Home Case Index All Cases SEBI SEBI + Board SEBI - 2020 (5) TMI Board This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (5) TMI 366 - Board - SEBIMoney mobilization - Public issue - Whether the Company came out with the Offer of RPS [Redeemable Preference Share] as stated in the Interim Order? - whether the Offer of RPS is in violation of Section 56, Section 60 and Section 73 of Companies Act, 1956? - HELD THAT:- As neither the company nor the directors have disputed the same. Also perused the documents/information obtained from the 'MCA 21 Portal' and other documents available on records. It is noted, that OIL has issued and allotted RPS to 4,191 investors during the financial years 2011-12 and 2012-13 and raised a total amount of ₹ 5,46,48,000/- - number of allottees and funds mobilized has been collated from the information from Ministry of Corporate Affairs (MCA) Portal and the documents submitted with the complaint received by SEBI. Therefore, it is possible that the actual number of allottees and amount mobilized could be more than 4,191 allottees and ₹ 5,46,48,000/- respectively. Therefore conclude that OIL came out with an Offer of RPS as outlined above. Securities to more than 49 persons - public issue and the provisions of Section 56 not followed - Violation of Section 56, Section 60 and Section 73 of Companies Act, 1956 - HELD THAT:- OIL assessee has issued RPS to more than 50 persons and it is noted that in financial years 2011-12 and 2012-13 RPS has been issued to 4,191 allottees. It may be noted that even in cases where the issue is made in tranches and any one of the tranche has not exceeded forty nine people, reference may be made to the in Neesa Technologies Ltd. v. SEBI [2017 (4) TMI 1500 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] which lays down that "In terms of Section 67(3) of the Companies Act any issue to '50 persons or more' is a public issue and all public issues have to comply with the provisions of Section 56 of Companies Act and ILDS Regulations. Accordingly, in the instant matter the appellant has violated these provisions and their argument that they have issued the NCDs in multiple tranches and no tranche has exceeded 49 people has no meaning". Therefore, I hold that even if one or more of the tranche is 49 or less, in view of this judgment, the issue qualifies as deemed public issue. OIL has allotted RPS to more than forty-nine allottees, I find the offer of RPS is a "public issue" within the first proviso of Section 67(3) of Companies Act. Hence, the Offer of RPS are deemed to be public issues and OIL was mandated to comply with the 'public issue' norms as prescribed under the Companies Act. Since the Offer of RPS is a public issue of securities, such securities shall also have to be listed on a recognized stock exchange, as mandated under section 73 of the Companies Act. As per section 73(1) and (2) of the Companies Act, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange and if permission has not been applied for or not granted, the company is required to forthwith repay with interest all moneys received from the applicants. Allegations of non-compliance of the above provisions were not denied by OIL or its directors. I also find that no records have been submitted to indicate that it has made an application seeking listing permission from stock exchange or refunded the amounts on account of such failure. Therefore, I find that OIL has contravened the said provisions. Moreover, the allegations of non-compliance of the above provisions are not denied by the Directors of the company. OIL has contravened the provisions of sections 73(1) and (2) of the Companies Act. No material is available on record or submitted by the aforesaid Directors of OIL to show that the amount collected by the company was kept in a separate bank account. OIL has also not complied with the provisions of section 73(3) which mandates that the amounts received from investors shall be kept in a separate bank account. As the Offer of RPS was a deemed public issue of securities, OIL was required to register a prospectus with the RoC under section 2(36) read with Section 60 of the Companies Act. OIL has not submitted any record to indicate that it has registered a prospectus with the RoC, in respect of the Offer of RPS. OIL has not complied with the provisions of Section 60 of the Companies Act, 1956. As per section 56(3) of the Companies Act, 1956, no one shall issue any form of application for shares in a company, unless the form is accompanied by abridged prospectus, containing disclosures as specified. Neither OIL nor its directors produced any record to show that it has issued Prospectus containing the disclosures mentioned in section 56(1) of the Companies Act, 1956, or issued application forms accompanying the abridged prospectus. Therefore, OIL has not complied with sections 56(1) and 56(3) of the Companies Act, 1956. OIL was engaged in fund mobilizing activity from the public, through the Offer of RPS and has contravened the provisions of sections 56(1), 56(3), 2(36) read with 60, 73(1), 73(2), 73(3) of the Companies Act, during the financial years 2011-2012 and 2012-2013. Liability for violations committed - A person cannot assume the role of a Director in a company in a casual manner. The position of a 'Director' in a company comes along with responsibilities and compliances under law associated with such position, which have to be fulfilled by such director or face the consequences for any violation or default thereof. The aforesaid Directors cannot therefore wriggle out from liability. A Director who is part of a company's Board shall be responsible and liable for all acts carried out by a company. Accordingly, I note that aforesaid Directors are responsible for all the deeds/acts of the company during the period of their directorship and are obligated to ensure refund of the money collected by the company to the investors as per the provisions of Section 73 of Companies Act. Natural consequence of not adhering to the norms governing the issue of securities to the public and making repayments as directed under section 73(2) of the Companies Act, is to direct OIL and its Directors, viz., Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati to refund the monies collected, with interest to such investors. Further, in view of the violations committed by the Company and its Directors, to safeguard the interest of the investors who had subscribed to such RPS issued by the Company, to safeguard their investments and to further ensure orderly development of securities market, it also becomes necessary for SEBI to issue appropriate directions against the Company and the other Noticees.
|