Order in the matter of M/s IHI Developers India Ltd

WTM/PS/31/CIS-NRO/AUG/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999 In the matter of IHI Developers India Limited In respect of: 1. IHI Developers India Limited and its Directors, 2. Mr. Harjit Singh [PAN: CGFPS6608M], 3. Mr. Kulbir Singh [PAN: BKHPS1704D], 4. Mr. Sanjeev Kumar [DIN: 01558230] and 5. Ms. Ranjit Kaur [PAN: CIRPK5759F] 1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) had, vide an interim ex-parte Order dated August 11, 2014 (‘the interim order’), prima facie found that one IHI Developers India Limited (hereinafter referred to as ‘the Company’ or ‘IHI’) is engaged in fund mobilizing activities from the public, which is in the nature of Collective Investment Scheme (hereinafter referred to as 'CIS') as defined in Section 11AA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘the SEBI Act’), without obtaining a certificate of registration from SEBI as required under Section 12(1B) of the SEBI Act and Regulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as ‘the CIS Regulations’).

2. The interim order was issued in order to protect the interest of investors, safeguard the assets/ property acquired by the Company by using the funds collected from the investing public and also to prevent the Company from further carrying on with its existing fund mobilizing activities through the alleged CISs. This Order directed IHI Developers India Limited and its promoters and directors namely Mr. S. Harjit Singh, Mr. S. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur (hereinafter collectively referred to as ‘noticees’): " not to collect any money from investors under its existing scheme; not to launch any new schemes or plans or float any new companies to raise fresh moneys; to immediately submit the full inventory of the assets owned by IHI Developers out of the amounts collected from the "customers"/investors under its existing schemes; not to dispose of any of the properties or alienate the assets of the existing scheme;

not to divert any funds raised from public at large, kept in bank account(s) and/or in the custody of the company, and to furnish all the information sought by SEBI including, i. Details of amount mobilized and refunded till date, ii. Scheme wise list of investors and their contact numbers and addresses, iii. Sample copies of all the documents pertaining to scheme including the documents/agreements/contracts executed with the "customers"/investors, and iv. PAN numbers of the aforementioned Directors." 3. The aforesaid directions came into force with immediate effect and the noticees were advised to file their reply within a period of fifteen (15) days from the date of receipt of the interim order and also to indicate whether they wish to avail an opportunity of personal hearing in the matter.

4. The interim order was forwarded to the Company and its directors vide separate letters all dated August 18, 2014. The letters issued to Mr. Harjit Singh, Ms. Ranjit Kaur and Mr. Kulbir Singh were duly delivered in the available address. A reminder letter was then issued to the noticees vide letter dated September 24, 2014, advising the Company and its directors to reply to the interim order, which was duly delivered. Another letter dated October 16, 2014, was issued to the Company advising it to file its reply and deliver a copy of the interim order to one of the directors namely Mr. Sanjeev Kumar. This letter of SEBI was also delivered in the address of the Company. As no reply was forthcoming, SEBI proceeded further and granted an opportunity of personal hearing to the Company and its directors on April 20, 2015. The Company and other noticees had failed to turn up for the personal hearing inspite of due communication vide the public notice dated April 15, 2015 in newspapers.

5. I note that the interim order had been delivered to the noticees and that SEBI has also issued public notice with respect to the date of hearing. The public notice had mentioned that in case the noticees fail to appear on the date fixed, the matter shall be proceeded ex-parte on the basis of the material available on records. Considering that reasonable opportunities to the Company and its directors have already been afforded for making the submissions in the matter, I proceed further on the basis of the material available on record.

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

7. Whether IHI was operating a CIS without obtaining registration from SEBI?

a. I note that the Company was incorporated on May 31, 2010. The registered office of the Company is situated at Makhu Gate, Ferozpur City, Punjab-152002. The present directors of the Company are Mr. Harjit Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur.

b. As per the sample brochure collected during the inspection of IHI, the Company has various plans/ schemes i.e. - IPP Plan 'A' for 66 months, - IPP Plan 'B' for 72 months, - IPP Plan 'C' for 120 months - Cash Down Payment Plan for Various Period

The plans/ schemes of IHI have been elaborately discussed in the interim order. A sample of such plans has been brought out below: Table A (IPP Plan 'A' for 66 months) Plot Cost of Developme Installments Projected Plot Size Plot ( ) nt & other Value of Expiry of charges( ) Agreement Term* Mly. Qly. Hly. Yly. 650 15,000 7,000 250 700 1,375 2,725 22,000 650 18,000 8,400 300 840 1,650 3,270 26,400 650 24,000 11,200 400 1,120 2,200 4,360 35,200 650 30,000 14,000 500 1,400 2,750 5,450 44,000 780 60,000 28,000 1,000 2,800 5,500 10,900 88,000 1,170 90,000 42,000 1,500 4,200 8,250 16,350 1,32,000 1,560 1,20,000 56,000 2,000 5,600 11,000 21,800 1,76,000 1,950 1,50,000 70,000 2,500 7,000 13,750 27,250 2,20,000 2,340 1,80,000 84,000 3,000 8,400 16,500 32,700 2,64,000 3,120 2,40,000 1,12,000 4,000 11,200 22,000 43,600 3,52,000

Table B (Cash Down Payment Plan for Various Period) Plot Period Cost of Developme Projected Plot Size Plot ( ) nt & other Value of Expiry of charges( ) Agreement Term* 650 24 Months 16,000 4,000 20,000 813 24 Months 50000 12,500 62,500

650 36 Months 15,000 5,550 20,550 890 36 Months 50,000 18,500 68,500 650 48 Months 13,000 7,150 20,150 2,015 48 Months 1,00,000 55,000 1,55,000 650 60 Months 12000 8,040 20,040 2,171 60 Months 1,00,000 67,000 1,67000 650 72 Months 11,000 9,240 20,240 2,392 72 Months 1,00,000 84,000 1,84000 650 84 Months 10,000 10,100 20,100 2,613 84 Months 1,00,000 1,01,000 2,01,000 650 144 Months 6,000 16,920 22,920 4,966 144 Months 1,00,000 2,82,000 3,82,000 35,650 216 Months 5,000 30,000 35,000 9,100 216 Months 1,00,000 6,00,000 7,00,000 It is seen from the details available on record that the plans of IHI can be broadly categorised as 'Installment Payment Plan' and 'Cash Down Payment Plan'. It is seen that the plans were for different time periods, the minimum monthly installment in the 'IPP Plans' was in the range of 90 to a maximum amount of 5,400 and the said plans had provided the projected plot value at the expiry of the agreement term (profits).

c. The interim order further notes that IHI issues a 'Registration Letter' based on the application made by the 'customers'/ investors and the agreement executed. The said 'Registration Letter' contains the details regarding the payment plan, cost of the plot, installment amount, date of acceptance, projected plot value on expiry of the term, nominee details, plot size, estate unit code. The 'General Terms and Conditions' as noted from the reverse side of the 'registration letter' are as under: "... - The Land shall be allotted in the name of the customer, in the case of cash down payment plan, after receipt of full payment within a reasonable period generally not exceeding 270 days and in the case of installment payment Plan(s) within a reasonable period generally not exceeding 90 days after the receipt of 50% of the total amount of installment. Subject to the foregoing, land ownership all be transferred to the customer within a reasonable period after allotment. ... ... - When the installment is not paid within the grace period the plot booking/contract stands discontinued. But same can be revived at any time within next 12 months on payment of all dues together with simple interest @ 12 % p.a. and the liquidated damages @ 5 % p.a. for the period of default.

However payment of such shall be accepted by IHI developers India Ltd. only in cash/ demand draft. - The customers shall be the owner in possession of the said property. The possession of the said property shall rests in the hand of IHI Developers India Ltd. for the limited purpose of developing and for whereever considered appropriate by IHI Developers India Ltd. for cultivating raising crops, trees, plants, sapling etc. ... ... cost of the said property includes the cost of land, development charges, other inputs, saplings, plants, trees, crops, planting expenses maintenance and other muse expenses. - The customer has the right to retain or sell the said property, as he/she may deem fit on expiry of the lenure for this agreement. To facilitate easy liquidity, IHI developers India Ltd. provided(s) to customer(s) the marketing services for sale of developed plots. In case customer decides to avail aforesaid services, he/she must notify IHI developers India Ltd. That effect at least 180 days before the expiry of period of agreement. the sale can be made only at the end of the tenure of this agreement of such price which may be mutually agreed between the parties in the opinion of the company based on current market situations and related factors, a developed plot of land 650 sq. yds. upon completion period and owing to value addition may fetch on estimated price as per details given below, depending up to the development period.

The estimated value mentioned against each development period is the composite value of land, plants, trees etc. and structures thereon. - ... The sold Property cannot in any other manner be sold, assigned, mortgaged, pledged or alienated without obtaining NO DUE CERTIFICATE from the company in case of installment payment plan(s). - The management of company reserves the right to discontinue/ amend/ modify or after prospectively only of the rules/ regulations and payment plan(s) and introduces new payment plan(s) of any times at its sole discretion with or without any notice. - In case of joint sale deeds the title deeds performing to the sale of property shall be kept in the sole custody of trustee(s) appointed by IHI Developers Ltd. for the purpose, a certificate copy of the said title deed issued by the sub-registrar or by the public Notary as may be feasible or practicable, shall be made available to the costumer by the said trustee(s). The name and address of trustee(s) shall be informed to the customer by the letter of allotment. The customer shall have the liberty the title deed of the office of frusta(s) during the normal working hours on any working day.

After furnishing a formal writer request there for 15 day(s) in advance. ..." d. Another document is 'receipt cum acceptance letter' which contains the name and address details of the customer, amount received, details of the plan opted, date of expiry of the agreement.

e. From the discussion above, it is observed that IHI was inviting applications from the customers/ investors for obtaining plot under its various plans. I also note the following: i. IHI guaranteed assured returns on completion of the term as more specifically mentioned in the brochure as 'projected plot value on expiry of the term'. ii. At no stage, the Company provided the details of the land allotted to the customers. iii. IHI has failed to furnish the information as asked vide the interim order.

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

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

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

g. The definition for ‘collective investment scheme’ was inserted in the SEBI Act, 1992, vide the Securities Laws (Amendment) Act, 1999 w.e.f. February 22, 2000. According to the definition, CIS means any scheme or arrangement which satisfies the conditions specified in Section 11 AA of the SEBI Act, which provides as under: "(1) Any scheme or arrangement which satisfies the conditions referred to in subsection (2) or [sub-section (2A)]1 shall be a collective investment scheme. [Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under the exemptions from CIS sub-section (3), involving a corpus amount of one hundred Crore rupees or more shall be deemed to be a collective investment scheme.]2 (2) Any scheme or arrangement made or offered by any [person]3 under which, (i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the purposes of the scheme or arrangement; (ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement; (iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; (iv) the investors do not have day to day control over the management and operation of the scheme or arrangement.

[(2A)] Any scheme or arrangement made or offered by any person satisfying the conditions as may be specified in accordance with the regulations made under this Act.] (3) Notwithstanding anything contained in sub-section (2) [or sub-section (2A)], any scheme or Arrangement: i. made or offered by a co-operative society ii. under which deposits are accepted by non-banking financial companies iii. being a contract of insurance iv. providing for any scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund v. under which deposits are accepted under section 58A of the Companies Act, 1956 vi. under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society vii. falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund Act, 1982(40 of 1982); viii. under which contributions made are in the nature of subscription to a mutual fund; [ix. such other scheme or arrangement which the Central Government may, in consultation with the Board, notify,] shall not be a collective investment scheme." The term ‘securities’ in section 2(h) of the Securities Contracts (Regulation) Act, 1956 was amended vide the Securities Laws (Amendment) Act, 1999, w.e.f. February 22, 2000, to include units or any other instrument issued by any collective investment scheme to the investors in such schemes.

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

i. The first condition is that the contributions, or payments made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement. The Company had invited its customers to subscribe to one of the plans offered by it for the purchase of land. IHI took the contribution/ investments of the investors/ customers in accordance with its plans/ schemes as detailed above for the purchase of land and issued receipt cum acceptance letter.

It is noted that even after the receipt of full payment, in 'Cash Down Payment Plan', unidentified land is only agreed to be allotted to the customer, within a period not exceeding 270 days. Similarly, in the case of ‘Installment Payment Plan’, the allotment of unidentified land is agreed within a period, not exceeding 90 days after the receipt of 50% of the total amount. It is noted that the registration letter, receipt cum acceptance letter issued by IHI, did not contain any details of the land allocated to the investors/ customers. The 'estate unit code' as noted in the 'registration letter' also appears to be an internal number of IHI and does not give any specific details of the land. In view of the same, it can be said that no land was identified and demarcated to be sold till the stage of issuance of 'registration letter'. It is also noted that the 'General Terms and Conditions' on the reverse side of 'registration letter' contains no details as to when the sale deed will be executed in favour of the customers and actual possession of the plot is given to the customers. In view of the same, it can be said that IHI collects the moneys from the investors and the same remains with the Company till it procures the land and allots the plot to the customer.

These are sufficient to show that the 'contributions, or payments made by the investors, are pooled and utilised by IHI for the purposes of the scheme or arrangement', the scheme being to accept contributions/ payments in the name of sale of land. Thus, satisfying the first condition as stipulated in Section 11AA(2)(i) of the SEBI Act.

ii. The second condition is that the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable from such scheme or arrangement. As discussed above, the investors/ customers made payments towards the plans/ schemes promoted by IHI. The brochure itself assured the investors/ customers of 'Projected Plot Value of Expiry of Agreement Term'/ 'estimated value' which meant nothing but profits as detailed in Table A and B above. The same makes it clear that the investors/ customers made contribution/ payment with a view to receive the profits/ income/ property/ return on their investments that may accrue to them as applicable, thus attracting the second condition as stipulated in Section 11AA(2)(ii) of the SEBI Act.

iii. The third condition is that the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors. The fourth condition is that the investors do not have day to day control over the management and operation of the scheme or arrangement. In this regard, I note that the investors/ customers were not even provided with the specific/ identified plot details at the time of making payments.

I also note that in the plans of IHI, the customer/ investor only decides the plan number, term of the plan, etc. The customer/ investor has no role in the acquisition or development/ management of the land. The customer/ investor also did not manage his investments in the plans/ schemes rather his investments were managed and utilized by the Company, which in the end offered 'projected plot value of expiry of agreement term'. As per the 'General Terms and Conditions' as noted on the reverse side of 'registration letter', the possession of the land rests in the hand of the Company for development. Further, the Company has made provisions for 'Joint Sale deeds' wherein, if on execution of sale deeds the same will remain with the trustee(s) appointed by IHI. Likewise the provision for obtaining 'no dues certificate' from the Company for the purposes of sale/ mortgage/ pledge indicates the total authority of IHI over the subject land(s). The above discussion makes it clear that the contribution, investment and property, if any, pertaining to the plans/ schemes were managed by the Company. Further, the customer/ investor did not have day to day control over the management and operations of the scheme or arrangement. Such day to day control over management and operations of such schemes were also looked after by the Company and its directors. i. As all the four conditions specified under section 11AA(2) of the SEBI Act are satisfied in this case, the schemes/ plans promoted, launched, carried on and operated by the Company are in the nature of CIS in terms of section 11AA(1). In this regard, I place my reliance on the observations of the Hon'ble Supreme Court, made in the matter of PGF Limited & Ors. Vs. Union of India & Anrs. (Civil Appeal No. 6572 of 2004):

"Therefore, the paramount object of the Parliament in enacting the SEBI Act itself and in particular the addition of Section 11AA was with a view to protect the gullible investors most of whom are poor and uneducated or retired personnel or those who belong to middle income group and who seek to invest their hard earned retirement benefits or savings in such schemes with a view to earn some sustained benefits or with the fond hope that such investment will get appreciated in course of time. Certain other Section of the people who are worstly affected are those who belong to the middle income group who again make such investments in order to earn some extra financial benefits and thereby improve their standard of living and on very many occasions to cater to the need of the educational career of their children. 38. Since it was noticed in the early 90s that there was mushroom growth of attractive schemes or arrangements, which persuaded the above vulnerable group getting attracted towards such schemes and arrangements, which weakness was encashed by the promoters of such schemes and arrangements who lure them to part with their savings by falling as a prey to the sweet coated words of such frauds, the Parliament thought it fit to introduce Section 11AA in the Act in order to ensure that any such scheme put to public notice is not intended to defraud such gullible investors and also to monitor the operation of such schemes and arrangements based on the regulations framed under Section 11AA of the Act. ... ... ...

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

42. Therefore, in reality what sub-section (2) of Section 11AA intends to achieve is only to safeguard the interest of the investors whenever any scheme or arrangement is announced by such promoters by making a thorough study of such schemes and arrangements before registering such schemes with the SEBI and also later on monitor such schemes and arrangements in order to ensure proper statutory control over such promoters and whatever investment made by any individual is provided necessary protection for their investments in the event of such schemes or arrangements either being successfully operated upon or by any misfortune happen to be abandoned, where again there would be sufficient safeguards made for an assured refund of investments made, if not in full, at least a part of it. ... ... In the light of our above conclusions on this ground it will have to be held that Section 11AA is a valid provision, not suffering from any infirmity, as it does not intrude into the specific activities of sale of agricultural land and its development. ... ...

It is needless to state that as per the agreement between the customer and the PGF Limited, it is the responsibility of the PGF Limited to carry out the developmental activity in the land and thereby the PGF Limited undertook to manage the scheme/arrangement on behalf of the customers. Having regard to the location of the lands sold in units to the customers, which are located in different states while the customers are stated to be from different parts of the country it is well-neigh possible for the customers to have day to day control over the management and operation of the scheme/arrangement. In these circumstances, the conclusion of the Division Bench in holding that the nature of activity of the PGF Limited under the guise of sale and development of agricultural land did fall under the definition of collective investment scheme under Section 2(ba) read along with Section 11AA of the SEBI Act was perfectly justified and hence, we do not find any flaw in the said conclusion. ... .... 53. We, therefore, hold that Section 11AA of the SEBI Act is constitutionally valid. We also hold that the activity of the PGF Limited, namely, the sale and development of agricultural land squarely falls within the definition of collective investment scheme under Section 2(ba) read along with Section 11AA (ii) of the SEBI Act and consequently the order of the second respondent dated 06.12.2002 is perfectly justified and there is no scope to interfere with the same.

In the light of our above conclusions, the PGF Limited has to comply with the directions contained in last paragraph of the order of the second respondent dated 06.12.2002 ... ..." 8. I note that the interim order was issued against the Company and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur. As per the details taken from the 'MCA 21' portal of Ministry of Corporate Affairs, Mr. Harjit Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur are the present directors of the Company. These persons are continuing as directors of the Company and are responsible for carrying on unregistered CIS activities. From the documents available on record, I note that the noticee namely Mr. Kulbir Singh had resigned from the Company on July 23, 2012, however, the same does not absolve him from the charge levied in the interim order as the Company was incorporated on May 31, 2010 and since then it had started mobilising funds from the investors. At this stage, I also refer to a complaint received by SEBI on October 07, 2011 (also referred in the interim order) that the said Harjit Singh was earlier mobilising funds through another Company i.e. Imbowers Housing and Development Limited against which SEBI has initiated adjudication proceedings.

The same indicates the association of Harjit Singh with other companies which were found to mobilise money illegally.

Therefore, I have no hesitation in holding that IHI and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur 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. The interim order has observed that IHI has failed to furnish the details of the scheme as sought by SEBI. The directors of IHI namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur have also chosen not to respond to the interim order and remain silent. In the absence of any reply/ defence on record, the directors of IHI namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur are held to be responsible for the affairs of the Company.

9. Section 12(1B) of the SEBI Act mandates that no person, shall sponsor or cause to be sponsored or carry on or caused to be carried on any CIS unless it obtains a certificate of registration from SEBI in accordance with the CIS Regulations. The Company has clearly failed to do so. Regulation 3 of the CIS Regulations provides that no person other than a Collective Investment Management Company which has obtained a certificate under the said regulations shall carry on or sponsor or launch a 'CIS'. A person can launch or sponsor or cause to sponsor a CIS only if it is registered with SEBI as a Collective Investment Management Company. Therefore, the launching/ floating/ sponsoring/ causing to sponsor any 'collective investment scheme' by any 'person' without obtaining the certificate of registration in terms of the provisions of the CIS Regulations is in contravention of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations. I note that IHI launched CIS without obtaining certificate of registration from SEBI, it contravened the provisions of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations.

10. In view of the observations made in this Order, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 and Sections 11(1), 11B and 11(4) thereof and Regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999, hereby issue the following directions:

a. IHI Developers India Limited and its directors namely Mr. Harjit Singh [PAN: CGFPS6608M], Mr. Kulbir Singh [PAN: BKHPS1704D], Mr. Sanjeev Kumar [DIN: 01558230] and Ms. Ranjit Kaur [PAN: CIRPK5759F] shall abstain from collecting any money from the investors or launch or carry out any Collective Investment Schemes including the scheme which have been identified as a Collective Investment Scheme in this Order. b. IHI Developers India Limited and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur are restrained from accessing the securities market and are prohibited from buying, selling or otherwise dealing in securities market for a period of four (4) years. c. IHI Developers India Limited and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur shall wind up the existing Collective

Investment Schemes and refund the money collected by the said company under the schemes with returns which are due to its investors as per the terms of offer within a period of three months from the date of this Order and thereafter within a period of fifteen days, submit a winding up and repayment report to SEBI in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999, including the trail of funds claimed to be refunded, bank account statements indicating refund to the investors and receipt from the investors acknowledging such refunds. d. IHI Developers India Limited and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur shall not alienate or dispose off or sell any of the assets of IHI Developers India Limited except for the purpose of making refunds to its investors as directed above. e. IHI Developers India Limited and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur are also directed to provide a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/securities, if held in physical form. f. In the event of failure by IHI Developers India Limited and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur to comply with the above directions, the following actions shall follow: - IHI Developers India Limited and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur shall remain restrained from accessing the securities market and would further be prohibited from buying, selling or otherwise dealing in securities, even after the period of four (4) years of restraint imposed in paragraph 10(b) above, till all the Collective Investment Schemes of IHI Developers 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. - SEBI would make a reference to the State Government/ Local Police to register a civil/ criminal case against IHI Developers India Limited, its promoters, directors and its managers/ persons in-charge of the business and its schemes, for offences of fraud, cheating, criminal breach of trust and misappropriation of public funds; and - SEBI would make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the company, IHI Developers India Limited. - SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and regulations framed thereunder.

11. 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 IHI Developers India Limited and its directors namely Mr. Harjit Singh, Mr. Kulbir Singh, Mr. Sanjeev Kumar and Ms. Ranjit Kaur, including other persons who are in default, for the violations as found in this Order and the contravention of Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.

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

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

DATE : August 03, 2015 PRASHANT SARAN PLACE : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA