Order in the matter of Vayaa Builder and Developers Private Ltd. and its directors

WTM/GM/IMD/ 75/2018–19 SECURITIES AND EXCHANGE BOARD OF INDIA INTERIM ORDER CUM SHOW CAUSE NOTICE UNDER SECTIONS 11(1), 11(4), 11B AND 11AA OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH REGULATION 65 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (COLLECTIVE INVESTMENT SCHEMES) REGULATIONS, 1999. IN THE MATTER OF VAYAA BUILDER AND DEVELOPERS PRIVATE LIMITED (FORMERLY KNOWN AS VEENAYAKA H&H PROPERTY MAKERS PRIVATE LIMITED) – COMPANY CIN PAN 1. V AYAA BUILDER AND U45201MP2010PTC024055 AADCV3685L DEVELOPERS PRIVATE LIMITED

DIRECTOR DIN PAN 2. Y OGENDRA BISAY 02664008 AFQPB2353A 3. J ITENDRA BISAY 00128091 AFZPB2659A

BACKGROUND – 1. SEBI is in receipt of multiple complaints against Vayaa Builder And Developers Private Limited (“VBDP”/"the company") formerly known as Veenayaka H&H Property Makers Private Limited. The complainants have alleged that the company had mobilised fund from investors through different land/plot allotment scheme under the garb of a real estate business and thereafter company had closed its office and investors are not receiving their invested amount.

2. The company was incorporated on August 03, 2010 as Veenayaka H&H Property Makers Private Limited. Its name was changed to Vayaa Builder and Developers Private Limited and new certificate of incorporation was issued on August 08, 2014. The registered office address of VBDP is at 109, Asawa Chamber, 14 Sneh Nagar, Sapna Sangeeta Main Road, Indore Madhya Pradesh - 452001. The company's Memorandum of Association describes its main object as inter alia including construction, designing and interior decoration.

3. As a matter of preliminary enquiry in order to ascertain whether or not VBDP was carrying on fund mobilization activities as per ‘Collective Investment Schemes’ in terms of Section 11AA of the SEBI Act, 1992 (“SEBI Act”), SEBI, vide letters dated October 06, 2016 and November 10, 2016, advised VBDL and its Directors, i.e. Order in the matter of VBDL

Jitendra Bisay, Yogendra Bisay, Sanjit Kumar, Jagdish Prasad Mittal and Ram Kishan Gupta to submit the information pertaining to fund mobilization activities by the company. In response to SEBI letters, VBDL filed its reply vide letter dated December 21, 2016 and stated that they have neither launched any scheme nor raised money from public. A detailed clarification was also sought vide letter dated May 03, 2017 from the company and its directors. However, no reply to the same was received by SEBI. Another letter dated May 03, 2017 was sent to the auditor of the company seeking information pertaining to audit of accounts/annual report and other activities of the company. The auditor replied to SEBI vide letter dated May 15, 2017.

4. Upon an examination of the information provided by the Company and its directors, the complainant, the auditor of the company and documents available at MCA, the following is observed – (i) The certificate provided by the complainant (titled as 'Registration Letter') includes the name of the investor, nominee name, plan, term, date of commencement, final payment date, cost of product, mode of payment, instalment amount, agreed cost of product, and assumed cost of product. (ii) The reverse side of the certificate provides “terms and Conditions”. Some of the terms provided therein are as under: (a) The land shall be allotted in the name of Customer in case of cash down/lump sum payment after 180 days of receipt of full payment. In instalment plan, allotment in the name of Customer shall be done after 60 days from date of receipt of 60% amount as per plan opted by the Customer. In both lump sum plan and instalment plan, the sale deed will be executed in the name of Customer after the receipt of the full consideration amount. (b) If the Customer after duly subscribing to a plan of VBDP fails and refuses to submit documents, papers, photographs to complete the necessary formalities and execute the documents required for the purpose of the effective transfer and maintenance of his/her/their plots by VBDP, the same shall be constructed as a case of opting out. (c) VBDP shall have the first charge on the said property on account of the unpaid installment for services/development charges for other incidental expenses incurred by VBDP. The said property cannot in any manner be sold, assigned, mortgaged, pledged or alienated without obtaining NO DUES CERTIFICATE from the VBDP.

(d) The Customer has the right to retain or sell the said property to anybody or to the company as he/she may deem fit on expiry of tenure of the agreement. To facilitate easy liquidity, VBDP provides to Customer the marketing services for sale of developed plots. (e) The Company reserves the right to discontinue/change/amend/modify or alter prospectively/ retrospectively any of the rules/regulation plans and introduce new payment plan at any time at its self-discretion with or without any notice.

(iii) From the analysis of the certificate provided by the complainants, company is operating different schemes including L2 (lump sum) (5Y6M), R2 (Monthly, Half yearly, yearly) (5Y0M), R3 (Quarterly) (5Y6M). These plans are of same types which are mentioned in the “terms and condition” of certificate (i.e. lump sum and instalment plan). As per the certificates made available to SEBI, in L2 (5Y6M)-lump sum plan, the company is paying Rs. 1,00,000/- after expiry of terms of certificate for lump sum payment of Rs. 50,000/-.

(iv) Complainant has also provided land registration agreement dated March 15, 2013 having sale value of Rs. 1,21,96,000/-. The land was purchased in the name of the company. The registration agreement was supported by the PAN card copy of the company and the establishment certificate issued by Labour Department of Madhya Pradesh Government. The said registration agreement indicates that the company had bought lands and plots for execution of its plan/scheme of land development.

5. Documents and annual reports have been obtained from MCA database. Analysis of the Balance Sheets of the company is provided as under: (TABLE 1) FY 2010-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 Non- NIL NIL Rs. 139,551/- Rs. 811,481/- Rs. 644,690/- Rs. curren t (Tangible (Tangible (Tangible assets) 504,473/-assets assets) assets) (Tangible assets) NIL NIL Rs. 16,000/- Rs. 21,000/- Rs. 2,15,000/- NIL (Long term (Long term loan and loan and (Long term loans advances) advances) and advances) Rs. 20,000/- Rs. 15, Rs. 10,000/- NIL NIL NIL (other non- 000/-(other (other non-current non-current current assets) assets) assets) Current NIL NIL Rs. Rs. Rs. Rs. assets 13,080,210/- 13,080,210/- 13,080,210/- 13,080,210/- (inventories) (inventories) (inventories) (inventories) Rs. 75,000/- Rs. 70,000/- Rs. 126,597/- Rs. Rs. 1,242,618/- Rs. (cash & Cash (cash & Cash (cash & Cash 5,148,529/- (cash & Cash 1,730,521/-equivalents) equivalents) equivalents) (cash & Cash equivalents) (cash & Cash equivalents) equivalents) NIL NIL NIL Rs. Rs. 21,048,705/- Rs. 22,080,574/- (Short term loan 21,410,905/- (short term and other (Short term loan and other advances) loan and other advances) advances) NIL NIL NIL Rs. 80,000/- Rs. 10,854/- Rs. 27,900/- (Other current (Other current (Other current assets) assets) assets) Rs. Rs. 353, 823,87 Rs. 40,389,313/- /- 36,249,536/- Total Rs. 95,000/- Rs. 85,000/- Rs. Rs. Rs. 36,242,077/- Rs. asset 13,372,358/- 41,221,794/- 36,754,009/- Non- NIL NIL NIL Rs. 40,190/- NIL Rs. 62,259/-current (Long term (long term liability borrowing) borrowing) NIL NIL Rs.3728/- NIL NIL NIL (differed tax liability) Current NIL NIL NIL Rs. 254,760/- Rs. 62,989/- Rs. 239,280/-liability (Short term (Short term (short term borrowing) borrowing) borrowing) Rs. 5000/- Rs. 6000/- Rs. 19,550/- Rs. 397,100/- Rs. 4,61,598/- Rs. (Trade (Trade (Trade payable) (Trade payable) (Trade payable) 1,067,942/-payable) payable) (Trade payables) NIL NIL Rs. Rs. Rs. Rs. 13,340,000/- 40,208,822/- 35,531,346/- 35,391,404/- (Other current (Other current (other current ( Other liabilities) liabilities) liabilities) current liabilities) NIL NIL NIL Rs. 88,383/- Rs. 24,900/- NIL (Short term (Short term provisions) provision) Rs. 5000/- Rs. 6,000/- Rs. Rs.36,080,833/- Rs. 13,363,278/- Rs. 36,698,626/- 40,949,065/-

Total Rs. 95,000/- Rs. 85,000/- Rs. Rs. Rs. 36,242,077/- Rs. liability (including (including 13,372,358/- 41,221,794/- (including capital 36,754,009/-capital & capital & (including (including & Reserve and (including Reserve and Reserve and capital & capital & Surplus) capital & Surplus) Surplus) Reserve and Reserve and Reserve and Surplus) Surplus) Surplus) 6. It is noted from the balance sheet that the "Other current liabilities" of the company has increased from NIL (2010-11) to Rs. 40,208,822/- (FY 2013-14). Prima facie it appears that the "Other current liabilities" represent the amount of fund mobilized by the company. It is also noted that the value of inventory has increased from NIL in FYs 2010-11 and 2011-12 to Rs.1,30,80,210/- in FY 2012-13. Given that the company's primary activity as per its MoA is with respect to real estate and real estate development, the aforesaid figures indicate acquisition of land using money mobilised from investors. Available records on purchase of land by the company further support the aforesaid argument. The said land purchase details are as follows: (TABLE 2) Total Date of Total paid Remaining Land Location Consideration Agreement amount (in Rs.) amount. (in Rs.) (in Rs.) 15.03.2013 Gram : Bachora, 1,21,96,000/- 1,21,96,000/- (Sale deed) Rani Mandal-02, Shivpuri, Ward No. 01, Madhya Pradesh (5.266 H) 28.12.2013 Gram: Islampura, 8,82,00,000/- 2,20,50,000/- 6,61,50,000/- Dhar, Madhya (by June 11, 2015) Pradesh (3.542 H) 02.09.2013 Gram: Maath, NA 15,00,000/- NA Kharora, Raipur, Chhattisgarh (1.625 H) 10.09.2014 Gram: Telebadha, 23,43,000/- 5,85,750/- 17,57,250/- Raipur, Chhattisgarh (0.425 H) 29.10.2014 Gram: Islampura, 95,00,000/- 48,50,000/- 48,50,000/- Dhar, Madhya Pradesh (by December 31, (0.266 H) 2017) 25.10.2013 Gram : Bachora, Rani 6,00,000/- 3,00,000/- 3,00,000/- Mandal-02, Shivpuri, Ward No. 01, Madhya Pradesh (1500 Sq. ft) 12.11.2013 Gram : Bachora, Rani 7,75,000/- 3,75,000/- 4,00,000/- Mandal-02, Shivpuri, Ward No. 01, Madhya Pradesh (2000 Sq. ft) 18.10.2013 Gram : Bachora, Rani 10,00,000/- 5,90,400/- 4,09,600/- Mandal-02, Shivpuri, Ward No. 01, Madhya Pradesh (2500 Sq. ft)

7. The auditor of the company has also provided the bank statement of the company which indicates that funds have been collected by the company from Madhya Pradesh, Chhattisgarh, New Delhi, Haryana etc.

8. In order to take a prima facie view as to whether the impugned money mobilisation by VBDP constitutes a collective investment scheme or not, the available facts regarding the case need to be tested against each of the elements of section 11AA of the SEBI Act. The same is discussed in the following paragraphs- a. Section 11AA(2)(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. As noted in preceding paragraphs, the company was engaged in mobilisation of funds during the FYs 2012-13 to 2015-16 and as per records monies mobilised by the company was invested in acquisition of land. The fact that each of the land purchase/land development records are closely preceded by increase in the company's "other current liabilities" points to the strong possibility that money raised from the public was used for investing in the said land projects. In view of the same, prima facie I am of the view that the scheme/plan of the company satisfied first condition stipulated in Section 11AA (2) of SEBI Act, 1992.

b. Section 11AA(2)(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. From the available documents including the Registration letter, it is noted that investors were promised allotment of a share in a property and not a bounded property in itself. In fact, the Registration letter also mentions the expected value of the property over a defined time period, although there is no specific mention of a buy-back option. This "expected value" read along with the terms and conditions mentioned on the reverse of the Registration Letter which states that the company may purchase the property back from the investor, goes on to indicate that the transaction is not a simple case of land sale. Therefore, I am of the prima facie view that the company's scheme/plan also satisfies the second condition stipulated in Section 11AA (2) of SEBI Act, 1992.

c. The property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors; and d. The investors do not have day-to-day control over the management and operation of the scheme or arrangement. As per the terms of the conditions mentioned on the reverse side of certificate (registration letter), the land will remain in the name the company till the payment of full consideration. Only after payment of certain percentage of consideration amount, the land allotment (not the transfer of land title) will take place. Significantly there is no record of any agreement to sell and the Registration letters merely mention allotment of a value of property but not any specific bounded/identified property in the name of the investor. Also, the right of the company to discontinue/change/amend/modify or alter prospectively/ retrospectively any of the rules/regulation plans and introduce new payment plan at any time at its self-discretion with or without any notice, indicates that the investors do not have day to day control over management and operation of scheme for which amount has been collected by company. Therefore, in my prima facie view, the aforesaid aspects satisfy the conditions stipulated in Section 11AA (2)(iii) & (iv)of the SEBI Act.

9. In this context, it may be relevant to refer to the observations made by the Hon’ble Supreme Court of India in P.G.F. Limited & Ors. Vs. UOI & Anr. (MANU/SC.0247/2013), wherein it observed: “... Sub-section (2) of Section 11AA, which defines a collective investment scheme disclose that it is not restricted to any particular commercial 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.”

10. Upon a consideration of the preceding paragraphs and having regard to the observations of the Hon’ble Supreme Court, I prima facie find that the ‘Scheme’ of allotment of lands/ developing colony/plots, as offered by VBDP satisfies the four requirements of a ‘Collective Investment Schemes’ as defined in Section 11AA of the SEBI Act, viz. – (i) There was pooling of contributions; (ii) Contributions were made with a view to receive assured realisable value; (iii) The contributions were managed on behalf of the investors, and (iv) The investors did not have day to day control over the management of the ‘Scheme’.

11. Section 12(1B) of the SEBI Act states that: “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.”Further, Regulation 3 of the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as “CIS Regulations”) also prohibits carrying on ‘Collective Investment Schemes’ activities without obtaining Certificate of Registration from SEBI.

12. I note that VBDP has not obtained any Certificate of Registration from SEBI under the CIS Regulations. I therefore, find that the ‘Scheme’ of allotment of land/ developing colony/plots has been carried out by VBDP in contravention of Section 12(1B) of the SEBI Act read with Regulation 3 of the CIS Regulations.

13. I also note that the fund mobilizing activity of VBDP through the Scheme of allotment of land post September 2013 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, 2003”).

14. As per information available on the MCA21 Portal, the details of the present and past Directors of VBDP, including the dates of appointment/cessation as Directors are provided below:

(TABLE 3) S. Name Date of Date of DIN PAN Address No. Appoint Cessation ment as as Director Director 1 Yogendra Bisay 03-08-10 - 0266400 AFQPB235 194, Dr. S/o. 8 3A Ambedkar Nagar, Phoolchand Indore, Madhya Bisay Pradesh : 452001 2 Jitendra Bisay 03-08-10 - 0012809 AFZPB2659 194, Dr. S/o. 1 A Ambedkar Nagar, Phoolchaind Indore, Madhya Bisay Pradesh : 452001 3 Ram Kishan 03-08-10 15-10-11 0316266 ACDPG261 S/o. Ganga Gupta 8 8P Kishan Gupta S/o. Ganga C/o. Shri. B. D. Kishan Gupta Gandhi, Nr. B. R. Garden, Morena, Madhya Pradesh : 476001 4 Sanjit Kumar 03-08-10 15-10-11 0313965 BKOPK474 S/o. Mohan S/o. Mohan 5 2A Prasad Soni Prasad Soni H. No. 787, Kailash Nagar, Bhilai, Chhattisgarh : 490026 5 Jagdish Prasad 03-08-10 15-10-11 0316124 No record S/o. Shiv Mittal 9 found. (as Narayan Mittal S/o. Shiv per IT Rjaeev Gandhi Narayan Mittal website) Marg, Joura, Morena, Madhya Pradesh : 476001 From the above Table, I note that the persons at serial nos. 1 and 2 are the present Directors and continue to be responsible for the affairs of VBDP. The persons at serial nos. 3 to 5 of Table 1 were the past Directors of VBDP, but the date of cessation of directorship as per the above Table was before the period during which money mobilisation took place as per available records. In view of the above, prima facie only directors at serial nos. 1 and 2 i.e. Yogendra Bisay and Jitendra Bisay are liable for the alleged contraventions by VBDP for the purposes of this Order

15. Based on the figures in Table 1 above, the maximum amount of money mobilisation has taken place in the FY 2013-14 which amounted to Rs. 4,02,08,822/- under the ‘Scheme’ of allotment of lands/ developing colony/plots. Therefore prima facie it appears that the company had raised an amount of atleast 4,02,08,822/- under the said ‘Scheme’. I note that VBDP has not provided any details to SEBI regarding the amount of money mobilized under the said ‘Scheme’.

Protecting the interests of investors is the first and foremost mandate for SEBI and therefore, steps have to be taken to ensure that VBDP does not collect further funds under the ‘Scheme’ of allotment of land/ developing colony/plots or any other Schemes and no investors are defrauded. Further, in order to prevent liquidation of assets/properties acquired by VBDP and its Directors using the funds collected from the investing public until full facts and materials are brought on record and a final decision is taken in the matter, it is incumbent on SEBI to take preventive action by way of an immediate measure. In light of the aforesaid and as VBDP failed to submit complete details/information as sought by SEBI, I find no other alternative but to take recourse through an Interim Order against VBDP and its Directors for preventing them from further carrying on with its existing fund mobilizing activity by launching ‘Collective Investment Scheme’ without registration from SEBI in accordance with law.

DIRECTIONS– 16. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 19 read with Sections 11(1), 11(4), 11B and 11AA of the SEBI Act read with Regulation 65 of the CIS Regulations and Regulation 11 of PFUTP Regulations, 2003, hereby direct VBDP and its Directors, viz. Yogendra Bisay and Jitendra Bisay: (i) Not to collect any fresh money from investors under its existing schemes; (ii) Not to launch any new scheme/plan or float any new companies/firm to raise fresh moneys; (iii) Not to dispose of any of the properties or alienate the assets obtained directly or indirectly through the money raised by VBDP; (iv) Not to divert any funds raised from public at large, kept in bank account(s) and/or in the custody of VBDP; (v) To immediately submit the full inventory of the assets obtained through money raised by VBDP; (vi) To immediately submit the full inventory of the assets owned by VBDP out of the amounts collected from the investors under its existing Scheme; (vii) To furnish all the information sought by SEBI, including – a. Copies of all the relevant documents of the company including Application Form, Agreement, Certificate issued by the Company, etc.; b. Scheme wise list of investors and their contact numbers and addresses, including –

 List of investors to whom land has been allotted and got registered and  List of investors who have been refunded. c. Details of amount mobilized and refunded till date; d. Details of amount refunded till date along with the details of mode of payment, duly certified by a Chartered Accountant;

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

18. The preliminary findings contained in paragraphs of this Order are made on the basis of the information obtained from MCA21 Portal and other relevant material on record. VBDP and the abovenamed Directors (collectively referred to as “Noticees”) are hereby called upon to show cause as to why suitable directions/prohibitions under Sections 11, 11(4), 11B and 11AA of the SEBI Act read with Regulation 65 of the CIS Regulations, 1999 and Regulation 11 of the PFUTP Regulations, 2003, should not be issued/imposed, including the following directions, viz. – (i) VBDP and its Directors, viz. Yogendra Bisay and Jitendra Bisay to wind up the existing Collective Investment Scheme and to refund the money collected under the Scheme with returns which are due to investors as per the terms of offer of the said Scheme, supported by a Winding up and Repayment Report (in accordance with the CIS Regulations, 1999) to the satisfaction of SEBI (to be submitted to SEBI within 7 days of completion of the refund); and (ii) VBDP to be restrained/prohibited from accessing the securities market 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.

19. The prima facie observations contained in this Order are made on the basis of the materials available on record. In this context, VBDP 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.

20. This order is without prejudice to the right of SEBI to take any other action that is deemed fit to be initiated against VBDP and its Directors in accordance with law.

21. A copy of this Order shall also be forwarded to the Local Police/State Government for their information.

Place: Mumbai G. MAHALINGAM Date: November 09, 2018 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA