Order dated May 03, 2016 in the matter of Garima Real Estate and Allied Limited

8/17/2019 Order dated May 03, 2016 in the matter of Garima Real Estate and Allied Limited

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WTM/PS/20/IMD-CIS/WRO-ILO/MAY/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 Securities and Exchange Board of India (Collective InvestmentSchemes) Regulations, 1999

In respect of –

S. No. Name of noticee PAN/DIN

1. Garima Real Estate & Allied Limited AADCG0853B

2. Mr. BanwariLalKushwah AAGPF1976L

3. Mr. BalkishanKushwah AVQPK4360A

4. Mr. ShivramKushwah 02338542

5. Mr. BanabarilalLodhi 01759136

6. Mr. Bijendra Pal Singh 01781312

7. Mr. Jitendra Kumar 06719377

1.

Securities and Exchange Board of India (“SEBI”), vide ex-parte interim Order dated

November 24, 2014 (“the interim order”), prima facie observed that the fund mobilization activity of

the company, Garima Real Estate and Allied Limited (“the Company” or “Garima”) is a Collective

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

1992 (“the SEBI Act”). 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”) prior to the launch and operation of such

schemes. The Company was also alleged to have contravened regulation 4(2)(t) of the SEBI(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations,

2003 ("the PFUTP Regulations").


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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 Company and its past and present directors were directed as follows:

22. “In view of the above, I, in exercise of the powers conferred upon me under Sections 11(1),

11B and 11(4) of the SEBI Act read with Regulation 65 of CIS Regulations, hereby direct

Garima Real Estate & Allied Limited and its past and present Directors viz., Mr.

BanwariLalKushwah (PAN-AAGPF1976L), Mr. BalkishanKushwah (PAN-AVQPK4360A),

Mr. ShivramKushwah (DIN: 02338542), Mr. BanabarilalLodhi (DIN: 01759136), Mr.

Bijendra Pal Singh (DIN: 01781312)and Mr. Jitendra Kumar (DIN: 06719377):-

(i) not to collect any fresh money from investors under its existing schemes;

(ii) not to launch any new schemes or plans or float any new companies to raise fresh moneys;

(iii) to immediately submit the full inventory of the assets including land obtained through money raised

by Garima;

(iv) not to dispose of or alienate any of the properties/assets obtained directly or indirectly through money

raised by Garima;

(v) not to divert any fund raised from public at large which are kept in bank account(s) and/or in the

custody of Garima.

(vi) to furnish all the information/documents sought by SEBI vide letter dated January 22, 2014,

within 15 days from the date of receipt of this order, including:

i.

Scheme wise list of investors and their contact numbers and addresses;

ii. PAN of the aforementioned Directors and

iii.

Details of agents along with address, money mobilized and commission paid ”.

3. The interim order came into force with immediate effect and is still in force. The Company

and its past and present directors, namely, Mr. BanwariLalKushwah, Mr. BalkishanKushwah, Mr.

ShivramKushwah, Mr. BanabarilalLodhi, Mr. Bijendra Pal Singh and Mr. Jitendra


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Kumar(collectively referred to as “noticees”) were advised that they may file their response to the

interim order and if they so desire, also seek an opportunity of personal hearing.

4. The interim order was forwarded to the noticees vide SEBI letters dated November 27,

2014. However, no reply was received from them within the time period advised in the interim

order. Thereafter, vide letter dated February 09, 2015, one Mr. A.K. Bansal, Advocate informed that

he represents the Company and requested for extension of time to file the reply on the ground that

he is suffering from ailments and undergoing medical treatment. However, no reply was received

thereafter. In view of the same, SEBI sent a reminder letter dated April 19, 2015 to the Company

advising the Company to provide the status of compliance with the interim order and status of

resolution of a complaint received in SEBI. There was no reply to this letter or to the interim order.

Subsequently, vide letter dated May 21, 2015, the Company and other noticees were advised to filecompliance report to the interim order and also the resolution status of the investor complaint. The

Company and other noticees were also informed that they were afforded an opportunity of personal

hearing on July 10, 2015 at the Local Office of SEBI at Indore. As the previous letters/notices were

undelivered on few of the noticee directors, SEBI had also issued a public notice in newspapers {in

Hindi in DainikBhaskar , Rajasthan/ Navbharat Times , Delhi/DainikBhaskar , Madhya Pradesh and in

English in The Times of India , Rajasthan and Delhi, on June 30, 2015} regarding the instant

proceedings initiated pursuant to the interim order and the personal hearing fixed on July 10, 2015.

5. In the personal hearing held on July 10, 2015, Mr. A.K. Bansal, Advocate appeared for the

Company and filed the Company‟s representation and requested that the same be taken on record.

Oral submissions were also made. As requested, liberty was granted to file additional submissions

and documents within a period of three weeks. There was no appearance by the other noticees. In

the representation of the Company filed by its Advocate, the following were inter alia submitted:

(a) The Company referred to SEBI‟s letter dated May 21, 2015 and stated that the investor has

no grievance against the Company and therefore the same was not an issue to be adjudicated

by the forum. Further, her complaint was due to some misunderstanding.


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(b) The Company had received an SCN dated August 22, 2014 issued by the Adjudicating

Officer and has filed a detailed reply dated September 15, 2014.

(c) In the said reply, the Company has submitted that it is not involved in any activity within the

meaning of CIS.

(d)

It was also informed that the SCN was issued on the basis of the information allegedly

furnished by the Company vide purported letter dated December 05, 2013. However, the

said letter was not issued on behalf of the Company and the information contained therein

was false and not binding on the Company.

(e) The said letter was a forged and fabricated document and reliance on the same is not

warranted.

(f) Even after receiving the reply dated September 15, 2014, SEBI without taking the same into

consideration and appreciating the specific stand taken in the reply had passed the interimorder.

(g) The findings of SEBI in the interim order are solely based on the said forged letter dated

December 05, 2013. The documents furnished along with the said forged letter has nothing

to do with the Company and it seemed that someone with fraudulent intention has

mischievously created/fabricated documents and sent to SEBI.

(h) The Company vide letter dated February 09, 2015 sought time to furnish reply. It was

surprising that SEBI has not referred to the aforesaid reply dated September 15, 2014.

(i)

In view of the above submissions, the Company firmly believes that the requirements of

SEBI letter dated May 21, 2015 have been satisfied. The Company is ready to furnish further

reply if required.

(j) The Company submitted that the SCN and the interim order have been issued solely on the

basis of the information which is false, forged and fabricated and therefore requested that

the same needs to be set-aside in the interest of justice.

As the Advocate had referred to the adjudication proceedings, he was specifically advised that the

present proceedings is pursuant to the interim order and he was asked to make submissions

pertaining to the charges made in the interim order.


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6. Therefore, the Advocate for the Company, vide letter dated July 27, 2015, referred to the

proceedings of the personal hearing held in the matter on July 10, 2015 and requested SEBI to

forward copies of the following documents:

(a) Order passed in the proceedings held on July 10, 2015

(b)

Copy of Order dated July 13, 2012 passed by the Hon‟ble High Court of MP in the matter of

Dharamvir Singh

(c) Copies of the purported letter mentioned in paragraph 5 of the interim order

(d) Documents submitted by the complainantincluding Career & Rule Book for agents

(e) Letter dated December 05, 2013 said to have been sent by Garima

(f) All documents mentioned in the SEBI letter dated August 22, 2014

(g) All documents mentioned in the interim order

(h)

Copies of all documents in the records of SEBI pertaining to the matter.

7. In response to the above letter from the Company‟s Advocate, SEBI vide letter dated

August 25, 2015 had forwarded the documents mentioned and relied on in the interim order and the

proceedings of the personal hearing held on July 10, 2015. The Advocate was again informed that

adjudication proceedings are separate proceedings and that the instant proceedings are pursuant to

the interim order. The Advocate was also advised to forward his reply.

8.

Considering that documents were supplied by SEBI and that the Company had not filed its

reply, it was afforded another opportunity of personal hearing on February 01, 2016. The schedule

of personal hearing was informed to the Company and its Advocate vide SEBI letters dated January

14, 2016. In response, the Advocate vide letter dated January 25, 2016 stated that they have made

sincere efforts to contact the directors of the Company and stated that they would be available at

their offices at Gwalior (MP). The Advocate requested that the personal hearing fixed on February

01, 2016 may be adjourned to some other date in order for him to take necessary instructions with

all records relevant to the hearing. He assured that he would contact the clients in a short time and would proceed accordingly. In view of the request, the personal hearing was rescheduled to

February 16, 2016 and the Advocate was accordingly intimated. Thereafter, vide email dated

February 15, 2016, Mr. A.K. Bansal, Advocate stated that despite his best efforts he was not able to


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contact the Company and stated that they could be contacted at their address in New Delhi and

Dholpur, Rajasthan. He informed that unless and until he gets instructions from his client (i.e.

Company), he will not be in a position to attend the hearing scheduled on February 16, 2016. He

further stated that he trying to contact the right persons and then appear in the personal hearing.

9. As the Company and its directors have not filed their written submissions despite adequate

opportunities, I do not find it reasonable to afford more time or opportunities to them. I

accordingly proceed to consider the case on its merits on the basis of material available on record.

10.

I have perused the interim order, the submissions made in the hearing, the representation of

the Company filed in the personal hearing. and other material available on record. The interim order,

on the basis of the material collected during the inquiry in the matter, has alleged that the Company

was offering collective investment scheme without obtaining a certificate of registration from SEBI

as mandated under section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations. The

Company is also alleged of contravening regulation 4(2)(t) of the PFUTP Regulations.

11. Before proceeding into the merits of the matter, I wish to deal with the preliminary

contention of the Company/its Advocate that the Company‟s letter dated December 05, 2013 was

not issued by the Company and that the same was forged and therefore no reliance can be placed on

such letter or on the documents forwarded through it. As per the interim order, the Company, videthe letter dated December 05, 2013 had forwarded the following documents:

a) MoA and AoA of the company as filed with the Registrar of Companies,

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

c) Brochures/offer document pertaining to the schemes/arrangements,

d) Copies of application forms

e)

Sample copies of allotment letter issued to the investors who subscribe to the schemes

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

/applicant under the schemes

g) Details of the scheme wise amount mobilized by Garima till date along with the number

of investors under the schemes


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h) Certified copy of audited financial statement for the FY 2009-10, 2010-11, 2011-12 and

2012-13, copies of IncomeTax Returns filed by Garimafor the last three financial years.

I have perused the aforesaid letter of the Company wherein it has forwarded the aforesaid

document. The Advocate for the Company has merely contended that the letter is forged without

stating the reasons why the documents cannot be relied. He has also submitted that the documents

enclosed with the said letter has nothing to do with the Company. However, he has not put forth

submissions with proof to show that how such documents cannot be treated as genuine or were

fabricated. I also note that SEBI vide letter dated January 22, 2014 had confronted the Company

with respect to the plans/schemes as stated by it vide letter dated December 05, 2013 and those

mentioned in the „Career and Rule Book‟ forwarded by the complainant. However, the Company

has not responded to such letter till date. The Company was also asked to provide the scheme-wise

amount mobilized by the Company along with number of investors and sample copy of application

form, registration certificate and agreement executed in respect of any two investors of each plan

offered by it. However, the Company till date has not provided such details. This letter was also

forwarded to the Company‟s Advocate who had at a later stage submitted that he is not able to

contact his clients. The Company has also not intimated any steps taken by them against the alleged

forgery.

SEBI letter dated January 22, 2014 had also advised the Company and its present and past directorsto inform –

(a) Address of branch offices of the Company

(b) Name, address of each investor and amount deposited by them with plan details and date of

investment

(c) List of properties acquired by them

(d)

List of properties transferred to investors, if any

(e) Details regarding refunds made if any

(f)

Amount outstanding to each investor.


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The Company and its directors were also informed that it did not provide information regarding its

group company and that SEBI found that Garima Homes and Farm House Limited was its group

company.

In view of the above facts and circumstances, the contention of the Advocate regarding the letter

dated December 05, 2013 cannot be accepted.

12. The relevant observations made in the interim order are reproduced here for reference:

(a) “Garima (CIN: U70100MP2007PLC019955) was incorporated on October 29, 2007 having its

registered office at 403-Souraw Plaza, GoleKaMandir, Gwalior - 474001. Its present Directors are

Mr.BanabarilalLodhi, Mr.ShivramKushwah and Mr.Jitendra Kumar. As per the details furnished by

Garima two of its earlier Directors viz., Mr.BanwariLalKushwah and Mr.BalkrishanKushwah resigned from

the directorship with effect from July 20, 2010 and April 15, 2013 respectively.

(b) As per the brochures containing the schemes, the plans offered by Garima were Plan B1 (for 5 years), Plan B2

(for 5 years & 6 months), Plan B3 (for 8 years and 4 months), Plan C1 (for 6 years), Plan C2 (for 8 years

& 11 months) and Plan C3 (for 10 years and 6 months). Each plan offered investment in plot of land of size

from 800 sq. ft. onwards. Garima offers an exit option to the applicants after the expiry of terms of the

respective plans with a refund of estimated realizable value as per the opted plans. If the applicant opts to

continue with the plan at the end of 15 years(term) investor needs to make payment of specified amount for

effecting registration of plot. For instance, the details provided in respect of plan B1 is as under:-

Plot sizein sq. ft.

No of Instalments Exit option 5 years EstimatedRealizable Value

in `

At the end of 15 yr. Payment duefor registration of plot

Monthly60

Quarterly20

Half-yearly10

Yearly5

800 110 325 640 1265 9400 993400 + Registration charges1200 220 650 1280 2530 18800 1486800 + Registration charges1600 330 975 1920 3795 28200 1980200 + Registration charges2000 440 1300 2560 5060 37600 2473600 + Registration charges2400 550 1625 3200 6325 47000 2967000 + Registration charges


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(c) It is noted from the above table that Garima is collecting funds from the public under its various Lumpsum

Payment Plans and Instalment Payment Plans. The 'applicant'/investors who are interested in the aforesaid

schemes are required to execute an 'Application form along with an Agreement' with Garima. Upon execution

of the same, Garima issues a 'Registration Letter'.

(d) As per the details submitted by Garima vide letter dated December 05, 2013, Garima stated that an amount

of ` 55,22,35,396/- was collected under its Plans B1, B2, B3, C1, C2 and C3 from 1,08,791 investors and

repaid an amount of ` 45,87,20,787/-. Further, an amount of ` 9,35,14,609/- is stated to be the payment

outstanding towards 15,683 investors. There was no proof of repayment attached in this regard.

(e) Garima stated that no regulatory approvals were taken for accidental death/disability benefits to investors. It

also informed that no other scheme was floated by the company ”.

13.

The interim order has also observed the following with respect to the documents provided

by the complainant:

a) “ Nature of activity-Garima is stated to be engaged in buying and selling of land. It is contended that

company develops the land and shares the profit with its customers/investors. In case all the formalities are

completed, the land is later transferred to the customer. In case the customer does not want the land, money

will be returned as per rules/plans.

b) Branches: The head office of Garima is at 'Garima', Shri Kalyan Tower, Opp. Basant Talkies, Thatipur,

Gwalior (M.P.). It has various branches at Gwalior(M.P.), Dholpur (Rajasthan), Jaura (M.P.), Champa

(Chhatisgarh), Rajgarh (M.P.), Korba (Chhatisgarh), Raipur(Chhatisgarh), Shivpuri (M.P.), Bharatpur

(Rajasthan), Shahdol (M.P.), and Agra (U.P.).

c) Plans offered:-Garima is offering Plan B1 (for 5 years), Plan B2 (for 5 years and 6 months), Plan B3 (8

years and 4 months), plan B4 ( 3 years and 6 months), Plan B5 (for 6 years). The details of Plan B1 (for 5

years) is as under:-

Landsize

(sq. ft.)

Amountin `

Monthly60

Quarterly20

Half- yearly

10

Yearly5

Expected costof land

A/RBenefit*

132 6600 110 325 640 1265 9400 9900264 13200 220 650 1280 2530 18800 19800396 19800 330 975 1920 3795 28200 29700


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528 26400 440 1300 2560 5060 37600 39600660 33000 550 1625 3200 6325 47000 49500

d) It is noted that there were various plans launched by Garima such as plan D1(5 years), Plan D2(6 years),

Plan D3( 7 years), Plan D4(8 years), Plan E1(6 years), Plan E2( 7 years), Plan E3(8 years), Plan E4

(9 years). For example, the details of plan D1 and E1 are given below:-

Plan D1

Land size(sq. ft.)

Amountin `

Monthl60

Quarterly20

Half-yrly10

Yearly5


A/RBenefit*

240 11500 200 590 1160 2300 17100 18000480 23000 400 1180 2320 4600 34200 36000720 34500 600 1770 3480 6900 51300 54000960 46000 800 2360 4640 9200 68400 720001200 57500 1000 2950 5800 11500 85500 90000

Plan E1

Land size(sq. ft.)

Amountin `

Monthl72

Quarterly24

Half-yrly12

Yearly6


A/RBenefit*

200 10000 147 433 853 1667 15500 18000400 20000 294 866 1706 3334 31000 36000600 30000 441 1299 2559 5001 46500 54000800 40000 588 1732 3412 6668 62000 720001000 50000 735 2165 4265 8335 77500 90000

e) Apart from the above stated instalment payment plans, there were other lump-sum payment plans such as

Plan C1 (6 years), Plan C2 ( 8 years & 11 months), Plan C3 (10 years & 6 months), Plan C4 ( 1 year)

& Plan C5 special (6 years). For example, the details of plan C3 are as under:-

Plan C3

Land size (sq.ft.)

Amount(Rs.)

Expected cost of land A/RBenefit*

20 1000 4000 1500100 5000 20000 7500200 10000 40000 15000400 20000 80000 300001000 50000 200000 75000

2000 100000 400000 120000

f) Commission offered by Garima is tabulated as under:


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Plan B1, B2, B3, B5, D all, E allRank Year A/R

Benefit* I II III IV V+ Agent 22 10.5 7.27 5.25 5.25 21000

Field Officer 5 0.5 0.5 0.5 0.5 21000Development Officer 4 0.5 0.5 0.25 0.25 21000

Organizer 3 0.5 0.5 0.25 0.25 30000Zonal Officer 2 0.5 0.5 0.25 0.25 30000Sr. Zo. Officer 2 0.5 0.5 0.25 0.25 30000

Development Advisor 2 0.5 0.5 0.25 0.25 35000Inspector 2 0.5 0.5 0.25 0.25 40000

Regional Manager 2 0.25 0.25 0.25 0.25 50000Zonal Manager 2 0.25 0.25 0.25 0.25 80000

Executive Manager 2 0.25 0.25 0.25 0.25 100000 Total commission 48 14.75 11.52 8 8

*the details and nature of A/R benefits are not provided by Garima till date.

g) It is noted from the ' Rule book for agents ' that Garima is offering very high commission which is as much as

48% in the first year to its agents and other officials for mobilisation from public opting for instalment Plans.

This amount reduces to 14.75% in 2nd year, 11.52% in 3rd year and 8% from 4th year onwards. In

respect of investors opting for lump sum payment and also for instalment plan of 3 years 6 months, the

commission structure is as under:-

Other PlansRank CI C2 C3 C4 C5 B4

Agent 6 7 9 2 6 11Filed Officer 1 1 1 0.1 1 2.5Development Officer 1 1 1 0.1 1 2

Organizer 1 1 1 0.1 1 1.5Zonal Officer 0.5 0.5 0.5 0.1 0.5 1Sr. Zo. Officer 0.5 0.5 0.5 0.1 0.5 1Development Advisor 0.5 0.5 0.5 0.1 0.5 1Inspector 0.5 0.5 0.5 0.1 0.5 1Regional Manager 0.5 0.5 0.5 0.1 0.5 1Zonal Manager 0.5 0.5 0.5 0.1 0.5 1Executive Manager 0.5 0.5 0.5 0.1 0.5 1

Total 12.5 13.5 15.5 3 12.5 24

Accidental benefit :-Garima has created a joint venture social welfare fund, whose contribution is given by the company

only. In case the joint-venturer dies due to accident, compensation is offered out of said fund. This will be applicable

after 6 months from start of scheme. Further, maximum compensation shall not be more than ` 1,20,000/- “ .


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As mentioned above, these differences were brought to the notice of the Company for

reconciliation. However, the Company did not offer any clarification till date despite this being sent

to the Advocate for the Company.

14.

The interim order had also provided the following details:

“ A perusal of the annual reports of Garima for the financial years 2008-09, 2009-10, 2010-11, 2011-12 and

2012-13 shows the following: -

(in `)

As per balancesheet

As on March31, 2013

As on March31, 2012

As on March31, 2011

As on March31, 2010

As on March31, 2009

Liabilities includes Advance for plot

booking

9,64,32,481.25 11,48,79,107.25 17,02,94,129.46 7,20,86,405.46 6,01,54,037.46

Assets includes Inventories* 7,52,81,506.40 6,79,60,308.40 6,44,53,564.40 5,20,46,282 1,53,17,772

*It is noted that break up of inventory has not been provided in any of the balance sheet of Garima.“

15.

In the light of the above facts and circumstances, whether the scheme/activity of the

Company is in the nature of CIS in terms of section 11AA of the SEBI Act. The provisions of

section 11AA are referred and reproduced herein below:

“ Collective investment scheme .

11AA. (1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) or sub-

section (2A) 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 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 forthe purposes of the scheme or arrangement;


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(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

(2A) Any scheme or arrangement made or offered by any person satisfying the conditions as may be specified

in accordance with the regulations made under this Act.

(3) Notwithstanding anything contained in sub-section (2) or sub-section (2A), any scheme or

arrangement —

(i) made or offered by a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912)

or a society being a society registered or deemed to be registered under any law relating to co-operative societies

for the time being in force in any State;

(ii) under which deposits are accepted by non-banking financial companies as defined in clause (f) of section

45-I of the Reserve Bank of India Act, 1934 (2 of 1934);

(iii) being a contract of insurance to which the Insurance Act, 1938 (4 of 1938), applies;

(iv) providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees

Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952);

(v) under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956);

(vi) under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society under

section 620A of the Companies Act, 1956 (1 of 1956);

(vii) falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund Act,

1982 (40 of 1982);(viii) under which contributions made are in the nature of subscription to a mutual fund;

(ix) such other scheme or arrangement which the Central Government may, in consultation with the Board,

notify,] shall not be a collective investment scheme ”.


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16. The first condition, under section 11AA(2) of the SEBI Act, is that the contributions or

payments made by the investors by whatever name called are pooled and utilized for the purposes of

the scheme or arrangement.As per the application form, the Company is accepting monies under the

scheme of allotment/transfer of land units and development and maintenance under the lumpsum

payment plan/instalment payment plans. Therefore, it is clear that the monies/contribution from

the investors are pooled under the scheme and used for the purposes of the scheme. It is noted

from the copy of registration certificate issued to one of the investors that the land promised therein

is not identified or demarcated. Paragraph 11 of the terms and conditions of the sample registration

letter provided by Garima states that “these plots which are developed by the company in various parts of the

country and will be of similar sizes (i.e. 800 sq. ft. & 1200 sq. ft. respectively). The plots would be numbered and

identified by the company and thereafter be allotted to the applicants, the said plot may be allotted to the applicantsanywhere and in any location, at the discretion of the management.” It is noted from the financial statements

of Garima that funds received from the applicants/investors are poo led together as “Advance for

Plot booking.” As on March 31, 2013, Garima has collected ` 9,64,32,481.25 towards advance for

plot booking. As per the reply dated December 05, 2013, the Company had mentioned that it had

collected an amount of ` 55,22,35,396/- under its Plans B1, B2, B3, C1, C2 and C3 from 1,08,791

investors and repaid an amount of ` 45,87,20,787/-. Further, an amount of ` 9,35,14,609/- is

claimed to be the payment outstanding towards 15,683 investors. In view of the above

observations, I find that the first condition mentioned above is satisfied. I accordingly conclude that

the aforesaid first condition under section 11AA(2)(i) of the SEBI Act is satisfied.

17. The second condition under section 11AA(2) of the SEBI Act is 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.

As mentioned above, each of the plans mentioned in the documents forwarded by the Company

vide letter dated December 05, 2013 and those forwarded by the complainant have represented thatthe investor would receive a higher amount than that they have invested in the schemes at the end

of the tenure of such scheme. The interim order has made the following observations in this regard:


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“It is noted from the Schemes/Plans offered by Garima that an investor who opts for Lump-sum Payment Plan or

Instalment Payment Plan to purchase land, an amount is indicated as 'estimated realizable value' if exit option is

exercised by an investor as per the said plan. Similarly, it is noted from the booklet of Garima titled “Career & Rule

Book for agents” (At page 18 para 5) that in lieu of the money deposited by the investors, Garima assures to give duly

registered land. In case the investor is not interested in the land, Garima guarantees the payment of money as per the

plan. Apart from the same Garimaalso offers Accidental benefit as compensation to investors. For instance, if an

applicant/investor opts for Plan B1 (mentioned at para 7(b) above)and invested ` 1265 per year for 800 sq. ft plot

for 5 years, at the end of 5 years the investor is offered an exit option at ` 9400. This implies ` 3075 ( ̀ 9400-

` 6325) is the profit. Similarly, it is noted from booklet of Garima titled “Career & Rule Book for agents”, wherein

the expected cost of land after certain period is tabulated. For example, in Plan B1, a plot of area 132 square feet

worth ` 6600 shall have expected cost of land increased to ` 9400 after 5 years. The difference is the expected profit for

the investor. Similarly, different returns have been offered in different plans launched by Garima ”.

I have perused such observations along with the documents and agree with the same. The Company

has also admitted collecting funds under its schemes. In view of the above observations, I hereby

conclude that the second condition is also met in this case.

18. The third and fourth conditions under section 11AA(2) 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 andoperation of the scheme or arrangement. As per Clause 2(a) of the „Proforma of Agreement ‟ the

Company has stipulated that “Garima shall carry out necessary works by conducting the survey, demarcation,

clearing and related jobs/ works on behalf of the customer. Further, it s hall procure and install bore wells, open bells

and other water points and install motors, pump sets and other facilities main pipelines, electrical installations and

temporary sheds/ structures required for the development of property. Garima shall keep accounts with reference to the

income and expenditure incurred /to be incurred, pertaining to the development and maintenance of the entire project

site, which includes the said property.”


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As per clause 3 of proforma of agreement, it is stated “Garima shall have the rights to develop and maintain

the said property in consultation with Engineers/ experts, customer shall not ordinarily interfere with the method and

mode of development and maintenance of the said property.”

As per clause 14 of general terms & condition of registration letter, it is stated “Garima shall have first

charge on said property on account of the unpaid instalments for services / development / maintenance charges and for

other incidental expenses incurred by Garima. The said property cannot, in any other manner be sold, assigned,

mortgaged, pledged or alienated without obtaining No dues certificate from the Garima by the applicant .”

Paragraph 11 of the Rules & Regulations of the sample registration letter provided by Garima states

that “t he se plots which are developed by the company in various parts of the country and will be of similar sizes (i.e.

800 sq. ft. & 1200 sq. ft. respectively). The plots would be numbered and identified by the company and thereafter beallotted to the applicants, the said plot may be allotted to the applicants anywhere and in any location, at the discretion

of the management.”. However, in the registration letter, the whereabouts of the land said to be allotted

to the investor is not mentioned. This would show that the Company is operating a scheme with

purchase of lands as the underlying. The Company has also not provided details of sale deeds it has

registered in favour of its investors.

From the features of the „scheme‟, it can therefore be noticed that the Company/its management

have the sole right to manage the contribution or property/investment forming part of the scheme

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

scheme or arrangement. I accordingly conclude that the „scheme‟ satisfies the third and fourth

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

19. From theabove findings and observations, I conclude that the „scheme‟ offered by the

Company with a promise of „return‟ satisfies all the four conditions specified in section 11AA (2) of

the SEBI Act and therefore qualify as a Collective Investment Scheme as defined under the saidsection read with the CIS Regulations. I also refer to the following observation of the

Hon‟bleSupreme Court in the matter of PGF Limited vs. UoI and another (ref.

MANU/SC/0247/2013):


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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. 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. 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.

21. 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 bedeemed 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

carried on any collective investment scheme by any person. This provision in the above Regulations

has been brought into effect from September 06, 2013. 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.

.22. Therefore, havingconcluded 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:


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

scheme];

(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.”

23. 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. As per the reply dated December 05, 2013, the

Company had mentioned that it had collected an amount of ` 55,22,35,396/- under its Plans from

1,08,791 investors and repaid an amount of ` 45,87,20,787/- and that an amount of ` 9,35,14,609/-

is claimed to be the payment outstanding towards 15,683 investors. However, the Company has not

proved the veracity of such claim of refunds with documents. It has also not submitted any

verifiable proof to SEBI. Therefore, the claim of refunds cannot be accepted at this stage.

24. The interim order has issued directions against the past and present directors namely Mr.

BanwariLalKushwah, Mr. BalkishanKushwah, Mr. ShivramKushwah, Mr. BanabarilalLodhi, Mr.

Bijendra Pal Singh and Mr. Jitendra Kumar.

Of the above persons, Mr. BanabarilalLodhi, Mr. ShivramKushwah and Mr. Jitendra Kumar are the

present directors (as per data in MCA website accessed on May 02, 2016) of the Company.

The following table provides the details of the tenure of the above said 6 persons in the Company:Sr.

No.

Name of Director Appointment Date Cession Date


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1 Mr. BanwariLalKushwah (01829943) October 29, 2007 July 20, 2010

2 Mr. BalkishanKushwah (02338533) November 17, 2007 April 15, 2013

3 Mr. ShivramKushwah (02338542) November 17, 2007 Continues as a director

4 Mr. BanabarilalLodhi (01759136)* July 06, 2010 Continues as a director

5 Mr. Bijendra Pal Singh (01781312) October 29, 2007 November 20, 2007

6 Mr. Jitendra Kumar(06719377) October 23, 2013 Continues as a director

*as per another form (View director details) from MCA portal, it is mentioned that this noticee was a

director in the Company from 29.10.2007 to 20.11.2007. However, as he is shown as a present director in

another MCA record, the same has been considered.

Regarding the liability of the above persons, I note that –

(a) 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 being responsible for the

conduct of the business of a company shall be liable for any non-compliance of law and such

liability shall devolve on individual directors also. Accordingly, a director who is part of acompany‟s board shall be responsible and liable for all acts carried out by a company unless

exemptions are provided. 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 Hon‟ble High Court of Madras in

MadhavanNambiar 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 nominatedis bound to discharge the functions of a director and should have taken all the diligent stepsand taken care in the affairs of the company.

14. In the matter of proceedings for negligence, default, breach of duty, misfeasance or breach oftrust or violation of the statutory provisions of the Act and the rules, there is no difference ordistinction between the whole-time or part time director or nominated or co-opted director and the


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liability for such acts or commission or omission is equal. So also the treatment for such violationsas stipulated in the Companies Act, 1956 .”

(b) The Company was incorporated on October 29, 2007. SEBI on perusal of the Balance

Sheets from FY 2009-2010 till 2012-2013 has noted that amounts were mobilized by the

Company under „Advance for plot booking‟. It can be said that the Company started

mobilizing funds under its schemes immediately after its incorporation. Therefore, the

persons who were the directors from such date would be liable for the contravention as

found against the Company. The interim order has stated that Mr. BanwariKushwah and

Mr. BalkrishanKushwah had resigned from the directorship with effect from July 20, 2010

and April 15, 2013 respectively.

(c)

I therefore, find Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr. BanabarilalLodhi, Mr.

ShivramKushwah, Mr. Bijendra Pal Singh and Mr.Jitendra Kumarliable for the

contraventions committed by the Company in launching and operating unregistered CIS, in

violation of section 12(1B) of the SEBI Act and regulation 3 of the CIS Regulations and

contravening regulation 4(2)(t) of the PFUTP Regulations. The Company and the above

persons have also not provided the information sought by SEBI vide letter dated January 22,

2014 including the details such as scheme-wise list of investors and their contact numbers

and addresses and details of agents along with address, money mobilized and commission

paid. This is a breach of a direction issued vide the interim order.

25. In view of the foregoing, in the interest of investors and the securities market, 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), 11B and 11(4) thereof and regulation 65 of the SEBI (Collective

Investment Schemes) Regulations, 1999, hereby issue the following directions:

(a)

Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra

Kumarshall abstain from collecting any money from the investors or launch or carry out any


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Collective Investment Schemes including the scheme which have been identified as a

Collective Investment Scheme in this Order.

(b) Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.

BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra

Kumarshall wind up the existing Collective Investment Schemes and refund through „Bank

Demand Draft‟ or „Pay Order‟, 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

Investment Schemes) 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.

In case the Company has made refunds as claimed in its submission, it shall produce the

proof for such repayment as directed above and also submit a certificate from Chartered

Accountant as directed in sub-paragraph (d) below.

(c) Garima Real Estate & Allied Limited/its present management are permitted to sell the assets

of the Company only for the sole purpose of making the refunds as directed above and

deposit the proceeds in an Escrow Account opened with a nationalised Bank.

(d) After completing the aforesaid repayments in terms of sub-paragraph (b) above, the

Companyshall file a certificate of such completion with SEBI, within a period of 15 days,

from two independent peer reviewed Chartered Accountants who are in the panel of any

public authority or public institution. For the purpose of this Order, a peer reviewed

Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by

the Institute of Chartered Accountants of India („ICAI‟).

(e) Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.

BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra Kumarare


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also directed to provide a full 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.

(f)

Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.

BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra Kumarare

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

otherwise dealing in securities market for a period of 4 years.

(g) In the event of failure by Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr.

BalkrishanKushwah, Mr. BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh

and Mr. Jitendra Kumarto comply with the above directions, the following actions shall

follow:

- Garima Real Estate & Allied Limited, Mr. BanwariKushwah, Mr. BalkrishanKushwah, Mr.

BanabarilalLodhi, Mr. ShivramKushwah, Mr. Bijendra Pal Singh and Mr. Jitendra

Kumarshall remain restrained from accessing the securities market and would further be

prohibited from buying, selling or otherwise dealing in securities, even after the period of4

yearsof restraint imposed in sub- paragraph (f) 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.

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

criminal case against the Company, 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 misappropriation of public funds;

- SEBI would also make a reference to the Ministry of Corporate Affairs to initiate

appropriate action as deemed fit.


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- SEBI would make a reference to the Ministry of Corporate Affairs to restrain above-

mentioned noticee directors from being directors in other companies.

- SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and

regulations framed thereunder against the Company and others responsible.

26.

This order shall come into force with immediate effect.

27.

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 Garima Real Estate & Allied Limited, Mr.

BanwariKushwah, Mr. BalkrishanKushwah, Mr. BanabarilalLodhi, Mr. ShivramKushwah, Mr.

Bijendra Pal Singh and Mr. Jitendra Kumarincluding other persons who are in default, for the

violations as found in this Order.

28.

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

action.

PRASHANT SARAN WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

Date: May 03, 2016Place: Mumbai