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2022 (7) TMI 1478 - AT - SEBIFraudulent GDR issue - Vintage was the sole subscriber was not intimated to the stock exchange and to the Indian investors and, accordingly, the Company and its Directors were charged with violation of Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations - Penalty imposed on directors - HELD THAT:- We are of the opinion that since the loan has been repaid and the GDR proceeds have been utilized in accordance with the objects of the GDR the finding that a fraud was committed by the Company is patently erroneous. We are of the opinion that when the proceeds have come into the Company and have been utilized by the subsidiary and have been ulitized for the purpose of which the GDR was issued the debarment of the Non-Executive Director for five years and penalty of Rs. 10 lakhs only on the basis that they were signatories to the resolution of the Board of Directors dated 31st March, 2008 appears to be excessive as well as unjustified. Other than this there is no evidence that they were part and parcel in the issuance of the GDR. A categorical statement has been made by these Directors that they were not involved in the day to day affairs of the Company. In the absence of any finding, merely because they were signatories to the resolution these Non-Executive Directors cannot be held to be part of the fraudulent scheme. The imposition of penalty and the debarment cannot be sustained. A penalty of Rs. 20 lakhs has been imposed upon the Directors of the Company. We find that in similar circumstances in the case of Visu International Ltd. a penalty of Rs. 10 lakhs was imposed upon the Directors and in Govind Das Pasari a penalty of Rs. 15 lakhs was imposed - penalty of Rs. 20 lakhs is excessive. Considering the fact that they have already undergone debarment for more than three years we think it fit and proper if the penalty is reduced to Rs. 10 lakhs each to be paid by the Directors. Consequently, while affirming the order of the WTM and AO of the aforesaid violations committed by the Company we reduce the debarment period of the Company and the Managing Director, Director and Independent Director from five years to the period undergone. In so far as the penalty imposed by the AO is concerned, the penalty against the Company is reduced to Rs. 25 lakhs. The penalty against the Managing Director and Director is reduced to Rs. 10 lakhs. The penalty imposed against the Independent Director is quashed. The appeals are partly allowed.
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