TMI Blog2021 (2) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... rustee unless he is either - (a) a Scheduled Bank carrying on commercial activity; or (b) a public financial institution within the meaning of Section 4A of the Companies Act, 1956; or (c) an insurance company; or (d) body corporate. The petitioners, who are allegedly acting as Debenture Trustees, are members of Institute of Chartered Accountants of India. The petitioners have no case that they are holding registration to act as Debenture Trustees. Therefore, there is prima facie violation of Section 12(1) of SEBI Act, 1992. Petitioners have a case that the Company being a NBFC, is regulated by, apart from the Companies Act, by RBI Act and Regulations only and is not amenable to the jurisdictional authority of SEBI and hence Ext.P2 show-cause notice is ultravires. This Court is unable to accept the said proposition. Even though the Company is an NBFC, as far as regulation of issue of Debentures and Non-current Bonds is concerned, it is the bounden duty of SEBI to protect the interest of investors in securities. As long as NBFCs are not specifically excluded from the purview of SEBI Act, 1992, the Board will have jurisdiction over securities transactions of an NBFC, inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout complying with the statutory requirements for public issues; (2) The Company failed to provide the details as to whether the consent of the Debenture holders has been obtained, for extending the tenure of the Debentures; (3) Details of issuance of Bonds-Noncurrent (Unsecured Subordinate Debt) were not e-filed by the Company with ROC as required under the Companies Act, 1956/2013. (4) The Company has not submitted any information to prove that the offer/allotment of Debentures and bonds were not intended to be available for subscription to general publicity compliance of Section 67(3) of the Companies Act, 1956. (5) The issuance of bonds by the Company during 2014 '15 and 2017 '18 has to be treated as a public issue of securities in view of the RBI Circular and read with Section 42 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. The Company has reached the number of 200 subscribers, where subscription per investor is less than ₹1 Crore. (6) Under Section 73 of the Companies Act, 1956, every Company making public offer shall, before making such an offer, make an application to one or more recognised stock exchange or exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . SEBI [(2013) 1 SCC 1], (6) UOI and others v. Madhumilan Syntex Pvt. Ltd. and others [AIR 1988 SC 1236], (7) State of Punjab and others v. Bhatinda District Cooperative Milk Producers Union [(2007) 11 SCC 363], (8) Adjudicating Officer, SEBI v. Bhavesh Pabari [(2019) 5 SCC 90], (9) Astra Zeneca Pharma India Ltd. v. SEBI [2019 SCC Online SAT 356-Mumbai Bench], (10) Ashok Shivlal Rupani and another v. SEBI [2019 SCC Online SAT 169-Mumbai Bench upheld by SC in SEBI v. Ashok Shivlal Rupani and another [MANU/SCOR/48290/2019], (11) MCP Enterprises and others v. State of Kerala [2020 (1) KHC 127], (12) Calcutta Discount Co. Ltd. v. ITO, Companies District Calcutta and another [AIR 1961 SC 372 Constitution Bench], (13) East India Commercial Company Ltd., Calcutta and others v. Collector of Customs, Culcutta [AIR 1962 SC 1893], (14) Shrisht Dhawan v. Shaw Brothers [(1992) 1 SCC 534], (15) Naresh Kumar and Co. Pvt. Ltd. v. UOI [2015 (37) STR 451 (Cal)], (16) Jeans Knit Pvt. Ltd. v. Deputy Commissioner IT, Bangalore and others [(2018) 12 SCC 36], (17) India Tobacco Co. Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the issuer of securities, the Debenture Trustee will have the power and authority to bring the secured property to sale and the proceeds of sale will have to be applied to redeem the Debentures. Though a Debenture Trustee has the characteristics of an agent of the Company insofar as holding of its property, the duties and functions required to be discharged by a Debenture Trustee make the Trustee an independent entity functioning for the benefit of Debenture holders. The statutory recognition given to Debenture Trustees by the Rules and Regulations framed under the Securities and Exchange Board of India Act, 1992, makes Debenture Trustees statutorily recognised bodies, independent of the Company, as long as they function as Debenture Trustee of the Company. 9. In Ext.P2, the charge against the petitioners- Debenture Trustees, is as follows:- It is alleged that the noticees 13 and 14 acted as debenture trustees in public issue of NCDs without SEBI registration thereby violating Sec.12(1) of SEBI Act, 1992 read with Regulation 7 of SEBI (Debenture Trustees) Regulations, 1993. In this connection Noticees 13 and 14 are called upon to show cause as to why appropriate direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debenture Trustee unless he is either - (a) a Scheduled Bank carrying on commercial activity; or (b) a public financial institution within the meaning of Section 4A of the Companies Act, 1956; or (c) an insurance company; or (d) body corporate. 11. The petitioners, who are allegedly acting as Debenture Trustees, are members of Institute of Chartered Accountants of India. The petitioners have no case that they are holding registration to act as Debenture Trustees. Therefore, there is prima facie violation of Section 12(1) of SEBI Act, 1992. 12. The petitioners have a case that the Company being a NBFC, is regulated by, apart from the Companies Act, by RBI Act and Regulations only and is not amenable to the jurisdictional authority of SEBI and hence Ext.P2 show-cause notice is ultravires. This Court is unable to accept the said proposition. Even though the Company is an NBFC, as far as regulation of issue of Debentures and Non-current Bonds is concerned, it is the bounden duty of SEBI to protect the interest of investors in securities. As long as NBFCs are not specifically excluded from the purview of SEBI Act, 1992, the Board will have jurisdiction over securities transac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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