AI Drafter 
TaxTMI 
TaxTMI 
2016 (8) TMI 1384
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...., Mr. Satnam Singh Randhawa, Mr. Amandeep Singh Sran, Mr. Gajraj Singh Chauhan, Mr. Manjeet Kaur Sran, Ms. Jasbeer Kaur, Mr. Rakesh Kumar Tomar, Mr. Sukhdev Singh Dhillon and Ms. Sukhjeet Kaur, shall not solicit or collect any further money/ investments from investors/ customers into its schemes or launch or carry out any money collection schemes. ii. HBN and its aforesaid directors shall submit to SEBI, a reasonable proposal including firm time lines with regard to the manner in which it proposes to wind up its schemes and make payments along with the returns which are due to its investors. This proposal shall be submitted within a period of 30 days from the date of this Order. iii. HBN and its aforesaid directors shall not dispose of any of the properties including the properties mentioned in Annexure A, except for the purpose of winding up of its schemes and repaying the money to its investors/ customers with returns that have been promised to them, as directed." 3. Pursuant to the said Interim Order, HBN vide letter dated August 08, 2013, forwarded a repayment proposal/ schedule to SEBI along with a list of its properties. It also proposed to repay an amoun....
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.... lines so that the money can be repaid to the investors within a time of one year: S.No. Time lines % of the money deposited 1 Within two days of opening of escrow account 100% of cash/ deposits in any form with bank or other institutions available with HBN 2 Within three months from the date of receipt of SEBI letter 33% of the remaining total money due to the investors 3 Within six months from the date of receipt of SEBI letter 33% of the remaining total money due to the investors 4 Within nine months from the date of receipt of SEBI letter 34% of the remaining total money due to the investor + the additional amount if any • RTA to repay the money to the investors from the escrow account on proportionate basis. HBN has to provide an undertaking in the form of an affidavit to the effect that the said money would be utilized only for the purposes of repayment to investors. • HBN to submit a monthly report to SEBI on the progress of realization of assets/ selling of scheme assets. 4. It is noted that SEBI constantly reviewed HBN's repayment procedure from 2014 through several correspondence exchanged with HBN ....
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....complaints and are still receiving complaints. These complaints inter alia alleged as under: • HBN is not paying the matured amount. In certain cases, HBN has not repaid even after 18-24 months of the maturity date. • Phone calls have been received by SEBI, alleging therein that the branch office of HBN has informed them that the payment of matured amount shall be made by SEBI. • HBN has issued post-dated cheques to its investors. Certain investor complaints have also alleged that the cheques received from HBN are getting bounced. • That the agents of HBN are asking for fresh deposits and are threatening investors of not getting their money back unless money is deposited in new scheme. • Hon'ble Delhi High Court in its order dated November 14, 2014, has also prima facie observed substantial lapses and transfer of funds between HBN and its subsidiaries and referred the matter to Serious Fraud Investigation Office (SFIO). iv) It is noted from the Auditors report submitted by the Auditor R. Shandilya & Associates who conducted post verification repayment audit of HBN for 1,99,877 investors amounting to Rs. 192.96 ....
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....de its order dated July 30, 2014 passed ex parte directions to HBN whereby the Company was restrained from selling, alienating, transferring or parting with the possession and creating any third party rights in the immovable assets of the Company and its subsidiaries. The matter was settled on September 6, 2014 and HBN thereafter moved an application seeking recalling of the directions of Hon'ble High Court. As per the order dated December 09, 2014, the Hon'ble Court directed HBN that in case any further assets of HBN are sought to be sold, intimation with regard to the book value of the assets and proposed sale consideration along with the details of recorded owner of the asset shall be furnished to the Hon'ble Court, prior to the transaction being completed. 6. It is noted that SEBI considered in detail the schemes launched by HBN, various submissions made by HBN and the repayment procedure adopted by HBN pursuant to the interim order. Thereafter, SEBI vide Order bearing no. WTM/PS/71/CIS-NRO/FEB/2015 dated February 12, 2015 ("final order") made the following observations: I. The schemes/arrangements/operations of HBN are in the nature of collective invest....
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.... liberty to HBN "to send a proposal to SEBI seeking implementation of the impugned order, and if such representation is made, SEBI shall consider the same on its own merits in accordance with law". 9. In view of the same, HBN re-submitted the repayment proposal to SEBI on May 19, 2016 and requested for an opportunity of hearing to explain the proposal in detail. In conformity with the principles of natural justice, vide hearing notice dated August 04, 2016, an opportunity of personal hearing was granted before me on August 09, 2016. HBN attended the hearing and was represented by its Advocates. 10. I have considered the material available on record such as Orders passed by SEBI, repayment proposal dated May 19, 2016 submitted by HBN and the oral submissions made before me by HBN during the hearing dated August 09, 2016. On examination of the same, I note the following: 10.1 The repayment proposal that HBN has now proposed is a structured repayment mechanism which involves setting up an independently managed ring fenced Special Purpose Entity ("SPE") in the nature of a trustee company as a corporate registered under the Indian Trust Act, 1882. The salient features of the re....
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....ansfer of Assets: Select assets of HBN will be transferred to the SPE which will be pure legal transfer at market value with the approval of High Court. The asset transferred will be used to repay the principal liability in totality along with the administrative expenses of the SPE. v) Taxation: As the transfer of assets is in the interest of investors, a special exemption may be permissible with due approval from the High Court and Commissioner of Income tax, as well as special exemption from stamp duty from the High Court. vi) Pool of Assets for Repayment: The Assets are categorized as assets available for Sale, assets available for construction and assets with business for revenue generation. The assets available for sale and assets available for construction will be transferred to the SPE. The assets shall comprise of residential properties and plots, commercial complexes, malls and multiplex, and cash flows from select properties of HBN such as Radisson Blue Hotel and Developable Land in Bhatinda, Ujjain, Raipur. vii) Sale methodologies to be used by the SPE: Due to various reasons, HBN was unable to sell it proper....
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....EBI (Public Offer and Listing of Securitized Debt Instruments) Regulations, 2008 so as to bring the activities of HBN under the regulations. This is clearly an attempt to bestow legal sanctity on what has clearly been an illegal raising of funds. iv. Further, the proposed methodology for transfer of assets and liabilities from HBN and its wholly owned subsidiaries to SPE envisages "reconstruction for merger" under section 232 of the Companies Act, 2013 and "amalgamation of companies in public interest" under section 237 of the Companies Act, 2013 respectively. v. I find that the current proposal which envisages setting up of an SPE, legal transfer of assets to the SPE, credit rating of the assets, obtaining insurance from an appropriate insurance Company, etc., will require substantial additional time for making repayments to the investors. vi. During the course of the personal hearing granted to HBN on August 09, 2016, the company submitted that the new proposal was made on account of the difficulties faced by it in selling its properties at market value. As per the valuation report of P & A Valutech Pvt. Ltd. submitted by HBN as part of the new repaymen....
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....oposal is nothing but a deliberate ploy to delay in making repayments to the investors. If the company wanted to make repayments, it could have been easily done so by selling the assets of the company during the last three years. The instant proposal for the repayment through a circuitous route is fraught with hurdles and impediments and is not remotely in the interests of investors. 12. SEBI has been assigned the statutory duty to protect the interests of investors in securities and regulating the market by such measures as it deems fit. It is the duty of SEBI to ensure that the securities market functions in a fair manner. In this regard, reference may be made to the following observations of the Hon'ble Supreme Court in its judgment dated April 26, 2013, in N. Narayanan Vs. Adjudicating Officer SEBI (Civil Appeal Nos.4112-4113 of 2013) wherein it held that: "SEBI, the market regulator, has to deal sternly with companies and their Directors indulging in manipulative and deceptive devices, insider trading etc. or else they will be failing in their duty to promote orderly and healthy growth of the Securities market. Economic offence, people of this country should know, is a ....
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....uch promoters by making a thorough study of such schemes and arrangements before registering such schemes with the SEBI and also later on monitor such schemes and arrangements in order to ensure proper statutory control over such promoters and whatever investment made by any individual is provided necessary protection for their investments in the event of such schemes or arrangements either being successfully operated upon or by any misfortune happen to be abandoned, where again there would be sufficient safeguards made for an assured refund of investments made, if not in full, at least a part of it." 14. HBN failed to take any concrete steps for all these years to repay the investors' money despite its own earlier repayment proposal in 2013. The past malafide conduct of the company can be seen from the factors mentioned below: (i) though SEBI's CIS Regulations were well in place, HBN chose not get registered and illegally mobilized funds amounting to Rs. 1136.78 crores; HBN's fund raising is ab-initio illegal. (ii) though HBN proposed repayment plan in 2013 and thereafter agreed to the SEBI's repayment procedures, HBN has failed to comply with the same; ....