Order in the matter of Kalpbut Real Estate Limited[SAT Appeal No.:316/2019]

Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulation 65 of SEBI (Collective Investment Schemes) Regulations, 1999 in the matter of Kalpbut Real Estate Limited.

In respect of: - Noticee No. Name of the Noticees CIN/PAN 1 Kalpbut Real Estate Limited AADCK3482E 2 Mr. Bhanu Pratap Singh AENPS9792L 3 Mr. Krishan Pal Singh AMYPS0600G 4 Ms. Guddi Devi AJXPD0444R 5 Mr. Rajendra Singh Thakur ABUPT7761N 6 Mr. Parvesh Kumar Singh DEWPS4079J 7 Mr. Natthu Singh DKBPS2620L 8 Mr. Raksha Pal Singh BDSPS9886A 9 Mr. Devendra Pal Singh BJVPS0029N 10 Ms. Rajeshwari Sengar AVZPS2724H 11 Mr. Pooran Prakash ALLPP2252K

The aforesaid entities are hereinafter referred to by their respective names/serial numbers or collectively as “the Noticees”.

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") vide order dated July 03, 2015, found that M/s Kalpbut Real Estate Limited (hereinafter referred to as "KREL/ Company”) was engaged in operating Collective Investment Scheme by mobilizing funds from the public, as defined under Section 11AA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as "SEBI Act, 1992”), in contravention of the Section 12 (1B) of the SEBI Act, 1992. In order to protect the interest of investors in the securities market, SEBI vide aforesaid Order dated July 03, 2015, inter alia, directed the above Company and its directors to wind up the existing collective investment schemes and refund the money collected by the Company with returns which are due to the investors as per the terms of offer within a period of three months from the date of said Order.

2. The Noticees (the Company and aforementioned directors) challenged the said SEBI Order dated July 03, 2015, by filing an appeal before the Hon’ble Securities Appellate Tribunal (hereinafter referred to as “SAT”). The Hon’ble SAT vide Order dated November 21, 2017 while disposing of the appeal (SAT Appeal No. 447 and 448 of 2015) observed as under:

1. These two appeals are filed by the appellants to challenge the order passed by the Whole Time Member (“WTM” for short) of the Securities and Exchange Board of India (“SEBI” for short) on July 03, 2015. By the said order the appellants are inter alia directed to abstain from collecting any money from the investors under the schemes which are identified by SEBI as Collective Investment Schemes (“CIS”) and restrained from accessing the securities market for a period of four years. Moreover, the appellants are also directed to wind up the schemes identified as CIS and refund the money collected with 15% interest per annum. 2. Counsel for the appellants submit that without prejudice to the contention of the appellants that the schemes floated by the appellant no. 1 company do not constitute CIS, the appellant no. 1 company has refunded ₹ 12.64 crore out of the amount ₹15.64 crore collected and that the appellant no. 1 company is ready and willing to refund the balance amount in time bound manner. It is further submitted that the interest directed to be paid is unjustified in the facts of present case.

3. Counsel for SEBI states that the refunds allegedly made by the appellants are yet to be verified by SEBI. 4. Since appellants are willing to comply with the impugned order by refunding the entire amount collected, without going in to the merits of the argument as to whether the schemes floated by the appellant no. 1 constituted CIS or not, we dispose of the appeal by permitting the appellants to make a representation to SEBI within a period of eight weeks from today setting in detail the name and the quantum of amount already refunded and the mode and the manner in which the balance amount would be refunded. Appellants in the representation shall also set out their grievances relating to the interest liability. 5. If the appellants make a representation within a period of eight weeks from today, then, SEBI shall consider the said representation and pass appropriate order thereon. If the appellants fail to make representation within a period of eight weeks from today, then SEBI is at liberty to implement the impugned order.

6. Appellants shall furnish list of their assets to SEBI within a period of eight weeks from today. Appellants shall also furnish any other information/ documents that may be demanded by SEBI. 7. Both the appeals are disposed of in the aforesaid terms with no order as to costs.

3. I note that after disposal of the aforesaid appeal by the Hon’ble SAT, SEBI received a representation dated February 5, 2018 from Noticee no. 1, along with a list of investors to whom refund has been claimed to have been made. The information and documents provided by the Notice no. 1, were prima facie observed as not complete and, therefore, SEBI vide its letter dated September 10, 2018 advised the Company to provide the requisite details of all the investors with respect to whom refunds have been completed along with the documents evidencing the refund of money to the investors 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. The Noticee no. 1 was also advised to submit a certificate of such refunds from an Independent Chartered Accountant. The company was advised to submit the said information witin 15 days from the date of receipt of the letter dated September 10, 2018. However, I note that the Company has not furnished any reply to the aforesaid SEBI letter dated September 10, 2018.

4. In compliance with the principles of natural justice, the Noticees were afforded an opportunity of personal hearing on January 11, 2019 when Mr. V.P. Verma, Advocate, from M/s MSB Legal, appeared on behalf of all the Noticees and submitted that the requisite details of refund made to the investors have been submitted to SEBI vide their representation dated February 5, 2018. It may be noted that the counsel is referring to the representation dated February 05, 2018, subsequent to which SEBI had vide letter dated September 10, 2018 advised the company to submit full details as stated in para 3 above, since, the company did not furnish complete details in its representation.

5. During the course of hearing, it was argued that in the representation dated February 5, 2018, the Noticee no. 1 has submitted that the refund of ₹12,64,48,244/- to 1878 investors has been made, out of ₹15,64,86,244/- collected from 2338 investors. However, the representation dated February 05, 2018 contained a list of only 1792 investors. Further, on perusal of the representation, it is noted that mode and manner of repayment claimed to have been made to the investors have not been mentioned in any of the cases and the list of investors was not complete, trail of funds was not provided, supporting documents acknowledging receipt of funds by investors were not provided, bank account statements evidencing refund were not furnished even after the company was advised to furnish the same by SEBI vide letter dated September 10, 2018. The Noticees were again directed during the hearing on January 11, 2019 to submit the following information and supporting documents within a period of one month from the date of hearing:

a. A list containing name of the investors, amount collected from him, the date of collection of money from the investor, amount of refund, amount of interest paid, date of refund and mode of repayment made to the investors; b. Document evidencing the trail of source of funds from where refund has been claimed to have been made to the investors; c. Documents evidencing mode of payment made to the investors like bank account statements etc. indicating transfer of money in the account of investors and receipt from the investors acknowledging such refunds; d. In terms of SEBI’s order dated July 03, 2015, complete and detailed 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.

6. After conclusion of the hearing proceedings held on January 11, 2019, the record of proceedings, containing the aforementioned directions given during the course of hearing, were also communicated to the Advocates of the Noticees by SEBI vide email dated January 14, 2019. However, the Noticees have not filed any reply or information / documents which were sought during the course of hearing held on January 11, 2019, even after expiry of the time period of one month granted for the same.

CONSIDERATION OF ISSUES:

7. The Hon’ble SAT in its Order dated November 23, 2017 noted the submissions made by the appellants that they were willing to refund the amounts to the investors, as stipulated in the impugned SEBI Order dated July 03, 2015 and, therefore, without going into the merits of the contention raised by the appellants that the schemes floated by the appellants do not constitute CIS, the Hon’ble SAT directed the appellants to make a representation to SEBI setting out in detail the names and the quantum of amount refunded to the investors and the mode and the manner in which the balance amount was to be refunded to the investors. The appellants were also directed to furnish all information/documents demanded by SEBI.

8. Pursuant to aforementioned Order of Hon’ble SAT dated November 23, 2017, the Noticees made their representations dated February 5, 2018 whereby, among other, the Company has submitted a list of 1792 investors in nine columns viz. serial number, name of the Plot holder (investor), date of collection, Amount collected, address, name of project, area, plot number, date of refund, amount refunded, year tabulated in following manner:

Sr. Name Date of Amount Addres Name Area Plot Date of Amount Year No. of Plot collectio collected s of No. refund refunded Holder n project

9. As noted above, the Noticees have not provided the particulars of repayment claimed to have been made to the investors vide representation dated February 05, 2018. The Noticees have also not provided the mode and manner of repayment to be made to the rest of investors as directed by Hon’ble SAT vide Order dated November 23, 2017. Further, the Noticees have also failed to provide the requisite information and documents sought by SEBI vide letter dated September 10, 2018 whereby the Noticees were, inter alia, asked to provide the documents evidencing the refund of money claimed to have been made to the investors viz. the trail of funds claimed to have been refunded, bank account statements indicating refund made to the investors, receipt of acknowledgement from the investors and a certificate of repayment of such refund made to investors from an independent Chartered Accountant. The Hon’ble SAT vide aforesaid Order dated November 23, 2017, had specifically directed the appellants (Noticees herein) to furnish all the information/ documents demanded by SEBI. However, the Noticees have failed to provide the information as sought by SEBI vide its letter dated September 10, 2018. Another opportunity was also given during the hearing on January 11, 2019 to furnish the detail but the Noticees failed to provide the requisite information/ documents.

10. I also note that the Hon’ble SAT vide its order dated November 23, 2017 has also directed the Noticees to make any representations to SEBI, in respect of ‘interest’ that was to be paid alongwith refund amount. However, I note that no such representation has been made by the Notice no. 1 in its representation dated February 5, 2018 made to SEBI, nor contention has been raised by any of the Noticees at the time of personal hearing. I also note that there is no mention of amount of interest paid on the refund amount as mentioned in the representations made by Noticee no. 1 on February 5, 2018.

ORDER:

11. Under the above circumstances, I, in exercise of the powers conferred upon me under Section 19 read with Sections 11(1), 11(4) and 11B of the SEBI Act, 1992 read with Regulation 65 of the CIS Regulations, 1999, hereby, dispose of the representation made by the Noticees vide letter dated February 5, 2018, in accordance with the findings contained above. Accordingly, the Noticees shall comply with the SEBI Order dated July 3, 2015 within a period of 45 days from the date of this Order, failing which SEBI shall take appropriate action in accordance with law.

Sd/- Date: February 28, 2019 ANANTA BARUA Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA