Order in the matter of Suvidha Farming And Allied Ltd.

7/26/2019 Order in the matter of Suvidha Farming And Allied Ltd.

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WTM/PS/131/IMD-CIS/WRO-II/ILO/JAN/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIACORAM: PRASHANT SARAN, WHOLE TIME MEMBER

ORDER

Under sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992and regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999

In the matter of Suvidha Farming and Allied Limited

In respect ofS. No. Name CIN/DIN PAN

1 Suvidha Farming and AlliedLimited

U01400MP2010PLC023082 AAOCS5986Q

2 Vinod Kumar Shankhwar 02444432 ATNPS4287P3 Rajendra Karn Rajpoot 02444466 AJAPR9252L4 Pardeshi Ram 03118992 AVGPS2415J5 Jagdish Bisvas 03119157 AOWPB8544E6 Rajneesh Dutta 06736734 ALEPD7075R

Date of hearing: July 10, 2015Appearance:

For the noticees:

1. Mr. G. Kumar, Chartered Accountant and Mrs. Purnima Gupta, Advocate appeared on behalf of theSuvidha Farming and Allied Limited, Mr. Vinod Kumar Shankhwar, Mr. Rajendra KarnRajpoot and Mr. Pardeshi Ram.

2. Noticee, Mr. Jagdish Biswasappeared in-person.

For SEBI:1. Mr. Piyoosh Gupta, Regional Director, WRO2. Dr. Deepali Dixit, Assistant General Manager3. Mr. T. Vinay Rajneesh, Assistant General Manager4. Mr. Piyushkumar Mahajan, Manager

1. Securities and Exchange Board of India (SEBI), vide ex-parte interim Order dated February

12, 2015 (the Order), prima facie observed that the fund mobilization activity of the company,

Suvidha Farming and Allied Limited (the Company or SFAL) is a Collective Investment


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Scheme in terms of section 11AA of the Securities and Exchange Board of India Act, 1992 (the

SEBIAct). It was alleged that the Company did not obtain a certificate of registration as required

under section 12(1B) of the SEBI Act and regulation 3 of the SEBI (Collective Investment Schemes)

Regulations, 1999 (the CIS Regulations) and regulation 4(2)(t) of the SEBI (Prohibition of

Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ("the PFUTP

Regulations").

2. In order to protect the interest of investors who had subscribed to such schemes launched

and carried out by the Company and also to prevent the Company and its directors from further

carrying with their fund mobilization activity in the nature of CIS without registration from SEBI, the

following directions were issued vide the Order:

22. 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 and PFUTP Regulations, hereby

direct SFAL and its Directors viz., Shri Vinod Kumar Shankhwar (DIN: 02444432;

PAN:ATNPS4287P), Shri Rajendra Karn Rajpoot (DIN:02444466; PAN:AJAPR9252L), Shri

Pardeshi Ram (DIN:03118992; AVGPS2415J), Shri Jagdish Bisvas (DIN:03119157) and Shri

Rajneesh Dutta (DIN: 06736734; PAN:ALEPD7075R): not to collect any fresh money from investors under its existing schemes;

not to launch any new schemes or plans or float any new companies to raise fresh moneys; not to dispose of or alienate any of the properties/ assets including land/gold acquired directly or

indirectly through the money raised by SFAL;

not to divert any funds raised from public at large, kept in bank account(s) and/or in the custody ofSFAL;

to furnish all the information/details sought by SEBI within 15 days from the date of receipt of this

order.

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

24. This order is without prejudice to the right of SEBI to take any other action that is deemed fit to be

initiated against SFAL and its Directors in accordance with law.

3. The Order advised the Company and its directors to file their response and also to indicatewhether they wish to avail personal hearing. For convenience, the Company and its directors Mr.

Vinod Kumar Shankhwar, Mr. Rajendra Karn Rajpoot, Mr. Pardeshi Ram, Mr. Jagdish Bisvas and Mr.

Rajneesh Dutta, are collectively referred as noticees.


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4. The Company, vide an undated letter (received in SEBI on March 03, 2015) made the

following submissions:

(a)The Company had stopped collection of money under its schemes since January 31, 2014.

(b)The Company has given effect to all the restrictions and directions issued under the Order.

The Company is not selling its assets but giving the maturity amount out of the money

generated from trading of goats as well as from cash in hand.

(c)The Company has no malafide intention to cheat or defraud the money of investors. The

Company did take advance from customers and invested their money in land for goat farms,

investments in liquid money like FDRs with Bank and in Gold so that in case of maturities,

the Company has sufficient amount of fund in hand to clear the same in time.

(d) Major part of collection was from the high time period plan as the business of the company

had a long gestation period and accordingly the profit or earning would start after 3-5 years

from inception and by the time maturity period comes, the Company would be in a healthy

situation to refund the money of customers without any failure.

(e)The amount taken by the Company has not been diverted in any malafide manner. The money

so collected was spent by the Company for administrative expenses for running the Company

and the rest in land, offices, FDRs with Banks and in establishing projects.

(f)The directors of the Company were not aware about the rules as applicable on such kind of

activities as prescribed by SEBI or any other authority. The Companys motto was to carry

out business of goat farming which would serve the best interest of the customers as the

Company has gain a good platform to gainfully deploy the savings of investors in an

investment which will give good returns.


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(g) In the last four years, the Company never failed in paying its maturities to its customers. Even

a single complaint is not registered with any authority. The customers of the Company have

full access to the project progress reports, balance sheets, MoA, AoA during business hours.

(h)The Company also stated that it is not mobilizing fresh funds through existing schemes or

launching any news schemes/plans to raise funds.

(i) The Company undertook that it would not divert funds or dispose off property which belongs

to the Company and/or is in the custody of the Company.

5. The noticees were afforded an opportunity of personal hearing on July 10, 2015. The schedule

of personal hearing was communicated to all the noticees through letters and e-mails dated May 29,

2015. A public notice was published on June 30, 2015 in various newspapers in the areas of

residence/work as available in the records. In the personal hearing held on July 10, 2015, the

Companyand its directors, Mr. Vinod Kumar Shankhwar, Mr. Rajendra Karn Rajpoot and Mr.

Pardeshi Ramwere represented by Mr. G. Kumar, Chartered Accountant and Mrs. Purnima Gupta,

Advocate, who made oral submissions. As requested by the representatives, liberty was granted to

file written submissions within a period of 10 days. Noticee, Mr. Jagdish Biswas appeared in person

and made oral submissions. He too was granted liberty to file written submissions along with

documents, as per his request. Despite service of the Order and the hearing notice through postalservice and publication of public notice in newspaper, noticee, Mr. Rajneesh Duttadid not appear

in the personal hearing.

6. Thereafter, vide email dated July 20, 2015, noticee Mr. Jagdish Biswasmade the following

submissions:

1. I am no more associated with SFAL (Suvidha farming and Allied Limited) nor am I

holding any shares of the company.

2. I was working in SFAL (Suvidha farming and Allied Limited) as a salaried director, and

have resigned from the position on 24/06/2011 which is accepted by RoC.


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3. My tenure at SFAL as a silent director was for 11 months only i.e from 16/7/2010 till

24/6/2011.

4. Even during that tenure I was working with Sony India Pvt Ltd. Wherein I have worked

from 21-09-2009 to 05-04-2011.

5. Hence my presence in SFAL as a director was for 2 months only ie from 06-04-2011 to24/6/2011.

6. This is to confirm, as even after joining SFAL I was working with Sony India Pvt Ltd. I

had no involvement or any clue of day to day working of the SFAL, nor was I involved in any

kind of financial transaction done by SFAL, by any other directors or by anyone else on the

behalf of SFAL.

7. I had no involvement in any financial transactions/decisions done by the company SFAL.

8. I never had any company financials like bank account or check book or any pay-outs

linked to my signatures or on my name.

9. I was never involved as a signing authority under any monetary transactions done by the

company SFAL.

10. During my tenure in the company, my visits were only to take motivational speeches and

personality development sessions for people on behalf of SFAL for which I was paid per visit.

11. My joining SFAL was a sudden influenced decision. I used to take motivational classes

for students, once the current director Mr Rajput approached me saying why dont you join

the company SFAL as a director as they dont have any educated person in the position whom

they can project as knowledgeable person. Hence due to friendship and faith I joined their

company SFAL as a salaried silent director but with condition that:

a. I will not be involved in any day to day matters of company SFAL.

b. I will not leave current company I was associated with during those days (Sony India Pvt

Ltd).

c. I will not be involved in any financial transaction done by the company

d. Nor will I be involved in any working of the company SFAL.

12. I was totally unaware of the operating plans and structure of SFAL during those days as I

was nowhere involved in it. I was kept in dark and was told a very different story about working

of the company SFAL by other directors. Further I was told to create other business lines like

tea and spices business. The day I realised that I am being cheated and the working going in


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the company is not as per what I was told by directors of the company, I immediately resigned

from the position of Director which is accepted by ROC on 26-04-2012.

13. I had sent legal notice to SFAL dated 29-03-2012 to remove my name from any and every

place where SFAL is operating.

14. Further I have also given public notice in newspaper dated 25-04-2012. I am not involved

in any financial transactions done by SFAL and will not be responsible for any losses incurred

by the company.

15. Also attached is the legal agreement done between board of directors of SFAL and me

stating-

a. That Jagdish Biswas has not been involved in any financial transactions done by SFAL.

b. That Jagdish Biswas bears no responsibilities against any pre and post business done by

SFAL.

c. That under any circumstances Jagdish Biswas will not be liable for any losses/legal

prosecutions done against the company SFAL

Its a sincere request that please understand my state and request you to please exempt me

from this issue. I am currently working in a private company and earning livelihood as an only

earning member in family. I have no involvement with SFAL and their any operations. Request

you to please guide me if any further documents are required from my end to prove my part.

I will be really grateful to you if you can exempt me from the case of SFAL.

7. Thereafter, vide letters dated October 13, 2015 and November 30, 2015, the Company

requested permission to dispose its lands/assets so that money obtained would be utilized forrepayment of the remaining investors and attached a list of properties/projects. The Company also

submitted that after repayments, it would make a detailed submission to SEBI.

8. I have considered the Order, the submissions made by the noticees and other material available

on record. The Company or the other noticees have not disputed the findings or observations made

in the Order. Accordingly, I refer to such observations on the scheme related documents for making

my observations:

(a) Brochure:

A Brochure of the Company inter aliaprovided details of various plans (called as "Joint

Venture Plans") for purchase of cattle/ goat (of quantity 1 to 10), expected sum payable


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on expiry of term and Accidental Help (A/H) provided by SFAL to investor's nominee.

The Company has solicited investments through its two plans, namely -

i. Installment Payment Plan (monthly, quarterly, half-yearly & yearly): The various plans

in this category are S-1 for 12 months, S-2 for 24 months, S-3 for 36 months, S4 for

48 months, S-5 for 60 months, S-6 for 75 months, S-7 for 84 months, S-8 for 96

months, S-9 for 120 months, S-10 for 84 months, Plan SFM2 for 180 months having

return value after 3 years, 6 years, 9 years, 12 years.

As an illustration, the following table gives the details regarding the payments and

returns of one instalment plan:

Installment Payment Plan No. S-4 for 4 Years or 48 Months:

No. ofCattle /

Goat

Cost ofCattle/

Goat

Installment No. Expected Sumpayable on expiry

of term cattle

A/H(Accidental

Help)MLY QLY HLY YLY

48 16 8 4

2 4800 100 295 580 1150 7250 48004 9600 200 590 1160 2300 14500 96006 14400 300 885 1740 3450 21750 144008 19200 400 1180 2320 4600 29000 1920010 24000 500 1475 2900 5750 36250 2400012 28800 600 1770 3480 6900 43500 2880014 33600 700 2065 4060 8050 50750 33600

16 38400 800 2360 4640 9200 58000 3840018 43200 900 2655 5220 10350 65250 4320020 48000 1000 2950 5800 11500 72500 48000

ii. Lump sum Payment Plan: The various plans in this category are S-F1 for 3 years,

S-F2 for 6 years, S-F3 for 6 years, S-F4 for 8 years, S-F5 for 10 1/2 years, SFM-1 MIS

for 6 years, SF-6 for 6 years, SF-7 for 8 years, SFM3 MIS for 6 years. The details of

one Lump sum Payment plan is provided in the table below:


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Lump sum Payment Plan No. S-F 3 for 6 years

No. ofCattle/Cow

Cost of Cattle/ Cow Expected Sum payable on expiry ofterm Cattle 6 year

A/H(Accidental

Help)

1 6000 12300 60002 12000 24600 120003 18000 36900 180004 24000 49200 240005 30000 61500 300006 36000 73800 360007 42000 86100 420008 48000 98400 480009 54000 110700 5400010 60000 123000 60000

(b)The Brochure (which was in Hindi language) inter alia made the following

representations/promises:

i. SFAL purchases agricultural / barren lands and makes it fit for agriculture

usage and develops farms wherein cows, goats and sheep are reared and

taken care of.

ii. SFAL has various plans for Joint Ventures in Lump Sum Payment and

Installment Payment Plans and as per these plans, the investor chooses the

cattle. After completion of all formalities, the Company issues the

allotment letter for cattle to the investor (investor termed as 'JointVenturer'). After completion of the stipulated time frame, the investor can

either opt to get the cattle in his name or the specified money as per the

plan opted. As per these plans, the rearing of cattle takes place in the

Companys farm houses.

iii. The investor also has the option of emergency loan service after 12 months

on 60% of amount paid.

iv. The Company also provided Accidental Help (A/H) upto` 150000/- to

the nominees of theJoint Venturer.


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(c)The Company also has a structured commission pay-out scheme for its agents. As per the

brochure pertaining to the same, the Company had agents at various levels. These agents are

paid "ORC Commission" for business brought in by them. Further, they are also given

Accidental Help (A/H) by SFAL. Another document called the Rule Book for F.A. &Joint

Venture provides details of various plans and other information for the agents and investors.

(d)The following are noted from the Companys letter dated February 17, 2014 to SEBI:

i. As per the copies of filled in application forms and registration certificate issued for

each of the Plans, it is observed that the Company mobilized the contributions from

investors as per the Plan opted.

ii. The terms and conditions of the application form inter aliastated:

"Joint Venture must be an Indian National.......

The company shall issue Certificate on the basis of Application Form.....

Joint Venture shall be repaid on Maturity of Term only.....

Minors can apply through their parents/guardian. Application in the name of minor must be

signed by his/her/their natural parent(s)...."

iii. The General Terms and Conditions in the Certificate issued by the Company inter alia

statesd

"Special Provisions for refund in case of natural Death: In case of natural death of a Joint

Venture or the Nominee of legal Representative /Successor may have the refund as specified in

Rule Book, as amended from time to time.

Accidental Death Compensation: The Joint Venture (s) shall be eligible for compensation in the

event of accidental death as per Rule Book, as amended from time to time."

iv. The Company has branches in 9 locations and had 21 bank accounts with HDFC

Bank, Axis Bank, ICICI Bank, Yes Bank, Bank of India and Vijaya Bank.


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(e) The following were noted from the documents /information submitted by the Company vide

its letter dated March 24, 2014 to SEBI:

i. In a brief note attached on Accidental Help (A/H), the Company has represented

as follows:

"Accidental Help (hereinafter refer as A/H) belongs to Accidental Health Help which the Co.

is providing to its customer's nominee after death of the customer, on certain terms & conditions.

The Accidental Help is the financial assistance to the family/dependant of the customer of the

Co who have applied in any of the scheme of the Co. and being provided only on the death, on

certain terms & conditions and on complete discretion of the Board and any other prescribed

authority of the Co. The said financial assistance is in nature of help and Co. is not chargingany extra/additional money for this, from its customer.

ii. In a brief note attached on "Appropriation of amount received from the Investors"

the Company had stated:

"The Company M/s Suvidha Farming & Allied Limited was incorporated in the year 2010

with an object of cattle farming, animal husbandry, farming business and has been raising the

fund from its customer on the basis of the cattle farming. The Company accept the advance from

customer against the product i.e. cattle and assured them certain returns.

After getting advance from the customer, the Company purchases cattle, takes care of them and

whatever the benefits accrue out of the cattle farming, it will be shared to the customers.

For the above, the Company gets the application signed from customers with their personal details,

and issues the Bond/certificate which also includes the terms and conditions of the cattle and

advances given by the customers.

Till the time the company returns the money to the customer, it treats the advances received from

customers under the head of Liabilities........"


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(f)The Order has mentioned that the Company had mobilized an amount of approximately

`28.22 crores from 2,69,905 investors during the financial years 2010-11 to 2013-14. The

break-up of such mobilization financial year-wise and plan-wise is as below:

2010-11

Plan Code Total amount mobilized (`

) No. of investor

S1 2970 10S10 44552 63S2 1682 10S3 44856 151S4 34195 111S5 3483177 6646S6 484852 672S7 40271 34S8 63490 72S9 16597 40SF1 65679 3

SF2 145577 13SF3 575395 23SF4 943680 36SF5 543605 19SF6 1128210 42SF7 1318415 58SFM2 19989 10SFM3 1889505 21Grand Total 10846697 8034

2011-12

Plan Code Total Amount Mobilized (`) No. of investors

S1 9523 33S10 132164 192S2 52631 57S3 713101 1314S4 308470 625S5 12019671 33230S6 4551888 5219S7 269006 259S8 160781 452S9 115121 134SF1 553105 29SF2 789002 106SF3 2002745 109SF4 1621100 100SF5 5128620 192SF6 8442490 258SF7 6194365 298SF8 1432170 39SFM1 112810 2


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SFM2 330162 100SFM3 8479275 95Grand Total 53418200 42843

2012-13

Plan Code Total Amount Mobilized (`

) No. of Investors

S1 140548 220S10 235160 317S2 168443 275S3 1971105 3885S4 595020 962S5 35856561 57665S6 11124827 15296S7 655172 550S8 242898 416S9 311552 310SF1 1237965 57SF2 1219065 165SF3 1999335 123SF4 3788315 223SF5 4968600 216SF6 15091495 519SF7 19849415 733SF8 6065725 260SFM2 567739 232SFM3 10843560 132Grand Total 116932500 82556

2013-14 (upto January 31, 2014)

Plan Code Total Amount Mobilized (`

) No. of InvestorsS1 969213 1094S10 522140 586S2 255788 415S3 2970417 5603S4 597788 1120S5 51654215 102300S6 14699508 22212S7 998060 924S8 234144 419S9 314494 343SF1 530338 26SF2 137439 27

SF3 212745 21SF4 2077895 79SF5 775945 41SF6 5315130 226SF7 9409815 613SF8 1892560 107


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SFM2 578726 228SFM3 6896240 88Grand Total 101042600 136472

(g)The Order also noted and observed the following:

iv. As per the audited financial statement as on March 31, 2010, March 31, 2011, March 31, 2012

and March 31, 2013 submitted, it is observed as follows:

The details of fund mobilization and their utilization (as apparent from the audited financial

statements) are as under:

As on March 31, 2011

(`)

As on March 31,2012

(`

)

As on March 31,2013

(`

)Major Liabilities

Advance received from customers 1,08,46,697.00 6,41,06,191.00 17,77,21,932.00Major AssetsTangible Assets 13,77,496.00 2,00,83,102.00 2,91,09,536.00Bank balance 51,13,327.32 2,02,04,395.13 2,45,95,387.53Cash in hand 5,63,047.00 11,21,508.00 12,03,513.00Investments - - 4,23,86,546.31Other current assets (mainly loan& advances w.r.t. business)

5,21,200.00* 23,47,115.00 76,24,711.92

* As per note 7 to the Financial Statement as on March 31, 2012, this figure is

Rs.4,21,200/- with respect to loans and advancesbusiness.

During these years, the commission paid/ payable to agents involved in mobilization of fundsfrom customers is given below:-

2010-11 (` 2011-12 (`) 2012-13 `)ORC Commission paid 14,64,637.00 2,04,94,871.00 3,53,04,947.00Commission payable - 41,63,249.00 4,59,992.00Total Commission 14,64,637.00 2,46,58,120.00 3,57,64,939.00

The total commission paid/payable to agents viz., `6,18,87,696/-, for the three years

considered is approximately 35% of the amount indicated as "Advance received from customers"

as on March 31,2013.

The income generated by SFAL from operations is as below:-

2011-12 (`) 2012-13 (`)

Animal husbandry consultancy fees 22,01,500.00 23,56,200.00


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Trading in Goatry 21,20,050.00 20,51,850.00

Total Revenue from Operations 43,21,550.00 44,08,050.00

v. The details of investments as provided by SFAL is as under:

Investment in land Total paid amount is `6,61,78,233/- (outstanding amount is

`5,06,06,292/-).

Investment in gold- 356.50 gms. ( 10,05,646/-)

Investment in FDRs- `2,11,75,462/-.

vi. SFAL has also provided a list of its group companies comprising eleven entities and M/s

Suvidha Land Developers India Limited is one of the group entities. It is noted that the

Shri Vinod Kumar Shankhwar and Shri Rajendra Karn Rajpoot are the Directors in tenof these entities.

g) It is pertinent to mention here that the group entity of SFAL, viz. M/s Suvidha Land

Developers India Limited, against which a complaint has been received, have vide their letter

dated March 21, 2014, inter alia submitted: "M/s Suvidha Farming & Allied Limited

is one of the group company, which is raising funds from the Public....".

9. In the light of the features of the schemes/plans including the features mentioned above, it

needs to be determined whether the schemes are CISs as alleged in the Order. The Company, in its

submissions, has not disputed the findings/allegations in the Order. Rather, in its submissions, the

Company accepted that it took advance from customers and invest their money in goat farming, land,

administrative expenses, establishing of projects etc. To conclude whether a scheme is a CIS or not,

all the four conditions under section 11AA(2) of the SEBI Act should be satisfied.

(a)The first conditionunder the said section is that 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.

From the above scheme related and submissions of the Company, it is very clear that the

Company receives payments from customers under the head Advances and assured them


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returns. The following submission from the Company is the testimony to the fact that monies

were pooled and utilized for its scheme related business:

The Company M/s Suvidha Farming & Allied Limited was incorporated in the year 2010

with an object of cattle farming, animal husbandry, farming business and has been raising the

fund from its customer on the basis of the cattle farming. The Company accept the advance from

customer against the product i.e. cattle and assured them certain returns.

After getting advance from the customer, the Company purchases cattle, takes care of them and

whatever the benefits accrue out of the cattle farming, it will be shared to the customers.

For the above, the Company gets the application signed from customers with their personal details,

and issues the Bond/certificate which also includes the terms and conditions of the cattle and

advances given by the customers.

Till the time the company returns the money to the customer, it treats the advances received from

customers under the head of Liabilities........"

The Company accepts monies from customers under its schemes and uses it for the purposes

of the purported schemes i.e. purchases cattle and offers benefits to the customers under the

schemes. In view of the same, it is proved that the Company pools and utilizes the monies

towards the scheme/arrangement. Accordingly, I find that the first condition is satisfied.

(b)The secondconditionis that 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.

On perusal of the various schemes/plans and the submissions of the Company, the Company

solicits investments from customers to carry out its scheme objectives and promises returnsto the customers as per plans opted by them. It is noted that the Certificate issued by SFAL

indicates the Plan opted by the investor in the application form. Further, the brochure issued

by SFAL provides details of the various Plans, viz. number, cost of cattle/cow, expected sum


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payable on expiry of term and also Accidental Help (A/H). As per sample plan table for

Installment Payment Plan No.S-4 for 4 years, which is detailed in paragraph 8 of this order,

it is observed that for an investor paying an amount of Rs.100/- per month for 48 months

for cattle/goat costing Rs.4,800/-, the expected sum payable on expiry of term is Rs.7,250/.

The investor can either opt to get the cattle or is assured of receiving a specified amount at

the expiry of term. The Company also provides financial assistance (accident help) to its

customers and also provides emergency loan services after 12 months on 60% of the amount

paid.

As the scheme envisages payment of money/cattle in return of the investment by the

customer, the second condition is also satisfied.

(c)The third and fourth conditionsunder section 11AA(2) of the SEBI Act can be discussed

together. These conditions are that the property, contribution or investment forming part

of scheme or arrangement, whether identifiable or not, is managed on behalf of the

investors and the investors do not have day-to-day control over the management and

operation of the scheme or arrangement.

As per the scheme related documents, the rearing of cattle takes place in the Companys farm

houses and at the end of term of the Plan, the investor can either opt for the cattle or the

money assured. There is no clause in the terms and condition of the application form/

registration certificate to show that the investor has any say in the management of these Plans

or towards purchase of land/cattle and rearing of cattle. In these facts and circumstances, it

is clear that the schemes are managed by the Company on behalf of the investors. The

Company has also not disputed the observations made in the Order in this regard.

Accordingly, I find that the third and fourth conditions under section 11AA(2) are satisfied.

As all the 4 conditions under section 11AA(2) of the SEBI Act are satisfied, the scheme of the

Company qualifies as a collective investment scheme.

10. The Company, through its schemes, had mobilized Rs.28.22 crore from 2,69,905 investors

from FY 2010 to 2014. In Order, in paragraph 16, has observed It is also disconcerting that the total


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"Commission paid/payable to agents" viz.,`6.19 Crores is approximately 35% of the amount of `.17.77 Crores

collected in three years indicated as "Advance received from customers" as on March 31,2013 (details in page 14 above

of this order). Prima facie, it appears that a significant portion of the moneys collected as "Advance received from

customers" is utilized for payment of Commission to agents for their role in attracting investors to invest in the various

Schemes/ Plans offered by SFAL. It is noticed that the Company has paid huge amounts (from the

money mobilized from customers) as commission to its agents. Further, the usage of joint venture

in the brochure has already been observed to be a camouflage for the Companys mobilization activity

to mislead and solicit investments from public.

11. In view of the above discussion, the Scheme of the Company i.e. purchase of land and cattle

and rearing of goats/buffaloes, satisfies all the four conditions under section 11AA(2) of the SEBI

Act. Accordingly, it is concluded that the purchase and rearing (of goats/buffaloes) arrangements ofthe Company with its customers fall within the ambit of the definition of Collective Investment

Scheme under section 11AA of the SEBI Act. The Honble Supreme Court in the matter of PGF

Limited vs. UoI and another (ref. MANU/SC/0247/2013, has observed "..the Parliament thought it

fit to introduce Section 11AA in the Act in order to ensure that any such scheme put to public notice is not intended to

defraud such gullible investors and also to monitor the operation of such schemes and arrangements based on the

regulations framed under Section 11AA of the Act." The Hon'ble Supreme Court further observed "Inasmuch

as the said Section 11AA seeks to cover, in general, any scheme or arrangement providing for certain consequences

specified therein vis-a-vis the investors and the promoters..

12. To carry out the activity of CIS and mobilize public funds from such schemes, it is mandatory

under law to obtain a certificate of registration from SEBI. Section 12(1B) of the SEBI Act mandates

that no person, shall sponsor or cause to be sponsored or carry on or caused to be carried on any CIS

unless it obtains a certificate of registration from SEBI in accordance with the CIS Regulations.

Regulation 3 of the CIS Regulations provides that no person other than a Collective Investment

Management Company which has obtained a certificate under the said regulations shall carry on orsponsor or launch a 'collective investment scheme'. A person can launch or sponsor or cause to

sponsor a collective investment scheme only if it is registered with SEBI as a Collective Investment

Management Company. Therefore, the launching/ floating/ sponsoring/ causing to sponsor any


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'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. The Company does not have a certificate of registration as

mandated under law and has launched CIS without obtaining certificate of registration from SEBI,

thereby contravening the provisions of section 12(1B) of the SEBI Act and regulation 3 of the CIS

Regulations. The activities of the Company are not exempt under the clauses under section 11AA(3)

of the SEBI Act.

13. I also note that in terms of regulation 4(2)(t) of the SEBI (Prohibition of Fraudulent and

Unfair Trade Practices Relating to Securities Market) Regulations, 2003, dealing in securities shall be

deemed to be a fraudulent or an unfair trade practice if it involves fraud and includes illegal

mobilization of funds by sponsoring or causing to be sponsored or carrying on or causing to be carriedon any collective investment scheme by any person. This provision in the above Regulations has been

brought into effect from September 06, 2013. The Company has stated that it stopped mobilization

from January 31, 2014. Accordingly, it could be held that by mobilizing public funds through CIS

without obtaining registration from SEBI as required under section 12(1B) of the SEBI Act read with

regulation 3 of the CIS Regulations, after the provision coming into force, the Company has

contravened the above provision.

14. Therefore, having concluded that the activities of the Company are CIS in terms of section

11AA of the SEBI Act and that the same were carried out without obtaining registration from SEBI,

suitable enforcement action should necessarily follow in the interest of investors. In view of such

unregistered CIS activities carried on by the Company, it becomes necessary to issue suitable directions

in the interest of investors and the securities market. In this regard, regulation 65 provides for various

directions by SEBI. The said provision is reproduced below for reference:

65. The Board may, in the interests of the securities market and the investors and without prejudice to its right to

initiate action under this Chapter, including initiation of criminal prosecution under section 24 of the Act, give such

directions as it deems fit in order to ensure effective observance of these regulations, including directions:

(a) requiring the person concerned not to collect any money from investors or to launch any [collective investment scheme];


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(b) prohibiting the person concerned from disposing of any of the properties of the [collective investment scheme] acquired

in violation of these regulations;

(c) requiring the person concerned to dispose of the assets of the [collective investment scheme] in a manner as may be

specified in the directions;

(d) requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite

interest or otherwise, collected under the [collective investment scheme];

(e) prohibiting the person concerned from operating in the capital market or from accessing the capital market for a

specified period.

As the Company is carrying out unregistered CIS activities, it becomes necessary to direct the

Company to wind up the CIS and refund its investors money or assets along with requisite interest

along with other necessary directions.

15. The interim order was issued in respect of Vinod Kumar Shankhwar, Rajendra Karn Rajpoot,

Pardeshi Ram, Jagdish Bisvas and Rajneesh Dutta. Except for Mr. Jagdish Bisvas, the other individuals

have not filed their replies. With respect to their liability, I observe as follows:

(a)As per the details available in the MCA portal, Vinod Kumar Shankhwar, Rajendra Karn

Rajpoot, Pardeshi Ram and Rajneesh Dutta. Details regarding their DIN, address and date of

appointment as directors in the Company is given in the table below:

DIN/DPIN/PAN Full Name Present residential address Designation Date of Appointment

02444432VINOD KUMAR

SHANKHWAR

OPP. QR NO. 97, SEVA NAGAR,LASHKAR, GWALIOR, 474001, MadhyaPradesh, INDIA

Director 16/02/2010

02444466RAJENDRA KARN

RAJPOOT

C/O SURENDRA BHONSLE, 4, NORTHAVENUE , CHAUBEY COLONY, RAIPUR,492001, Chhattisgarh, INDIA

Director 16/02/2010

03118992 PARDESHI RAMHNO. 7, NEW MOTI NAGAR, VILL -

BORIYAKHURD, RAIPUR, 492001,Chhattisgarh, INDIA

Additional director 01/06/2015

06736734 RAJNEESH DUTTA4/251 BLOCK NO 4, SUBHASH NAGAR,

HARI NAGAR, NEW DELHI, 110027, Delhi,INDIA

Additional director 01/12/2013


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(b)The Company was incorporated on February 16, 2010. Vinod Kumar Shankhwar and

Rajendra Karn Rajpoot are the directors in the Company from the date of its incorporation.

These directors become responsible for the conduct of the business of the Company and

therefore liable for the contraventions, as found above in this Order, committed by the

Company.

(c) Rajneesh Dutta was appointed as a director on December 01, 2013. Pardeshi Ram was

inducted on June 01, 2015. It appears that they have not taken any action against the

Company/management in running unregistered CIS even after the interim order, which gives

an impression that they have colluded with the Company/management in carrying on with

the unregistered CIS. Further, these directors have also not taken any steps to remedy the

violations. Therefore, these persons also become responsible for the conduct of the businessof the Company from the date of their appointment.

(d)With respect toJagdish Bisvas, I note that he was admittedly a director in the Company from

July 16, 2010 to June 24, 2011. This noticee had made elaborate submissions stating that he

was not responsible for the violations and that he resigned from the Company on noticing

that the Company was not working as he was told and that his resignation was accepted by

RoC on April 26, 2012. The noticee has also sent a legal notice to the Company demanding

that his name be removed and had also made a newspaper notice stating that he was not

involved in any financial transactions of the Company and therefore not responsible for any

losses incurred by the Company. The noticee has also submitted that during the period of

directorship with the Company he was also employed elsewhere from September 21, 2009 to

April 05, 2011.

I have considered such submissions. In terms of section 291 of the Companies Act, 1956, the

board of directors of a company shall be entitled to exercise all such powers and do all such

acts and things as the company is authorized to exercise and do. Therefore, the board of

directors shall be responsible for the conduct of the business of a company and liable for any

non-compliance of law and such liability shall trickle down to individual directors.


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Accordingly, a director who is part of a companys board shall be responsible and liable for all

acts carried out by a company unless exemptions are provided. The noticee, in the present

case, was part of the Companys Board of Directors for the periodJuly 16, 2010 to June 24,

2011. Accordingly, he shall also be responsible and liable along with the others in the Board,

for all the deeds/acts of the Company during the period of his directorship. The noticee, by

merely stating that he was a silent director and not involved in the operations and finances

of the Company cannot wriggle out from his responsibility. The present case involves a

Company that has mobilized public funds from gullible investors through its unregistered

collective investment schemes. In this regard, the following observations made by the Honble

High Court of Madras in Madhavan Nambiar vs Registrar of Companies(2002 108 Comp Cas 1

Mad) are important to note:

13. . A director either full time or part time, either elected or appointed or nominated isbound to discharge the functions of a director and should have taken all the diligent steps and

taken care in the affairs of the company.

14. In the matter of proceedings for negligence, default, breach of duty, misfeasance or breachof trust or violation of the statutory provisions of the Act and the rules, there is no differenceor distinction between the whole-time or part time director or nominated or co-opted directorand the liability for such acts or commission or omission is equal. So also the treatment forsuch violations as stipulated in the Companies Act, 1956.

I also note that the noticee has made a newspaper notice stating that he was not involved inthe financial transactions done by the Company. The noticee has also referred to an

agreement entered into between the noticee and the Board of Directors of the Company

stating that this noticee was not involved in the transactions and would not be liable for any

losses/legal prosecution done against the Company. However, this agreement would not

abdicate the noticeesrole as a director in the Company when the Company was mobilizing

money from public under its unregistered CIS. He therefore becomes liable for enforcement

action.

16. I also note that the Company has requested SEBI to grant permission to dispose off its

assets/property for the purposes of repaying the investors. Considering that this request is made for


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the purposes of making refunds to the investors from whom mobilization was made, I find it

appropriate and in the interest of investors to allow this request.

17. In view of the foregoing observations and findings, I, in exercise of the powers conferred

upon me under section 19 of the Securities and Exchange Board of India Act, 1992 and sections 11(1),

11(4) and 11B thereof and regulation 65 of the SEBI (Collective Investment Schemes) Regulations,

1999, hereby issue the following directions:

1. Suvidha Farming and Allied Limited, Mr. Vinod Kumar Shankhwar, Mr. Rajendra Karn

Rajpoot, Mr. Pardeshi Ram, Mr. Jagdish Bisvas and Mr. Rajneesh Dutta shall abstain

from collecting any money from the investors or launch or carry out any Collective Investment

Schemes including the schemes which have been identified as a Collective Investment Schemein this Order.


Rajpoot, Mr. Pardeshi Ram and Mr. Rajneesh Dutta shall wind up the existing Collective

Investment Schemes and refund the moneycollected by the said company under the schemes

with returns which are due to its investors as per the terms of offer within a period of three

months from the date of this Order and thereafter within a period of fifteen days, submit a

winding up and repayment report to SEBI in accordance with the SEBI (Collective InvestmentSchemes) Regulations, 1999, including the trail of funds claimed to be refunded, bank account

statements indicating refund to the investors and receipt from the investors acknowledging

such refunds.


Rajpoot, Mr. Pardeshi Ram and Mr. Rajneesh Dutta shall not alienate or dispose off or

sell any of the assets of the aforesaid company except for the purpose of making refunds to its

investors, as directed above.


Rajpoot, Mr. Pardeshi Ram, Mr. Jagdish Bisvas and Mr. Rajneesh Dutta are directed to


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immediately submit the complete and detailed inventory of all their assets and properties and

details of all their bank accounts, demat accounts and holdings of shares/securities, if held in

physical form.


Rajpoot, Mr. Pardeshi Ram, Mr. Jagdish Bisvas and Mr. Rajneesh Dutta are restrained

from accessing the securities market and are prohibited from buying, selling or otherwise

dealing in securities market for a period of 4 years.

6. In the event of failure by Suvidha Farming and Allied Limited, Mr. Vinod Kumar

Shankhwar, Mr. Rajendra Karn Rajpoot, Mr. Pardeshi Ram and Mr. Rajneesh Dutta,

to comply with the directions in sub-paragraphs 1-4 above, the following action shall follow:

i. Suvidha Farming and Allied Limited, Mr. Vinod Kumar Shankhwar, Mr.

Rajendra Karn Rajpoot, Mr. Pardeshi Ram, Mr. Jagdish Bisvas and Mr.

Rajneesh Dutta shall remain restrained from accessing the securities market and

prohibited from buying, selling or otherwise dealing in securities market, even after the

completion of period of 4 years of restraint imposed vide sub-paragraph 5 above, till

all the Collective Investment Schemes of the Companyare wound up and all the monies

mobilized through such schemes are refunded to its investors with returns which are

due to them.

ii. SEBI would make a reference to the State Government/ Local Police to register a civil/

criminal case against Suvidha Farming and Allied Limited, its promoters, directors and

its managers/ persons in-charge of the business and its schemes, for offences of fraud,

cheating, criminal breach of trust and mis-appropriation of public funds.

iii. SEBI would make a reference to the Ministry of Corporate Affairs, to initiate theprocess of winding up of the company, Suvidha Farming and Allied Limited.


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iv. SEBI shall also initiate attachment and recovery proceedings under the SEBI Act and

rules and regulations framed thereunder.

18. This order shall come into force with immediate effect.

19. This Order shall be without prejudice to the right of SEBI to initiate prosecution proceedings

under section 24 and adjudication proceedings under Chapter VIA of the Securities and Exchange

Board of India Act, 1992 against Suvidha Farming and Allied Limited, Mr. Vinod Kumar

Shankhwar, Mr. Rajendra Karn Rajpoot, Mr. Pardeshi Ram, Mr. Jagdish Bisvas and Mr.

Rajneesh Dutta, including other persons who are in default, for the violations as found in this Order.

20. Copy of this Order shall be forwarded to the stock exchanges and depositories for necessary

action.

PRASHANT SARANWHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

Date: January 11th, 2016Place: Mumbai

Order in the matter of Suvidha Farming And Allied Ltd.

Documents

Transcript of Order in the matter of Suvidha Farming And Allied Ltd.