Order on representation in the matter of Networth Marketing Ltd.

WTM/GM/EFD/45/2018-19 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER On representation dated January 29, 2018 in the matter of Networth Marketing Limited with respect to order dated August 28, 2017 Sr. No. Noticees PAN Company 1 Networth Marketing Limited AACCN1305Q Directors/promoters 2 Mr. Anis Mohamad Kazi AONPK3801J 3 Mr. Bhaskar Bhao Vasage AIFPV5203P 4 Mr. Mahendra Mahadeo Bhuvad ARWPB6634J 5 Mr. Nuruddin Shaikh AZJPS0671F 6 Mr. Bhalerao Yashwant Misal APLPM5152R 7 Mr. Partha Ghosh AKYPG8318D

1. Securities and Exchange Board of India (SEBI) passed an order dated August 28, 2017 holding that Networth Marketing Ltd. (for short “Networth”) was engaged in mobilisation of funds from the public through various schemes of booking of plots of land which were in the nature of “Collective Investment Schemes” (CIS), as defined under section 11AA of the Securities and Exchange Board of India Act, 1992 (SEBI Act), without obtaining requisite certificate of registration from SEBI which is in contravention of section 12(1B) of the SEBI Act and regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1992 (CIS Regulations). In view of this, Networth and its directors, namely, Anis Mohamad Kazi, Bhaskar Bhao Vasage, Mahendra Mahadeo Bhuvad, Nuruddin Shaikh, Bhalerao Yaswant Misal and Partha Ghosh (hereinafter referred to as “Applicants/ entities”) were, inter alia, restrained from mobilising funds under any CIS and were directed to wind up the existing

Order in the matter of Networth Marketing Ltd.

schemes and refund the amount collected from investors with returns which are due to them as per the terms of offer, within a period of three months from the date of the Order.

2. The company and its aforesaid directors filed an appeal (Appeal No. 377 of 2017) against the aforesaid SEBI order before Hon’ble Securities Appellate Tribunal (SAT). The entities submitted before SAT that they are willing to comply with the order passed by SEBI and for implementing the SEBI order, they have drawn up a fresh plan for consideration of SEBI. In these circumstances, SAT vide order dated January 16, 2018, upheld the aforesaid order passed by SEBI and permitted the appellants/entities to submit the fresh plan for consideration of SEBI within two weeks.

3. The entities submitted the fresh plan of making refund to investors vide letter dated January 29, 2018. It has been stated therein that in order to make payments to the investors, they have appointed certain real estate brokers to enable them to expeditiously sell various plots of land owned by the company. It has been also stated that they are also negotiating with some investors for settlement of the maturity amount due to them against transfer of plots of land to them. The details of the fresh plan are as under:

 They have appointed real estate brokers for selling property at different places. Copies of letters appointing agents for selling the properties of the company have been furnished. It has been stated that the company might be able to garner around Rs.10 crore by selling these properties.  They are negotiating with some existing customers wherein the customer may adjust the maturity amount against fully developed farm plots of the company. Copy of some letters sent to investors indicating the same have been submitted. It has been stated that if the investors agree to the proposals, the liability of the company might be reduced by up to Rs. 8 crore.

4. An opportunity of hearing was granted to the entities on June 19, 2018. Anis Mohamad Kazi, Managing Director of Networth, along with Bhaskar Bhao Vasage and Mahendra Mahadeo Bhuvad, directors of Networth, appeared for hearing. The entities submitted during the hearing that they are desirous of implementing the order by refunding money due to the investors. They have refunded an amount of Rs.21.46 crore to the investors before the final order and an amount of Rs. 5 Crore after the passing of the final order in the matter. It was stated that a certificate issued by the chartered accountant on the amount of money refunded to the investors would be furnished within three months. It has been stated that maturity amount of Rs.20.82 crore is due to be returned to the investors and they are arranging for money to pay the investors by selling plots of land, flats etc. The entities were advised to file a detailed submission on the repayment plan. The entities have filed the same vide letter dated June 23, 2018. The summary is as under:

 It has been stated that efforts made by them for making refund have fallen short because after the passing of the interim order by SEBI most of the agents left the company which made completing the records of thousands of clients and contacting them extremely difficult. Further, the real estate market has been stagnant since the year 2012.  They are raising money by selling plots of land, flats etc. belonging to the company. An amount of Rs. 1.06 crore has been realised by selling plots of land. An amount of Rs. 2.6 Crore is expected from sale of plots of land in Raigad and Ratnagiri districts and by selling office space and flats in Kolkata. It has been also stated that negotiations are under way for sale of plots of land at Karjat (Maharashtra) and at Devas (Madhya Pradesh), which are valued at Rs. 7.77 Crore. They are expecting money from sale of these properties within six months.  They have initiated process of transferring plots of land to existing customers who are willing to adjust the value of the land against the maturity amount due to them. It has been stated that negotiations are under way with approximately 150 customers for transferring 32 acres of land at Kuchambe in Ratnagiri. This may settle liability of around Rs.8 Crore. They are also negotiating with around 20 customers for transferring 10,000 sq. ft. of land at Dewas, as a result of which the maturity amount expected to be adjusted is around Rs.50 lakh.  It has been also submitted that they will make efforts to clear the entire outstanding amount by obtaining best possible prices for the properties/assets of the company. However, if need arises, the personal assets of the directors of the company will be sold to pay the remaining maturity amount.

 The entities have urged that they may be granted a time of 3 months to (i) furnish complete audited account of the maturity amount paid to the investors and (ii) to make repayment and settlement of accounts through sale of plots of land. It has been stated that they will be able to refund an amount of at least Rs. 8 crore to the investors during this period.  It has been also urged that, after the initial three months’ time, they may be granted time of another 3 months for payment of balance maturity amount to the investors and for submission of all records related to repayment.

Consideration and findings 5. I have considered the representations made by the entities and the documents furnished by them. The only question for consideration in the representation is whether to grant extension of time to the applicants for refunding amount due to the investors.

6. In this regard, it is noted that the order dated August 28, 2017 directed the company and its directors to refund the amount of Rs. 37.27 Crore collected from around 18,000 investors under the schemes with returns which are due to them as per the terms of offer. It is observed from the letter dated June 23, 2018 filed by the applicants that an amount of Rs. 47.28 crore (including maturity) was due to the investors. The applicants have stated that after passing of the interim order dated March 19, 2015 in the matter, they have stopped collecting contributions from the investors and started refunding to the investors. They have refunded an amount Rs.26.46 crore to the investors since the passing of the interim order. They require additional time of 6 months for refunding the balance maturity amount of Rs. 20.82 crores to the investors.

7. With regard to proof of refund, the applicants/entities have submitted during the hearing that complete audited maturity records and the amount paid to investors along with certificate issued by the chartered accountant on the amount of money refunded to the investors would be furnished within three months.

8. On the repayment plan, it is noted from the letters furnished by the entities that they have already appointed real estate agents for selling plots of land belonging to the company and they have also sold some plots of land at Kondiye and Devas. As per submissions of the entities, most of the amount of sale proceeds has also been received by the company and the money was used by the company to make refund of the maturity amount due to the investors. It is also observed from the copies of acceptance letters furnished by the entities that some investors have also agreed to accept plots of land registered in their favour in lieu of the maturity amount. Further, the company has submitted that negotiations for sale of property worth more than Rs.8 crore is under way and they will be able to sell it soon.

9. Thus, it appears from the submissions made by the entities that they have started the process of refund in compliance with SEBI order. However, they have not been able to complete the payment of maturity amount to all investors due to the time consuming process of searching prospective buyers who will be able to give them good price for the plots of land owned by the company and the fact that properties of the companies are spread across three states. Further, it has been also claimed by the entities that they have already refunded more than 50% of the amount due to investors. Upon consideration of the facts and circumstances and the submissions of the entities during the personal hearing, I am inclined to grant an extension of four months to the applicants, in the interest of investors, so as to enable them to comply with the directions issued vide order dated August 28, 2017.

Directions 10. In view of the foregoing, 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 issue the following directions:

i. The time to comply with the direction of refund issued against Networth Marketing Ltd. and its directors, namely, Anis Mohamad Kazi, Bhaskar Bhao Vasage, Mahendra Mahadeo Bhuvad, Nuruddin Shaikh, Bhalerao Yaswant Misal and Partha Ghosh vide order dated August 28, 2017 stands extended by four months from today and shall expire by November 30, 2018. ii. Upon completion of the refund as directed above, the company and its directors shall, within a further period of seven days submit a winding up and repayment report to SEBI in accordance with the CIS Regulations as directed vide order dated August 28, 2017.

11. If the company and its directors fail to comply with the directions within the extended time, recovery proceedings shall be initiated against the company and its aforesaid directors. The representation dated January 29, 2018 is accordingly disposed of.

DATE: July 30, 2018 G MAHALINGAM PLACE: Mumbai WHOLE TIME MEMBER