AI Drafter 
TaxTMI 
TaxTMI 
2020 (5) TMI 366
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....he relevant provisions of Companies Act, 1956 (hereinafter referred to as "Companies Act") were complied with or not in the alleged issuance of RPS by the Company. On enquiry by SEBI, it was observed that OIL had issued RPS and the amount mobilized by the company are as follows: Financial Year No. of allottees Amount (Rs.) 2011-12 319 38,57,000 2012-13 3872 5,07,91,000 2013-14 1 50,000 Total 4192 5,46,98,000 The number of allottees and funds mobilized has been collated from the information on Ministry of Corporate Affairs (MCA) Portal and the documents received from the complaint. As the above said Offer of RPS was found prima facie in violation of respective provisions of the SEBI Act, 1992 and the Companies Act. 3. SEBI passed an interim order dated July 05, 2019 (hereinafter referred to as "Interim Order") and issued directions mentioned therein against OIL and its Directors viz. Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati, Mohammed Afaque Ahmad, Santanu Sen Choudhury (hereinafter referred to individually by their respective names and collectively referred to as "Noticees"....
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....nnection with the offer and allotment of RPS sought vide letters dated December 19, 2018 and February 04, 2019. " 4.4 The Interim Order also directed OIL and the Noticees to show cause as to why suitable directions/prohibitions under section 11, 11(4), and 11B of the SEBI Act, 1992 should not be issued/imposed against them, including the following directions, namely: - "Para 22.... (a) Orion Industries Ltd. and its directors Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati, Mohammed Afaque Ahmad, to jointly and severally refund the money collected from the public through the offer and allotment of RPS, without complying with the public issue norms, with an interest of 15% per annum {the interest being calculated from the date when the repayments became due in terms of Section 73(2) of the Companies Act, 1956 till the date of actual payment} within a period of ninety days and file a certificate of two independent Chartered Accountants to the satisfaction of SEBI (to be submitted within seven days of completion of the refund); and (b) The Noticees to be restrained/prohibited from accessing the securitie....
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.... RPS by the Company as he has not signed any Form 2 on behalf of the Company. iii. That he is not related to the directors/promoters of the Company. As he was not the director of the company, it is not his responsibility to comply with Section 56, 60, 73(1), 73(3) of the Companies Act.. iv. That as he was never involved in issuing any type of securities, he cannot be held responsible for the said non-compliances and cannot be considered as the officer in default. v. That he does not have any knowledge of the said funds mobilized by the Company as he never had nor in present associated with the Company. vi. The Direction issued in the interim order is not binding upon him since he was not the promoter of the company. 3 Md. Mahfuz Alam (hereinafter referred to as "Mahfuz") Vide letter dated September 24, 2019, stated that due to delay in receiving the interim order, sought for extension of time for 60 days to reply to the interim order. 4 Ms. Punam Bharati (hereinafter referred to as "Punam") Vide letter dated August 14, 2019, stated that she was appointed as Director on March 07, 2011 and ceased to be Director on May 16, 2014. She was Director for appro....
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....z. OIL, Punam, Santanu and Afaque. Paper publication was done on November 23, 2019 in Pioneer and Dainik Bhaskar was done for OIL and Afaque and in Edition of Telegraph, Sanmarg and Ananda Bazar Patrika for Punam and Santanu. 7.3. Meanwhile, vide different undated letter received by SEBI on December 09, 2019, following Noticees made written submission: 7.3.1 Parwez and Manzur: reiterated the submission made by them earlier and in addition stated that they have made efforts to collect the requisite documents stated in the interim order and sought for adjournment of hearing. 7.3.2 Salimuddin: reiterated the submission made by him earlier and said he could collect limited documents as advised in the interim order. 8. The Noticees viz., Salimuddin, Mahfuz, Kamal, Afaque and the Authorized Representatives (Mr. Monish Kumar and Mr. Rohitash Gupta) of Santanu appeared for the personal hearing held on the said date and made oral submissions, which are stated below: 8.1 Mahfuz and Kamal : i. The Company was managed by its six directors viz., Md Mahfuz Alam, Parwez Alam, Md. Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam and Punam Bharti. There is no Managing D....
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....t he doesn't know any of the directors of OIL Further, the Noticee was informed that this is not the appropriate forum to dispute the signatures and he has to file a complaint in the appropriate forum. 9. Pursuant to the personal hearing, the Noticees, namely Mahfuz, Parwez, Kamal, Salimuddin and Manzur vide joint letter dated December 20, 2019 made the following submission, relevant portions of which are summarized below: 9.1 That they are the directors of the company M/s Orion Industries Limited registered with the Registrar of Companies Jharkhand, Bihar Patna bearing its CIN No- U01403JH2010PLC014555 having its registered office at the address of K-4, Kalpatru, Jalan Road, Ranchi, Jharkhand -834001. That, the date of incorporation of the Company is 15-12-2010 and the PAN of the company is AABCO3919J. But the registered office has been closed and there is no other office as of date. 9.2 That, the list of the Promoters/Directors of the Company are as follows: • Md Mahfuz Alam - Director cum Promoter • Md Parwez Alam - Director cum Promoter • Md Kamal Kausher - Director cum Promoter • Md Salimuddin Ansari - Director c....
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....amtara and Asansol, West Bengal. ii. The Noticees were working in Basil International Ltd. as a commission agent and then started this company. Mr. Santanu Sen was also working in Basil International Ltd. Mr. Santanu Sen Choudhury worked in OIL for a period of 3 months. iii. Mr. Md. Afaque Ahmad preferred to resign after 3 months but the company did not accept his resignation for a long period. iv. There is no Managing Director in the Company. v. The Noticees submitted that they are in consensus with the written submissions made vide letter dated December 20, 2019. 11. OIL, pursuant to interim order did not file any reply nor appeared for personal hearing despite the notification through paper publication the date of personal hearing. In this regard, the direction of interim order dated July 05, 2019 is reproduced below: "Para 23 "the Noticees were given the opportunity to file their replies, within 21 days from the date of receipt of the said Interim Order. The order further stated the Noticees may also avail an opportunity of personal hearing by seeking a confirmation in writing from SEBI for the same within 45 days from th....
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....n affirmative, whether the Offer of RPS is in violation of Section 56, Section 60 and Section 73 of Companies Act, 1956? 15.1 The provisions alleged to have been violated and mentioned in Issue No. 2 are applicable to the Offer of RPS made to the public. Therefore, the primary question that arises for consideration is whether the issue of RPS is 'public issue'. At this juncture, reference may be made to sections 67(1) and 67(3) of the Companies Act, 1956: "67. (1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (2) any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for t....
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....tances mentioned in clauses (1) and (b) of Section 67(3) are satisfied, then the offer/invitation would not be treated as being made to the public. The first proviso to Section 67(3) was inserted by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000, which clearly indicates, nothing contained in Sub-section (3) of Section 67 shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. ... Resultantly, after 13-12-2000, any offer of securities by a public company to fifty persons or more will be treated as a public issue under the Companies Act, even if it is of domestic concern or it is proved that the shares or debentures are not available for subscription or purchase by persons other than those receiving the offer or invitation." 15.3 Section 67(3) of Companies Act, provides for situations when an offer is not considered as offer to public. As per the said sub section, if the offer is one which is not 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, if the offer is ....
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....he is 49 or less, in view of this judgment, the issue qualifies as deemed public issue. 15.8 Since, 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. 15.9 Further, 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. 15.10 The 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 m....
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....the abridged prospectus. Therefore, I find that OIL has not complied with sections 56(1) and 56(3) of the Companies Act, 1956. 15.14 Further, I note that the jurisdiction of SEBI over various provisions of the Companies Act, including the above mentioned, in the case of public companies, whether listed or unlisted, when they issue and transfer securities, flows from the provisions of Section 55A of the Companies Act. While examining the scope of Section 55A of the Companies Act, the Hon'ble Supreme Court of India in Sahara Case, had observed that: "We, therefore, hold that so far as the provisions enumerated in the opening portion of Section 55A of the Companies Act, so far as they relate to issue and transfer of securities and nonpayment of dividend is concerned, SEBI has the power to administer in the case of listed public companies and in the case of those public companies which intend to get their securities listed on a recognized stock exchange in India." "SEBI can exercise its jurisdiction under sections 11(1), 11(4), 11A(1)(b) and 11B of SEBI Act and Regulation 107 of ICDR 2009 over public companies who have issued shares or debentures to fifty or mo....
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....ter 16.2 I note that aforesaid Directors have not disputed about their tenure of directorship in the company except Afaque. Afaque in his submission has stated he was a past director who joined the Company on November 11, 2011 and worked for a very brief period of 3-4 months and tendered his resignation on February 12, 2012 and the same was accepted by the directors of the Company on February 14, 2012. On perusal of the document submitted by Afaque received by SEBI on November 28, 2019, I note that he has submitted his resignation on February 10, 2012 and the company had issued him "No objection and No due clearance certificate" in connection with his resignation letter on March 15, 2012. During the personal hearing, he also stated that the company had delayed in filing his resignation with MCA. In this regard, I note from the submission made by Directors of the company, vide joint letter dated December 20, 2019 that the Directors have admitted that Afaque submitted his resignation after three months of his appointment as Director and No Objection and No due clearance certificate was issued to him. During the personal hearing also the Directors admitted that ....
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....nd that the signatures appearing in Memorandum of Association (MoA) and Articles of Association (AoA) are not signed by him. I note from the submission made by the Directors vide joint letter dated December 20, 2019, that they have stated that he was the promoter of the company for the three months but has not provided the tenure when he was the promoter. During the personal hearing, Santanu was advised to file an affidavit whether he doesn't know any of the directors of OIL and was also informed to file a complaint regarding the dispute of signature in the appropriate forum and submit proof for the same. Santanu was given time till December 30, 2019 to make his submissions. However, he has not made any submissions with respect to the same. 16.5 In light of the claim made by Santanu that his signature has been forged, I note that in cases wherein persons allege forgery, the burden of proof lies upon the person who alleges the same. In the instant case the obligation to prove the same lies upon the Noticee. The said principle has also been recognized by various courts in catena of cases. In this regard, I note the following observations of the Hon'ble Securities Appellate....
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....oney with interest at prescribed rate. In this regard, I note that in terms of rule 4D of the Companies (Central Governments) General Rules and Forms, 1956, the rate of interest prescribed in this regard is 15%. 16.9 As per Section 5 of Companies Act, "officer who is in default" means (a) the managing director/s; (b) the whole-time director/s; (c) the manager; (d) the secretary; (e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act; (f) any person charged by the Board with the responsibility of complying with that provision; (g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors. 16.10 Reliance on the judgment of this Court by the respondent in the case of Manoj Agarwal v. SEBI [Appeal No. 66 of 2016, dated 14-7-2017] is not applicable and is distinguishable. The Tribunal in the case of Manoj Agarwal found that there was no material to show that any of the officers set out in clauses (a) to (c) of Section 5 or any specified director of the sai....
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....11-12 and 2012-13. Therefore, in view of Hon'ble Securities Appellate Tribunal (SAT) Order dated July 14, 2017 in the matter of Manoj Agarwal (supra), I am of the view that the obligation of the aforesaid Noticees to refund the amount with interest jointly and severally with OIL and other directors are limited to the extent of amount collected during his/her tenure as director of OIL. 16.13 It is to be noted that the above Noticees vide letter dated December 20, 2019 have submitted three options to be chosen by SEBI as part of their repayment plan along with the details of the land/properties belonging to the Company. It is observed that by submitting the three plans (viz., appointing arbitrator under the provision of arbitration and conciliation act; appointing liquidator and inviting investors' claims; urging SEBI to take over all the assets and neutralize their liability) the directors are trying to discharge their liability and transfer the liability of refunding the investors to a third party. It is to be noted that the onus of fulfilling the liability of refund lies on the Company and Directors of the Company who are the officers in default. In view of the same, th....
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....sue 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. 16.17 In view of the discussion above, appropriate action in accordance with law needs to be initiated against OIL and the Noticees viz. Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati and Santanu Sen Choudhury. 17. In view of the aforesaid observations and findings, I, in exercise of the powers conferred under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(4), 11A and 11B of the SEBI Act, here....
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....Manzur Alam, Punam Bharati are prevented from selling their assets, properties and holding of mutual funds/shares/securities held by them in demat and physical form except for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalized Bank. Such proceeds shall be utilized for the sole purpose of making refund/repayment to the investors till the full refund/repayment as directed above is made. g. Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam in their personal capacity and on behalf of the company and Punam Bharati in her personal capacity to make refund, shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily with wide circulation, detailing the modalities for refund, including the details of contact persons such as names, addresses and contact details, within 15 days of this Order coming into effect. h. After completing the aforesaid repayments, Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam in their personal capacity and on behalf of the company and Punam....