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2022 (3) TMI 1449 - AT - SEBIOffence under SEBI Act - Mobilisation of the funds - violation of the CIS Regulations - Prohibition of manipulative, fraudulent and unfair trade practices - Violation of the provisions of Section 12(1B) of the SEBI Act read with Regulation 3 of CIS Regulations and Regulation 4(2)(t) of the PFUTP Regulations - Scope of definition of fraud - monetary penalty of Rs.20 crores to be paid jointly and severally by the appellant, the Company and its Directors - HELD THAT:- In the instant case, we have gone through the entire impugned order and we do not find any finding to indicate that the appellant committed a fraud in the mobilisation of the funds. In the absence of any finding of fraud the charge of violating Regulation 4(2)(t) of the PFUTP Regulations cannot be proved. We are satisfied that in the absence of any finding of fraud against the appellant there is no violation of Regulation 4(2)(t) committed by the appellant. Regulation 4(2)(t) provides illegal mobilisation of funds. The impugned order does not show any iota of evidence that the appellant was involved in the illegal mobilisation of funds after he joined as a Director. Admittedly, the appellant was appointed as a Director in 2010. Majority of the schemes floated by the Company was already launched prior to the appellant’s appointment as a Director. There is no finding by the Adjudicating Officer that such and such scheme was launched during the period when the appellant became a Director nor there is any finding that the appellant was responsible in the mobilisation of the funds under those schemes. The finding that no evidentiary proof has been filed by the appellant that he is not an officer in default or that he did not attend the board meeting when such scheme was launched is patently erroneous. The burden has wrongly been placed upon the appellant. A charge has been levelled against the appellant, namely, violation of Regulation 4(2)(t). The responsibility to prove the charge is upon the prosecution, namely, upon SEBI. It is for the respondent to prove that the appellant was an officer in default or that he attended the meeting when a scheme was launched. It cannot be presumed that the appellant must have been present in the meeting of the board of directors when the scheme was launched. We are satisfied that in the instant case SEBI has failed to discharge its burden. In any case, the finding of the Adjudicating Officer that the appellant and other Directors are officers in default is totally misplaced. Under Section 5(g) of the Companies Act, 1956 all Directors can be treated as officers in default only when there is a finding that there was no Managing Director or designated person who was responsible for the mobilisation of the funds. We find that there is no finding that the Company did not have any designated person or Managing Director and, therefore, all Directors would be deemed to be officers in default. Penalty under Section 15HA can be imposed if a person indulges in fraudulent or unfair trade practices. We have already held that the appellant has not indulged in fraudulent and unfair trade practice and, therefore, no penalty under Section 15HA could be imposed. In the light of the aforesaid, the impugned order in so far as it relates to the appellant cannot be sustained and is quashed. The appeal is allowed. Attachment orders, if any, on the appellant’s demat account, bank account etc. shall be lifted forthwith. All the misc. applications are also accordingly disposed of. In the circumstances of the case parties shall bear their own costs.
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