Farmland "Units", 18% Assured Returns and the AIF Claim
Sahyadri Agro Ventures LLP has, since 2022, collected ₹78 crore from about 5,900 retail investors who pay ₹50,000 each for "units" in Sahyadri Green Acres. The money buys farmland on a 30-year lease, registered in the LLP's name. The brochure promises a "fixed 18% annual return plus appreciation at exit", an investor "membership" of ₹5,000, and describes investors as "partners in a joint venture" who may attend an annual meeting but have no say in decisions. Since April, returns have been paid out of fresh collections, and 300 investors have complained to SEBI after payments stopped. The LLP holds no SEBI registration. It now plans Sahyadri Premier, a ₹400 crore scheme with a ₹1 crore minimum ticket, and claims it will be an AIF and therefore outside the CIS framework. Its lawyer argues that no CIS exists because investors do not share day-to-day control and the arrangement is a genuine land joint venture.
1. Apply the statutory test for a collective investment scheme to Sahyadri Green Acres and advise whether an unregistered CIS exists.
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The four limbs of s.11AA of the SEBI Act. A collective investment scheme exists where contributions are pooled, under a scheme or arrangement, for a common purpose that yields profits or income, and the scheme is not registered with SEBI. All four limbs are met: ₹78 crore is pooled from 5,900 investors; the object is common, namely acquiring and developing land; investors expect profit in the form of the 18% return and appreciation; and there is no registration.
Substance over form. The labels - LLP, partnership, joint venture, units, membership - do not alter the analysis. Indeed, the brochure's own description of a joint venture is close to the statutory language.
The "no control" argument backfires. Passivity of investors supports the finding: the promoter manages the scheme and the investors were promised a fixed return, which cannot be fixed if they are genuine partners sharing risk.
Precedent and the payment pattern. In Sahara India Real Estate Corp. v. SEBI (2012) the Supreme Court applied this substance test to a scheme presented as private placement and held it to be a CIS. Paying returns out of fresh collections confirms the scheme is an unregistered CIS and a Ponzi arrangement.
2. What enforcement powers can SEBI exercise, and what other liabilities arise for the LLP and its partners?
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SEBI's powers. Under s.11(4) read with s.11AA and s.11B, SEBI may direct the LLP to stop collecting money, wind up the scheme, refund the amounts collected with interest, disgorge the gains, attach bank and property accounts pending investigation, and restrain the partners from the securities market.
Prosecution. Contravention of s.11AA is punishable under s.24 with imprisonment up to 10 years and/or a fine up to ₹25 crore.
Parallel exposure. The assured-return, fresh-money-for-old-investors structure invites action under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and under state depositors' protection laws. The "membership" does not convert investors into limited-recourse partners: the partners remain personally answerable, and the ₹78 crore is a liability that must be accounted for.
Others in the chain. SEBI can also proceed against the collecting agents and any chartered accountant or professional who certified the brochure or the projections, since their certificates lent credibility to an unregistered scheme.
3. Will Sahyadri Premier qualify as an AIF merely because it has a ₹1 crore minimum ticket? What lawful routes remain for the promoters?
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No. A ₹1 crore minimum investment is one condition of AIF eligibility under the AIF Regulations, not a substitute for registration. An AIF must be registered with SEBI, must invest in accordance with a stated strategy, must accept not less than ₹1 crore from each investor (₹25 lakh for employees, directors and designated persons of the manager or sponsor), and cannot assure returns. A ₹400 crore scheme promising fixed returns would be refused registration.
The existing scheme cannot be migrated. Five thousand nine hundred investors of ₹50,000 each cannot be converted into AIF investors, because they fail the minimum-investment test. Winding up and refunding is the only lawful path for the money already collected.
What the promoters could do. If they wish to continue in the business they must start afresh, either as a SEBI-registered AIF with eligible investors under a permitted category, or through a SEBI-registered mutual fund scheme. Neither vehicle may promise a fixed 18% return, and neither may market to retail investors on an assured-return basis.