Tribunal upholds SEBI order, directs refund of money collected through Redeemable Preference Shares

The tribunal dismissed the appeal, upholding SEBI's order holding the appellant liable for the period from December 20, 2010, to April 01, 2013. The appellant was directed to refund the money collected through the issuance of Redeemable Preference Shares with interest, jointly and severally with the company and other directors. The tribunal also dismissed the Miscellaneous Application No. 329/2017 and made no order as to costs.

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Issues Involved:
1. Liability of the appellant for refunding money collected through the issuance of Redeemable Preference Shares (RPS).
2. Validity and recognition of the appellant's resignation from the directorship.
3. Application of Section 283(1)(g) of the Companies Act, 1956 regarding the appellant's absence from Board meetings.
4. Appellant's responsibility as an "officer in default" under Section 73(2) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Liability of the Appellant for Refunding Money Collected Through the Issuance of Redeemable Preference Shares (RPS):
The appellant challenged the SEBI's order dated June 02, 2017, which directed him to jointly and severally refund the money collected by the company through the issuance of RPS, found to be issued in contravention of public issue norms, to the investors with 15% per annum interest compounded at half-yearly intervals. The appellant's contention was that his liability should be limited to the period during which he was a director, from December 20, 2010, to either April 09, 2011, or September 21, 2011. However, the tribunal concluded that the appellant remained a director from December 20, 2010, to April 01, 2013, and thus held him liable for the entire period.

2. Validity and Recognition of the Appellant's Resignation from the Directorship:
The appellant provided multiple resignation letters dated September 21, 2011, February 26, 2013, and April 01, 2013. The tribunal found that the appellant did not pursue his initial resignation with the Registrar of Companies or the company for filing Form 32. The tribunal noted that the appellant's name continued to appear on the MCA portal until April 01, 2013, indicating that he was considered a director until that date.

3. Application of Section 283(1)(g) of the Companies Act, 1956 Regarding the Appellant's Absence from Board Meetings:
The appellant argued that he should be deemed to have vacated his office under Section 283(1)(g) of the Companies Act, 1956, due to his absence from Board meetings. However, the tribunal clarified that Section 283(1)(g) applies only to directors who, despite receiving notices, absent themselves from three consecutive meetings or all meetings for three months. Since the appellant claimed he did not receive any notices, the tribunal ruled that the provision did not apply to his case.

4. Appellant's Responsibility as an "Officer in Default" Under Section 73(2) of the Companies Act, 1956:
The appellant contended that he was not involved in the company's day-to-day affairs and did not attend any Board meetings, thus should not be considered an "officer in default." The tribunal referred to a similar case (Manoj Agarwal vs. SEBI) and concluded that the appellant could not escape liability for the period he was officially a director. The tribunal emphasized that the appellant's liability was restricted to refunding the amount collected during his tenure as a director.

Conclusion:
The appeal was dismissed, and the tribunal upheld the SEBI's order, holding the appellant liable for the period from December 20, 2010, to April 01, 2013. The appellant was directed to refund the money collected through the issuance of RPS with interest, jointly and severally with the company and other directors. The tribunal dismissed the Miscellaneous Application No. 329/2017 and made no order as to costs.

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