In the Matter of Gurjevan Lending Corp.

October 11, 2012 SEC ADMINISTRATIVE CASE NO. 04-12-152 IN THE MATTER OF GURJEVAN LENDING CORP. ENFORCEMENT AND PROSECUTION DEPARTMENT , petitioner . ORDER Pending consideration of the Commission is the Prayer for Issuance of a Cease and Desist Order (CDO) in the Petition for Revocation of Certificate of Registration dated 12 April 2012 filed on 26 April 2012 by the Enforcement and Prosecution Department (EPD) of this Commission against GURJEVAN LENDING CORP. (GURJEVAN). GURJEVAN is a corporation duly registered with the Commission on 21 March 2001 under SEC Registration No. A200104171. The principal office address of GURJEVAN as it appears in its Articles of Incorporation (AOI) is 225 B Delas Alas Street, Pasay City. The primary purpose stated in the AOI is "to engage in business as lending investor without however engaging in pawnbrokering under PD 114 and financing under RA 5980, provided that borrowing shall be sourced from not more than 19 lenders." The names and addresses of the incorporators/directors and officers of GURJEVAN are as follows: 1 Name Nationality Position Address 1. Lydia L. Ranillo Filipino Director/Corporate 2124 Tramo St. Pasay City Secretary 2. Edith R. Gella Filipino Director/Treasurer 2124 Tripa de Gallena Pasay City 3. Rosalinda M. Filipino Director/Auditor # 9 F. Victor St., Pasay City Jordan 4. Pritpal Singh Indian Chairman/President 225-B Delas Alas St., Pasay City 5. Pargat Singh Indian 51 Bernie St., Pasay City This case was initiated by the EPD, upon receipt of a Memorandum 2 dated 24 November 2010 from the Corporation Finance Department (CFD), asking for an ocular inspection of GURJEVAN's business operations, to determine whether it is actually and continuously operating as a lending company, without the Certificate of Authority to Operate as a Lending Company, despite receipt of show cause letters from the Commission. The EPD formed a team to investigate (The Team) and obtained a Certification dated 24 February 2011 from the Business Permits and License Office (BPLO) of Pasay City, stating that GURJEVAN has already secured a business permit for 2011. 3 EPD exerted several efforts to have a conference with the officers and directors of the company, which failed. Several Notices of Conference were sent: 1) on 18 March 2011; 4 2) on 04 July 2011; 5 and 3) on 22 August 2011. 6 EPD tried to ascertain the identity of two officers,. Pritpal Singh and Pargat Singh through the Bureau of Immigration (BI) but the BI issued a Certification as to Pritpal Singh only. However, multiple results with different dates of birth were provided based on the given information as requested. 7 In its Petition, EPD claimed that on October 18, 2011, the Team was told that Pritpal was detained and under the custody of Bureau of Jail Management and Penology (BJMP) of Binangonan, so the service and issuance of summons to him was coursed through the BJMP of Binangonan. 8 After conducting three field investigations, specifically on 18 October 2011, 25 October 2011, and 26 October 2011, the team was able to locate the new address of Pritpal. 9 EPD issued a Subpoena Duces Tecum/Ad Testificandum dated 02 November 2011 addressed to the incorporators/directors/officers of GURJEVAN, commanding them to appear at the EPD office on 14 November 2011. The addresses used were the addresses appearing in the AOI, except for Pritpal who had two addresses. 10 EPD asserted that this was "duly received by GURJEVAN's incorporators, directors and officers in their addresses," but they disregarded the processes. 11 On 19 January 2012, the team sent another letter to the addresses of GURJEVAN's incorporators, directors and officers reiterating its need to comply with the provisions of R.A. 9474 and its IRR. 12 In this letter, the EPD informed GURJEVAN that based on the Commission's records, the company has not complied with the ONE MILLION PESOS (Php1,000,000.00) minimum capitalization requirement and neither has it been granted authority to operate as a lending company by the Commission, both required by Sections 4 and 5 of the Lending Company Regulation Act of 2007 (R.A. 9474). EPD ordered the company to comply with said requirements and warned that if the company fails to do so, administrative action will be taken against GURJEVAN. However, the company has not responded, and has not done anything to comply with the requirements of Sections 4 and 5 of R.A. 9474, as follows: "Sec. 4. Form of Organization. A lending company shall be established only as a corporation: Provided That existing lending investors organized as single proprietorships or partnerships shall be disallowed from engaging in the business of granting loans to the public one year after the date of effectivity of this Act. No lending company shall conduct business unless granted an authority to operate by the SEC ." (Emphasis ours) Sec. 5. Capital. The minimum paid in capital of any lending company which may be established after the effectivity of this Act shall be One million pesos (P1,000,000.00) : Provided, however, That lending companies established and in operation prior thereto shall comply with the minimum capitalization required under the provisions of this Sec. within such time as may be prescribed by the SEC which time shall, in no case, be less than three years from the date of effectivity of this Act and: Provided, further, That the SEC may prescribe a higher minimum capitalization if warranted by circumstances." (Emphasis ours) The Company Registration and Monitoring Department (CRMD) of the Commission sent a Memorandum dated 27 June 2011 to EPD stating that no Certificate of Authority (CA) to Operate as a Lending Company was issued by the Commission to GURJEVAN nor is there any pending application for a CA with CRMD. 13 The latest General Information Sheet filed by GURJEVAN on 20 March 2010 affirms that the total amount of paid up capital is a mere ONE HUNDRED TWENTY FIVE THOUSAND PESOS (Php125,000.00) 14 only, yet the database of the Commission reveals that the company has been filing its reports from 2004 until 2010, indicating that GURJEVAN is still operating. 15 Moreover, GURJEVAN has already secured a business permit for 2011, as certified by Business Permits and License Office of Pasay City. WHEREFORE, premises considered, there being a prima facie evidence that respondent GURJEVAN LENDING CORP. is engaged in the business of a lending company without complying with the requirements of Sections 4 and 5 of R.A. No. 9474, respondent, GURJEVAN LENDING CORP., its incorporators, directors and officers, representatives, agents, and any and all persons, claiming and acting for and in its behalf are hereby ordered to immediately CEASE and DESIST, 16 under pain of contempt, from further engaging in the lending business, until it has complied with the requirements of law and its implementing rules and regulations. Pursuant to Section 10-3 of the 2006 Rules of Procedure of this Commission, the respondent may, within a non-extendible period of five (5) business days from receipt of this Order, file a formal request or motion for the lifting thereof with the Commission En Banc , through the Office of the General Counsel. Let a copy of this Order be furnished the INVESTOR PROTECTION. & SURVEILLANCE DEPARTMENT, the CORPORATION FINANCE DEPARTMENT, and the ECONOMIC RESEARCH AND INFORMATION DEPARTMENT of the Commission for their information and appropriate action. FAIL NOT UNDER PENALTY OF LAW. SO ORDERED. Mandaluyong City, October 11, 2012. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) RAUL J. PALABRICA Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner Footnotes 1. Source: from the Articles of Incorporation, Records, p. 88 and the 2010 General Information Sheet, Records, p. 65. 2. Petition dated 12 April 2012, Annex "D", Records, pp. 54-59. 3. Id. , Annex "G", Records, p. 48. 4. Id. , Annex "H", Records, p. 47. 5. Id. , Annex "K", Records, p. 43. 6. Id. , Annex "O", Records, p. 22. 7. Id. , Annexes "P" and "Q", Records, pp. 19-20. 8. Id. , par. 15, Records, pp. 97-98. 9. Id. , par. 19, Records, p. 97. 10. Petition, Annex "T", Records, p. 6. 11. Petition, par. 19, Records, p. 97. 12. Annex "V", Records, p. 2. 13. Annex "M," Records, p. 37. 14. Records, p. 66. 15. Petition, par. 25, Records, p. 95. 16. SECURITIES REGULATION CODE (2000) "SECTION 5. Powers and Functions of the Commission. 5.1. The Commission shall act with transparency and shall have the powers and functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions: . . . (i) Issue cease and desist orders to prevent fraud or injury to the investing public ; . . ."