In the Matter of Satkartar Lending & Trading Corp.

October 4, 2012 SEC ADMINISTRATIVE CASE NO. 05-12-004 (SEC CDO Case No. 05-12-004) IN THE MATTER OF SATKARTAR LENDING & TRADING CORP. ENFORCEMENT AND PROSECUTION DEPARTMENT , petitioner. ORDER Pending consideration before the Commission is the prayer for a Cease and Desist Order (CDO) in the Petition for Revocation of Certificate of Registration dated 07 May 2012 filed on 08 May 2012 by the Enforcement and Prosecution Department (EPD) of this Commission against SATKARTAR LENDING & TRADING CORP. (SATKARTAR). At the outset, let the mistake in docketing of the instant case be corrected to indicate that this is an administrative case as it is principally a petition for revocation of certificate of registration that happens to have a prayer for CDO. Thus, the correct docket number is SEC Administrative Case No. 05-12-004. SATKARTAR is a corporation duly registered with the Commission on 11 January 2007 under Company Registration No. CS200700222. The principal office address of SATKARTAR as stated in its Articles of Incorporation (AI) is at 211 Apo St. Sta. Mesa Heights, Quezon City. The primary purpose and secondary purpose stated in its AI, are: ". . . to engage in the business as lending investor, lending money to persons and entities under the term [ sic ] and conditions allowed by law, provided that the company shall not engage in financing activities under RA 5980. That the secondary purpose of this corporation is to engage in the business of trading of goods such as but not limited to appliances and general merchandise on wholesale basis." IcSEAH The names and addresses of the incorporators of SATKARTAR are stated in its AI: 1 Name Nationality Address 1. Satkartar Singh Indian 211 Apo St. Sta. Mesa Heights, Quezon City 2. Sarbjit Singh Indian 211 Apo St. Sta. Mesa Heights, Quezon City 3. Kewal Singh Indian 226 B Mayon St., La Loma, Quezon City 4. Jonathan P. Diaz Filipino 70 Ohio St., New Manila, Quezon City 5. Elvie Santos Filipino 1304 M. Almeda St., Pateros, Metro Manila 6. Bella Quiambao Filipino 71 Baltazar II, Caloocan City 7. Susana C. Manalang Filipino 71 Baltazar II, Caloocan City The authorized capital stock of SATKARTAR is TWO HUNDRED THOUSAND PESOS (Php200,000.00), divided into TWO THOUSAND shares with a value of ONE HUNDRED PESOS (Php100.00) per share. Subscribed and paid up capital amounts to ONE HUNDRED THOUSAND PESOS(Php100,000.00) only. 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 SATKARTAR to determine whether it is actually and continually operating as a lending company, without the required Certificate of Authority (CA) to Operate as a Lending Company, despite receipt of an Order 3 dated 20 January 2010 from the CFD, to immediately obtain its CA. A Certification 4 dated 11 February 2011 was issued by the Business Permits and Licensing Office of the Office of the Mayor of Quezon City stating that no business permit has been issued in the name of SATKARTAR. On 04 March 2011, a team conducted surveillance on the activities of SATKARTAR and found a two-storey townhouse at its principal office address. 5 The address indicated in the Field Investigation Report 6 is, 211 Apo Ave. Maharlika, Quezon City, which is not the same as the address reflected in the AI 7 which is, 211 Apo Ave. Sta. Mesa Heights, Quezon City. There, the team met a person who claimed to be the driver of the townhouse owner, but he refused to disclose the owner's name. However, he informed the team that there is a "Bombay" (a person of Indian descent) who is leasing a unit at the back of the house whose name he does not remember. He also informed the team that as far as he knows, the person concerned is in the business of lending money and also sells various goods like umbrellas. According to him, the "Bombay" was not in the house and will probably return late in the afternoon. 8 cTSHaE Three Notices of Conference ("Notice") dated 19 April 2011, 28 April 2011, and 09 May 2011 were sent to Satkartar, Sarbjit and Kewal, all surnamed Singh. 9 The Notice dated 28 April 2011 was received by a certain Tegrinder Singh on 29 April 2011. The parties failed to appear in all the conferences scheduled, where they were given the chance to show cause why the company and its directors and officers should not be held liable under Rule 10 10 of the Implementing Rules and Regulations (IRR) of the Lending Company Regulation Act of 2007 (R.A. 9474). The Notice explicitly stated that the parties' failure to appear on the scheduled date may be construed as their waiver of their right to be heard and may be a cause for severe sanctions from the Commission. A second surveillance 11 was conducted by another EPD team on 08 November 2011, to determine if indeed, SATKARTAR is engaged in lending activities. The second team went to the address indicated in the AI (211 Apo Ave. Sta. Mesa Heights, Quezon City) and found that the purported office is a residential apartment-type building. A housemaid attended to them who confirmed that Satkartar Singh (Mr. Singh), one of the incorporators of SATKARTAR, is a lessee of the building. She admitted to the team that as far as she knew, Mr. Singh is engaged in the lending business. Accordingly, Mr. Singh leaves early in the morning to attend to his lending activities in Tondo, Manila, and returns at around 5:00 p.m. From the housemaid, the team gathered the following information: 1) Sarbjit Singh was also a previous lessee in the said address, but he has moved to Novaliches; 2) She does not know the other incorporators, except for Kewal Singh who often visited Mr. Singh; 3) She was the one who personally received the Notices of Conference sent to the company and gave the same to Mr. Singh; and 4) That SATKARTAR does not hold office in the same address. The team requested her to advise Mr. Singh to respond to the Notices and visit EPD soon to shed light on the lending activities of SATKARTAR. On 23 November 2011, the team personally served the Subpoena Duces Tecum/Ad Testificandum 12 dated 17 November 2011 to the incorporators of the company at SATKARTAR's principal office address, duly received by a certain Regina J. Garcia. Again, not one of them appeared at the EPD office at the appointed time. In a letter 13 dated 26 January 2012 addressed to the company's incorporators, EPD directed SATKARTAR to comply with Section 5 14 of R.A. 9474 requiring the minimum capital requirement of ONE MILLION PESOS (Php1,000,000.00) and reminded the company to obtain a CA as prescribed by Section 4 15 of R.A. 9474. However, SATKARTAR has not responded in any way. CAaSHI There is no doubt that SATKARTAR has no CA to Operate a Lending Company as certified 16 by the Company Registration and Monitoring Department of the Commission in a Memorandum dated 14 February 2012. Moreover, records of the Commission show that SATKARTAR has not done anything to increase its paid-in capital from ONE HUNDRED THOUSAND PESOS (Php100,000.00) to the minimum capital requirement of ONE MILLION PESOS (Php1,000,000.00) for lending companies as mandated by R.A. 9474. The policy behind R.A. 9474 is "to prevent and mitigate, as far as practicable, practices prejudicial to public interest." In relation thereto, the continued operation of SATKARTAR without complying with these requirements is likely to cause grave or irreparable injury or prejudice to the investing public. WHEREFORE, premises considered, respondent SATKARTAR LENDING & TRADING 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 17 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. The Respondent may file a formal request or motion for the lifting of this Cease and Desist Order within a non-extendible period of five (5) business days from receipt of the Order. Let a copy of this Order be furnished the Corporation Finance Department and the Economic Research and Information Department for their information and appropriate action. FAIL NOT UNDER PENALTY OF LAW. SO ORDERED. Mandaluyong City, October 4, 2012. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (did not participate) RAUL J. PALABRICA Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (on vacation leave) ELADIO M. JALA Commissioner Footnotes 1. Records, p. 24. 2. Records, p. 20. 3. Petition dated 07 May 2012, Annex "D" mailed on 29 July 2010, received by a certain Genelyn Latoc on 09 August 2010, Records, p. 14. 4. Id. , Annex "E", Records, p. 13. 5. Petition par. 10, Records, p. 35. 6. Id. , Annex "G", Records, p. 10. 7. Id. , Annex "B", Records, p. 25. 8. Id. , Annex "G", Records, p. 10. 9. The Notice was sent to the Incorporators because the company has not submitted any General Information Sheet indicating its officers and directors. 10. RULE 10. Acts Punishable and Persons Liable A fine of not less than Ten Thousand Pesos (PhP10,000.00) and not more than Fifty Thousand Pesos (PhP50,000.00) or imprisonment of not less than six months but not more than ten (10) years or both, at the discretion of the court, shall be imposed upon: (a) Any person who shall engage in the business of a lending company without a validly subsisting authority to operate from the SEC; (b) The president, treasurer and other officers of a corporation, including the managing officer thereof, who shall knowingly and willingly i. Engage in the business of a lending company without a validly subsisting authority from the SEC; ii. Hold themselves out to be a lending company, either through advertisement on whatever form, whether in its stationery, commercial paper, or other document, or through other representations; iii. Make use of a trade or firm name containing the words lending company or "lending investor" or any other designation that would give the public the impression that it is engaged in the business of a lending company as defined in the Act without the appropriate SEC authority; and (c) Violators or violations of the provisions of the Act; (d) Any officer, employee or agent of a lending company who shall: i. Knowingly and willingly make any statement in any application, report, or document required to be filled under the Act, which statement is false or misleading with respect to any material fact; ii. Overvalue or aid in overvaluing any security for the purpose of influencing in any way the action of the company in any loan; (e) Any officer, employee or examiner of the SEC directly charged with the implementation of the Act or of other government agencies who shall commit, connive, aid, or assist in the commission of acts enumerated under Subsection 1 and 2 of this Rule. 11. Petition, dated 07 May 2012, Annex "H", Records, p. 8. 12. Id. , Annex "I", Records, p. 6. 13. Id. , Annex "J", Records, p. 4. 14. 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. 15. ". . . No lending company shall conduct business unless granted an authority to operate by the SEC." 16. Annex "L", Records, p. 1. 17. Securities Regulation Code, SEC. 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; . . . .