Order in the matter of Sunshine Global Agro Limited

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 Sunshine Global Agro Limited ( PAN: AAJCS2508K) ( formerly known as Sunshine Forestry Private Ltd. ) and its Directors viz. Mr. Lekh Narayan Chand (PAN : AALPH6536K), Mr. Mokarram Mohammad (PAN : AJPPM9356A), Mr. Mohammad Ahteshamul Haq (PAN : ACGPH4147P), Mr. Anand Kumar Jha (PAN : AEKPJ8257J ), Mr. Wasim Khan (PAN : CENPK6085G ) and Mr. Ashif Khan (PAN : BEMPK1322J).

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") received a letter dated December 17, 2012, alleging illegal mobilization of funds by Sunshine Global Agro Limited (formerly known as Sunshine Forestry Private Limited) (hereinafter referred to as "SGAL") through its short term unit plan and unit plan "Jathropha bush group plant sale" which appeared to be in the nature of "collective investment scheme".

2. As a matter of preliminary inquiry, SEBI vide its letter dated March 11, 2013, sought the following details / documents from SGAL : a. Number of plans/schemes launched/proposed, b. Structure of such plans/schemes, c. Terms and conditions of each Plans/Schemes launched by SGAL, d. Number of investors and amount collected in each such plan/scheme as on January 31, 2013, e. Brochure pertaining to SGAL's schemes/ projects, f. Application forms that are required to be submitted by the investors/applicants to participate in SGAL's plans/schemes, g. Sample copies of certificates issued to the investors who subscribe to such schemes, h. Sample agreements, if any, that are required to be entered into by investors/applicants at the time of joining SGAL's Projects/Schemes, i. Details of location of projects current and proposed to be developed under various schemes, Balance Sheets and Profit and Loss Accounts of the company since incorporation as filed with the concerned Registrar of Companies ("RoC"), j. Memorandum and Articles of Association ("MoA" and "AoA") of SGAL as filed with RoC, k. Annual Returns of SGAL since incorporation as filed with RoC for the past three years, l. Details of past and present promoters/directors/Key management personnel of SGAL.

3. However, it is noted that the aforesaid letter sent by SEBI was returned undelivered with a remark " No such firm at such address". Subsequently, SEBI, vide letter dated April 17, 2013, sought information from Registrar of Companies, Delhi ("RoC-Delhi") such as certified copies of documents containing latest address of registered office of SGAL, details of past & present directors of SGAL including the period of directorship of each director, copies of MOA/AOA, Annual Returns, Form No. 32, Balance Sheets, copies of Board Resolutions, etc. In response, RoC-Delhi, vide letter dated May 14, 2013 provided the following details/information in respect of SGAL:

a) MoA and AoA of SGAL, b) Form 20B as filed by SGAL from 2006 to 2011, c) Form 23AC as filed by SGAL from 2006 to 2011, d) Additional attachment to Form 23AC filed in the year 2011.

4. Pursuant to the above, SEBI, vide letter dated June 04, 2013 issued another reminder to SGAL and its directors to the addresses noted from the records provided by RoC-Delhi. The said letter addressed to SGAL at its Delhi office, returned undelivered with postal remark "left". Whereas acknowledgement in respect of letter addressed to Purnea address of SGAL was received by way of acknowledgment card, however, no response / reply was received from SGAL. Thereafter, SEBI vide letter dated December 03, 2013 issued another reminder to SGAL, its directors and the statutory auditor. The letters sent to directors also returned undelivered, whereas, the statutory auditors of SGAL vide letter dated nil (received at SEBI on December 18, 2013) sought time to file reply till December 31, 2013. Further, vide letter dated December 31, 2013, the auditor again sought an extension to file reply till January 15, 2014. The statutory auditors vide letter dated January 15, 2014 submitted MoA and AoA of SGAL, Annual Reports from 2009 to 2012, Income Tax Returns, TDS Certificates, Form 26AS and Annual Returns from 2009 to 2012.

5. In the meantime, SGAL, vide letter dated December 31, 2013 filed its response, inter-alia, stating that the said reply may be treated as reply on behalf of the company, its existing directors as well as ex-directors and forwarded the following documents : a) MoA and AoA of SGAL as filed with RoC, b) Details of past and present promoters, directors and key management personnel, c) Brochure pertaining to schemes/ plan(s)/ offers/ projects which were made available to the public.

d) Application forms/ model agreements which are required to be submitted/ executed/ signed by investors / clients / applicants to participate / invest in the schemes/plans/offers/projects etc. e) Copy of Certificates issued to the investors to subscribe to such schemes, f) Copies of Agreements/contracts entered into by investors, clients/ applicants with the company at the time of joining and continuation of scheme/plants offers, g) Terms and Conditions of such plans/offer/projects/scheme, h) Copies of Annual Returns, audited financial statements, balance Sheets, Profit and loss Accounts and Income Tax Returns filed by SGAL for the last three years, i) Number of Investors and amount collected from each scheme.

6. I have carefully considered the materials available on record, correspondence exchanged between SEBI and SGAL, its Directors, Statutory Auditors, along with the documents contained therein, documents and information as made available by RoC-Delhi, submissions made by SGAL etc. In this context, the issue for determination is whether the mobilization of funds by SGAL under its schemes "sale of Jhatropha Bush Group and Sale of plant/trees" fall under the ambit ‘collective investment scheme’ provided in Section 11AA of the SEBI Act, 1992 (hereinafter referred to as "SEBI Act").

7. On examination of the material available on record, it is prima facie observed that:

a) SGAL was incorporated on June 01, 2004 as Sunshine Forestry Private Limited. It has its registered office at D-30, 3rd Floor, Shakarpur Extension, Madhuban Road, New Delhi-110 092. Its directors are Mr. Lekh Narayan Chand, Mr. Mokarram Mohammad, Mr. Mohammad Ahteshamul Haq, Mr. Anand Kumar Jha, Mr. Wasim Khan and Mr. Ashif Khan.

b) The main objects of SGAL as per the MoA, inter alia, are" to carry on the business of trading of plant & nursery farm forestry or otherwise for commercial, domestic, industrial and other purposes....to carry on the business as horticulture etc. by cultivation and farming on land, water or in special chambers and to plant, grow, cultivate, produce, raise, develop, sale, purchase, import…………………for own self and on behalf of others" c) As per the reply dated December 31, 2013, SGAL is operating a few nurseries for seedling plants and 38 growth centers/farms with trees and plants located in every state wherever its carrying activities. Further, the current and proposed scheme is stated to be the sale of Jhatropha Bush Group (" J.B.G.") and sale of plant / trees. d) As per the terms and conditions of plant purchase and J.B.G., SGAL has invited investment from the public towards the purchase of grown up plants/J.B.G. by depositing a sum of ` 1000/- by way of cash or demand draft in favour of SGAL, e) After receiving duly completed application along with cost of each plant/J.B.G. @ ` 1000/- SGAL issues Plant title Certificate/ J.B.G. Certificate within 60 days. This certificate is not transferable. f) As per clause 3 of terms and conditions of Plant purchase, the saleable plant will further require maintenance for 7 & more years, hence, the purchaser will give ownership right of the plant to SGAL for its maintenance. Similar clause is seen in the case of there for the purchase of J.B.G. g) The purchaser shall be bound to sell the said plant on completion of 7 years. h) SGAL also provides one time accidental insurance policy as an additional facility. i) The sample certificate issued in lieu of investments in the J.B.G. scheme, which was provided by SGAL, states as following:

" It is hereby certified that the person/persons named herein this certificate has purchased .....grown up Jatropha B.G. paying total cost of Rs. ....on dated .... the said

J.B.G. unit is/are situated at..... The certificate for ownership of J.B.G. unit is subject to rules & regulations over leaf." j) Following clauses noted from the copy of Certificate of M.O.U which contained the "terms and conditions for purchase of grown up J.B.G and their further maintenance": 1. The company will do maintenance of grown-up J.B.G. purchased by you for further 5 1/2 years as agreed by you, 2. The purchaser will be bound to sell or lease transfer the said J.B.G. after completion of term (5 1/2 years), 3. The purchaser will be free from maintenance of such J.B.G. up to the maintenance period (5 1/2 years), 4. As the J.B.G. lying on mostly lease hold land, purchaser must take delivery of fruits with his bush group as per M.O.U. at project site, 5. The purchaser must submit their J.B.G. title certificate on completion of due date with the option to sell it back to the Company, 6. If the purchaser not hold J.B.G. on self, the company will purchase his J.B.G. as per existing estimated value including full term fruit cost of one J.B.G. `200/- and `600/- against each standing plant as per mutual agreement subject to condition that such agreement must be executed within one year after the terms of M.O.U., 7. If the purchaser doesn't want to sell their J.B.G. after term, then lease agreement will be transferred to purchaser for a minimum period of 25 years. After transfer he will bear lease rent with maintenance cost on self. 8. The certificate is not transferable." k) Similar certificates are issued to the purchasers of plants along with the terms and conditions.

l) From the balance sheet of SGAL for the financial years 2011-12 and 2010-2011, it is observed that an amount of ` 207,384,338/- (` 214,941,977/- as on March 31, 2011) is appearing under the head "Advance received from Customers" besides an amount of ` 162,282,539/- (` 169,484,666/- as on March 31, 2011) is indicated under the sub-header "Sale of Products – Plants" under header "Revenue from Operations". An amount of ` 106,941,370/- (` 81,760,623/- as on March 31, 2011) is indicated as " Plant and Maintenance fund" under the header " Reserves and Surpluses" as on March 31, 2012. As per the list of investors provided by SGAL, as on December 31, 2013, there are 39,290 customers/clients/buyers and SGAL has collected an amount of ` 38,13,41,000/-.

8. The features of the so-called "sale of J.B.G. and Sale of plant/trees" offered by SGAL appears to be a "scheme". In view of this, the details of the scheme of "sale of J.B.G. and Sale of plant/trees" offered by SGAL, have to be considered in light of the provisions of Section 11AA of the SEBI Act. Section 11AA, which provides for the conditions to determine whether a scheme or arrangement is a collective investment scheme, reads as follows: "(1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) shall be a collective investment scheme. (2) Any scheme or arrangement made or offered by any person 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.”

9. In the context of the abovementioned Section 11AA of the SEBI Act, the scheme of "sale of J.B.G. and Sale of plant/trees" offered by SGAL is examined as under:

(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;

SGAL is engaged in the plans/schemes/projects of sale of J.B.G. and sale of plant/trees. The structure of such scheme as stated by SGAL vide its reply dated December 31, 2013, that an intending buyer of the scheme can buy the plant(s)/J.B.G. against outright payment or on terms, for growth, with an option to sell the produce to actual users, or to SGAL, depending on the size and growth of the plant. As per the terms and conditions for purchase of plant and J.B.G., SGAL has invited investment from the public towards the purchase of plants/J.B.G. by depositing a sum of ` 1000/- by way of cash or demand draft in favour of SGAL. Thereafter, SGAL issues a non transferable certificate ( Certificate of Plant /Certificate of M.O.U ) in the name of the applicant acknowledging purchase of plants/J.B.G. It is also noted from the terms and conditions of plant purchase that the purchaser would give ownership right of the plant/J.B.G. to SGAL for maintenance. Admittedly, as per the list of buyers provided by SGAL vide its reply dated December 31, 2013, there are 39,290 customers/buyers from whom SGAL has collected an amount of ` 38,13,41,000/-. In view of the aforesaid, it appears that the contribution or investment received from the "customer" is pooled and utilized for the purpose of "sale of plant/ trees and sale of J.B.G." scheme. I find that the instant scheme for " sale of plant/ trees and sale of J.B.G." satisfies the first condition stipulated in section 11AA(2)(i) of the SEBI Act.

(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;

The contribution or investment made by the "customer" under the SGAL scheme of sale of J.B.G. and sale of plant/trees is utilized for the purpose of such scheme i.e. purchase, maintenance of the plant/ J.B.G. and re sale of the same after the completion of the agreed term. Further, it is also noted from the brochure that SGAL is offering the plant/JBG for sale at a discounted price of `1,000/- per tree whereas, the registered valuer has valued a 5 to 7 years old tree @ `1,500/-. It is also stated that the grown up trees which SGAL is offering for sale, require further maintenance for 7 years to be marketable at the time of delivery, the value of which is expected to be `3000/-. SGAL is undertaking the regular maintenance of the trees and in return SGAL is assuring 14 cft wood benefit. Similarly in the case of J.B.G., SGAL assured an estimated value including full term fruit cost of one J.B.G. at `200/- to `600/-at which it will purchase J.B.G. from the customer(s),if they, so desire. The provision of purchase by SGAL when read in conjunction with SGAL’s promise to purchase J.B.G. as per existing estimated value can only mean an exercise of such option with profit motive. In view of the above, I find that the instant scheme for sale of J.B.G. and Sale of plant/trees satisfies the second condition stipulated in section 11AA(2)(ii) of the SEBI Act.

(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.

It is noted from the Memorandum of Agreement in respect of sale of plant / tree and Memorandum of Understanding in respect of J.B.G. that the purchaser does not manage the scheme. Further, the purchaser does not have any day to day control in respect of the plant/tree or J.B.G. forming part of the scheme. In this context, reference, may be made to the following clauses of the aforesaid agreement, viz.: ...since purchaser living far from the project site, it is felt by him/her difficult to look after day to day growth, maintenance to the said plant and therefore agreed to authorize the SGAL to supervise, look after the plant for better growth subject to natural calamities. That the total period of such supervision, maintenance, taking care for the growth of the plant is for 7 years That the purchaser agreed to take 14cft of wood benefit of each grown up plant, rest of the wood benefit will be retained by SGAL

To cover any kind of adversities, SGAL draw proper insurance of the plant at their cost for 7 years..."

In these facts and circumstances, I find that the scheme of SGAL for "sale of J.B.G. and Sale of plant/trees" satisfies third and fourth conditions stipulated in Section 11AA(2) of the SEBI Act.

10. At this stage, it is relevant to refer to the observations of the Ho'ble Supreme Court of India in the matter of P.G.F. Limited & Ors Vs. UOI & Anr. (MANU/SC/0247/2013), wherein it had observed that: " ...sub-section (2) of Section 11AA, which defines a collective investment scheme disclose that it is not restricted to any particular activity such as in a shop or any other commercial establishment or even agricultural operation or transportation or shipping or entertainment industry etc. The definition only seeks to ascertain and identify any scheme or arrangement, irrespective of the nature of business, which attracts investors to invest their funds at the instance of someone else who comes forward to promote such scheme or arrangement in any field and such scheme or arrangement provides for the various consequences to result therefrom..."

11. The features of the schemes of "sale of J.B.G. and Sale of plant/trees" offered by SGAL, as discussed in the preceding paragraphs, shows that the activity of fund mobilization by SGAL under its ‘scheme(s)/plan(s)’ with a resultant promise of returns, prima facie falls within the ambit of 'collective investment scheme' as defined under Section 11AA of the SEBI Act. Therefore, I am of the view that SGAL is engaged in the mobilization of funds from public under its schemes " sale of plant/ trees and sale of J.B.G.”, which is in the nature of a ‘collective investment scheme’ as defined in Section 11AA of the SEBI Act.

12. I note that in terms of Section 12(1B) of the SEBI Act, "no person shall sponsor or cause to be sponsored or cause to be carried on a 'collective investment scheme' unless he obtains a certificate of registration from the Board in accordance with the regulations”. Regulation 3 of the SEBI (Collective Investment Schemes)

Regulations, 1999 (hereinafter referred to as "CIS Regulations"), also prohibits carrying on CIS activities without obtaining registration from SEBI. 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. In this regard, I note that all the factors and characteristics of the ‘scheme(s)/plan(s)’ offered by SGAL as already mentioned in the preceding paragraphs, prima facie disclose that the scheme of SGAL for "sale of J.B.G. and Sale of plant/trees" is nothing but a collective investment scheme and SGAL has not obtained any certificate of registration under the CIS Regulations for its existing fund mobilizing activity from the public under the ‘scheme(s)’offered by it. It is observed from the list of buyers provided by SGAL vide its reply dated December 31, 2013, there are 39,290 customers/buyers from whom SGAL has collected an amount of `38,13,41,000/-.

13. I also find that the fund mobilizing activity of SGAL through its "sale of J.B.G. and Sale of plant/trees", prima facie, amounts to a fraudulent practice in terms of Regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ("PFUTP Regulations").

14. Upon consideration of the above, it prima facie appears that SGAL is engaged in fund mobilizing activity from the public, by floating or sponsoring or launching 'collective investment scheme' as defined in Section 11AA of the SEBI Act without obtaining a certificate of registration from SEBI as required under Section 12 (1B) of the SEBI Act, 1992 read with Regulation 3 of the CIS Regulations. Thus, it has, prima facie, violated Section 12 (1B) of the SEBI Act, 1992 and Regulation 3 of the CIS Regulations read with Section 11AA of the SEBI Act, 1992.

15. Protecting the interests of investors is the first and foremost mandate for SEBI and therefore, steps have to be taken in the instant matter to ensure that only legitimate activities are carried on by SGAL and no investors are defrauded. From the material available on record, it is observed that Mr. Lekh Narayan Chand (PAN : AALPH6536K), Mr. Mokarram Mohammad (PAN: AJPPM9356A), Mr. Mohammad Ahteshamul Haq (PAN: ACGPH4147P), Mr. Anand Kumar Jha (PAN: AEKPJ8257J ), Mr. Wasim Khan (PAN: CENPK6085G) and Mr. Ashif Khan (PAN: BEMPK1322J) are the Promoters / Directors/ persons in charge of the business of SGAL. Further, in order to safeguard the assets/property acquired by SGAL and its promoters/directors using the funds collected from the investing public until full facts and materials are brought and final decision is taken in the matter, it is incumbent on SEBI to take preventive action by way of an immediate measure. In the light of the above, I find no other alternative but to take recourse to an interim order against SGAL and its Directors for preventing them from further carrying on with its existing fund mobilizing activity by launching ‘collective investment scheme(s)’ without registration from SEBI in accordance with law.

16. In view of the above, I, in exercise of the powers conferred upon me under sections 11(1), 11B and 11(4) of the SEBI Act, 1992 read with Regulation 65 of CIS Regulations, hereby direct Sunshine Global Agro Ltd. its directors, who are in charge of and responsible for the day to day affairs of SGAL viz. Mr. Lekh Narayan Chand, Mr. Mokarram Mohammad, Mr. Mohammad Ahteshamul Haq, Mr. Anand Kumar Jha, Mr. Wasim Khan and Mr. Ashif Khan): not to collect any fresh money from investors under its existing scheme(s); not to launch any new schemes or plans; to immediately submit the full inventory of the assets owned by SGAL; not to dispose of any of the properties or alienate the assets of the existing scheme(s); not to divert any funds raised from public at large, kept in bank account(s) and/or in the custody of the company.

17. The above directions shall take effect immediately and shall be in force until further orders in this regard.

18. This order is without prejudice to the right of SEBI to take any other or further action that is deemed fit to be initiated against SGAL and its Directors/ Promoters. 19. The prima facie observations contained in this Order are made on the basis of the material available on record. In this context, SGAL and its abovementioned Directors may, within 21 days from the date of receipt of this Order, file their reply, if any, to this Order and may also indicate whether they desire to avail themselves an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard.

S RAMAN Date: July 15, 2014 WHOLE TIME MEMBER Place: Mumbai SECURITIES AND EXCHANGE BOARD OF INDIA