the expected cost of land” as from simple calculations, the Company was offering only the expected cost of land after completion of term which is way less than the interest one can get on fixed deposit for the same amount. As illustration, the Company has stated that in a recurring deposit, monthly deposit required to get Rs.6500/- in 12 months was Rs.520/, whereas the Company takes Rs.500/-. d) Therefore, according to the Company, the second condition under Section 11AA(2)(ii) is also not satisfied by the schemes offered by BAFIL.

xx. With respect to charges in the interim order regarding Section 11AA(2)(iii) and (iv), it is stated that : a) BAFIL has specified the size description of the plot at the time of issuing registration letter itself and Allotment letter, which is issued on payment of 50% of the money. BAFIL binds itself from alienating with plot of the agreed description, which could be easily visited, demarcated, distinguished and identified by each and every customer. b) Each and every customer is given selected size of the plot of the land to choose before allotment of the plot. By issuing the allotment letter, BAFIL binds itself from the change of the location of the land for any reason, unless it is Force Majeure. c) With respect to the charge, that even after the allotment, neither the ownership nor possession transferred to the customers, it is stated that right is in favour of the customer has been created through issuance of registration and allotment letter. d) With respect to the final settlement form signed by the customer, it is stated that BAFIL settles the value mentioned in the registration letter. e) With respect to the condition that the land cannot be alienated or sold by the customers, it is stated that these conditions are legal and as per transfer of property Act, 1882. f) With respect to the condition that BAFIL reserves the right to alter any of the Rules, regulations and Plans in Rules Book, they have stated that it is for the worst case scenario and reading it is meaningless, as plans are continuing for five years and plans had already matured. Furthermore, the customers have all the legal remedies to get the possession of the plot or land or money with penal interest, as in case of other sales transaction. Thus, the finding of SEBI that the customer does not have day to day control over the management of property and contribution is wrong, as the right is created in favour of the customer by issuance of registration letter and Allotment letter.

xxi. It was submitted that the restraint order of SEBI is affecting all the business of BAFIL, as the customers/people are hesitant to deal with its other business also. BAFIL is restrained from executing Sales Deed to its 16,864 customers and BAFIL is restrained from issuing intimation letter to 34,295 customers, to whom the land allotment is made.

xxii. According to the Company, the facts of its case are clearly distinguishable from the facts of PGF Limited.

xxiii. The Company also submitted that for the year 2013-14, the amount receivable by BAFIL for its schemes is Rs.89.60 Crores and the amount collected was Rs.16.26 crore and the amount due and receivable after 2014-15 is Rs.73.34 crore and the amount outstanding from Defaulters is Nil.

xxiv. In view of its submissions, the Company contended that: a) None of the conditions in section 11AA are satisfied and the activities of the Company do not fall under the purview of Section 11AA of SEBI Act, 1992 b) BAFIL is doing ordinary business of real estate. c) The documents filed by BAFIL portray the bonafide and legitimacy of its activities. d) They have provided scheme wise details of investors with names and addresses in a Compact Disc (CD). e) The Company is running diversified business and all businesses have come to a standstill after SEBI’s order.

xxv. BAFIL has also attached following documents: a) Copies of the Income Tax Returns, forms filed with MCA, Incorporation certificate, MOA and AOA, Copies of PAN card of Directors: b) Copies of Sale Deed by which BAFIL has acquired 9.01 Acres of Land; c) Copy of a Certificate of Auditor of BAFIL on inventories of fixed assets of BAFIL as March 31, 2014 aggregating to Rs.62.22 Crores. d) Copy of a certificate of Auditor of BAFIL on the money collected by BAFIL from the investors for its Schemes, as on March 31, 2014. As per the same, it was noticed that as on March 31, 2014, the Company had collected around Rs.84.30 Crores from 1,30,189 investors and paid back around Rs.10.41 Crores to 12,970 investors. The remaining outstanding amount is Rs.73.89 Crores.

e) A C.D. containing names and addresses of the investors; f) Carton box containing hard copies of names and addresses of investors; g) Copies of Application Forms of few investors for investing in the schemes of BAFIL, Registration Certificate and Allotment letter issued by BAFIL and Agreement of Sale executed between BAFIL and its few customers.

xxvi. The Company requested SEBI to consider that - a) its activities do not require any registration under CIS regulations; b) the mobilisation of funds has been done to carry on the business of sale and purchase of plot of lands; c) the plans offered by BAFIL are only a sale and purchase transactions in accordance with Transfer of property Act, 1882. d) they are engaged in the legitimate business of real estates and sale and purchase of plots are in accordance with law. e) The Company may be allowed to carry its business and collect money from the customers in the course of business. f) The activities of BAFIL do not amount to fraudulent practices under the PFUTP Regulations. The noticees also sought for an opportunity of personal hearing in the matter.

7. An opportunity of personal hearing was granted on May 21, 2015 to the noticees. On this day, Mr. Abhishek and Mr. Jitender Chaudhary, Advocates, appeared and made oral submissions on the lines of the submissions made by the Company in its replies. Liberty was granted to submit documents which the Company wished to submit in support of its case within a period of 15 days. Personal hearing in the matter was accordingly concluded.

8. Thereafter, vide letter dated June 08, 2015, the Company forwarded copies of – i. ‘No Objection Certificate’ obtained from the Tahsildar, Peraiyur for selling plots, ii. copy of a site plan. iii. A summary of ‘land sale’ pertaining to 61 customers.

iv. Letter of BAFIL to their customers mentioning that the Company cannot alienate the land in view of the restraint imposed by SEBI vide the interim order and also on receipt of the final order from SEBI, they shall register the land in the name of the customer. v. A copy of an Agreement for sale entered into between BAFIL and its customer vi. A copy of allotment letter issued by BAFIL to the customer. vii. A letter of BAFIL to customers acknowledging the receipt of entire consideration from the customers and inviting them for executing – “Agreement for Sale”. They have also stated that the parent document is available at the registered office of the company and the same may be obtained by the customers for seeking legal opinion on the title of the property. They have also invited the customer to pay stamp duty and registration charges for preparing the sales deed.

The Company also requested for another opportunity of personal hearing stating that it was heard in part on the previous occasion. SEBI responded to the said request by stating that the hearing was concluded on May 21, 2015 and that the Company was allowed time for submitting documents, if any. The Company, vide letter dated June 22, 2015, reiterated its request for a personal hearing. The Company also filed another letter dated July 20, 2015 forwarding photographs of its various businesses – Dairy Farm, Water Plant, Soap works and School and also submitted copies of ‘Possession letters’ stating that the Company had transferred the possession of land on the payment of first instalment to the customers to keep itself away from the maintenance and control of the plot(s) of land. 9. In view of the repeated requests for personal hearing, in the interest of natural justice, a final opportunity of personal hearing was afforded to the noticees on August 17, 2015. In this hearing, Mr. Abhishek, Advocate and Ms. Nupur represented the Company and made oral submissions. Liberty was granted to file written submissions along with documents, if any, within a period of three weeks. Personal hearing was concluded. A copy of the record of proceedings was given to the representatives post the hearing on acknowledgement. Thereafter, vide letter dated September 02, 2015 (received on September 04, 2015), the noticees inter alia made the following submissions: a) The Company is strictly abiding by the directions of SEBI.

b) The Company is involved in multiple business including dairy business, farming, agriculture, real estate, manufacturing of drinking water/cleaning material, insurance agents, etc. and also engaged in various charitable activities. c) The business income of BAFIL from businesses other than real estates is around ₹2 Crores. The balance sheet depicting the same has already been filed. d) The Company commenced the business of real estate by purchasing 9.01 acres of waste land in Sivagangai District for an amount of Rs.1,45,000/- received by Mr. IL Joseph Jeyaraaj as a consideration for the transfer of his business of manufacturing of washing/cleaning products to BAFIL. The company gradually purchased and registered lands in its name, to pursue its objects, to an extent of 1412.27 acres (in 15 villages in Madurai) and shown the same in the books of accounts, as stock in trade under the heads - “Current Assets”. e) The company has obtained requisite approval from local authorities as per the local laws, made adequate provisions for road and other facilities. The lands were also earmarked for roads and common facilities. f) BAFIL handed over the possession of the lands to respective customers and the sample possession letters were already filed with SEBI g) BAFIL has floated different schemes and till December 15, 2014, i.e. the date of the interim order, there were 19,683 customers whose plans were to mature, out of which 10,007 customers opted for monetary settlement, 9,128 customers discontinued with the plan and thus, only 548 customers were remaining. Thus, for all the 548 customers, the possession had been handed over and request for registration of the land had been sent and those customers who readily came forward have been entered into the registration of land, before the passing of the interim order dated December 15, 2014. h) The Company also stated that it had entered into sale deeds to prove its bonafide business. It had given copies of 5 sale deeds (1 sale deed each for FY 2010-11, 2011- 12 and 2013-14 and two sale deeds pertaining to FY2012-13). i) BAFIL has plotted land admeasuring 686 acres in 5 nearby villages totalling 15026 plots and the total true copy of the plan was attached with. j) BAFIL has already filed documents disclosing and substantiating documents of 171 persons, who are awaiting registration of their lands;

k) The company has acquired all the lands and registered it in its name and held as stock in trade as current assets. l) The company has also sufficient revenue from business other than real estate to purchase the lands, which is clear from their Balance sheets. m) As on date, BAFIL is liable to deliver lands to only 1,377 persons out of 1,30,189 customers. 96,627 customers out of 1,30,189 have not completed the tenure. 15,054 customers out of the remaining 33,562 customers were dropped out. 17,131 customers out of the remaining 18,508 Customers took the settlement. The tenure of the remaining 1377 customers continues till 2019. BAFIL is ready to get the registration of the lands to the remaining customers. n) After passing of SEBI’s order, due to panic created amongst the customers, the credibility of BAFIL and its Directors is at stake. BAFIL has enclosed a chart showing cash flow, and inventory break –up. o) The Company contended that the first condition under section 11AA(2) of the SEBI Act is not satisfied for the following reasons: The contributions and payments made by the customers are pooled and utilized by BAFIL for various purposes including charitable activities. The business of sale of lands has been started by BAFIL by a land admeasuring 9.01 acres owned by it since inception and with money around 2 Crores, earned through multiple business other than real estate business before floating any plan for poor. Thus, the company already had enough infrastructure, money and goodwill and good intention to start the real estate business to help the local villagers. The money collected from the customers or local villagers has been kept separately or utilized for charity by BAFIL. The Balance sheet, P&L and the description of all the activities in support have already been filed before SEBI. p) BAFIL offered the plots of lands to the local villagers at fair market value and also added buy back clause with a promise to take back land at a price which is lower to the rate of interest a person could earn by putting his money in fixed deposits in Bank. Thus, there was no lucrative or attractive offer from BAFIL due to allurement of which it could be presumed that local villagers would have invested money due to greed for earning more as is the case in PGF Limited. Hence, the condition provided under Clause (ii) section 11AA (2) does not get satisfied.

q) The possession letters, agreements to sell, and registered Sales Deeds filed by BAFIL clearly depict that the maintenance of plot of lands were with their respective customers only, since inception. Therefore, the question of BAFIL maintaining the plots of land under agreement has been entered into does not arise at all. Thus, the condition under Clause (iii) of Section 11AA (2) not satisfied. r) The possession letters issued to all individual customers of the plots of lands have already been filed with SEBI. The Government approved plan of plotting has also been filed with SEBI. The proper demarcation of plots had been done since inception with the approval of the government. Thus, the day to day control of the plots of lands has been with respective customers. Moreover, registration of sale-deeds at the maturity of the plan also finally supports the aforesaid argument. It is therefore the condition provided under Clause (iv) of Section11 AA (2) is also not satisfied. s) BAFIL also submitted that it is a genuine business entity and its activities do not fall under the four clauses of Section 11AA of SEBI Act, 1992 and BAFIL could carry on its real estate business in its normal course as earlier, since inception as per law. BAFIL has also attached documents pertaining to three investors, few plan approvals obtained from concerned authorities, NOC obtained from Divisional Engineer for construction of approach roads to the lands owned in the name of the BAFIL and a summary stating the total number of investors, number of investors whose tenure are completed and settled, number of customers to whom the land allotment and registration is pending.

10. I have perused the interim order, the submissions made by the Company/noticees, the material submitted by them and other material available on record. I note that the Company, with CIN: U01210TN2009PLC070355, was incorporated on January 02, 2009, having its registered office at 1-K &1-E, Kajiyar Complex, North Gate, S.S. Colony, Madurai – 625010. The Company is a Corporate Agent (License Number: 5371656) of the Life Insurance Corporation of India. The main objects as per the MoA of BAFIL inter alia, is "to carry on the business of Dairy products, Agriculture, Horticulture, Real Estate, manufacturer of Soap, Grocery, Drinking Water, Agents for Life and General insurance...".

11. The interim order had alleged that the Company is engaged in mobilization of funds from the general public through its 'collective investment schemes' as defined in section 11AA of the SEBI Act, without obtaining the certificate of registration from SEBI as required under section 12(1B)

of the SEBI Act and regulation 3 of the CIS Regulations. The interim order had referred to various documents of the Company, the business model and activities to make such allegations. The following observations from the interim order are relevant to note:

1. “On an examination of the material available on record, it is prima facie observed: i ……………… ii ……………… iii ……………… iv As per the financial statements of BAFIL, an amount of `45.18 Crores as on March 31, 2013 and `25.28 Crores as on March 31, 2012 is mentioned as "Trade payables".

2. As per the reply of BAFL, various plans offered to the public are illustrated as under: i. Various plans offered by Blessing Agro farms as per the rule book are as under:

Scheme - BMP A - 1 (12 months) In `

Land in Consideration Expected Accidental Death S.No. Sq Ft. amount Instalments cost of land Compensation Mly (12) Qly (4) Hly (2) Yly (1) 1 109 6,000 500 1475 2925 5900 6,500 6,000 2 130 7,200 600 1770 3510 7080 7,800 7,200 3 152 8,400 700 2065 4095 8260 9,100 8,400 4 174 9,600 800 2365 4680 9440 10,400 9,600 5 195 10,800 900 2655 5265 10620 11,700 10,800 6 217 12,000 1000 2950 5850 11800 13,000 12,000

Scheme - BMP A - 2 (36 months) In `

Land in Consideration Expected Accidental Death S.No. Sq Ft. amount Instalments cost of land Compensation Mly (36) Qly (12) Hly (6) Yly (3)

1 367 18,000 500 1475 2950 5900 22,000 18,000 2 440 21,600 600 1775 3545 7080 26,400 21,600 3 514 25,200 700 2065 4130 8260 30,800 25,200 4 587 28,800 800 2365 4725 9440 35,200 28,800 5 660 32,400 900 2655 5310 10620 39,600 32,400 6 734 36,000 1000 2955 5905 11800 44,000 36,000

Scheme - BMP A - 3 (60 months) In `

Land in Consideration Expected Accidental Death S.No. Sq Ft. amount Instalments cost of land Compensation Mly (60) Qly (20) Hly (10) Yly (5) 1 142 6,000 100 295 580 1150 8,500 6,000 2 284 12,000 200 590 1160 2300 17,000 12,000 3 425 18,000 300 885 1740 3450 25,500 18,000 4 567 24,000 400 1180 2320 4600 34,000 24,000 5 709 30,000 500 1475 2900 5750 42,500 30,000 6 850 36,000 600 1770 3480 6900 51,000 36,000 7 992 42,000 700 2065 4060 8050 59,500 42,000 8 1134 48,000 800 2360 4640 9200 68,000 48,000 9 1275 54,000 900 2655 5220 10350 76,500 54,000 10 1417 60,000 1000 2950 5800 11500 85,000 60,000

Scheme - BMP A - 4 (75 months) In `

Expected Land in Consideration cost of Accidental Death S.No. Sq Ft. amount Instalments land Compensation Mly (12) Qly (4) Hly (2) Yly (1) 1 317 12,000 160 470 960 1,900 19,000 12,000 2 475 18,000 240 705 1440 2850 28,500 18,000 3 634 24,000 320 940 1920 3800 38,000 24,000 4 792 30,000 400 1175 2400 4750 47,500 30,000 5 950 36,000 480 1410 2880 5700 57,000 36,000 6 1109 42,000 560 1645 3360 6650 66,500 42,000 7 1267 48,000 640 1880 3840 7600 76,000 48,000 8 1425 54,000 720 2115 4320 8550 85,500 54,000 9 1584 60,000 800 2350 4760 9500 95,000 60,000

3. From the Rule Book, sample application form, registration letter, allotment letter, Final Settlement Form provided by BAFIL, following terms and conditions of the schemes are observed: i. “BAFIL is “An Agro and Land Development Project Based Public Limited Co.” and is inter-alia engaged in development of waste lands and agriculture; ii. The company is offering various plans to the customers by which the customer enters into an agreement by booking the agricultural land of different sizes and the same shall be allotted to the customer; iii. The person joining as customer need to submit at least one instalment amount along with `10 as application fees; iv. When the instalment is not paid within the grace period the registration letter stands discontinued but may be revived at any time within 12 months on payment of all dues together with penalty there on @ 15% per annum and appropriate late fees for delayed payments; v. Along with the said schemes, the company is also offering Accidental Death Compensation to the customers; vi. At the end of the term period the customer should apply to the company for getting land as per the registration letter; vii.

All remittances shall be made through authorised distributors; viii. The company shall have first charge on the said property on account of its unpaid instalments for services/development charges and for other incidental expenses incurred by the company, The said property cannot be sold, assigned, mortgaged, pledged, alienated without obtaining no dues certificate from the company in case of instalment payment plans; ix. In case of BMP Plans (Instalment Payment plans) within a reasonable period generally not exceeding 270 days after receipt of 50% of consideration amount, the land shall be allotted in the name of applicant. The company reserves the right to change the location of the allotment of land and allot an alternative site at any other place; x. On completion of the term period, the customer is free to take agricultural lands/waste lands as per allotment letter. If the customer opts to surrender the land with all relevant documents to the company, the company is ready to take the land for an expected cost of land as per the plan as noted in the Registration letter and in the Rule Book.

Customer can use the Blessing Marketing Service to sell their allotted land to any other person. The payment of such sale consideration amount to the customers is linked with transfer of ownership of the said developed property; and xi. The company reserves the right to discontinue/change/amend/modify or alters any of the Rules and regulations and Plans mentioned in the Rule Book at any time at its sole discretion with or without any notice.” b Application Form: i. As per the application form, the customer applies for purchase, development and maintenance of the land, produce and marketing of agricultural products under cash down plans /instalment payment plans. ii. The application form contains various fields including Plan Category, Consideration amount, Introducers code, Advisors code, etc. iii. From the terms and conditions printed on the reverse of Blank Application Form provided by BAFIL, the following Clauses are noted: a) "... b) Clause 12:“In case of BMP Plan after receipt of full payment within a reasonable time period generally not exceeding 120 days and in case of Instalment Payment plans within a reasonable period generally not exceeding 90 days after receipt of 50% of consideration amount, the land shall be allotted in the name of applicant.

The company reserves the right to change the location of the allotment of land and allot an alternative site at any other place.; c) Clause 13: On expiry of the term, applicant should surrender the registration letter, last instalment receipt, identity proof and a letter requesting the company to get the land or expected cost of land; d) Clause 22: The company reserves the right to discontinue/change/amend/modify or alter prospectively any of the rules/regulations and plans mentioned in the Rulebook at any time at its sole discretion with or without notice." c Registration letter: i. The registration letter inter-alia mentions “you have been registered for the land booked by you as per the details mentioned". Details include Plan number and Term, Consideration amount and land size, mode of payment and the instalment amount. ii. On the reverse of the blank registration letter, the terms and conditions mentioned in the application form are reproduced. iii. It is observed that no specific information or details regarding the land allotted to the investor like location of the land, survey number, etc. are mentioned in the registration letter. d Allotment letter: i. Though allotment letter mentions the Survey No./Sq ft. of the land and village and taluk in which it is situated, it is mentioned in the allotment letter that the company reserves the right to change the location of the allotment and allot an alternative site at any other place.(Emphasis added) ii.

It is also stated that on expiry/completion of the term of the period, the customer is free to take agricultural lands/waste lands. If the customer opts for surrender of the land, the customer shall surrender all relevant documents to the company or if any circumstances arise where it is not possible to allot land to the customer, the company will take the land from the customer for an expected sum payable value as per the plan as mentioned in the Application Form and the Registration letter.

e Customer – Final Settlement Form: i. The five sample documents submitted by BAFIL, contains a document viz., “Customer – Final Settlement Form” which are signed by all the five customers. ii. In the said document, it is stated that the investors are willing to accept the contents in the registration letter and requests BAFIL to settle the value mentioned in the registration letter. iii. Further, it is also stated that BAFIL may retain the content of registration letter or make a sale of it to anyone who is interested to buy it. The proceeds accruing may be handed over to the investors and acknowledging that the sum received is the amount of cost of land. iv. The same form is filled by the all five customers, whose sample documents are submitted by BAFIL to SEBI. Thus, it appears that the company is making the Customers to sign the “Final Settlement Form” and is mainly not transferring the land in the name of the customers or handing over the possession of land to them but provides for the estimated value mentioned in the plan”.

12. The Company has contended that it is in the business of ‘real estate’ and that after noticing the constraints faced by its customers, it had launched instalment plans for purchase of plots. The Company also submitted that it has commenced its business in real estate by purchasing 9.01 acres of waste land at Sivaganga District out of Rs.1,45,000/- received by its promoter as consideration for transfer of his business of manufacturing of washing and cleaning products to the Company. It is the Company’s admission that it had gradually purchased and registered lands to the extent of 1412.27 acres in its name. The Company has also submitted that it had plotted lands admeasuring 686 acres totalling 15026 plots. The Company’s primary contention is that it conducts business of real estate and that such activity is not a CIS.

13. I have perused the observations made in the interim order with respect to the application, registration letter, brochure/pamphlet, final settlement form, allotment letter etc. The Company had also submitted certain documents along with its replies/submissions dated July 20, 2015 and September 02, 2015.

14. In its written submissions dated September 02, 2015, the Company has submitted documents with respect to three of its customers – V. Karuppiah, M. Muaiyandi and K. K. Janarthananan. The documents of V. Karuppiah are perused and the following observations are made: 1. As per application form (which is undated), this person has opted for Plan – BMP A-2, 3 years plan for consideration amount of Rs. 36,000/- for monthly instalment of Rs. 1,000/- 2) Date of commencement of the plan is not mentioned. 3) There is no mention of any plot details – area, location or identity. 4) The ‘Terms and conditions’ printed on the reverse of the application form also does not mention anything about lands/plots or real estate businesses. One of the conditions mentions about payment of instalment amount in time and within the grace period allowed.

5) This customer has made 4 applications and has selected the same plan (3 years – 36,000/-) in all those applications. 6) The company has issued “Land Allotment Letter” Allotment No. AL000000503 dated June 29, 2010. This document states that the company has allotted plot as per details below: Survey No. - 95/5 Area - 734 sq. ft Village – Prabakalur (Praba) Taluka – Mudukalathur District – Ramnad The exact identity of the plot is not at all decipherable with the above details. It remains a question as to how the customer would identify his plot in the whole plotted lands. 7) The company has in clear terms stated that it reserves the right to change the location of allotted plot. The company has also represented that if the company opts for surrender of land or if the company is not able to allot land to customer, the company would pay the ‘expected sum payable’ as mentioned in the plan mentioned in the application and registration letter. 8) The company could charge for land maintenance and for development charges incurred by the company. 9) The company had issued a letter dated February 15, 2012 to this customer stating that the entire consideration amount of Rs.36,000/- as stipulated in the allotment letter was received and advised the customer to call on the company for executing necessary agreement for sale. The schedule of property mentioned in this letter is the same as mentioned in the Land Allotment Letter. This letter too does not mention the exact identity / location of plot. Only the survey number is mentioned. 10) Another factor that is noted is that the allotment letter is dated 29/06/2010 and the application is said to be dated 01/04/2009. Yet the company stated that it received the entire consideration by 15/02/2012, which is before the completion of tenure of 36 months. 11) From the minutes of the meeting of Board of Directors of the company held on December 03, 2012, it is noted that the board resolved that the company would arrange for registration / transfer of 13 plots of vacant land aggregating 15600 sq. ft situated in S.F.Nos. 108/11A and 108/11C at Sathangudi Village, Thirumangalam Taluka, Madurai

District belonging to Mrs. Packiam Parthiban, W/o. Mr. P. Parthibar of Madurai through her registered power of Attorney holder V. Jeyaraj in favour of company’s customers or their nominees (in cases where required ) coming under the company’s plans as and when required. It was also resolved that IL. Joseph Jeyaraaj, Managing Director of company would negotiate with the power of attorney holder and with such other persons to finalize the terms and conditions, payment of monies, registration formalities etc. in respect of this transaction. As per the Minutes, the lands acquired by the company for distribution/transfer to the eligible customers require approvals from various government authorities before making registration and that more time was required for obtaining such clearances. It was therefore desirable to acquire lands from such parties which were suitable for transfer / registration in favour of customers or their nominees. 12) The Company had entered into an Agreement for sale dated September 27, 2012 with V. Jeyaraj (PoA of Mrs. Packiam Parthiban) for transferring certain plots to K. Palpandi, Gnanaprakasam and Kasimayan. The PoA was also required to sell plots to such customers as may be indicated by the company. 13) The customer (Mr. V. Karuppiah) has vide letter dated June 07, 2012 has informed the company that he would not be able to come on the day specified by company for registration and has requested the company to sell the plot allotted to him to one K. Palpaadi. It is noted that two other customers, S. Xavier Arul Raj and M. Mahalingam have made similar request. 14) A sale deed was executed and registered between K. Palpandi and V, Jeyaraj on October 15, 2012 for Rs. 2,40,000/- for sale of plots belonging to Packiam Parthiban.

From the above facts, it is strange to note that persons said to be customers inform the company to register the plot in favor of another person. This coupled with the fact that the company is not the seller indicates that the Company is not into real estate but mobilizes money on the pretext of providing returns to the customers. 15) Similar observations are made with respect to documents pertaining to company’s investors M. Muniyandi & K. K. Janarthanan. 16) The company has also enclosed a ‘Plan’ showing proposed layout in Madurai District, Periyar Taluka, Kuppalantham Panchayath.

17) The company has also provided a cumulative summary as below: Total customers – 130189 (FY 2009 to 2014) No of customers whose – 96627 tenure not over No of customer whose tenure – 17131 completed and settled Dropout – 15054 Land allotted, given possession and pending registration – 1377 (as of reply on 02/09/2015)

From the above, it is very clear that the Company has not registered a single sale deed. The Company has ‘settled’ in monetary term the accounts of 17,131 whose tenure in the plans of the Company was completed. The foregoing observations make it very clear that the company is involved in money mobilization schemes from the public, through its various schemes, under the garb of selling plots to customers and therefore does not carry on ‘real estate’ transactions as represented by it.

15. The Company vide its letter dated July 20, 2015, had enclosed photographs claimed to be pertaining to various businesses. These were done to support the submission that the Company is involved in various business and earning substantial amount which was utilized for purchase of land and the money collected from the customers was always lying in the accounts of the Company but never utilized for the purpose of the scheme. The above contention would be totally irrelevant to the issue at hand. Irrespective of whether the monies from other business were used, the Company had collected monies from investors under its schemes/plans under the garb of purchase of plots of land. If such schemes/plans of the Company satisfy the provisions of section 11AA of the SEBI Act, the Company would be mandated under the SEBI Act and the CIS Regulations to seek registration before launching and carrying on with such collective investment schemes. The Company had also forwarded copies of letters pertaining to ‘Handing over possession of plot’. The letter states that the Company is handing over possession of plot and that it would register the same on payment of complete amount. The letters were issued on various dates (2011-2013) with the earliest one issued on 30/10/2011. However, as mentioned above, the Company has not forwarded a single sale deed wherein it had sold the plot to its customer. As observed in the previous paragraph, the Company has admittedly ‘settled’ the accounts of customers and had not ‘executed’ any sale deeds’. The Company also contended that as it had issued ‘possession letters’ and therefore the customers had day to day control of the plots and were managing the plots. This argument does not have any merit as the customer does not even know the location / identity of his plot. In such case, there would be no opportunity to the customer to exercise control or manage such plots.

16. In the light of the Company’s contentions and the material available on record, it is to be determined whether the activities of the Company constitute CIS or is only a real estate business as is contended. Section 11AA of the SEBI Act provides the necessary guidelines in order to test a scheme or activity is a CIS or not. The said provision is reproduced below: “(1) Any scheme or arrangement which satisfies the conditions referred to in subsection (2) or sub-section (2A) shall be a collective investment scheme. Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under 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) Any scheme or arrangement made or offered by any person under which, (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement; (ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement; (iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; (iv) the investors do not have day to day control over the management and operation of the scheme or arrangement. (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. Sub-section (3) to section 11AA mentions the list of activities or enactments which are not considered as CIS.

17. The first condition under section 11AA(2) is that the contributions or payments made by the investors, by whatever name called, are pooled and utilised solely for the purposes of the scheme or arrangement. In this regard, I observe the following:

(a) The Company is admittedly offering various schemes (BMP A – 12 months, 36 months, 60 months and 75 months) to its customers for the purported sale/purchase and development of plots. (b) The above said plans/schemes mention the extent of land, the amount payable in instalments (monthly, quarterly, half-yearly and yearly). The plan also indicates the expected cost of land and the accidental death compensation. (c) The customer is made to fill in an Application Form. This form mentions the plan, consideration amount. This form clearly mentions that the Company reserves the right to change the location of the allotment of land and allot an alternate site at any other place. (d) The Company issues a Registration letter which mentions the name of the investor, the plan (tenure and consideration amount), land size and mode of payment. However, the specific location of land is not mentioned here. (e) The Company has submitted that it had gradually increased the extent of lands to 1412 acres owned by it over a period. The initial land holding, as per the Company, was only 9.01 acres. The Company had contended that the money earned out of other business are utilised to purchase lands and that the money mobilised from customers under the schemes are kept in the accounts of the Company.

The Company has not provided proof for the same. It is irrelevant as to whether BAFIL is using the contribution of customers to purchase the lands. The Company has admitted launching and operating various schemes/plans as mentioned in the interim order. This clearly proves that the Company had a scheme in place and was pooling monies under such schemes. In this regard, the following observations of the Hon’ble SAT in the case of NGHI Developers India Limited decided on July 23, 2013 is important to note: “19. ………….. The Appellants submit that in the present case the land is first purchased by the Appellants with its own funds. With respect to this submission, we state that the concept of CIS as envisaged by the legislature does not take into account any such variable. The fact stands that the money collected from the customers of the Appellants ostensibly for the purpose of purchase of land is pooled together and then utilized for the purposes of the scheme, whether to buy more land or to develop the land already in possession of the Appellants. In this regard, it is noteworthy that the Appellants first seek contributions from members of the public based on the standard agreement and the application form.

On receiving contributions, they issue certificates confirming the receipt of the amount of money paid by the customers to the Appellants. This money, in turn, is utilized by the Appellants to further buy land after pooling the investments of all customers. This leads to the conclusion that there is in fact a scheme in place which involves pooling of the investments of the Appellants”. {Emphasis supplied} (f) The Company in its submissions, stated that in case of instalment schemes, it allots a specific plot of land after receipt of 50% of consideration amount, which according to the Company endorses the right of the customer. It is important to note that as per the land allotment letter, though the survey number and area, village, taluk and district are mentioned, the exact location or identity of the plot is not mentioned. The Company has now contended that a right for specific performance would be available to the customer after payment of the full amount. Though the Company may contend so, the customer is notified vide the Company’s brochures/material that the Company reserves the right to change location of plot.

Therefore, the customer had no say with respect to the plot which he wishes to purchase. It is also noticed that the Company has produced only a few sale deeds. From a perusal of these sale deeds, it is noticed that the buyer and seller are individuals who are total strangers, as Company is not a party to the transaction and the second party is not a customer. It appears that the Company passes off these transactions done elsewhere as sale transactions by it. The same cannot prove that the Company is into real estate business. Further, the Company has the right to change the location of plot. (g) The Company also makes the customer to sign a Final Settlement Form. This form states that the investor is willing to accept the value mentioned in the brochure/registration letter and requests the Company to settle the same. The Company has enclosed few letters along with its submissions dated July 20, 2015 stating that it was ‘pleased to handover possession’ to the customer. However, no sale deeds for such persons are forwarded. The same indicates that the Customer/Company are not serious about registering the land and the same is only an underlying for the investment and receiving back the contribution with return as indicated against each plan.

It is seen that the Company solicits contribution to its schemes with a promise of return in monetary terms. (h) I also note that the interim order has observed that there was no clarity regarding the time period of actual possession of property or any individual ownership right given to "customer(s)"/ investors. (i) In view of the above observations, it becomes clear that the Company is engaged in operating a scheme purportedly in the nature of sale/purchase of land and utilises the contributions of the investors in its schemes/businesses. Accordingly, the first condition under section 11AA(2) is proved in the instant case.

18. 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. With respect to this, I observe the following:

(a) As mentioned above, the Company has not executed any sale deeds. (b) As per the submissions made by the Company and the Final settlement forms, it is noted that the Company has returned the ‘estimated cost of land’ to the investors. (c) The Company has further submitted that it was offering only the expected cost of land after completion of term which was way less than the interest one can get on fixed deposit for the same amount. As illustration, the Company has stated that in a recurring deposit, monthly deposit required to get Rs.6500/- in 12 months was Rs.520/, whereas the Company takes Rs.500/-. The same would show that the Company is offering higher interest. (d) The schemes/plans of the Company have already been mentioned above at paragraph 11, in this order. In every plan, the customer is promised a higher value than his investment and also promises accidental benefit called ‘Accident Death Compensation’. (e) Therefore, by envisaging a scheme/plans with return to investors, the second condition is also satisfied.

19. The third and fourth conditions under section 11AA(2) are that the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors, and the investors do not have day-to-day control over the management and operation of the scheme or arrangement. (a) As per the scheme documents, the allotment of land is at the sole discretion of the Company. (b) If the plot is allotted (which is only illusory as seen from the observations above), the Company can change the location. (c) The exact identity of the plot is not mentioned. Therefore, without knowing the exact location of plot, the customer cannot have any hold on his property.

(d) Neither possession nor ownership in the plot is transferred. (e) As per the Rule Book, the said property cannot be sold, assigned, mortgaged, pledged, alienated without obtaining no dues certificate from the company in case of instalment payment plans. It is already mentioned that the plot is not identified. (f) BAFIL reserves the right to ‘discontinue/change/amend/modify or alters any of the Rules and regulations and Plans mentioned in the Rule Book at any time at its sole discretion with or without any notice’. This clearly indicates that the Company/management have complete control over the schemes and the investors do not have any role. (g) In view of the above, it can definitely be said that the scheme/property is managed on behalf of the investors and the investors do not have any control over the management and operation of the scheme or arrangement.

20. In view of the above, the schemes/arrangement of the Company satisfies all the four conditions under section 11AA(2) of the SEBI Act. The Company has therefore carried on and operating CIS. The Company is not registered as a collective investment management company with SEBI. With respect to the other arguments made by the noticees, I observe the following:

i. BAFIL has stated that the terms of the schemes are in accordance with Transfer of Property Act, 1882 and it binds itself by Indian Contract Act, 1872 and as it allots plots to the customer, the customer can claim under Specific Relief Act, 1963. Further, it states that it is running genuine Real Estate Business and the plans offered by BAFIL are only a sale and purchase transaction in accordance with Transfer of property Act, 1882. However, as observed above, the Company has not provided even a single sale deed registered in favour its customers in their schemes. The Company had produced Final Settlement Forms for such customers which proves that the Company returns the monetary value promised as per the scheme/plan opted by the customer. Even as per the Company, it has not executed sale deeds and it stated that for 1377 customers, it was pending registration. ii. Though the company claims that their agreements are in accordance with Transfer of Property Act, 1882, Specific Relief Act, 1963 and The Indian Contract Act, 1872, it may be noted that if these contracts/agreement are in the nature of CIS Schemes, as per the attributes of CIS Schemes mentioned in Section 11AA (2) of SEBI Act, 1992, then such Schemes have to be treated as CIS.

As the Company did not transfer plot under a registered sale deed, it is clear that the there is no transfer of property per-se and hence, Transfer of Property Act, 1882 has no relevance to these schemes. iii. Though, BAFIL claims that only in the worst case scenario, it returns the money, it may be noted that as per the submissions of the Company, it has given money in most cases and has admitted that registrations are pending only in few cases. iv. It appears that copies of the letter issued by BAFIL to their customers, (which are attached with their letter June 08, 2015), stating that they could not transfer the land in the name of the customers due to restriction imposed by SEBI’s interim order, is only an afterthought/excuse, as no steps were taken by BAFIL to transfer the land in the name of the customer, before the date of SEBI’s interim order. From the scheme of activities of the Company, it appears that the Company encourages customers to sign the Final Settlement Form to accept the consideration/return mentioned in the Registration Certificate/brochures rather than getting the concerned plots registered in their name. v. Further, another important factor is that the Company as per its plans has offered to transfer very small area of plots.

It would be impracticable to transfer the small pieces of the land (in some cases as low as 109 Square feet) in favour of the customers. vi. BAFIL denies some of the terms and conditions of their Schemes - BAFIL never charges for the development of the land and it is incorrect to state that BAFIL reserves that right to change the location of the land and allot an alternative site at any other place. However, it is observed that the Rule Book, Application Forms, Registration Certificates and Allotment letters of the customers provided by BAFIL, pre and post SEBI’s order, contains all such terms and conditions as detailed in SEBI’s interim order. vii. Further, I observe that the conduct of the noticees was not at all satisfactory as observed in the interim order. When certification from the Statutory Auditor of the company was sought by SEBI, BAFIL attached a “certificate” dated February 27, 2014, from one Mr. S. Saravanan (M.No.109/06), claiming to be an “Auditor”. SEBI got a confirmation from ICAI that no such person was given membership. When information regarding the investors in their schemes was sought, BAFIL vide letter dated August 16, 2014, provided a CD which was in completely broken down condition.

21. From the above discussion, I conclude that the schemes offered by the Company with a promise of returns satisfy all the four conditions specified in Section 11AA (2) of the SEBI Act and therefore qualify as a Collective Investment Scheme as defined under the said section read with the CIS Regulations. At this juncture, it is important to note that the Hon’ble Supreme Court in the matter of PGF Limited vs. UoI and another (ref. MANU/SC/0247/2013, has observed "…..the Parliament thought it fit to introduce Section 11AA in the Act in order to ensure that any such scheme put to public notice is not intended to defraud such gullible investors and also to monitor the operation of such schemes and arrangements based on the regulations framed under Section 11AA of the Act." The Hon'ble Supreme Court further observed "Inasmuch as the said Section 11AA seeks to cover, in general, any scheme or arrangement providing for certain consequences specified therein vis-a-vis the investors and the promoters…….,”. The Hon’ble Supreme Court further observed - "A reading of sub-Section (3) of Section 11AA also throws some light on this aspect, wherein it is provided that those institutions and schemes governed by sub-clause (i) to (viii) of sub-Section (3) of Section 11AA will not fall under the definition of collective investment scheme. ........... Therefore, by specifically stipulating the various ingredients for bringing any scheme or arrangement under the definition of collective investment scheme as stipulated under sub- Section (2) of Section 11AA, when the Parliament specifically carved out such of those schemes or arrangements governed by other statutes to be excluded from the operation of Section 11AA, one can easily visualize that the purport of the enactment was to ensure that no one who seeks to collect and deal with the monies of any other individual under the guise of providing a fantastic return or profit or any other benefit does not indulge in such transactions with any ulterior motive of defrauding such innocent investors and that having regard to the mode and manner of operation of such business activities announced, those who seek to promote such schemes are brought within the control of an effective State machinery in order to ensure proper working of such schemes."

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

23. The interim order has alleged that the fund mobilizing activity of the Company through its schemes prima facie amounts to a fraudulent practice in terms of regulation 4(2)(t) of the PFUTP Regulations. I note that in terms of regulation 4(2)(t), 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 liable for action.

24. In view of such unregistered CIS activities carried on by the Company, it becomes necessary to issue suitable directions in the interest of investors and the securities market. In this regard, regulation 65 provides for issuance of various directions by SEBI. The said provision is reproduced below for reference:

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

As the Company is carrying out unregistered CIS activities, it becomes necessary to direct the Company to wind up the CIS and refund its investors’ money or assets along with requisite interest along with other necessary directions. It is noted that as per the auditor’s certificate, as on March 31, 2014, the Company had collected around Rs.84.30 Crores from 1,30,189 investors and claims to have paid back around Rs.10.41 Crores to 12,970 investors and that the outstanding amount is Rs.73.89 Crores.

25. The interim order has been issued in respect of the following directors of the Company- (a) Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj (b) Mrs. Prakasam Sagaya Packia Santhi (c) Mr. Irudayaraj Manickam Pillai Jeyabalan (d) Mr. Santhanapeter.

As per the information available in the website of MCA, it is noted that the present directors are Mr. Irudayaraj Manickam Pillai Jeyabalan (appointed on 25.03.2010), Mr. Elshadai Lourdu Pillai Santhana Peter (re-appointed on 04.10.2014) and Mr. Innsaipillai Lourdupillai Joseph Jeyaraaj (appointed as Managing Director on 02.01.2009). As per the latest filings made in the MCA-21 website, it is observed that Mrs. Prakasam Sagaya Packia Santhi has allegedly submitted her resignation letter dated October 04, 2014. However, the necessary form was filed with RoC only in the month of January, 2015 (i.e. post SEBI’s interim order). Regarding Mr. Santhanapeter, though he submitted that he resigned on April 06, 2013, he had been re-appointed on October 04, 2014. From the above information, it is clear that the noticee directors are persons responsible for the conduct of the business of the Company and therefore liable for the violations in conducting/launching CIS without necessary registration from SEBI under section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations.

26. Therefore, I have no hesitation in holding that BAFIL and its directors namely, Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter 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. As, the fund mobilization by BAFIL commenced from April 2009, Mrs. Prakasam Sagaya Packia Santhi and Mr. Santhanapeter are also equally responsible for the violations committed by BAFIL.

27. 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:

i. Blessing Agro Farm India Limited (CIN : U01210TN2009PLC070355) and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj (PAN no. ACUPJ0102E), Mrs. Prakasam Sagaya Packia Santhi (PAN no. ALKPS4279C), Mr. Irudayaraj Manickam Pillai Jeyabalan (PAN no. AJFPJ3454R) and Mr. Santhanapeter (PAN No. BQMPS1649Q) 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.

ii. Blessing Agro Farm India Limited and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr.

Santhanapeter shall wind up the existing Collective Investment Schemes and refund, through ‘Bank Demand Draft’ or ‘Pay Order’, 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.

iii. Blessing Agro Farm India Limited and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter shall not alienate or dispose off or sell any of the assets of Blessing Agro Farm India Limited except for the purpose of making refunds to its investors as directed above.

iv. After completing the aforesaid repayments, as directed in sub-paragraph (ii) above, the Blessing Agro Farm India Limited shall file a certificate of such completion with SEBI, within a period of 15 days, from two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. For the purpose of this Order, a peer reviewed Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by the Institute of Chartered Accountants of India (‘ICAI’).

v. Blessing Agro Farm India Limited and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter 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.

vi. Blessing Agro Farm India Limited and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter 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.

vii. In the event of failure by Blessing Agro Farm India Limited and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter to comply with the above directions, the following actions shall follow: (a) Blessing Agro Farm India Limited and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter 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 (vi) above, till all the Collective Investment Schemes of Blessing Agro Farm India Limited are wound up and all the monies mobilized through such schemes are refunded to its investors with returns which are due to them.

(b) SEBI would make a reference to the State Government/ Local Police to register a civil/ criminal case against Blessing Agro Farm India Limited and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter, 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 (c) SEBI would make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the company, Blessing Agro Farm India Limited.

(d) SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and regulations framed thereunder.

28. 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 Blessing Agro Farm India Limited and its directors namely Mr. Innsaipillai Lurdpillai Joseph Jeyaraaj, Mrs. Prakasam Sagaya Packia Santhi, Mr. Irudayaraj Manickam Pillai Jeyabalan and Mr. Santhanapeter, including other persons who are in default, for the violations as found in this Order.

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

30. As Blessing Agro Farm India Limited is a Corporate Insurance Agent of LIC and considering the number of customers in their CIS schemes, it appears that they may have used their position as Insurance Agents, to sell their illegal CIS schemes to their customers. Hence, I direct SEBI to forward a copy this order to IRDA /LIC for information and necessary action.

31. 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: February 11th, 2016 Place: Mumbai