Order in the matter of Sunshine Agro-Infra Ltd.

1. The Hon'ble Supreme Court vide order dated May 09, 2014 disposed of WP (C) Nos.401, 402 and 413 of 2013; 324 of 2014 and T.P(C) No. 445 of 2014 - ( Subrata Chattoraj v. Union of India & Ors.; and Alok Jena v. Union of India & ors.,) directing inter alia CBI investigation into the fund mobilization activities by companies listed in the aforesaid petitions. Sunshine Agro- Infra Limited(“SAIL”) was one amongst such companies that allegedly indulged in illegal fund raising activities.

2. In this background, Securities and Exchange Board of India (“SEBI”) sought information from SAIL in the context of fund raising activities by SAIL by launching various schemes. Letters dated November 28, 2014 and reminder letters dated December 06, 2014 were issued to SAIL and its directors - Premlata Mittal, Anurag Mittal and Lokesh Periwal seeking the following information: i. Copy of the Memorandum and Articles of Association of the company. ii. Copy of Audited Annual Accounts of the company for last 3 years. iii. Name, addresses and occupation of all the promoters/directors of the company.

iv. Names and details of the Key Managerial Personnel of the company. Information in respect of schemes launched by SAIL for raising funds a. A statement of mobilization and deployment of funds under various schemes duly certified by the Statutory Auditors of the company(s) b. Terms and conditions of the schemes launched by the company; c. Structure of the Plans/Schemes; d. Details of the scheme(s) wise amount mobilized by the company till date along with the number of investors under the schemes; e. Promises or assurances or assured returns made in the schemes(s); f. Copies of offer documents, application form, pamphlets brochures of the scheme(s) launched; g. Sample copies of the registration letter and allotment letter issued to the investors who subscribed to the scheme(s). h. Sample copies of the agreement letter/contract required to be entered into by investor/applicant under the scheme(s). i. Options available with the investor if he does not want to hold his investment till maturity; j. Whether any instrument is issued to the investors after receipt of fund; k. If such instruments are issued whether they are transferable; l. In case the ‘Scheme(s)’ pertain to booking/purchase of goods/properties, the options available with the investor if he does not want to possess the good/property after payment of initial amount; m. Whether 'Schemes(s)' floated fall under the SEBI (Collective Investment Schemes) Regulations, 1999. In terms of section 12(1B) of the SEBI Act, 1992 and the provisions of SEBI (Collective Investment Schemes) Regulations, 1999 (CIS Regulations), no entity can carry on or sponsor or launch a Collective Investment Scheme without obtaining a certificate of registration from SEBI under the said Regulations.

Reply was received from SAIL vide letter dated December 11, 2014.

3. Subsequently, letter dated December 16, 2014 and reminder letter dated January 30, 2015 were issued to SAIL, seeking explanation with respect to the notes on financial statements for the year ended 31.3.2013 wherein the "Advances against property" was mentioned. Similarly explanation was sought from each of the directors of SAIL vide letters dated March 17, 2015. Reply dated April 20, 2015 was received by SEBI from Ms. Premlata Mittal, Director. Vide letter dated June 15, 2015 and reminder letter dated June 22, 2015 to SAIL, SEBI sought pamphlet /advertisement material with respect to the 'Advances against property'. Thereafter, SEBI vide letter dated January 5, 2016, sought from SAIL and its directors viz. Premlata Mittal, Tara Chand Chordia and Nabendu Dey the following information : " 1. Copy of Audited Annual Accounts and Annual Returns of the company for last 3 years; 2. Name, addresses, PAN and occupation of all the Promoters/Directors and Key Managerial Personnel of the company; 3. Nature of Business and PAN of the company. 4. Information in respect of issue of shares/debentures– a. Copy of Prospectus/Red Herring Prospectus/Statement in lieu of Prospectus/Information Memorandum filed with ROC for issuance of shares/debentures; b. Date of opening and closing of the subscription list for the said shares/debentures; c. Number of application forms circulated inviting subscription for shares/debentures and number of applications received; d. Details of allottees in the format given below (in hard copy as well as in soft copy); Sl Date of Financial Name of Address of Amount of No. Allotment Year allottee allottee/contact shares/debentures details allotted (Rs.)

Total:

e. Copies of the minutes of Board/Committee meeting in which the resolution has been passed for raising such additional capital and also for allotment of shares/debentures; f. Copies of application forms, pamphlets, advertisements and other promotional material circulated for issuance of shares/debentures; g. Terms and conditions of the issue of shares/debentures. h. Whether the company has applied for listing of its securities with any of the stock exchanges i. Copies of Form 2 and Form 10 filed with the ROC j. Details of debenture trustee viz, name, address, board resolution authorizing their appointment etc. "

Letter issued to one of the directors viz. Premlata Mittal was returned undelivered. Replies have not been received with regard to the aforesaid letters issued to the remaining entities.

4. When a site visit was made to the registered office address of SAIL, the company was not traceable. This was subsequently brought to the notice of the Registrar of Companies ("RoC") vide letter dated May 30, 2016. Further, documents such as Form 2, annual return etc. filed by the company were obtained from RoC. The company has filed its Annual Accounts with the RoC only for the F.Y. 2010-11. However, the company has submitted Annual Accounts for the F.Y. 2010-2011, 2011-2012 and 2012-2013, to SEBI along with its letter dated December 11, 2014 in response to SEBI letter dated November 28, 2014,. The mismatch of information between that filed by the company with RoC and that submitted to SEBI, was brought to the notice of the RoC vide letter dated May 30, 2016.

5. Based on the filings made by the company with RoC, a preliminary examination was carried out by SEBI. 5.1 The details of company are as follows: i) Date of Incorporation : 09.09.2010 ii) CIN : U01403WB2010PLC152898 iii) PAN: AAOCS7432H iv) Registered Office Address: Opp. Kanchanjanga Stadium, Tilak Road, Siliguri, West Bengal- 734001 v) As per the last available balance sheet of the company on record (i.e. for the F.Y. ended 31.03.2013), it is observed that the company has fixed assets of Rs.45.73 lakhs which includes land of Rs.38.09 lakhs.

5.2 Extracts of the details of securities issued by the company are as under: Table A: - Details of Securities Issued Year Type of Security Amount Raised (Rs. in No. of Allottees Lakhs) 2011-12 Preference Shares 8.23 112

2012-13 Preference Shares 4.45 39

Total 12.68 151

The company has thus issued preference shares amounting to Rs. 8.23 Lakhs to 112 investors during the Financial Year 2011-12. (the allotment in 2011-12 is hereinafter referred to as the "offer and allotment of preference shares").

6. In the context of the abovementioned details of the offer and allotment of preference shares, the issue for determination in the instant matter is whether or not the mobilization of funds by SAIL as described above, during the period 2011-12 is in accordance with the provisions of the Companies Act, 1956 read with the provisions of the SEBI Act, 1992.

7. Section 67 of the Companies Act, 1956 deals with the conditions or circumstances under which an offer of shares/debentures by a company would be construed as one made to the public. Extracts of the relevant provisions of section 67 of the Companies Act, 1956, dealing with offer of shares or debentures to the public, are reproduced as under:

"Construction of reference to offering shares or debentures to the public, etc. 67. (1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (2) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (3) No offer or invitation shall be treated as made to the public by virtue of sub-section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances- (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation.

Provided that nothing contained in this sub-section shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more: Provided further that nothing contained in the first proviso shall apply to non-banking financial companies or public financial institutions specified in section 4A of the Companies Act, 1956 (1 of 1956).” 8. For ascertaining whether the offer and allotment of preference shares by SAIL would fall within the scope of Section 67 of the Companies Act, 1956, the number of persons to whom offer was made by the Company is crucial. In terms of the first proviso to section 67(3), an offer of shares or debentures made to fifty persons or more would constitute an offer to the public. In this regard, it is observed from the documents obtained from RoC, that during the Financial Year 2011–12, SAIL made an offer and allotted preference shares to 112 persons amounting to ₹ 8.23Lakh.

9. From the above, it will follow that the offer and allotment of preference shares made by SAIL prima facie qualifies to be construed as an offer made to the public in terms of section 67 of the Companies Act, 1956. Such a public issue makes it imperative for SAIL to comply with the mandate of Section 73 of the Companies Act. Relevant extract of Section 73 of the Companies Act, 1956 is reproduced as under:

"Allotment of shares and debentures to be dealt in on stock exchange. 73. (1) Every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange. (1A) ... (2) Where the permission has not been applied under subsection (1) or such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money. ....” (emphasis supplied)

10. As the offer and allotment of preference shares is, prima facie, a public issue in accordance with the provisions of the Companies Act, 1956, the same will attract the requirement for such shares to be dealt on a recognised stock exchange in terms of Section 73 of the Companies Act, 1956, as stated above. I find that SAIL is prima facie in breach of the provisions of Section 73 as well.

11. Further, in connection with the public issue, Section 56 of the Companies Act, 1956 mandates that the prospectus issued by a company shall state the matters specified thereunder and Section 60 of the Companies Act, 1956 mandates registration of such prospectus with the ROC. I find that there is no evidence on record to indicate that SAIL has complied with the provisions of Sections 56 and 60 of Companies Act, 1956, in respect of the offer and allotment of Preference Shares. In view of the same, I find that SAIL is prima facie in breach of the provisions of Sections 56 and 60 of the Companies Act, 1956 in connection with the subject offer and allotment of preference shares.

12. SEBI has a statutory duty to protect the interests of investors in securities and promote the development of, and to regulate, the securities market. Section 55A of the Companies Act, 1956, confers the jurisdiction on SEBI inter alia to administer provisions specified therein, in relation to public issue of securities. Section 11 of the SEBI Act has empowered it to take such measures as it deems fit for fulfilling its legislative mandate. Further, sub-section (4) of section 11 lists measures that SEBI may take, by an order in writing, either pending or on completion of investigation or inquiry, in the interest of investors in the securities market. Section 11B empowers SEBI to issue such directions as may be appropriate, in the interest of investors in securities and the securities market, inter alia, to any company in respect of issue of capital, transfer of securities etc.

13. In terms of Section 73(2), the company and every director who is an officer in default is jointly and severally liable for repayment of the money raised in breach of provisions of section 73(1). As per available information, the details of the appointment of directors of SAIL are as under:

Name of the director Date of Date of appointment cessation Sushil Kumar Periwal 09.09.2010 09.02.2012 Anurag Mittal 09.09.2010 21.10.2015 Lokesh Periwal 09.09.2010 11.04.2015 Premlata Mittal 03.01.2011 - Tara Chand Chordia 10.04.2015 - Nabendu Dey 17.10.2015 -

14. From the above table, it is noted that Sushil Kumar Periwal, Anurag Mittal, Lokesh Periwal and Premlata Mittal were the directors of SAIL at the time of the issue and allotment of preference shares and were responsible for the affairs of SAIL at the relevant point of time. Further, Tara Chand Chordia and Nabendu Dey joined as directors subsequent to the allotment and as directors are presently responsible for the affairs of SAIL.

15. In light of the facts in the instant matter, I find this to be a fit case to pass interim directions against SAIL and its Directors, for preventing the company from continuing with its fund mobilizing activity. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11, 11(4) and 11B of the SEBI Act, 1992 hereby issue, with immediate effect, the following directions, which shall remain in force until further orders:- i. SAIL shall cease to mobilize fresh funds from investors through the offer and allotment of Preference Shares 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; ii. SAIL and the aforesaid Directors are prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, or associating themselves with any listed company or company intending to raise money from the public; iii. SAIL and the aforementioned Directors shall not dispose of, alienate or encumber any of its/their assets or not divert any funds raised from public through the offer and allotment of preference shares; and iv. SAIL and the aforementioned Directors shall co-operate with SEBI and shall furnish all information/documents in connection with the offer and allotment of preference shares including the documents sought vide letter dated January 5, 2016.

16. The prima facie observations contained in paragraphs 9 to 11 of this Order are made on the basis of the material available on record and information obtained from RoC. SAIL and its abovementioned Directors are also called upon to show cause as to why suitable directions/prohibitions under Sections 11, 11(4), and 11B of the SEBI Act should not be issued/imposed, including the following directions, namely:- i. SAIL and its above named directors, to jointly and severally refund money collected through the offer and allotment of preference shares, with an interest of 15% per annum (the interest being calculated from the date when the repayments became due in terms of Section 73(2) of the Companies Act, 1956 till the date of actual payment) within a period of 180 days from the date of receipt of this order, supported by a certificate of two independent Chartered Accountants to the satisfaction of SEBI; and ii. SAIL and its above named directors be refrained / prohibited from accessing the securities market by issue of prospectus / offer document / advertisement and buying, selling or otherwise dealing in securities in any manner whatsoever, directly or indirectly, for a period of four years from the date of effecting the refund as directed above.

17. SAIL and its abovementioned Directors, may, within 21 days from the date of receipt of this interim order -cum-show cause notice, file their respective replies. SAIL and the directors named above are also directed to furnish an inventory of their assets in their reply. In the event of the company or any of its aforementioned directors intending to avail an opportunity of personal hearing, they may do so by seeking a confirmation in writing from SEBI for the same, within 90 days from the date of receipt of this order. In the event of the directors or the company failing to file replies or request for an opportunity of personal hearing, within the said 90 days, the prima facie findings regarding the violations at paragraphs 9 to 11 of this order shall become final and absolute, without any further orders. Consequentially, SAIL and its abovementioned Directors shall automatically be bound by the directions contained in paragraphs 15 & 16 above till the expiry of a period of four years from the date of repayment to the satisfaction of SEBI.

18. In case of failure to comply with the aforesaid directions within a period of one hundred eighty (180) days from the date of receipt of this order, appropriate enforcement actions in terms of the SEBI Act, 1992, shall be initiated including reference to the State Government/ Local Police.

19. Copy of this Order shall be forwarded to the recognized stock exchanges and depositories for information and necessary action. A copy of this order may also be forwarded to MCA/concerned RoC for their information and necessary action with respect to the directions imposed on company and directors.

Place: Mumbai G. MAHALINGAM Date: December 23, 2016 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA