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2020 (2) TMI 871 - AT - SEBIIndependent director liability in respect of acts of omission or commission by a company - Fraudulent issue of debentures - HELD THAT:- Decision to issue debentures and consequent allotment was made by the company during the period when the appellant had never attended the Board Meeting. The decision making process done by the company was concluded in the absence of the appellant. The appellant had no say in the decision making process made by company and its directors with regard to the issuance of debentures. Thus, the finding of the WTM in paragraph no. 18.4.2 of the impugned order that the appellant was involved in the decision making process relating to the issuance of debentures is factually incorrect and based on surmises and conjectures. The said finding in the light of the aforesaid cannot be sustained. Admittedly, the appellant was appointed as an independent director and was not involved in the day to day affairs. Section 42(10) of the Companies Act, 2013 indicates that where the company makes an offer or accepts monies in contravention of this Section in that case the company and its promoters and directors shall be liable for penalty. The provision makes it apparently clear that the liability of director is only to the extent of penalty and not for the refund of the monies collected from the subscribers. The liability to refund the amount under Section 42(10) of the Companies Act, 2013 is fastened upon the company. Thus, the direction of the WTM directing the appellant to refund the money is wholly incorrect. An independent director shall be held liable only in respect of such acts of omission or commission by a company which had occurred with his knowledge, consent or connivance or where the independent director had not acted diligently. In the instant case, there is no finding that the appellant had given his consent or that he had connived with the other directors in the issuance of debentures or had not acted diligently and therefore the liability to refund the amount cannot be fastened. The impugned order in so far as it relates to the appellants cannot be sustained and is quashed. The appeal is allowed. The amount realised by the respondent pursuant to the impugned order from the accounts of the appellants shall be refunded within four weeks from today along with the interest @ 12% per annum.
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