Order in the matter of Dhanolty Developers India Ltd

WTM/GM/EFD/ 104 /2018-19 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under Sections 11(1), 11(4) and 11B of Securities and Exchange Board of India Act, 1992 read with Regulation 65 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999, in respect of Final Order dated October 06, 2017 in the matter of Dhanolty Developers India Ltd.

In respect of: Sr. Noticees PAN No. Category : Company 1. Dhanolty Developers India Ltd. AADCD8142Q Director 2. Sanjay Walia AAKPW0221H The aforesaid entities are hereinafter referred to by their respective names or collectively as “the Noticees”. 1. SEBI had passed a Final order dated November 04, 2015 (hereinafter referred to as "SEBI Final order") inter alia against the Noticees holding that the Company (i.e. Dhanolty Developers India Ltd.) and its directors namely Mr. Sanjay Walia, Mr. Siddharth Walia, Ms. Anita Malik, Ms. Raksha Kumari, Mr. Shiv Pratap Singh, Ms. Shefali Walia and Mr. Pankaj Bakshi 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. Accordingly, the aforesaid persons including the noticees to this Order were inter alia: (i) directed to 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 (ii) restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities market for a period of four (4) years. Order in the matter of Dhanolty Developers India Ltd.

2. The SEBI Final order was challenged in appeal by the company and its director Sanjay Walia (the noticees to this Order, also hereinafter referred to as "appellants") before the Hon'ble Securities Appellate Tribunal (SAT) and SAT vide its order dated October 06, 2017 directed the appellants to file a representation before SEBI within a period of 4 weeks from the date of its order dated October 06, 2017 setting out in detail the amount already refunded to the investors and also the mode and the manner in which the balance amount would be refunded to the investors. Hon’ble SAT also directed the appellants to furnish to SEBI, relevant copies of balance sheets of the company and details of the total amount collected by the company from the investors under the scheme which are held to be CIS within a period of 45 days from its order dated October 06, 2017. The appellants were further directed to disclose to SEBI the list of assets owned by them within a period of 2 weeks and give an undertaking to SEBI that they shall not sell the said assets without the prior approval of SEBI.

3. The appellants filed a review application before Hon’ble SAT and Hon’ble SAT vide its order dated January 30, 2018 added the words, “as are available with the appellants” after the words “which are held to be CIS” to para 5 of its order dated October 06, 2017. Hon’ble SAT also extended the time to make a representation before SEBI for a further period of 2 weeks from its order dated January 30, 2018.

4. SEBI received a letter dated February 12, 2018 (hereinafter also referred to as “Application”) from the appellants wherein the following inter alia has been submitted:  The business premises of the company was sealed by the district administration in 2013, after which a Writ Petition was filed before the Hon’ble Ranchi High Court. The said Petition was disposed of on April 26, 2013 and conditional de-sealing of its premises was granted by the Hon’ble Ranchi High Court. However de-sealing could not be carried out and as such the company is not in a position to disclose the details of total amount collected by it under its schemes and details of amounts already refunded to investors.

 The company had already started refunding the investors from July 2012 itself and most of the investors have been refunded. Public notices had been published in local newspapers inviting the investors to accept refunds.  Copies of balance sheet and documents pertaining to assets of the company could not be produced since premises continued to be sealed.  The following properties belong to the appellants : o 11,000 sq. yards land on Banswada Road, Sailana, Ratlam, M.P. o 450 Bee-colony presently lying in various areas for rearing  The appellants undertook not to sell the properties mentioned above and requested for an opportunity of personal hearing.

5. An opportunity of personal hearing was granted to the noticees on June 18, 2018. Noticee No. 2 (director of Noticee No. 1) - Sanjay Walia appeared in person along with Advocates T.N. Saxena and H.C. Kharbanda. Brief of the oral submissions made during the course of the hearing are as follows: (i) There were 20-22 employees in the Bihar/Jharkhand offices of the company and 6-7 agents who used to bring clients to the company. The premises of the company wherein relevant documents, electronic information etc are located, stand sealed on account of Court orders. Despite repeated efforts, the orders have not been reversed. Therefore the noticee is not able to provide details regarding monies collected, the list of investors, amounts repaid etc. (ii) Money was raised approximately from 250-300 investors. Money raised was approximately amounting to Rs 2.5 crore. (iii) Refunds were made to several investors through cheque and almost all investors have been repaid. Bank accounts are maintained with the Patna and Deoghar branches of SBI, ICICI and PNB. (iv) SEBI should issue an order /communication for de-sealing premises and records of the company to facilitate better compliance with SEBI's order of refund.

6. During the course of the hearing, the noticee was directed to provide details regarding his/company's bank accounts based on which SEBI would write to the concerned banks for providing bank statements so as to verify the noticee's claims of refunds already carried out. Noticee agreed to submit the said information within 15 days. However till date, no submissions have been received from the noticees. Further letters were sent on 25.02.2019 to the noticees requesting them to file additional submissions, if any. However the letters sent by speed post (India Post) returned undelivered.

7. Though the noticees were asked to provide bank records of refunds having been made to investors, no information has been forthcoming from them except for a bland statement that they have made refunds to most investors. They have also submitted without adducing any supporting evidence that there are only two immovable properties in their possession. In the absence of any concrete information furnished by the noticees, their request for reconsideration of earlier directions passed by SEBI cannot be considered. No tangible grounds exist for any deviation from SEBI’s earlier directions.

8. I note that the SEBI Final Order had not specified the amount illegally raised by the noticee company. However, during the course of the personal hearing granted to the noticees, it was submitted that approximately ` 2.5 crore had been raised from around 250- 300 investors. As per para 9 of the SEBI Final Order the brochure of the noticee company reveals at least three 'payment plans' using which monies had been mobilised from the public. However the noticees have not clarified which of those payment plans were used to mobilise money from investors. As nothing has been brought on record to provide details regarding the same, there is a likelihood that the amounts raised may be in excess of ` 2.5 crore. In any case the noticees have not complied with the specific directions of SAT regarding furnishing of balance sheets of the company and details of the total amount collected by the company from the investors. The list of assets owned by them are also not supported with any evidence. Accordingly, in the absence of any other information arising from the SEBI Final Order, the aforesaid amount (i.e. ` 2.5 crore) shall be treated to be the minimum amount liable for refund by the noticees to the SEBI Final Order, to the investors of the illegal CIS.

9. In view of the above, the noticees’ Application dated February 12, 2018 is disposed of. Directions consequent to SEBI’s final order dated November 04, 2015 shall accordingly take effect.

Date: March 29, 2019 G. MAHALINGAM Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA