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2019 (2) TMI 1742

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..... nst the appellant. In the instant case, the appellant has annexed documents to indicate that the company had a managing director, namely, Mr. Indranath Daw and, therefore, as per the provisions of Section 5 the managing director would be an officer in default. We also find that there is no finding given by the WTM that the appellant was the managing director or whole time director or was a person charged by the Board with the responsibility of compliance with the provisions of the Companies Act and, consequently, could not be made responsible for refunding the amount under Section 73(2). The Tribunal in the case of Manoj Agarwal [2017 (7) TMI 1104 - SECURITIES AND EXCHANGE BOARD OF INDIA MUMBAI] found that there was no material to show that .....

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..... 60 [read with Section 2(36)], 67 and Section 73 of the Companies Act, 1956 (hereinafter referred to as, Companies Act ). Based on this investigation, SEBI passed an ex2 parte interim order dated March 13, 2015 restraining the company and its directors including the appellant from fund mobilizing activities through the issuance of RPS. The appellant and other directors were being given opportunity of hearing and after considering their submissions, the Whole Time Member of SEBI (hereinafter referred to as WTM ) passed a final order dated January 15, 2016 restraining the company and its directors including the appellant from accessing the securities market. The company and the directors including the appellant were jointly and severally direc .....

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..... rest under Section 73(2) of the Companies Act. 5. In order to appreciate the submissions of the learned counsel for the appellant, it is essential to note a few facts. The company allotted RPS on the following dates :- Date of Allotment Year No. of Persons Amount ( ) 31/07/2011 2011-12 176 19,08,000 10/10/2011 121 13,05,500 20/01/2012 1 6,000 20/01/2012 262 48,02,000 20/04/2012 2012-13 693 56,65,500 Total 1,253 1,36,87,000 6. The allotment of RPS admittedly, exceeded 49 persons and, consequently, such allotment would be deemed to be a public issue in terms of the first proviso of Section 67(3) of the Companies Act. The appellant was admittedly, appointed as an additional director of the company on March 22, 2012 and during her period admitt .....

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..... on for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange. (1A) Where a prospectus, whether issued generally or not, states that an application under sub-section (1) has been made for permission for the shares or debentures offered thereby to be dealt in one or more recognized stock exchanges, such prospectus shall state the name of the stock exchange or, as the case may be, each such stock exchange, and any allotment made on an application in pursuance of such prospectus shall, whenever made, be void, if the permission has not been granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of t .....

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..... longwith interest at such rate as may be prescribed. From the aforesaid, it is apparently clear that the liability to repay the amount is upon that director of the company who is an officer in default. Officer in default has been defined under Section 5 of the Companies Act. For facility the said provision is extracted hereunder:- Meaning of "officer who is in default". 5. For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely : (a) the managing director or managing directors; .....

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..... an officer in default. 11. In the light of the aforesaid provision, the appellant had categorically submitted before the WTM that she was appointed as an additional director by the managing director and that she was not responsible for the affairs of the company. The appellant further stated that she did not attend any meeting and was never connected with the issuance of RPS. It was urged that the WTM without considering the submissions of the appellant has mechanically and without any application of mind has illegally held that since the appellant was a director, and was responsible for affairs of the company and was liable to the contravention found against the company and, therefore, was jointly and severally responsible for making a ref .....

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