TMI Blog2015 (10) TMI 2847X X X X Extracts X X X X X X X X Extracts X X X X ..... panies Act, 1956 to be covered under the second proviso to section 67(3) of the Companies Act, 1956. Therefore, considering the number of persons from whom monies were mobilized by the Company by issuing RPSs, which is definitely more than 49 persons, it can be concluded that the Company had made a public issue of RPS in terms of the first proviso to section 67(3) of the Companies Act, 1956. Further, the manner of making such offer and issuance of RPS adopted by the Company (i.e., series of allotments made consistently every month) can be definitely held to be a ploy employed by the Company to circumvent the provisions of the first proviso to section 67(3) of the Companies Act, 1956. In view of the above observations, by virtue of section 55A(a) and (b), the SEBI has jurisdiction and would govern the issue of RPS as the same was made to more than 49 persons. As alleged in the SEBI Order, the Company was mandated to comply with the provisions of sections 56, 60 and 73 of the Companies Act, 1956 read with Companies Act, 2013 and the DIP Guidelines read with the ICDR Regulations, in respect of its offer and issue of RPS. As Company did not comply with the public issue norms mand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company, its directors and former directors are also directed to provide a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/securities, if held in physical form.The Company is directed not to, directly or indirectly, access the capital market by issuing prospectus, offer document or advertisement soliciting money from the public and are further restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, from the date of this Order till the expiry of 4 years from the date of completion of refunds to investors as directed above.) The directors including former directors restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, with immediate effect. - Prashant Saran, Whole Time Member ORDER 1. Securities and Exchange Board of India (hereinafter referred to as SEBI ), vide an interim ex-parte Order dated December 29, 2014 (hereinafter referred to as the interim order ) had observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and its Directors shall provide a full inventory of all its assets and properties; e) SURAKSHA AGROTECH and its Directors shall not dispose of any of the properties or alienate or encumber any of the assets owned/acquired by that company through the issue of RPS, without prior permission from SEBI; f) SURAKSHA AGROTECH and its Directors shall not divert any funds raised from the public at large through the issue of RPS, which are kept in bank account(s) and/or in the custody of SURAKSHA AGROTECH; g) SURAKSHA AGROTECH and its Directors shall, within 21 days from the date of receipt of this Order, provide SEBI with all relevant and necessary information, as sought vide SEBI letters dated July 26, 2013 and February 05, 2014 . 2. The interim order was issued without prejudice to the right of SEBI to take any other action that may be initiated against the Company and its directors in accordance with law. The interim order observed that the prima facie observations made therein were on the basis of material available on record i.e. the complaint received by SEBI, the correspondence between SEBI and the Company and the information obtained from the 'MCA 21 Portal&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zation, he submitted his resignation on May 06, 2013 (copy was enclosed). (f) To his utter surprise, he observed that the Company had re-inducted him to the Board of Directors on August 05, 2013 without obtaining his consent and forging his signature. The noticee had formally lodged a complaint with the Company and the RoC. (g) The noticee was totally unaware of any mischievous fund raising activity by the Company. He was told to sign by Arunabha Mukhopadhyay in certain papers prepared and checked by other directors and that in full faith had signed such papers. (h) He was solely looking after the dairy and agro projects of the Company and was inducted on the Board only because of his agri background. He is an ex-public servant and a citizen of good social standing. The noticee requested for a personal hearing. 5. As it was noticed that the interim order was not served on few noticees, SEBI made a public notice dated March 31, 2015 in the newspapers (in Times of India dated April 15, 2015 and Ananda Bazar Patrika dated April 14, 2015) regarding the proceedings against the Company and its directors initiated vide the interim order. The newspaper notice also mentioned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney etc. as the reasons for resigning from the Company. The letter said to be drafted by the M.D. does not contain these allegations. (d) The Company was represented by Lt. Col. (Rtd.) T. K. Chattopadhyay and filed letter dated April 21, 2015 and copy of Balance Sheet for 2012-2013. Vide letter dated April 21, 2015, the Company inter alia submitted that it has paid Rs.5,49,97,418/- till date, which was nearly 50% of the total amount of Rs.11,45,97,600/-. Copy of Company s letter dated January 18, 2015 and Balance sheet for 2012-2013 were also submitted. (e) The other noticees/directors - Indranil Das, Arunabha Mukhopadhyay and Subrata Das, did not appear in the personal hearing. 7. I have considered the interim order cum SCN, the submissions and documents submitted by the aforesaid noticees and other material on record. The interim order has alleged that the Company did not comply with the public issue norms mandated under the Companies Act, 1956 and the DIP Guidelines in respect of the issue of Redeemable Preference Shares (RPS) issued by the Company during 2009-2010, 2010-2011 and 2011-2012. As per the interim order, the Company had issued and allotted RPSs to 13612 pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2534 2,48,04,100.00 Year Date of allotment Type of Security No of securities No. of persons to whom issued(approx) Total Amount (Rs) 01/04/2010 Preference shares of Rs. 10/ with premium Rs. 40/- 109078 561 54,53,900.00 02/05/2010 -Do- 58864 331 29,43,200.00 01/06/2010 -Do- 79024 432 39,51,200.00 01/07/2010 -Do- 96751 547 48,37,550.00 01/08/2010 -Do- 108374 590 54,18,700.00 01/09/2010 -Do- 108834 590 54,41,700.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the public by virtue of sub- section (1) or sub- section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances- (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation Provided that nothing contained in this sub-section shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more: Provided further that nothing contained in the first proviso shall apply to non-banking financial companies or public financial institutions specified in section 4A of the Companies Act, 1956 (1 of 1956). In terms of section 67(3), as amended by the Companies (Amendment) Act, 2000, with effect from December 13, 2000, no offer or invitation shall be treated as made to the public by virtue of sub-sections (1) or (2), as the case may be, if the offer or invitation can properly be regarded, in all circumstances (a) as not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to subscribe for shares or debentures is made to fifty persons or more. Resultantly, if an offer of securities is made to fifty or more persons, it would be deemed to be a public issue, even if it is of domestic concern or proved that the shares or debentures are not available for subscription or purchase by persons other than those received the offer or invitation. I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. {Emphasis supplied} 10. In the present matter, it is noted that the Company has made multiple allotments on a monthly basis during the financial years 2009-2010, 2010-2011 and 2011-2012. It can be seen that on every allotment (excluding the solitary allotment made on 30.04.2009), the number of persons to whom RPS were allotted always exceeded 49. The Company is not an NBFC or a Public Financial Institution within the meaning of Section 4A of the Companies Act, 1956 to be covered under the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making a public offer/ issuing the 'prospectus'. The Company has contravened the above provisions. (b) By issuing RPS to more than 49 persons, the Company had to compulsorily list such securities in compliance with section 73(1) of the Companies Act, 1956. As per section 73(1) Companies Act, 1956, 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. The Company has not disputed that this allegation is incorrect. Further, there is no material to say that the Company has filed an application with a recognized stock exchange to enable the RPS to be dealt with in such exchange. Therefore, the Company has failed to comply with this requirement. Section 73(2) states that Where the permission has not been applied under subsection (1) or such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 73(2) of the Act. Listing is, therefore, a legal responsibility of the company which offers securities to the public, provided offers are made to more than 50 persons. In view of the above, I find that the Company has contravened the provisions of section 73 of the Companies Act, 1956. (c) The Company has merely stated that it has commenced making refunds. The Company also sought to know whether it could approach CSE for listing of its shares. As already stated, the Company was mandated to list its shares (when issued to the public) on a stock exchange and in case it failed to do so, it was mandated to make refunds under section 73(2) of the Companies Act. Therefore, regularizing a public issue (made in contravention of public issue norms) by now seeking to list on a stock exchange is not allowed under applicable law. (d) During the personal hearing, the Company s representative submitted that the Company has paid Rs.5,49,97,418/-out of the total amount of Rs.11,45,97,600/-. However, the Company did not submit any proof for such claimed payments. (e) The interim order has also alleged that the Company failed to comply with the DIP Guidelines. In this regard, the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unlisted companies, which made public offer, until it was replaced by ICDR 2009 . Though the DIP Guidelines were rescinded vide the ICDR Regulations, regulation 111(2) of the ICDR Regulations provided that - (2) Notwithstanding the repeal under sub-section (1) of the repealed enactments, (a) anything done or any action taken or purported to have been done or taken including observation made in respect of any draft offer document, any enquiry or investigation commenced or show cause notice issued in respect of the said Guidelines shall be deemed to have been done or taken under the corresponding provisions of these regulations; (b) any offer document, whether draft or otherwise, filed or application made to the Board under the said Guidelines and pending before it shall be deemed to have been filed or made under the corresponding provisions of these regulations. The Company has not denied such allegation. There is also no material to suggest compliance with such provisions of law. The Company is therefore found to have contravened the aforesaid provisions of the DIP Guidelines read with ICDR Regulations in respect of its offer and issue of RPS during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refunds as mandated under law. (d) For the violation of the DIP Guidelines read with the ICDR Regulations, SEBI, in terms of Clause 17 of the DIP Guidelines, may in the interest of securities market and in the interest of investors, inter alia direct the persons concerned to refund the money collected under an issue to the investors with or without requisite interest (as the case may be) and direct the persons concerned not to access the capital market for a particular period. (e) As per the information available in the website of MCA (accessed on October 06, 2015), Indranil Das, Arunabha Mukhopadhyay, Akhil Chandra Saha and Subrata Das are the present directors of the Company. (f) It is noted that Arunabha Mukhopadhyay, Indranil Das and Subrata Das were appointed as directors of the Company on November 24, 2008 and continue to occupy such position till date. Few noticees have stated that Arunabha Mukhopadhyay is the Managing Director of the Company. Though SEBI issued public notices in newspaper, the aforesaid three noticees have neither filed replies to the interim order nor appeared in the personal hearing. Therefore, for the reasons and observations made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted him as a director w.e.f August 05, 2013. He has also alleged his signature was forged. Though this noticee has made allegations against the Company/management in his submissions/resignation letter dated May 06, 2013, he has not informed of any action taken by him in this regard except for forwarding a copy of his resignation letter to the Commissioner of Police, Kolkata. However, the noticee is at liberty to take appropriate steps for the alleged forgery of signature and retention of his name as the director in the Company. As per records forwarded by the RoC (i.e. Register of directors, managing directors, manager and secretary etc.), this noticee was originally appointed as a director on November 24, 2008 and thereafter on August 05, 2013. As per the MCA website/RoC records, this noticee is one of the present directors of the Company. As this noticee was present as a director in the Company during the financial years when the RPSs were offered and issued without complying with the public issue norms, he also becomes liable for the violations committed by the Company. This noticee is also responsible, jointly and severally, for making refunds to investors as mandated und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, with an interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became due (in terms of Section 73(2) of the Companies Act, 1956) to the investors till the date of actual payment. (b) The repayments to investors shall be effected only in cash through Bank Demand Draft or Pay Order. (c) The Company/its present directors are permitted to sell the assets of the Company only for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalised Bank. (d) The Company and its promoters and directors shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily (in Bengali) with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect. (e) After completing the aforesaid repayments, the Company shall file a certificate of such completion with SEBI, within a period of three months from the date of this Order, from two independent peer reviewed Chartered Accountants who are in the panel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, with immediate effect. They are also restrained from issuing prospectus, offer document or advertisement soliciting money from the public and associating themselves with any listed public company and any public company which intends to raise money from the public, or any intermediary registered with SEBI. The above directions shall come into force with immediate effect and shall continue to be in force from the date of this Order till the expiry of 4 years from the date of completion of refunds to investors, as directed above. (j) The above directions shall come into force with immediate effect. 16. This Order is without prejudice to any action, including adjudication and prosecution proceedings that might be taken by SEBI in respect of the above violations committed by the Company, its promoters, directors and other key persons. 17. Copy of this Order shall be forwarded to the recognised stock exchanges and depositories for information and necessary action. 18. A copy of this Order shall also be forwarded to the Ministry of Corporate Affair ..... X X X X Extracts X X X X X X X X Extracts X X X X
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