In the Matter of Mohit Lending & Trading Corp.

July 15, 2014 SEC ADMINISTRATIVE CASE NO. 05-12-155 IN THE MATTER OF MOHIT LENDING & TRADING CORP. ENFORCEMENT AND PROSECUTION DEPARTMENT, now the ENFORCEMENT AND INVESTOR PROTECTION DEPARTMENT, petitioner . ORDER Pending consideration by the Commission is the Petition (for Revocation of Certificate of Registration) (Petition) 1 filed on 17 May 2012 by the then Enforcement and Prosecution Department (EPD) of this Commission, now the Enforcement and Investor Protection Department (EIPD), against MOHIT LENDING & TRADING CORPORATION (MOHIT). MOHIT is a stock corporation duly registered with the Commission under SEC Registration No. CS200619700 on 20 December 2006. 2 Its primary purpose is "to engage in the business of lending investor, lending money to persons and entities under the terms and conditions allowed by law, provided that the company shall not engage in financing activities under Republic Act 5980." 3 Its authorized capital stock is Php200,000.00 4 while its paid-in capital is Php100,000.00. 5 The then Corporation Finance Department (CFD), now the Corporate Governance and Finance Department (CGFD), recommended that an ocular inspection be conducted by the EPD on GURDAVER-GURJANT LENDING AND TRADING CORPORATION (GURDAVER) to determine whether said corporation is operating without the required Certificate of Authority to Operate as a Lending Company (CA) from the Commission. 6 During the investigation of GURDAVER, one of its incorporators, Ms. Arlene Maik, denied involvement in the incorporation and operation thereof. 7 It was found out during the reverse check that Ms. Arlene Maik is also an incorporator of MOHIT. 8 The EPD inquired from the Business Permit and Licensing Office of Caloocan City (BPLO-Caloocan City) if a business permit or license was issued to MOHIT. BPLO-Caloocan City issued a Certification that MOHIT had paid the business permit and license fees for 2011 as a "Financial Establishment Lending" . 9 On 9 November 2011, the EPD proceeded to the principal place of business of MOHIT to determine whether or not it is engaged in lending activities. The EPD investigating team was attended to by Mr. Kishan Singh, one of the incorporators of MOHIT, who confirmed that MOHIT was engaged in lending activities. Thereafter, the EPD explained to him that MOHIT is required to obtain a CA from the Commission and invited him to visit the Commission in order to further explain the procedure for obtaining the CA. 10 HCaDIS Notices of Conference 11 and a Subpoena Duces Tecum/Ad Testificandum 12 were sent to the incorporators, directors and officers of MOHIT directing them to appear before the EPD and clarify matters regarding possible violation of the Lending Company Regulation Act (LCRA). 13 However, despite due receipt of the notices, the parties failed to appear. 14 The EPD, in its Order dated 26 January 2012, directed the incorporators, directors and officers of MOHIT to comply with the minimum capital requirement of Php1,000,000.00 for lending corporations under the LCRA and to secure a valid CA from the Commission. 15 However, no CA was issued by the Commission to MOHIT nor is there any pending application for said CA. 16 Hence, this instant Petition filed by the EPD praying for the revocation of the Certificate of Registration of MOHIT pursuant to the LCRA and Section 6 (1) (3) of Presidential Decree 902-A (P.D. 902-A), as amended, for refusal to comply with or defiance of the lawful order of the Commission. The Commission issued a Summons to MOHIT at its principal office address, and to its treasurer, Jemarie Garcia, ordering them to enter their appearance in the case and file their Answer to the Petition within fifteen (15) days from receipt thereof. The Summons states that failure to file their Answer to the Petition within the above-mentioned period may result in a judgment by default in favor of the petitioners and reliefs applied for may be granted. 17 Records show that the Summons was not successfully served on MOHIT since it was merely received by one of its incorporators, Rajinder Singh. 18 Moreover, the Summons was not served on its treasurer, Jemarie Garcia, for the reason that she moved out from her residential address on record. 19 Thereafter, an Order dated 6 December 2012 was issued by the Commission directing the EPD to manifest whether or not it was interested in moving for the issuance of an Alias Summons. TcSAaH In compliance with said Order, the EPD filed a Motion and Manifestation on 15 January 2013 requesting that a Summons by Publication be issued pursuant to Section 49 of Rules IV, 2006 Rules of Procedure of the Commission (Rules) since it claims that the whereabouts of MOHIT and its officers are unknown and cannot be ascertained. 20 In response, the Commission issued an Order dated 12 February 2013 directing that the Summons to MOHIT be posted on the Commission's website and published once in a newspaper of general circulation. Thus, the Summons was published in the Philippine Star on 21 February 2013 21 and posted on the SEC website on 19 February 2013. 22 However, no Answer to the Petition was filed by MOHIT despite publication. Thus, for failure to file its Answer, MOHIT is considered as in default. Section 3-12 of the Rules provides: " If the respondent FAILS TO ANSWER the complaint within the above-stated period, he shall be considered as in default . The Hearing Panel, or Officer shall, motu proprio , proceed to render judgment granting the complainant such relief as the complaint may warrant, unless the Hearing Panel or Officer determines the complainant should be required to submit ex parte additional evidence." (Emphasis ours) Based on the records, MOHIT is engaged in the business of a lending company without securing the required CA, as it failed to comply with the required minimum capitalization of Php1,000,000.00, in violation of the LCRA and its Implementing Rules and Regulations (IRR). A lending company is defined under Section 3 (a) of the LCRA as a corporation engaged in granting loans from its own capital funds or from funds sourced from not more than nineteen (19) persons. Clearly, MOHIT was organized as a lending company. Under its Articles of Incorporation, the primary purpose of MOHIT is "to engage in the business of lending investor, lending money to persons and entities . . ." . Moreover, the Certification of the BPLO-Caloocan City indicates that it issued a business permit to MOHIT for 2011 under the category as "Financial Establishment Lending" . Lastly and most importantly, Mr. Kishan Singh, one the incorporators of MOHIT, explicitly confirmed that it is engaged in lending activities. As a lending company, MOHIT is required under Section 4 of the LCRA to secure the required CA. 23 To obtain a CA, MOHIT is mandated under Section 5 of the LCRA to comply with the minimum capitalization of Php1,000,000.00 within three (3) years from the effectivity of R.A. 9474 which took effect 2007. 24 However, to date, its paid-in capital is only Php100,000.00 which is far below the required minimum capitalization, 25 and there is no CA issued by the Commission or an application therefor. IaSCTE Further, the Certificate of Registration of MOHIT must be revoked pursuant to Section 6 (l) (3) of P.D. 902-A for its refusal to comply or defiance of any lawful order of the Commission. The EPD gave MOHIT an opportunity to comply with the minimum capitalization required by law by ordering and directing it, in a Letter dated 26 January 2012, to do so prior to the filing of this instant Petition. MOHIT was warned that "otherwise the EPD will be constrained to take enforcement and/or administrative action against the former". MOHIT, however, did not comply with the lawful order of the Commission since, as above-stated, the former's paid-in capital is far below the minimum capitalization and the former has not secured the CA. Clearly, MOHIT refused to comply and defied the lawful order of the Commission, thus, warranting the revocation of its Certification of Registration. However, records will show that MOHIT's Certificate of Registration had been effectively revoked 26 on 1 August 2013 for non-compliance with the following reportorial requirements: (a) General Information Sheets (2007-2013); and (b) Financial statements (2006-2012). 27 Conversely, pursuant to SEC Memorandum Circular No. 22, Series of 2013, the Commission En Banc resolved to grant corporations with revoked certificates of incorporation which were registered from 2001-2006 and covered by Mass Revocation Orders issued from 2001-2013, which includes MOHIT, a non-extendible period of two (2) years from 31 December 2013, or until 31 December 2015, within which to file their Petitions to Set Aside the Order of Revocation with the Commission. Records indicate that MOHIT has not yet availed of such remedy. Nonetheless, MOHIT should be disqualified from filing the said Petition to Set Aside the Order of Revocation for the above-stated grounds. WHEREFORE, premises considered, the instant Petition (for Revocation of Certificate of Registration) is hereby GRANTED against MOHIT LENDING & TRADING CORPORATION for engaging in the unauthorized business as a lending company without securing the required Certificate of Authority to Operate as a Lending Company and for refusal to comply with or defiance of the lawful order of the Commission pursuant to Section 6 (l) (3) of Presidential Decree No. 902-A, in relation to Sections 4 and 5 of Republic Act No. 9474. However, considering that the Company Registration and Monitoring Department had already revoked the Certificate of Registration of Mohit Lending & Trading Corporation for non-compliance with the reportorial requirements, the prayer for revocation is hereby declared MOOT. Notwithstanding, its incorporators, officers, agents, and assigns are prohibited from operating or pursuing the lending business. No Petition to Set Aside the Order of Revocation shall be entertained. Let a copy of this Order be furnished the Company Registration and Monitoring Department and the Economic Research and Information Department for their information and appropriate action. SO ORDERED. Mandaluyong City, July 15, 2014. The dispositive portion reads as follows: "WHEREFORE, premises considered, the instant Petition (for Revocation of Certificate of Registration) is hereby GRANTED against MOHIT LENDING & TRADING CORPORATION for engaging in the unauthorized business as a lending company without securing the required Certificate of Authority to Operate as a Lending Company and for refusal to comply with or defiance of the lawful order of the Commission pursuant to Section 6 (l) (3) of Presidential Decree No. 902-A, in relation to Sections 4 and 5 of Republic Act No. 9474. However, considering that the Company Registration and Monitoring Department had already revoked the Certificate of Registration of Mohit Lending & Trading Corporation for non-compliance with the reportorial requirements, the prayer for revocation is hereby declared MOOT. Notwithstanding, its incorporators, officers, agents, and assigns are prohibited from operating or pursuing the lending business. No Petition to Set Aside the Order of Revocation shall be entertained. Let a copy of this Order be furnished the Company Registration and Monitoring Department and the Economic Research and Information Department for their information and appropriate action. SO ORDERED. aSACED Mandaluyong City, 15 July 2014". (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MANUEL B. GAITE Commissioner (SGD.) ANTONIETA F. IBE Commissioner (SGD.) EPHYRO LUIS B. AMATONG Commissioner (SGD.) BLAS JAMES G. VITERBO Commissioner Footnotes 1. Petition dated 15 May 2012. 2. Id. , Annex "A" (Certificate of Incorporation of MOHIT). 3. Id. , Annex "B" (Second Article of the Articles of Incorporation of MOHIT). 4. Id. , Annex "B" (Seventh Article of the Articles of Incorporation of MOHIT). 5. Id. , Annex "B" (Eighth Article of the Articles of Incorporation of MOHIT). 6. Id. , Annex "C" (Memorandum of the CFD dated 24 November 2010). 7. Id. , par. 7. 8. Id. , par. 8. 9. Petition, Annex "E" (Certification from Caloocan City dated 5 October 2011). 10. Id. , Annex "F" (Field Investigation Report). 11. Id. , Annex "G" (Notice of Conference dated 17 November 2011) and Annex "H" (Notice of Conference dated 1 December 2011). 12. Id. , Annex "I" (Subpoena Duces Tecum/Ad Testificandum dated 26 December 2011). 13. Republic Act No. 9474 (2007). 14. Petition, par. 11-12. 15. Id. , Annex "J" (Order of EPD). 16. Id. , Annex "M" (Memorandum of CRMD dated 14 February 2012). 17. Summons dated 5 June 2012; Records, p. 64. 18. Affidavit of Service filed by Jaime Rodil dated 8 June 2012; Records, p. 74. 19. Affidavit of Service filed by Edgar Arabe dated 7 June 2012; Records, p. 72. 20. Motion and Manifestation dated 11 January 2013, par. 4. 21. Affidavit of Publication filed by Perlita R. De Lara of the Philippine Star dated 11 March 2013; Records, p. 95. 22. Certification issued by Information and Communications Technology Department on 13 January 2014. 23. Section 4 of the LCRA provides that no lending company shall conduct business unless granted an authority to operate by the Commission. As a result of which, Rule 3 (a) (i) of the IRR requires lending companies to secure the required CA. 24. Section 5 of the LCRA and Rule 4 (a), subparagraph (i) of the IRR. 25. Petition, (Articles of Incorporation) Annex "B". 26. Certification of Corporate Filing/Information issued by the Company Registration and Monitoring Department dated 17 June 2014; Records, p. 104. 27. SEC Resolution No. 359, series of 2010, " RESOLVED, To Authorize the Company Registration and Monitoring Department to revoke, after complying with due process, Certificates of Incorporation of registered partnerships or corporations on the following grounds: . . . If companies fail to file/register for a period of at least five (5) years any of the following: i. Financial Statements; ii. General Information Sheets; and iii. Stock and Transfer Book/Membership Book . . . ."