Order on representation of Utkarsha Plotters and Multi Agro solutions India Ltd.

WTM/GM/EFD/Misc./3/2017-18 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER On representation dated May 9, 2016 and July 2, 2016 in the matter of Utkarsha Plotters & Multi Agro Solutions India Limited with respect to the order dated April 5, 2016 Sl. No. Name of the entities PAN Utkarsaha Plotters & Multi Agro Solutions India 1 Limited AABCU2646N 2 Mr. Mitharam Chhagan Gurav AHDPG8821D 3 Ms. Dipali Mitharam Gaurav ANVPG7189A 4 Mr. Pravin Chhagan Gurav AZBPG5053D

1. Securities and Exchange Board of India (SEBI), vide an order dated April 5, 2016 held that Utkarsha Plotters & Multi Agro Solutions India Limited (Utkarsha) was engaged in mobilisation of funds from the public through various schemes of purchase, sale and development of plots of land which were in the nature of “Collective Investment Schemes” 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 and thus contravened section 12(1B) of the SEBI Act and regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1992 (CIS Regulations). In view of this, Utkarsha and its directors, namely, Mr. Mitharam Chhagan Gurav, Ms. Dipali Mitharam Gurav and Mr. Pravin Chhagan Gurav (hereinafter referred to as “Applicants/ entities”) were, inter alia, restrained from mobilising funds under any Collective Investment Scheme and were directed to wind up the existing Collective Investment 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. After the passing of the order, the entities vide letter dated May 09, 2016 submitted that they have initiated the process of refund. It was also stated that as the current market position of real estate sector was not good, they were finding it difficult to sell the assets and properties

Order in the matter of Utkarsha Plotters & Multi Agro Solutions India Ltd.

of the company and make payments to the investors in a short period of three months. In view of the above, they sought 3 years’ time to make refunds, i.e. up to April 04, 2019. Subsequently, vide letter dated July 02, 2016, the entities urged that they may be granted five years’ time to comply with the directions in the order. The additional submissions made by the entities in this regard are as under: a. That pursuant to the passing of ex-parte ad-interim order dated January 14, 2015 in the matter, they have stopped collecting money from the public. Further, after the SEBI order, a large number of investors approached them for refunds even before maturity date, which was complied with. b. After receipt of final order, the Board of Directors (BoD) of the company held meetings on April 15, 2016 and May 6, 2016. During the meetings the directors were informed that, with great difficulty, they were able to sell two units of row houses at a nominal profit. The amount realised was around ` 36 lakh. c. The company has appointed a panel of real estate agents to dispose of the assets of the company. The progress of the sale of assets of the company is tracked by BoD on a monthly basis. d. The disposal of assets at the fair market price and as per approved valuer’s estimates has become quite cumbersome and impossible due to the following factors:  Global recession has adversely impacted the real estate market. Persons interested in buying the properties of the company are offering very low price as compared to actual market price and sometimes even less than the cost of acquisition.  Khandesh region in Maharashtra, where almost all properties of the company are located, went through one of the worst droughts in recent times which had a negative impact on the liquidity position of buyers. e. The company has sufficient assets to repay the investors. It possesses 10.49 hectares of land which is in process of development. The company also has agricultural land upon which it has planted around 10,000 trees of red and white sandalwood in the year 2013. These trees would not fetch good price if sold in present conditions and would result in loss to investors.

3. Simultaneously, the company also filed an appeal (Appeal No. 221 of 2016) against the aforesaid SEBI order before the Hon’ble Securities Appellate Tribunal (SAT). The counsel for the entities did not contest the appeal on merits before SAT and submitted that they are desirous of implementing the order within the extended time sought from SEBI vide the aforesaid representations dated May 9, 2016 and July 2, 2016. Accordingly, SAT vide order dated August 26, 2016 disposed of the appeal as withdrawn and directed SEBI as follows:

“Accordingly, the appeal is allowed to be withdrawn. SEBI is directed to dispose of the representation made by the appellants on 9th May, 2016 and 2nd July, 2016 as expeditiously as possible. Till the disposal of the aforesaid representations, SEBI shall not take any coercive action against the appellants.”

4. Subsequently, the company vide letter dated September 15, 2016 submitted a compact disc (CD) containing list of investors. It contains a list of 29,919 investors from whom it had raised an amount of ` 29,72,90,940/-. The CD also had a "optional return paid list" containing name of 4,552 investors from whom an amount of ` 9,02,96,211/- was mobilised by the company and an amount of ` 10,09,36,836/- was paid back or refunded to them. No documents supporting this claim of refund was furnished. Therefore, vide letter dated December 27, 2016, the company was advised to furnish a report from an independent auditor regarding the refund claimed to have been made by the company to the investors. The company was also advised to furnish in a prescribed format the details of the investors who have been repaid in full, amount invested by them and amount refunded by the company. The company was also asked to provide details of investors who are yet to be repaid and the details of assets of the company and its directors as directed in para 12(e) of the order dated April 5, 2016. As no reply was received, a reminder letter dated February 01, 2017 was sent to the company and its directors. The company vide letter dated February 24, 2017 submitted a list of landholdings of the company. The valuation of plots of land and shops held by the company has been put at ` 8,67,20,103/- and the valuation of sandalwood trees has been put at approximately at ` 20 Crore by the applicants.

5. An opportunity of hearing was granted to the entities on July 11, 2017. Shri Prakash Shah, Advocate, appeared for hearing on behalf of the company and its directors. The counsel submitted that they are desirous of implementing the order by refunding money to the investors and that in compliance, they have also repaid to investors whose payments had fallen due. He furnished list of property acquired from the funds collected from the investors and requested for time of 4 years to make the refund as directed in the order. The entity was asked to submit a repayment plan of a shorter duration. He was also advised to furnish evidence of refund (bank statement) along with certificate of chartered accountant and details of assets of the directors of the company. Vide e-mail dated July 25, 2017 the company has furnished an updated "optional return paid list" and copy of bank account statements. As per this list, money has been refunded to 6,413 investors. However, it is noted from the list that majority of such transfers are in cash.

Consideration and findings 6. I have considered the representation dated May 9, 2016 and July 2, 2016 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.

7. In this regard, it is noted that vide order dated April 5, 2016, the company and its directors have been directed to refund the money collected from the investors under the schemes 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 and thereafter within a period of fifteen days submit the winding up and repayment report to SEBI in accordance with SEBI (Collective Investment Scheme) Regulations, 1999. The entities are desirous of complying with the order and as per details provided by the entities in the compact disc along with letter dated September 15, 2016, the company has mobilised an amount of ` 38,75,87,151/- from approximately 34,471 investors (` 29,72,90,940/- from 29,919 investors and ` 9,02,96,211/- from 4,552 investors).

8. The applicants had also furnished an "optional return paid list" in the CD along with letter dated September 15, 2016. As per this list, an amount of `10.09 crores have been paid to 4,552 investors. During the hearing, the entities were advised to furnish evidence of refund (bank statement) along with certificate of chartered accountants. In response, the entities vide e-mail dated July 25, 2017 has furnished an updated "optional return paid list" and copies of bank account statements of the company maintained with various banks. The number of investors to whom money has been given as per the revised list is 6,413. It is also observed from the list that majority of such payments have been made in cash. Further, no certificate of chartered accountants has been furnished by the applicants even though they were asked several times to furnish report from an independent auditor regarding the amount paid back by them to the investors. It is also pertinent to mention here that the company has not been consistent in its various submissions about the number of investors from whom moneys were collected, the amount collected and refunds made by the company. Thus, in the circumstances, the number of investors who have been refunded in full cannot be ascertained from the available records and therefore the claim of refund made by the applicants cannot be accepted.

9. With regard to extension of time for refund, the entities have requested for time up to 5 years i.e. up to April 04, 2021 to make the refund to investors as directed in the order. In this regard, it is observed that, even as per submissions of the entities, around 30 thousand investors are yet to be repaid and the amount to be refunded could be more than ` 30 crore. On the other hand, as per submissions of the company, the valuation of the plots of land and shops owned by the company is approximately ` 9 crore (excluding value of sandalwood trees). Thus, from the details and value of assets of the company provided by the entities, it appears that funds collected from investors by the company were not utilised exclusively for the purpose of investment on behalf of investors or for purchasing assets in the name of the company. Further, from the huge gap in collection of money and its investment (only about 25-30% of the money collected were invested), it could be inferred that the funds were diverted and the company and its directors, who were managing the affairs of the company, had no intention to return the money collected from the investors since the beginning when the schemes were offered to the public. The directors of the company have not provided the details of their assets even after there being a direction in this regard in para 12(e) of the order dated April 5, 2016 and repeated reminders.

10. With regard to the submission of the entities that they intend to repay investors by selling sandalwood trees, it is noted from the submissions of the entities that these trees were planted in the year 2013 only. Thus, at present these trees are only 4-5 years old and it may take another 10 years or more for these trees to fetch good price.

11. It is also noted that the entities have neither furnished the certificate from chartered accountants of the payments made to investors nor the details and documents of properties of the directors of the company. Further, the company has not come up with the sources from where money is sought to be mobilised for repayment. The representation of the company does not bring out a plan or phase wise scheme to repay the investors. Thus, in my view, the extension application lacks bonafides and fails to invoke any faith regarding compliance, even if extention of time is granted.

12. In view of above, Utkarsha Plotters & Multi Agro Solutions India Limited and its directors, namely, Mr. Mitharam Chhagan Gaurav, Ms. Dipali Mitharam Gaurav and Mr. Pravin Chhagan Gurav shall wind up the existing collective investment scheme in terms of the directions contained in the order dated April 5, 2016 within three months from the date of this order, failing which recovery proceedings shall be initiated immediately against the company and its aforesaid directors. SEBI may also consider to initiate other proceedings against the entities, in accordance with law, if they fail to comply with the directions mentioned in order dated April 5, 2016. The representation dated May 9, 2016 and July 2, 2016 is accordingly disposed of.

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