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WTM/SR/IMD - CIS/ 49 / 08 /2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI
CORAM: S. RAMAN, WHOLE TIME MEMBER

ORDER
Under Sections 11(1), 11B nd 11(4) o! t"e Sec#rities nd $%c"n&e Bord o! Indi 'ct,
1992 red (it" Re&#)tion *+ o! t"e S$BI (Co))ecti,e In,est-ent Sc"e-es) Re&#)tions,
1999 in t"e -tter o! S"#."- /roti 0oods 1ri,te 2i-ited
(CI34U1+4111320111TC140952) nd its Directors, Mr6 So-it /is"nc"ndr S%en
(DI34 05*19+*8) nd Mr6 S#d"ir 3t"#r- 1(r (DI3 405*44582)6


1. Securities and Exchange Board of India (hereinafter referred to as 7S$BI7) received a
reference dated November 20, 201 from the !eserve Ban" of India, #hmedabad in
res$ect of Shubham %aroti &oods 'rivate (imited (hereinafter referred to as )S/012*) a
'une based com$an+ stating that the com$an+ engaged in the business of tea, groundnut,
so+a oi,, minera, -ater etc. in .aharashtra is co,,ecting funds from common $eo$,e in
Si,vassa.

2. #s a matter of $re,iminar+ in/uir+, SEBI vide ,etters dated 20.11.201 and 01.0.2012,
sought the fo,,o-ing information from S%&'( in re,ation to its business activit+, vi3. 4

i. .emorandum and #rtic,es of #ssociation of the 5om$an+ as fi,ed -ith the !egistrar
of 5om$anies (RoC)6
ii. 7etai,s of the $ast and $resent 7irectors of the com$an+.
iii. Brochures8offer document $ertaining to the schemes8arrangements6
iv. 5o$ies of a$$,ication forms that are re/uired to be submitted b+ investors 8 a$$,icant
to $artici$ate in the schemes6
v. Sam$,e co$ies of the registration ,etter and a,,otment ,etter issued to the investors
-ho subscribed to the schemes6
vi. Sam$,e co$ies of the agreement ,etter 8 contract re/uired to be entered into b+
investor 8a$$,icant under the schemes6
vii. 7etai,s of the scheme9-ise, +ear9 -ise, amount mobi,i3ed ti,, date a,ong -ith the
number of investors under the schemes6
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viii. 7etai,s of the scheme -ise, +ear -ise amount $aid8redeemed ti,, date a,ong -ith the
number of investors under the schemes6
ix. 5ertified co$+ of audited financia, statement for the $ast three financia, +ears6
x. (ist of a,, investors a,ong -ith the address and contact numbers6
xi. :erms and conditions governing cance,,ation of agreement or defau,t b+ investor in
the $a+ments. (ist of investors -ho have cance,,ed the agreement before maturit+ and
,ist of investors -ho have defau,ted6
xii. 7etai,s regarding $rocurement or $roduction of tea b+ the com$an+ ti,, date
a,ong-ith documentar+ $roof6
xiii. ;hether, actua, de,iver+ of tea units ha$$ened during the course of the scheme, and
detai,s of de,iver+ of tea units a,ong -ith ,ist of investors to -hom tea units -ere
de,ivered ti,, date6
xiv. Ban" statements of com$an+ since incor$oration.

. 7uring the $eriod bet-een 7ecember 201 to &ebruar+ 2012, S%&'( re$,ied to SEBI
vide its ,etters dated 11.12.201, 0.12.201 and 10.01.2012 -herein it inter alia submitted
the fo,,o-ing information, vi3.
i. 5ertificate of Incor$oration6
ii. (icense under .umbai Sho$s #ct6
iii. 5ertificate of Sa,es :ax !egistration6
iv. 5ertificate of <#: !egistration6
v. '#N 5ard of 5om$an+6
vi. Ba,ance Sheet and 'rofit = (oss #ccount for the +ear ending 1.0.12 and 1.0.16
vii. Brochure of the 5om$an+ having detai,s regarding various schemes6
viii. .emorandum and #rtic,es of #ssociation6
ix. Sam$,e co$+ of 5ertificate given to investors having genera, terms = conditions6
x. 7etai,s regarding its 7irectors6
xi. 7irect :ax 5ha,,an !e$ort for the #ssesment +ear 2019126
xii. Sam$,e co$+ of Business #$$,ication form6
xiii. Sam$,e co$+ of #greement for sa,e 6

2. I have $erused the materia, avai,ab,e on record i.e. corres$ondences exchanged bet-een
SEBI and S%&'( a,ong-ith the documents contained therein. In this context, the issue
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for determination in the instant matter is -hether the mobi,i3ation of funds b+ S%&'(
under its Joint Venture, is a collective investment scheme in accordance -ith section 11## of
the SEBI #ct, 1>>2 (hereinafter referred to as 7S$BI 'ct7).

5. ?n an examination of the materia,s avai,ab,e on record, it is noted that

i. S%&'( -as incor$orated on Se$tember 1, 2011 under the 5om$anies #ct, 1>@A
(5INBC1@211'N2011':5120>2) having its registered office in 1@282, ?ffice No. 2,
1
st
&,oor, Digh-a+ :o-er, Bomba+ 'une !oad, %a,bhor Nagar, 'une 9 2110@,
.aharashtra 4.

ii. #s $er the .emorandum of #ssociation of S''(, main obEect of S%&'( is to carr+ on
the business of manufacturing, $rocessing, bu+ing, se,,ing, trading, im$orting,
ex$orting, $ac"ing a,, t+$es of food and food $roducts ,i"e organic foods, $rocessed
foods, $ac"ed foods, fro3en foods, canned and Earred foods, $ou,tr+ $roducts ,
groceries inc,uding read+ to eat $re$arations, condiments, other ethnic $re$arations,
agricu,tura, $roduce, so+a bean, -heat , rice and rice $roducts, mai3e, tea and tea
$roducts, minera, -ater, etc.

iii. S%&'( has ,aunched various schemes or arrangements in the name and st+,e Joint
Venture, -hereb+ it has invited $artici$ation from the $ub,ic. Brochure of S%&'(
states that a Foint <enture #greement deed -i,, be made bet-een 5om$an+ = Foint
<enturer in Sing,e = .onth,+ &oods ',ans and the $artici$ation b+ -a+ of Foint
<enture.

iv. In $ursuance of the Joint Venture, S%&'( enters into an Agreement for Joint Venture
-ith Associates or investors -ho are invited to contribute in the form of monetar+
$a+ment or contribution ($artici$ation) to various $,ans ,aunched therein. Such
contribution is de$endent on the $,an that an "associate" or investor ma+ o$t for. In this
context, an i,,ustration of Sing,e $a+ment scheme and .onth,+ $a+ment scheme offered
under the Joint Venture is $rovided be,o-




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Sing,e &oods Scheme for 1 +ear (S&S91)

8 Considertion 9t:6 o!
te to .e ;#rc"sed
Bon#s 5< Mt#rit:
Tot)
Mt#rit:
in /&6
'ccident)
Det"
Ins#rnce (
in ` `` `)
50 50 Kg 1.50 Kg 57.5 Kg 59 Kg 10000
100 100 Kg 3.00 Kg 115 Kg 118 Kg 20000
250 250 Kg 7.50 Kg 287.5 Kg 295 Kg 50000
500 500 Kg 15 Kg 575 Kg 590 Kg 100000
One Unit = One Kg, rates of 1Kg Tea = Rs 200/

!ont"#$ %oo&s '("e)e for 1 $ear *!%'1+
Unit ,onsi&e
ration
-t$. of
tea to .e
/0r("as
e&
!o
nt"#
$
inst
a##)
ent
-t#$.
1nsta#
#)ent
2a#f
3r
1nsta#
#)ent
3ear#
$
1nsta#
#)ent
4on0s
35
!at0rit$
Tota#
!at0r
it$ in
Kg.
6((i&e
nta#
7eat"
1ns0ran
(e
30 30 Kg 500 1500 2980 5950 1.50 Kg 33.9 Kg 35.80
Kg
9i#

:0 :0 Kg 1000 3000 59:0 11900 3.00 Kg :7.8Kg 70.80
Kg
9i#
90 90 Kg 1500 :000 8980 17850 8.50 Kg 101.7 Kg 10:.20
Kg
9i#
120 120 Kg 2000 12000 11920 23800 : Kg 135.: Kg 181.:0
Kg
9i#
280 280 Kg 8000 1:000 23880 87:00 12 Kg 271.2 Kg 283.20
Kg
9i#
?ne Cnit G ?ne %g, rates of 1%g :ea G !s 20089

v. ;hen an "associate" or investor ma"es a contribution ($artici$ation) as $er the
insta,ment $a+ment $,an or one9time $a+ment $,an offered under the Joint Venture,
-herever a$$,icab,e, an investor is issued a 5ertificate of Investment (hereinafter
referred to as )Certi!icte*) b+ S%&'(. #s against such contribution, the "associate" is
$romised a return (ex$ected refund of $artici$ation) on maturit+ subEect to the
fu,fi,,ment of terms and conditions of the 5ertificate. #t the end of the maturit+ $eriod
i.e. com$,etion of re,evant $a+ment $,an, the "associate"or investor -i,, be entit,ed to
-ithdra- or rene- the contribution indicated in the 5ertificate.

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vi. In addition to the return offered under the re,evant $,an i.e. ex$ected refund of
$artici$ation, an "associate" is a,so offered accidenta, death com$ensation under the
Joint Venture.

:. :he abovementioned detai,s of the Joint Venture offered b+ S%&'( have to be
considered in ,ight of Section 11## of the SEBI #ct, -hich reads as fo,,o-s;

(1) Any scheme or arrangement which satisfies the conditions referred to in susection !2" shall e a
collective investment scheme.
(2) Any scheme or arrangement made or offered y any com#any under which,
!i" the contriutions$ or #ayments made y the investors$ y whatever name called$ are #ooled and
utili%ed solely for the #ur#oses of the scheme or arrangement&
!ii" the contriutions or #ayments are made to such scheme or arrangement y the investors with a view
to receive #rofits$ income$ #roduce or #ro#erty$ whether movale or immovale from such scheme or
arrangement&
!iii" the #ro#erty$ contriution or investment forming #art of scheme or arrangement$ whether identifiale
or not$ is managed on ehalf of the investors&
!iv" the investors do not have day to day control over the management and o#eration of the scheme or
arrangement.

7. In this context, I note that
(i) 'he contriutions$ or #ayments made y the investors$ y whatever name called$ are #ooled and
utili%ed solely for the #ur#oses of the scheme or arrangement&
S%&'( o$erates investment $,ans through the Joint Venture, -hich it offers to the
$ub,ic. :he contribution made b+ "associates" or investors in res$onse to the $,ans
offered under the Joint Venture i.e. $artici$ation in the form of insta,ments (month,+,
/uarter,+, ha,f +ear,+ and +ear,+ ) or in sing,e $a+ment scheme for units of tea and
each unit is e/uiva,ent to one "i,o gram of tea. ?ne %g of tea is stated to be -orth
`20089. In addition to this, there is a,so $rovision for $a+ment of bonus at H.
Dence, a $erson -ho bu+s 0 units b+ $a+ing `A00089 -hich is re$resentative of
@.20 "g of tea is e,igib,e to get `100089. &rom the above it is seen that contributions
received from the investors are $oo,ed for the $ur$ose of the schemes. I, therefore,
find that in the instant scheme8$,an satisfies the first condition sti$u,ated in Section
11 ## 2 (i) of the SEBI #ct.
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*ii+ 'he contriutions or #ayments are made to such scheme or arrangement y the investors with a view to
receive #rofits$ income$ #roduce or #ro#erty$ whether movale or immovale from such scheme or
arrangement;
:he contribution to-ards $,ans offered under the )Foint <enture* is made b+ an
IassociateI or investor -ith a vie- to receive $rofit or income in the form of ex$ected
refund, on maturit+. &or exam$,e, an IassociateI or investor o$ting for subscri$tion to
the Sing,e $a+ment scheme is re/uired to ma"e a tota, contribution of `10,00089 at
the beginning of the +ear and the ex$ected return for such investment is `11,00089 at
the end of the +ear. )Accidental death (nsurance is a,so offered under the )Foint
<enture*. In addition, a certificate is issued b+ S%&'( to the investor de$icting the
extent of contribution made b+ such IassociateI or investor in res$ect of each $,an
and term of the $,an. :he certificate $rovides detai,s such as amount of consideration
$aid b+ the investor and a,so $rovides for ex$ected sum $a+ab,e on ex$ir+ of the
term. :he said factors c,ear,+ indicate that the contributions are made b+ the
)associates8investors* -ith an ex$ectation to earn income8$rofit8return from such
IschemeI8$,an. In vie- of this, I find that the instant IschemeI8$,an a,so satisfies the
second condition sti$u,ated in Section 11##(2)(ii) of the SEBI #ct.

!iii" the #ro#erty$ contriution or investment forming #art of scheme or arrangement$ whether identifiale or
not$ is managed on ehalf of the investors&
(iv) the investors do not have day to day control over the management and o#eration of the scheme or
arrangement.
#s $er the brochure of S%&'(, it carries out the activities of the scheme on beha,f of
individua, or organi3ation on a contractua,8 Foint <enture basis . Dence, contributions
made b+ "associates" or investors under the various $,ans offered therein, are managed
on beha,f of S%&'(.
#s $er the I#greement to Se,,I, S%&'( -i,, $rocure8manufacture the $roduct b+
sa,e8$urchase8manufacture or b+ an+ other method as it deems fit. Dence, S%&'(
exercises com$,ete manageria, and administrative contro, over the $,ans offered under
the Joint Venture. SEBI in its ,etters dated 20.11.201 and 01.0.2012 sought s$ecific
detai,s regarding $rocurement or $roduction of tea b+ S%&'( and a,so detai,s


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regarding de,iver+ of tea units a,ong -ith ,ist of investors to -hom tea units -ere
de,ivered. Do-ever, S%&'( did not submit such detai,s. In the absence of such
im$ortant detai,s, the investors a$$ear to have no ro,e exce$t ma"ing $a+ment of the
consideration for the $,ans offered b+ S%&'(.
:he above c,ause of agreement c,ear,+ states that the associates8investors do not
a$$ear to have an+ da+ to da+ contro, or sa+ over the management and o$eration of
the Ischeme")$,an. I, therefore, find that the instant Ischeme")$,an a,so satisfies the
conditions sti$u,ated in Section 11##(2)(iii) and (iv) of the SEBI #ct.

8. In vie- of the above, I find that the Joint Venture offered b+ S%&'( has a,, the
ingredients of a *collective investment scheme* as defined in section 11## of the SEBI #ct.

>.1 I note that the categori3ation of an+ scheme or arrangement as Joint Venture is not
determinative of its nature and character6 the same has to be determined -ith reference to
the terms and conditions of such scheme or arrangement, -hich indicate the intention of
$arties therein. In this regard, I note that the DonJb,e Su$reme 5ourt of India had the
occasion to consider the nature of >?oint-,ent#re@ in +ew ,ori%ons -td vs. .nion of (ndia
/0112 !0" 344 5678, -herein the DonKb,e 5ourt observed B

'he e9#ression :oint venture ; connotes a legal entity in the nature of a #artnershi# engaged in the
:oint underta<ing of a #articular transaction for mutual #rofit or an association of #ersons or com#anies
:ointly underta<ing some commercial enter#rise wherein all contriute assets and share ris<s. (t re=uires
a community of interest in the #erformance of the su:ect matter$ a right to direct and govern the #olicy
in connection therewith$ and duty$ which may e altered y agreement$ to share oth in #rofit and losses.
/>lac<*s -aw ?ictionary& 3i9th @dition$ #. 7A18.

9.2 C$on ana,+sis of the instant Joint Venture offered b+ S%&'( (in terms of the Agreement
for Joint Venture" in the context of the abovementioned observations of the DonKb,e
Su$reme 5ourt of India, I note the fo,,o-ing


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i. :he Joint Venture in /uestion is not a $artnershi$ bet-een S%&'( and the
"associate" for furtherance of a commercia, enter$rise, etc. but rather an arrangement
-hich $rovides for a monetar+ return on the investment made b+ such "associate".
&urther, such Joint Venture stands cance,,ed after $a+ment of monetar+ return on
the investment made b+ the "associate"8investor.

ii. Cnder the instant Joint Venture$ there is no shared contro,. :he "associate")investor is
exc,uded from the financia, as$ect of the Joint Venture. &urther, such
"associate")investor -i,, have no right to interfere in the Joint Venture since S%&'(
exercises com$,ete manageria, and administrative contro, over the $,ans offered
therein.

>. In vie- of the above, I find that the scheme or arrangement offered b+ S%&'( having
nomenc,ature Joint Venture is not a >?oint-,ent#re@ in accordance -ith ,a- but rather
such term has been used b+ S%&'( to camouf,age its fund mobi,ising activit+, -hich is in
the nature of a *collective investment scheme*$ in order to mis,ead and attract investment from
the genera, $ub,ic.

10.1 I note that the main characteristics of a *collective investment scheme* are found in the instant
scheme offered b+ S%&'(. In this context, -e ma+ refer to the observations of the
DonKb,e Su$reme 5ourt of India in P.B.C -imited D Ers. vs. .E( D Anr.
!FA+.)34)G256)2G0A", -herein it had observedB

...suHsection !2" of 3ection 00 AA$ which defines a collective investment scheme disclose that it is
not restricted to any #articular commercial activity such as in a sho# or any other commercial
estalishment or even agricultural o#eration or trans#ortation or shi##ing or entertainment industry
etc. 'he definition only see<s to ascertain and identify any scheme or arrangement$ irres#ective of the
nature of usiness$ which attracts investors to invest their funds at the instance of someone else who
comes forward to #romote such scheme or arrangement in any field and such scheme or arrangement
#rovides for the various conse=uences to result there from.




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10.2 In vie- of the abovementioned observations, I find that the SEBI #ct is a$$,icab,e to
collective investment scheme that engage in inviting investment or contribution from investors
for investing in an+ asset -hich -i,, inter alia resu,t in a return on such investment. In this
regard, the activit+ of fund mobi,i3ation b+ S%&'( under the instant scheme -ith a
resu,tant $romise of returns -hen considered in ,ight of the other features of such scheme,
as discussed in the $receding $aragra$hs, #rima facie fa,,s -ithin the ambit of *collective
investment scheme* as defined under section 11## of the SEBI #ct.

10. I note that in terms of section 12(1B) of the SEBI #ct, "no #erson shall s#onsor or cause to e
s#onsored or cause to e carried on a *collective investment scheme* unless he otains a certificate of
registration from the >oard in accordance with the regulations. !egu,ation of the 5IS !egu,ations
$rovides that no $erson other than a 5o,,ective Investment .anagement 5om$an+ -hich
has obtained a certificate under the 5IS !egu,ations sha,, carr+ on or s$onsor or ,aunch a
*collective investment scheme*. :herefore, a $erson can ,aunch or s$onsor or cause to s$onsor a
*collective investment scheme* on,+ if it is registered -ith SEBI as a 5o,,ective Investment
.anagement 5om$an+. In m+ vie-, therefore, the ,aunching8f,oating8s$onsoring or
causing to s$onsor an+ *collective investment scheme* y any *#erson* -ithout obtaining the
certificate of registration in terms of the $rovisions of the 5IS !egu,ations is in
contravention of section 12(1B) of the SEBI #ct and regu,ation of the 5IS !egu,ations.
In this regard, I note that S%&'( has not obtained an+ certificate of registration under the
5IS !egu,ations for its fund mobi,i3ing activit+ from the $ub,ic, under the instant scheme
offered b+ it.

10.2 C$on consideration of the aforementioned $aragra$hs, I am of the vie- that S%&'( is
#rima facie engaged in mobi,i3ing funds from the $ub,ic, b+ f,oating or s$onsoring or
,aunching *collective investment scheme* as defined in section 11## of the SEBI #ct -ithout
obtaining a certificate of registration from SEBI as re/uired under section 12(1B) of the
SEBI #ct and the 5IS !egu,ations.

11. #s discussed at $aras >.1 4 >. above, I find that the instant scheme offered b+ S%&'(
under the nomenc,ature Joint Venture is nothing but a camouf,age for its fund mobi,i3ing
activit+. I find that such fund mobi,i3ing activit+ fa,,s -ithin the ambit of *collective investment


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scheme* as defined under section 11## of the SEBI #ct and the same has been carried on
b+ S%&'( -ithout due registration from SEBI. In this regard, SEBI vide its ,etters dated
20.11.201 and 01.0.2012, inter alia sought detai,s of the scheme -ise, +ear -ise amount
$aid 8redeemed ti,, date a,ong -ith the number of investors under the schemes. Do-ever
S%&'( fai,ed to $rovide such vita, information. 5onsidering the fact that no $rior
registration -as obtained b+ S%&'(, in res$ect of the aforesaid activities in the nature of
co,,ective investment scheme, I am of the vie- that S%&'( is i,,ega,,+ mobi,i3ing funds
from the $ub,ic, -hich #rima facie amounts to a fraudu,ent $ractice in terms of !egu,ation
2(2) (t) of the SEBI ('rohibition of &raudu,ent and Cnfair :rade 'ractice !e,ating to
Securities .ar"et) !egu,ations, 200.

12. 'rotecting the interests of investors is the first and foremost mandate for SEBI and
therefore ste$s have to be ta"en in the instant matter to ensure on,+ ,egitimate investment
activities are carried on b+ S%&'( and no investors are defrauded. In ,ight of the same, I
find it reasonab,e to ta"e recourse through an interim action against S%&'( for $reventing
it from further carr+ing on -ith its fund mobi,i3ing activit+ re,ated to *collective investment
scheme*$ -ithout registration from SEBI.

1. In vie- of the foregoing, I, in exercise of the $o-ers conferred u$on me under Sections
11(1), 11B and 11(2) of the SEBI #ct read -ith !egu,ation of 5IS !egu,ations, hereb+
direct S%&'( and its 7irectors .r. Somit %ishanchandra Saxena(7IN 9 0A1>@A0 8 '#N
9 B5L'S@0@1F and .r. Sudhir Nathuram 'a-ar,(7IN 9 0A2202 8 '#N 9 #II''02E)
a. not to co,,ect an+ more mone+ from investors inc,uding under the existing schemes6
b. not to ,aunch an+ ne- schemes6
c. not to dis$ose of an+ of the $ro$erties or a,ienate an+ of the assets of the schemes6
d. not to divert an+ funds raised from $ub,ic at ,arge, "e$t in ban" account(s) and8or in
the custod+ of S%'( or grou$ com$anies or $romoters or (('s or 'ro$rietar+
concerns or an+ $erson direct,+ or indirect,+ contro,,ed through shareho,ding or
management b+ S%'( 6
e. furnish a,, information regarding the schemes -ith detai,s of the investors and a,so
detai,s of insurance $o,icies and com$ensation given under the $o,icies as $art of the
schemes.

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1. :he above directions sha,, ta"e effect immediate,+ and sha,, be in force unti, further
orders.

12. :he #rima facie observations contained in this ?rder are made on the basis of the materia,s
avai,ab,e on record. In this context, SKPL and its abovementioned 7irectors ma+, -ithin
21 da+s from the date of recei$t of this ?rder, fi,e their re$,+, if an+, to this ?rder and ma+
a,so indicate -hether the+ desire to avai, themse,ves an o$$ortunit+ of $ersona, hearing on
a date and time to be fixed on a s$ecific re/uest made in that regard.





1)ce4 M#-.i S6 R'M'3
Dte4 '#&#st 08, 2014 WAB2$ TIM$ M$MB$R
S$CURITI$S '3D $CCA'3D$ BB'RD B0 I3DI'

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