Order in the matter of RBX Land Developers India Limited

WTM/RKA/EFD/137/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTIONS 11(1), 11(4), 11A AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN RESPECT OF RBX LAND DEVELOPERS INDIA LIMITED (PAN: AAFCR9720E), MR. KISHORE RAI (DIN:05120168), MR. ARJUN SINGH (DIN:06874021), MR. SHANKAR SINGH (DIN:06874305), MR. RAGHUVEER SINGH SISODIYA (DIN:03565848, PAN:BXHPS2674H) AND MR. HARI RATHORE SINGH (DIN:05130181). 1. Securities and Exchange Board of India (“SEBI”) conducted a preliminary inquiry into the issuances of debentures by RBX Land Developers India Limited (hereinafter referred to as 'RBX' or 'the company') with a view to ascertain the possible non-compliances with the public issue norms stipulated under the provisions of Companies Act, 1956/2013 and other applicable laws including the SEBI Act and SEBI Regulations/Guidelines. Pursuant to the preliminary inquiry, SEBI passed an ad interim ex parte order dated May 12, 2015 (hereinafter referred to as “interim order”) in respect of RBX and its present/past Directors, viz. Mr. Kishore Rai, Mr. Arjun Singh, Mr. Shankar Singh, Mr. Raghuveer Singh Sisodiya and Mr. Hari Rathore Singh (hereinafter collectively referred to as “the Noticees” and individually by their respective names), inter alia, in view of the following: “ ……………………………………. ii. The promoters of the company are Mr. Raghuveer Singh Sisodiya (Managing Director), Mr. Hari Rathore Singh (Director), Mr. Kishore Rai (Director), Mr. Lokendra Singh Chauhan, Mr. Kushal Singh Panwar, Mr. Madan Singh and Mr. Vinod Sahani. iii. The current Directors of RBX are Mr. Kishore Rai, Mr. Arjun Singh and Mr. Shankar Singh. Mr. Raghuveer Singh Sisodiya and Mr. Hari Rathore Singh were past directors of the company. …………………………………… v. It is also observed from the information received from Acme that RBX allotted debentures during FY 2009-10 to 2014-15 to 10,688 investors and mobilised funds amounting to Rs.11.98 Crores. The Details of the same are as under- Order in the matter of RBX Land Developers India Limited

Financial Year Total no. of investors Amount Mobilised (in Rs.) 2009-10 11 7,000 2010-11 283 22,85,745 2011-12 1,284 92,91,519 2012-13 2,607 3,05,68,130 2013-14 5,049 4,67,32,070 2014-15* 1,454 3,09,37,105 Total 10,688 11,98,21,569 *Till September 2014. It is noted that RBX was incorporated on July 13, 2012 with the RoC, Gwalior. However, it was raising money through the issuance of debentures since FY 2009-10 and has mobilized Rs. 11.98 Crores till September 2014. …………………………………………….” 2. By the interim order following interim directions were issued against the Noticees: “i. RBX shall forthwith cease to mobilize any fresh funds from investors through the issuance of debentures or through the issuance of equity shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions; ii. RBX and its present/past Directors, viz. Mr. Kishore Rai (DIN:05120168), Mr. Arjun Singh (DIN:06874021), Mr. Shankar Singh (DIN:06874305), Mr. Raghuveer Singh Sisodiya (DIN:03565848, PAN:BXHPS2674H) and Mr. Hari Rathore Singh (DIN:05130181), are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, till further orders; iii. RBX and its abovementioned Directors, are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions; iv. RBX shall provide a full inventory of all its assets and properties; v. RBX's abovementioned Directors shall provide a full inventory of all their assets and properties; vi. RBX and its abovementioned Directors shall not dispose of any of the properties or alienate or encumber any of the assets owned/acquired by that company through the offer of debentures, without prior permission from SEBI; vii. RBX and its abovementioned present Directors shall not divert any funds raised from public at large through the offer of debentures, which are kept in bank account(s) and/or in the custody of RBX;

viii. RBX shall furnish the information sought by SEBI vide letters dated May 05, 2014, July 17, 2014, July 30, 2014, August 20, 2014, October 13, 2014 and November 18, 2014 including Balance Sheets of the company for FY 2012-13 to 2014-15 and the details of the debenture trustee appointed, if any, within 21 days from the date of receipt of this Order.” 3. Vide the interim order, the Noticees were called upon to show cause as to why suitable directions/prohibitions under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) including the following, should not be taken/imposed against them:

“i. Directing them jointly and severally to refund money collected through the offer of debentures along with interest, if any, promised to investors therein; ii. Directing them to not issue prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, for an appropriate period; iii. Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period.” 4. The Noticees did not submit any reply to the interim order. Pursuant to the interim order, Mr. Raghuveer Singh Sisodiya, one of the directors of RBX, vide email dated June 5, 2015, informed SEBI that the company (i.e. RBX) will reply in the hearing and he alongwith Mr. Arjun Singh (another director of RBX) will personally attend the hearing. However, thereafter, no reply or communication was received from RBX or any of the Noticees. 5. I note that interim order in the matter was passed on May 12, 2015 and as mentioned in paragraph 25 thereof, the Noticees were required to file their reply to the interim order within 21 days from the date of the interim order.

As noted above, none of the Noticees have filed any reply in the matter (except for the above mentioned email dated June 5, 2015) during the said period of 21 days or thereafter. In the interest of natural justice, an opportunity of personal hearing was also provided to the Noticees on August 30, 2016, the notice whereof was sent to the Noticees vide letters dated August 2, 2016. The said information regarding the date of hearing was also published on August 23, 2016 in one leading vernacular newspaper (Dainik Bhaskar) and one leading National English newspaper (Times of India). However, all the Noticees failed to avail the said opportunity of hearing on August 30, 2016. Considering the above, I find that the principles of natural justice have been complied with in these proceedings. I am of the view that sufficient opportunities to file reply/submissions and appear for personal hearing have been provided to the Noticees and this matter should now be disposed of on the basis of the material available on record. 6. I have considered the interim order, the allegations levelled against the Noticees therein and the material available on record.

7. The core allegation in the interim order is that RBX made a “public issue” of debentures without complying with provisions of law regulating such public issues i.e. sections 56, 60, 73, 117B and 117C of Companies Act, 1956 and regulations 4(2)(a), 4(2)(b), 4(2)(c), 4(2)(d), 4(4), 5(2)(b), 6, 7, 8, 9, 12, 14, 15, 16, 17, 19 and 26 of Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (hereinafter referred to as “ILDS Regulations”). 8. As noted in the interim order, during the period FY 2009-10 to FY 2014-15 (till September 2014), RBX had mobilized ₹ 11.98 Crore through the issuance of debentures to 10,688 investors. The year wise allotment of debentures by RBX noted in the interim order is as under:

Financial Year Total no. of investors Amount Mobilised (in ₹) 2009-10 11 7,000 2010-11 283 22,85,745 2011-12 1,284 92,91,519 2012-13 2,607 3,05,68,130 2013-14 5,049 4,67,32,070 2014-15* 1,454 3,09,37,105 Total 10,688 11,98,21,569 *Till September 2014. 9. These findings of the interim order have not been disputed by any of the Noticees. Undisputedly, RBX issued debentures amounting to ₹ 11.98 Crore during the period FY 2009-10 to FY 2014-15 to 10,688 investors. Thus, by virtue of the proviso to section 67(3) of the Companies Act, 1956 the issuances of debentures by RBX were public issues. In this regard, it is important to mention that all the controversies with regard to questions such as whether an offer to 50 persons or more is a public issue or private placement, SEBI's jurisdiction on issuance of securities including debentures, intention/obligation to list such securities, etc. have been settled by the Hon'ble Supreme Court in its judgment and order dated August 31, 2012 in the matter of Sahara India Real Estate Corporation

Limited & Ors. Vs SEBI & Anr. - Civil Appeal No. 9813 and 9833 of 2011 [(2013) 1 SCC 1] (hereinafter referred to as “the Sahara Order"). 10. I note that since the issuances of debentures by RBX during the period FY 2009-10 to FY 2014-15 were public issues, it ought to have complied with the applicable provisions of the Companies Act, 1956 (read with the corresponding provisions of Companies Act, 2013) and ILDS Regulations as noted in the interim order. In the present case, there is no dispute as to the fact that RBX while making the aforesaid “public issues” of debentures had not complied with the provisions of sections 56, 60, 73, 117B and 117C of the Companies Act, 1956, regulations 4(2)(a), 4(2)(b), 4(2)(c), 4(2)(d), 4(4), 5(2)(b), 6, 7, 8, 9, 12, 14, 15, 16, 17, 19 and 26 of ILDS Regulations. Since the requirements of these applicable provisions and the relevant observations of the Hon’ble Supreme Court in the Sahara Order have been clearly stipulated in the interim order, I do not deem it necessary to reiterate the same and burden this order with the same findings. 11. In terms of section 291 of the Companies Act, 1956, the Board of Directors of a company shall be entitled to exercise all such powers and do all such acts and things as the company is authorized to exercise and do.

Therefore, the Board of Directors being responsible for the conduct of the business of a company are liable for any non-compliance of law and such liability shall be upon the individual directors also. Section 56(1) and 56(3) read with section 56(4) imposes the liability for the non-compliance of the said provisions, on the company, every director, and other persons responsible for the issuance of the prospectus. The liability for non-compliance of section 60 of the Companies Act, 1956 is on the Company, and every person who is a party to the noncompliance of issuing the prospectus as per the said section. Further, the directors of a company are also liable for action in case of contravention of the ILDS Regulations. 12. There is no dispute as to the fact that Mr. Kishore Rai, Mr. Arjun Singh, Mr. Shankar Singh, Mr. Raghuveer Singh Sisodiya and Mr. Hari Rathore Singh were the directors of RBX at the time when RBX authorized the issuances of debentures to 10,688 investors. The board of directors of RBX at the time of the above mentioned issuances of debentures being in control of their affairs, was under an obligation to ensure that these issuances were in compliance with all the applicable provisions of the Companies Act, 1956 and SEBI Act/Regulations/Guidelines.

In my view, the above named directors of RBX at the time of the above mentioned issuances are also "officers in default" as defined under section 5 of the Companies Act, 1956 read with section 2(60) of the Companies Act, 2013. I, therefore, find that the above named directors of RBX are also responsible for its acts and omissions in this case.

13. Considering the above, I find that in respect of the issuances of debentures by RBX during the financial years 2009-10 to 2014-15, the Noticees have failed to comply with the above-mentioned provisions of Companies Act, 1956 (read with the corresponding provisions of Companies Act, 2013) and ILDS Regulations. 14. It is important to mention that one of the consequence of the aforesaid non-compliance/violations is refund/repayment of subscription money to the allottees with interest as provided in section 73 read with section 56 of the Companies Act, 1956. With regard to liability to pay interest on the subscription money, I note that as per section 73 (2) of the Companies Act, 1956 read with section 40(3)(b) of the Companies Act, 2013, the company and every director of the company who is an officer in default is jointly and severally liable, to repay all the money with interest at prescribed rate. In this regard, I note that in terms of rule 4D of the Companies (Central Government's) General Rules and Forms, 1956 read with rule 3(c) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, the rate of interest prescribed in this regard is 15%.

Accordingly, the Noticees are liable to pay interest to the allottees at such statutory rate of interest. 15. In view of the foregoing, I, in exercise of the powers conferred upon me under sections 11, 11(4), 11A and 11B read with section 19 of the SEBI Act, hereby issue the following directions: i. The Noticees shall within a period of three months from the date of this order, jointly and severally refund the money collected through issuances debentures to the investors with interest at the rate of 15% per annum from the date of receipt of money till the date of such refund or the redemption value as promised and accrued till the date of refund, whichever is higher. ii. Such refund shall be made only in cash through a Demand Draft or Pay Order. iii. The Noticees shall within fifteen days from the date of this Order submit to SEBI complete details of their assets (alongwith proofs thereof) certified by a peer reviewed Chartered Accountant. iv. The Noticees are permitted to sell the assets of the company and deposit the sale proceeds in an Escrow Account opened with a nationalized bank.

Such proceeds shall be utilized for the sole purpose of making refund/repayment to the investors (holders of debentures) till the full refund/ repayment as directed above is made.

v. The Noticees shall issue a public notice, in all editions of one English national daily and one vernacular daily with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this order. vi. Within seven days of completion of refund/repayment as directed hereinabove, the Noticees shall file a certificate of such completion with SEBI from two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. Such certificate shall be issued by the Chartered Accountants after verifying the relevant documents including bank accounts of the Noticees and satisfying themselves that the refund has actually been made. vii. 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. viii. The Noticees are restrained from, directly or indirectly, accessing the capital market by issuing prospectus, any offer document or advertisement soliciting money from the public and are further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, in whatsoever manner for a period of four years or till the date of refund of money to the investors (holders of debentures) whichever is later. ix. Mr. Kishore Rai, Mr. Arjun Singh, Mr. Shankar Singh, Mr. Raghuveer Singh Sisodiya and Mr. Hari Rathore Singh are also restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, for a period of four years or till the date of refund of money to the holders of debentures, whichever is later. x. For the purposes of paragraphs 15(viii) and 15(ix), the period of restraint shall be counted from the date of the interim order. 16. The interim order cum show cause notice dated May 12, 2015 is disposed off accordingly. The above directions are without prejudice to the right of SEBI to take any other appropriate action for the violations found in this case or to initiate any action in case of failure to comply with the above directions, in accordance with the provisions of applicable laws including the proceedings under the provisions of section 28A of the SEBI Act.

17. The order shall come into force with immediate effect. A copy of this Order shall be forwarded to the recognized stock exchanges and depositories for information and necessary action. 18. A copy of this Order shall also be forwarded to the Ministry of Corporate Affairs/concerned Registrar of Companies for their information and necessary action.

Sd/-

DATE: October 3rd, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA