Interim order in the matter of Suvidha Farming and Allied Limited

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WTM/SR/CIS-WRO/ILO/ /02 /2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI

CORAM: S. RAMAN, WHOLE TIME MEMBER

ORDER

Under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act,

1992 read with Regulation 65 of the SEBI (Collective Investment Schemes) Regulations,

1999 in the matter of Suvidha Farming and Allied Limited

(CIN:U01400MP2010PLC023082; PAN:AAOCS5986Q) 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;

PAN:AVGPS2415J), Shri Jagdish Bisvas (DIN:03119157) and Shri Rajneesh Dutta (DIN:

06736734; PAN:ALEPD7075R)

___________________________________________________________________________

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") received a

complaint on October 07, 2013 alleging that Suvidha Farming & Allied Limited has

mobilized Rs.600 crores from public by violating CIS Regulations of SEBI. The complainant

provided certain documents in respect of Suvidha Farming & Allied Limited (hereinafter

referred to as "SFAL") and its group company Suvidha Land Developers India Limited and

requested for investigation by SEBI. The case of Suvidha Land Developers India Limited is

being examined separately by SEBI.

2. SEBI, vide letters dated October 24, 2013, sought the following information / documents

from SFAL and its Directors in order to ascertain whether or not SFAL is carrying on

'Collective Investment Schemes' in terms of Section 11 AA of the SEBI Act, 1992 (hereinafter

referred to as "SEBI Act") :

a. Memorandum and Articles of Association of the Company as filed with the

concerned Registrar of Companies ("RoC");

b. Details of the past and present directors of the company;

c. Brochures pertaining to SFAL's schemes/ offers which were made available to the

public.

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d. Copies of application forms that are required to be submitted by investors/applicants

to participate in SFAL's schemes.

e. Sample copies of the regulations letter and allotment letter issued to the investors

who subscribed to SFAL's schemes.

f. Sample copies of the agreement letter/ contract required to be entered into by

investor/applicant under SFAL's schemes.

g. Details of the scheme wise amount mobilized by SFAL till date along with the

number of investors under the schemes.

h. Certified copy of audited financial statement for the FY 2009-10, 2010-11 and 2011-

12.

i. Copy of Income Tax Return filed by SFAL for the last three years.

j. Details of the regulatory approvals obtained by SFAL, if any, for provision of

accidental death/disability benefits to investor, under SFAL's schemes.

k. Details of any other similar scheme(s), if any, floated by SFAL or its group/associates

company.

3. As the aforesaid letters sent to the registered office, regional office and head office of SFAL

were returned undelivered, a SEBI official visited the registered office address of SFAL on

December 18, 2013 when SEBI's letter dated October 24, 2013 was received by SFAL.

During the visit, the following information was gathered:

a. SFAL's office was operational and Shri.R. Sarothia was in-charge.

b. Shri Vinod Kumar Shankhwar is the main director.

c. The corporate office of SFAL is at G-13, Sector 6, Noida, Uttar Pradesh-201301,

Tel.No.: 0120-4512700 and website is www.suvidhafarming.com. The regional office

of SFAL is at 40-A, Prem Nagar, Lashkar, Gwalior-474001.

d. SFAL is following “Joint Venture” model for cows/ goats purchased and managed

for their associates.

4. No reply was however received to the SEBI letter dated October 24, 2013 . Copies of the

documents forwarded by the complainant were sent to SFAL and its three Directors, viz.

Shri Vinod Kumar Shankhwar, Shri Rajendra Karn Rajpoot and Shri Pardeshi Ram, vide

letter dated January 23, 2014 seeking their comments. In addition to the information sought

vide SEBI's earlier letter dated October 24, 2013, the following information was also sought:


http://www.suvidhafarming.com/

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a. Name, address of each investor and amount deposited by each of them with plan

details & date of investment (from start of company till date);

b. Details of how many persons have been refunded the amount after expiry of

agreement;

c. In case amount taken from investor, details for amount appropriated by SFAL with

reasons;

d. Amount outstanding to each investor;

e. Address of all branches operating in India;

f. Copies of duly filled in application form, registration certificate, agreement executed

in respect of any two investors of each plan offered by SFAL;

g. Details of all the assets purchased from the funds mobilized from public;

h. List of all the bank accounts of SFAL (including name of branch of bank) from start

till date;

i. Detailed trial balance for 2013-14 till date;

j. Clarification of amounts in each plan;

k. Provide list of all group companies/companies under same management and inform

about the activities performed by them with their addresses;

5. SFAL, vide fax letter dated February 04, 2014 sought additional time till February 18, 2014 to

submit the information/documents. Subsequently, vide letters dated February 17, 2014,

March 24, 2014 and March 31,2014, SFAL inter alia provided copies of Memorandum and

Articles of Association, list of past and present Directors, addresses of branches operating in

India, copies of application forms and certificates issued to Joint Venturers, list of bank

accounts, details of scheme-wise amount mobilized by the company, details of refund after

expiry of agreement, brief note on utilisation of amount received from the investors, details

of investments, copies of audited financial statement for the financial years 2009-10, 2010-11,

2011-12, 2012-13, copies of income tax return for financial year 2010-11, 2011-12, brief note

on accidental help provided to investors, list of group companies, and some data on

investors.

6. On perusal of the documents submitted by SFAL, SEBI, vide letter dated July 08, 2014,

sought clarifications /documents from SFAL with regard to the following observations :

a. The names of investors indicated in the copies of application forms and certificates

were not reflected in the data on investors.


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b. The details of year-wise amount mobilized did not tally with the total amount paid

by investors as per the data on investors. SFAL later advised that the difference is

on account of some deposits repaid on maturity.

c. The Customer Service Centre (CSC) address indicated in certificates issued to two

investors were not reflected in the list of nine branches submitted by SFAL.

d. SFAL had submitted details of repayments made to investors on maturity. SFAL

was advised to provide a certificate from the management as well as auditor

certifying the repayments to investors as per the list provided to SEBI. This has not

been done till now.

e. As per the audited financial statements as on March 31, 2013 submitted by SFAL,

an amount of `3,53,04,947/-was indicated as expenses towards "ORC Commission".

SFAL was advised to provide the list of all its agents (with their designation &

address) along with year-wise commission paid from start till date.

f. SFAL was also advised to provide copy of documents evidencing their submission

of investments (in land, gold and FDRs) made from funds mobilized from public.

7. In response, SFAL vide letter dated July 16, 2014 enclosed one CD containing scanned copy

of their reply, copies of few registries towards land purchase and sought a week's time to

provide comprehensive details with respect to agents and commission paid. In addition,

SFAL also made the following submissions:

"

a) The figures reported to you vide our letter dated March 24,2014 were the actual amounts collected.

b) As regards the discrepancies pointed out by you we would like to present to you that they were the result

of honest omissions and commissions which occurred because of the fact that the information presented was

culled out of a very large database within a very short span of time resulting in the inaccuracies pointed

out by you. ........... We are in the process to settle all maturity month wise after taking mandate from our

client individually...

c) As regards the certificates issued by us to......... the address which is printed on the certificates, is an old

branch address of the company which was shifted in June 2013 to the current address ...."

SFAL vide emails dated July 19, 2014 also provided copy of documents to show that they

have 4 properties in Dehradun, Uttrakhand.


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8. I have carefully considered the material available on record, correspondence exchanged

between SEBI and SFAL, along with the documents contained therein and information

furnished by the complainant, submissions made by SFAL, etc. In this context, the issue for

determination is whether the mobilization of funds by SFAL under its schemes falls under

the ambit of „collective investment scheme‟ in accordance with Section 11AA of the SEBI Act,

1992 (hereinafter referred to as "SEBI Act").

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

a) SFAL (CIN: U01400MP2010PLC023082) was incorporated on February 16, 2010 as

a private limited company and became a public limited company on July 28, 2010.

Its registered office at House No. 176, Near Habibganj, Behind Railway Track,

Narayan Nagar, Hushangabad Road, Bhopal, Madhya Pradesh-462026.

b) The present Directors of SFAL are Shri Vinod Kumar Shankhwar (DIN:02444432;

PAN:ATNPS4287P); Shri Rajendra Karn Rajpoot (DIN:

02444466;PAN:AJAPR9252L) and Shri Rajneesh Dutta (DIN:06736734;

PAN:ALEPD7075R). Further, Shri Pardeshi Ram (DIN:03118992;

PAN:AVGPS2415J) was director from 16/7/2010 till 01/12/2013 and Shri Jagdish

Bisvas (DIN:03119157) was director from 16/7/2010 till 24/6/2011).

c) As per the MoA of SFAL, its main object is "to carry on in India or else where the business

to own, lease, manage, run, establish and develop dairy and dairy farms and for this purpose to buy,

sell, trade breed, provide financial assistance, import, export, grow, produce, keep and deal in all

types of cattle including cows, buffaloes, she goats, sheep and to nourish, cherish and nurse them to

extract milk and also to act as dairyman, gardener, breeder, milk collector, milk vendor and use the

milk for manufacturing various dairy products. "

d) A perusal of the various brochures submitted by the complainant provides the

following details:

One brochure, inter alia, provides details of various "Joint Venture Plans" for

purchase of cattle/ goat (of quantity 1 to 10), expected sum payable on expiry of


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

plans indicated are :

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.

ii. Lumpsum 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 sample plan table for one Installment Payment Plan and Lumpsum Payment

Plan is given below:-

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

No. of

Cattle

/ Goat

Cost of

Cattle/

Goat

Installment No. Expected Sum

payable on

expiry of term

cattle

A/H

(Accidental

Help)

MLY QLY HLY YLY

48 16 8 4

2 4800 100 295 580 1150 7250 4800

4 9600 200 590 1160 2300 14500 9600

6 14400 300 885 1740 3450 21750 14400

8 19200 400 1180 2320 4600 29000 19200

10 24000 500 1475 2900 5750 36250 24000

12 28800 600 1770 3480 6900 43500 28800

14 33600 700 2065 4060 8050 50750 33600

16 38400 800 2360 4640 9200 58000 38400

18 43200 900 2655 5220 10350 65250 43200

20 48000 1000 2950 5800 11500 72500 48000


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Lumpsum Payment Plan No. S-F 3 for 6 years

No. of

Cattle/

Cow

Cost of Cattle/

Cow

Expected Sum

payable on expiry of

term Cattle 6 year

A/H

(Accidental

Help)

1 6000 12300 6000

2 12000 24600 12000

3 18000 36900 18000

4 24000 49200 24000

5 30000 61500 30000

6 36000 73800 36000

7 42000 86100 42000

8 48000 98400 48000

9 54000 110700 54000

10 60000 123000 60000

The brochure (translated version) inter alia provides as follows :

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 LumpSum Payment and

Installment Payment Plans and as per these plans, the investor

chooses the cattle and after all formalities are completed, SFAL issues

the allotment letter for cattle to the investor (investor termed as 'Joint

Venturer'). 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 SFAL's farm houses.

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

months on 60% of amount paid.

iv. SFAL also provides Accidental Help (A/H) upto `150000/- to the

nominees of the Joint Venturer.


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A second brochure indicates the commission structure offered by SFAL to 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.

A third brochure “Rule Book for F.A. & Joint Venture” provides details of various

plans and other information for the agents and investors.

e) SFAL's letter dated February 17, 2014 to SEBI inter alia provides the following

details:

As per the copies of filled in application forms and registration certificate

issued for each of the Plans, it is observed that SFAL collects the

contributions from investors as per the Plan opted.

The terms and conditions of the application form inter alia states:

"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)...."

The General Terms and Conditions in the Certificate issued by SFAL inter

alia states:

"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."

SFAL has branches in 9 locations and 21 bank accounts with HDFC Bank,

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


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f) A perusal of the documents /information submitted by SFAL vide letter dated

March 24,2014 to SEBI provides following details:

i. In a brief note attached on Accidental Help (A/H), SFAL has submitted 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 charging any extra/additional money for this, from its customer.

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

Investors" SFAL has submitted as follows:

"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........"

iii. As per the plan-wise amount mobilized by SFAL, detailed below, SFAL has

mobilized an amount of approximately `28.22 crores from 2,69,905 investors

during the financial years 2010-11 to 2013-14 :


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2010-11

Plan Code Total amount mobilized (`) No. of investor

S1 2970 10

S10 44552 63

S2 1682 10

S3 44856 151

S4 34195 111

S5 3483177 6646

S6 484852 672

S7 40271 34

S8 63490 72

S9 16597 40

SF1 65679 3

SF2 145577 13

SF3 575395 23

SF4 943680 36

SF5 543605 19

SF6 1128210 42

SF7 1318415 58

SFM2 19989 10

SFM3 1889505 21

Grand Total 10846697 8034


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2011-12

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

S1 9523 33

S10 132164 192

S2 52631 57

S3 713101 1314

S4 308470 625

S5 12019671 33230

S6 4551888 5219

S7 269006 259

S8 160781 452

S9 115121 134

SF1 553105 29

SF2 789002 106

SF3 2002745 109

SF4 1621100 100

SF5 5128620 192

SF6 8442490 258

SF7 6194365 298

SF8 1432170 39

SFM1 112810 2

SFM2 330162 100

SFM3 8479275 95

Grand Total 53418200 42843


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2012-13

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

S1 140548 220

S10 235160 317

S2 168443 275

S3 1971105 3885

S4 595020 962

S5 35856561 57665

S6 11124827 15296

S7 655172 550

S8 242898 416

S9 311552 310

SF1 1237965 57

SF2 1219065 165

SF3 1999335 123

SF4 3788315 223

SF5 4968600 216

SF6 15091495 519

SF7 19849415 733

SF8 6065725 260

SFM2 567739 232

SFM3 10843560 132

Grand Total 116932500 82556


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2013-14 (upto January 31, 2014)

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

S1 969213 1094

S10 522140 586

S2 255788 415

S3 2970417 5603

S4 597788 1120

S5 51654215 102300

S6 14699508 22212

S7 998060 924

S8 234144 419

S9 314494 343

SF1 530338 26

SF2 137439 27

SF3 212745 21

SF4 2077895 79

SF5 775945 41

SF6 5315130 226

SF7 9409815 613

SF8 1892560 107

SFM2 578726 228

SFM3 6896240 88

Grand Total 101042600 136472

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:


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As on March 31, 2011

(`)


(`)


(`)

Major Liabilities

Advance received from customers

1,08,46,697.00 6,41,06,191.00 17,77,21,932.00

Major Assets

Tangible Assets 13,77,496.00 2,00,83,102.00 2,91,09,536.00

Bank balance 51,13,327.32 2,02,04,395.13 2,45,95,387.53

Cash in hand 5,63,047.00 11,21,508.00 12,03,513.00

Investments - - 4,23,86,546.31

Other current assets (mainly loan & advances)

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

During these years, the commission paid/ payable to agents involved in

mobilization of funds from customers is given below:-

2010-11 (`) 2011-12 (`) 2012-13 (`)

ORC Commission paid 14,64,637.00 2,04,94,871.00 3,53,04,947.00

Commission payable - 41,63,249.00 4,59,992.00

Total 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

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/-.


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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 ten of 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...."

10. The aforementioned details of the Plans towards purchase of agricultural, barren lands,

cows, goats and sheep and of developing farms wherein the cows, goats and sheep are

reared and taken care ("Schemes") offered by SFAL to investors (termed as 'Joint Venturer')

have to be considered in light of the provisions of Section 11AA of the SEBI Act. The

aforesaid Section 11AA, which provides for the conditions to determine whether a scheme

or arrangement is a 'collective investment scheme', reads as under :

"(1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) shall be a

collective investment scheme.

[Provided that any pooling of funds under any scheme or arrangement, which is not registered with the

Board or is not covered under the exemptions from CIS sub-section (3), involving a corpus amount of

one hundred Crore rupees or more shall be deemed to be a collective investment scheme.]

(2) Any scheme or arrangement made or offered by any person under which,—

(i) the contributions, or payments made by the investors, by whatever name called, are pooled and

utilized solely for the purposes of the scheme or arrangement;

(ii) the contributions or payments are made to such scheme or arrangement by the investors with a view

to receive profits, income, produce or property, whether movable or immovable from such scheme or

arrangement;

(iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable

or not, is managed on behalf of the investors;

(iv) the investors do not have day to day control over the management and operation of the scheme or

arrangement.”


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11. In the context of the abovementioned Section 11AA of the SEBI Act, the 'Schemes' offered

by SFAL is examined as under:

(i) The contributions, or payments made by the investors, by whatever name called,

are pooled and utilized solely for the purposes of the scheme or arrangement;

It is noted from the various plans offered in the brochures, the application forms and

registration certificates that SFAL invites funds from public through its various Plans

for purchase of agricultural, barren lands, cows, goats and sheep and for developing

farms wherein the cows, goats and sheep are reared and taken care of. At the end of

term of the Plan, the investor (termed as 'Joint Venturer') has the option to either opt

to get the cattle in his name or the specified money as per the Plan opted. SFAL has

in their submissions stated that ".......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. SFAL's Balance Sheet as on March 31, 2013 states that

an amount of `17,77,21,932/- has been received as "Advance from the Customers". From

a reading of SFAL's submissions, it is apparent that these "Advances from the Customers"

are later pooled and utilized for purchasing and rearing cattle. As the contributions

received from the investors under SFAL's various Plans are pooled for the purpose of

the 'Schemes', prima facie it is clear that the instant 'Schemes' satisfies the first condition

stipulated in Section 11AA(2) of the SEBI Act.

(ii) The contributions or payments are made to such scheme or arrangement by the

investors with a view to receive profits, income, produce or property, whether

movable or immovable from such scheme or arrangement;

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 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 Point 9 on page 6 of this order, prima facie

for an investor paying an amount of Rs.100/- per month for 48 months for cattle/goat


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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.

As stated in the brochure, SFAL provides Accidental Help (A/H) upto Rs.1,50,000/-

to the nominees and the investor also has the option of emergency loan service after 12

months on 60% of amount paid. Further, as per SFAL's submissions, ".....The A/H is

the financial assistance to the family/dependant... The said financial assistance is in nature of help and

Co. is not charging any extra / additional money for this..... ".

SFAL has also in their submissions stated that "....... 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.

In light of the aforesaid, prima facie the nature of benefits receivable by the investor at

the expiry of term indicates an element of return for which money has been provided by

the investors to SFAL. Hence, the second condition, which stipulates 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, in Section 11AA (2) of the

SEBI Act is also fulfilled.

(iii) The property, contribution or investment forming part of scheme or

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

(iv) The investors do not have day to day control over the management and

operation of the scheme or arrangement.

It is noted from the brochures, application forms and registration certificates that

SFAL collects the contributions from investors as per the Plan opted and

contributions received are utilized for purchase of land/cattle and rearing of cattle.

SFAL manages these Plans on behalf of investors during the agreed term of Plan. At

the end of term of the Plan, the investor has the option to either opt to get the cattle

in his name or the specified money as per the Plan opted. Prima facie, it appears that


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the investor has no say in the purchase of land/cattle and SFAL collects the amount as

per the Plan opted by the investor in the application form.

Further, as stated in the brochure, the rearing of cattle takes place in SFAL's 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 SFAL on behalf of the

investors.

In view of above, it is clear that the investors do not have day to day control over the

management and operation of the 'Schemes.' I, therefore, find that the instant 'Schemes'

satisfies the third and fourth condition stipulated in Section 11AA(2) of the SEBI Act.

12. In the context of the 'Schemes' being in the nature of a ''Joint Venture', it may be relevant to

refer to the observations of the Hon’ble Supreme Court of India in New Horizons Ltd. vs.

Union of India [1995(1) SCC 478] regarding the nature of a joint venture that:-

“The expression joint venture”…. connotes a legal entity in the nature of a partnership engaged in the

joint undertaking of a particular transaction for mutual profit or an association of persons or

companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks.

It requires a community of interest in the performance of subject matter, a right to direct and govern the

policy in connection therewith, and duty, which may be altered by agreement, to share both in profit and

losses. (Black‟s law dictionary, sixth edition, p. 839).

13. It has further been illustrated by Hon’ble Supreme Court in Faqir Chand Gulati vs. Uppal

Agencies Pvt. Ltd. {(2008)10SCC345} that “An illustration of joint venture may be of some

assistance. An agreement between the owner of a land and a builder, for construction of apartments and sale

of those of apartments so as to share the profits in a particular ratio may be a joint venture, if the agreement

discloses an intent that both parties shall exercise joint control over the construction/ development and be

accountable to each other for their respective acts with reference to the project.”


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14. Thus, it implies that the joint venture arrangement should be a genuine joint undertaking of a

particular transaction with share of both parties in profit and losses arising thereof.

Irrespective of the nomenclature the present 'Schemes', do not fall within the meaning of

“Joint Venture’ since SFAL offers assured returns to investors irrespective of profit and

losses. Also, the element of joint control over the plans/cattle does not exist.

15. In view of the above analysis, it is apparent that the 'Schemes' offered by SFAL having

nomenclature “Joint Venture” is not a joint venture in accordance with law but rather such

term has been used by SFAL to camouflage its fund mobilizing activity which is in the nature

of a ''CIS' in order to mislead and attract investment from general public.

16. It is also disconcerting that the total "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.

17. 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 was stated: “...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.”

18. In the light of the above analysis and examination, it is clear that the activity of fund

mobilization by SFAL with a promise of returns prima facie satisfies all four conditions

specified in Section 11AA (2) of the SEBI Act and hence falls within the ambit of 'Collective

Investment Schemes' as defined under Section 11AA of the SEBI Act.


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19. I note that in terms of Section 12(1B) of the SEBI Act, "no person shall sponsor or cause to be

sponsored or cause to be carried on a 'collective investment scheme' unless he obtains a certificate of registration

from the Board in accordance with the regulations”. Regulation 3 of the SEBI (Collective Investment

Schemes) Regulations, 1999 (hereinafter referred to as "CIS Regulations") also prohibits

carrying on CIS activities without obtaining registration from SEBI. Therefore, the

launching/ floating/ sponsoring/causing to sponsor any 'collective investment scheme' by any

'person' without obtaining the certificate of registration in terms of the provisions of the CIS

Regulations is in contravention of Section 12(1B) of the SEBI Act and Regulation 3 of the

CIS Regulations. In this regard, I note that SFAL has not obtained any certificate of

registration from SEBI under the CIS Regulations for its fund mobilizing activity from the

public, under the instant 'Schemes' offered by it.

20. I also find that the fund mobilizing activity of SFAL 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").

21. Protecting the interests of investors is the first and foremost mandate for SEBI and

therefore, steps have to be taken to ensure that SFAL does not collect further funds under its

'Schemes' and no investors are defrauded. Further, in order to safeguard the assets/property,

acquired by SFAL 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 the light

of the same, I find no other alternative but to take recourse through an interim order against

SFAL 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.

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):


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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 of

SFAL;

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.

25. The prima facie observations contained in this Order are made on the basis of the material

available on record. In this context, SFAL and its abovementioned Directors may, within 15

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.

Place: Mumbai S. RAMAN Date: February 12, 2015 WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA


Interim order in the matter of Suvidha Farming and Allied Limited

Documents