TaxTMI 
TaxTMI 
2022 (6) TMI 991
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.... fact of the case, in gist is that, the petitioners are three of the directors of the accused company, M/s Just Reliable Projects India Limited, which was incorporated on 16th December, 2009 under the Companies Act, 1956, having its registered office at C-19, Uday Shankar Bithi, City Centre, Durgapur-713216. 3. A duty having been cast upon SEBI under section 11(1) of the SEBI Act to protect the interests of investors in Securities and to promote the development of and regulate the securities market through appropriate measures, the Securities Exchange Board of India conducted an enquiry in respect of alleged illegal fund mobilization by the accused company and its directors. It came to light that during the financial year 2010-2013, M/S Just- Reliable Projects India Limited had raised an amount of Rs.11.426 Crores through issuance of redeemable preference shares to 3,558 entities without complying with the regulatory provisions applicable to the public issue norms. 4. The accused company issued public shares without filing any offer documents in violation of section 56 of the Companies Act, 1956. Whenever any offer is made by any company to 50 or more persons, it is deemed to be ....
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....jender Pal Singh and Kanwal Prakash Singh, it was contended that although they with Virendra Kumar and Swarup Dutta promoted the company, they were not consulted with respect to any of the functions of the company and they had sent two representations on 18.6.2010 and 22.6.2010 to Swarup Dutta regarding the unilateral decisions taken to open company's bank account, increase share capital from rupees one crore to rupees three crores without holding Annual General Meeting and changing the registered office address. In course of enquiry it was found by SEBI that except such representations which returned undelivered due to refusal of Swarup Dutta, the directors did not initiate any action. This conduct on the part of the directors of not taking action even after their respective investments in the company was not found acceptable. Virendra Kumar was also found to have invested rupees two lakhs but did not initiate any action for default which makes them responsible for such conduct. On the basis of such enquiry the SEBI restrained M/S Just-Reliable Projects India Limited, the accused company from accessing the capital market by issuing prospectus, offer documents or advertisement soli....
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....ns. 10. The accused company had raised a huge amount of money from general public in contravention of legal provisions and without obtaining approval or clearance from ROC, MCA and SEBI as required under the Companies Act, 1956 and the SEBI Act, 1992. 11. The accused company did not take any steps for winding up of the scheme or repayment to the investors, nor did it take any steps to comply with the directions of the SEBI issued by order dated 13.10.2015. The accused company has not the refunded money to the investors and caused huge pecuniary damage. 12. Accused no. 2 to 13 in the complaint are the directors/promoters/key management/personnel and persons in charge of and responsible to the Accused No. 1/Company for the conduct of the business and are liable for the violations of sections 56, 60 and 70 read with section 55A and 67 of the Companies Act, 1956. 13. Three of the accused persons in the complaint, namely Kanwal Prakash Singh, Virendra Kumar and Gajendra Pal Singh filed an application under section 245 of the Code of Criminal Procedure praying for their discharge from the case. Learned Judge, Special Court, Kolkata after considering the materials and the findi....
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....ut the illegality committed by the officers in the company, who are in charge and responsible for the affairs of the company. It is argued that the delay of the petitioners in submitting their resignation was simply for the reason that they wanted their investments back. Further contention of the petitioners is that, for 93 allotments at least 94 Board meetings and one EOGM are required to be held but the petitioners did not get any notice of such meeting nor did they participate in the Board Meeting. It is argued that SEBI has not been able to produce any evidence that any notice was sent to the petitioners nor have they been able to produce any document to show that the petitioners were present in such purported meetings. According to the petitioners the Articles of the Company can't be violated and the same cannot be changed without Special Resolution in the General Body meeting of the shareholders. It is submitted that the Articles of the Company prohibits transfer or allotment of shares to outsider as such the petitioners cannot be held liable for issuing RPS. The impugned order passed by the learned Trial Judge has further been assailed on the ground that SEBI does not have a....
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....omission in giving notice is accidental or due to the fact that the member has informed the officer whose duty it is serve notice that he need not served notice on him and the business put through at a meeting not duly convene is invalid. (3) Reliance has also been placed on the decision of V.B. Rangaraj Vs. V.B. Gopalakrishnan; (1992) 1 SCC 160 (paragraph 5 to 7), In the said case, it was laid down that, "The private company means a company which by its Articles, restricts the right to transfer its shares, if any, and limits the number of its shares to 50 (excepting employees and ex-employees who were and are members of the company) ...................it is further held that even when the Memorandum and Articles of the Association are registered, they bind the company and the members thereof. S. 28 provides that the Articles of Association of a company limited by shares may adopt all or any of the regulations contained in Table A in Schedule 1 of the Act. S.31 provides for alteration of the Articles by a special resolution of the company. S.36 states that when the Memorandum and Articles of Association are registered, they bind the company and the members thereof. S....
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.... were fully aware about the activity of the company during such period till their resignations were accepted. Learned advocate for SEBI further argued that the accused company and the petitioners did not comply with the order passed by the Whole Time Member of SEBI dated 13.10.2015, for which the complaint has been filed before the Judge, Special Court under section 24 and 27 of the SEBI Act. 19. In response to the contention of learned advocate for the petitioners, it is contended that petitioners relied upon a decision in Century Spinning and Manufacturing & Company Limited and others Vs. State of Maharashtra: (1972) 3 SCC 282, It is laid down in the case that where there is no ground for presuming that the accused has committed an offence, then the accused must be discharged. However, it is argued that, it is not profitable for the petitioners to rely on the said decision as the Learned Trial Judge, while rejecting the application for discharge of the petitioners was of the view that from the materials on record a prima facie case alleged against the petitioner has been made out by the complainant. In my considered view the above decision does not lend support to the petitioner....
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....company, every person who at the time the [contravention] was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the [contravention] and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the [contravention] was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such [contravention]. (2) Notwithstanding anything contained in sub-section (1), where an [contravention] under this Act has been committed by a company and it is proved that the [contravention] has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the [contravention] and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purposes of this section,- (a) "c....
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....the financial years froms 2010-2013 without complying with public issue norms as mandated under sections 56, 60 and 73 of the Companies Act, 1956, read with the Companies Act, 2013. The Adjudicating Officer of SEBI directed the accused persons to refund the money collected by the company to the investors with interest of 15% per annum, compounded at half yearly intervals from the date when the repayments became due till the date of actual payment along with other compliance to be made. It is therefore apparent that the accused petitioners were fully aware and had knowledge about the activity of the company and also the contraventions of law made by it. The onus therefore shifts upon the petitioners under proviso to section 27(1) of SEBI Act that they had no knowledge about the contravention of the provisions of law committed by the Company in mobilizing such huge amount of funds from public shares. 24. In support of their case regarding not having any notice, petitioners relied upon Parmeshwari Prasad Gupta Vs. Union of India; (1973) 2 SCC 543, which lays down that notice had to be served upon the petitioners for constituting a valid meeting and validate any decision taken therein....
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....y of the company continued while petitioners were fully aware about such activity till 29.07.2011 and Virendra Kumar till 29.3.2012, their respective dates of resignation. 28. The Whole Time Member of SEBI after examining all materials furnished by such directors and the petitioners passed an order no. WTM/PS/66/ERO/OCT/2015 dated 13.10.2015, holding that the accused company and its director liable for violation of the extant law and directed them to refund the invested amounts to the shareholders with interest. After lapse of the time for repayment, when the order dated 13.10.2015 was not complied, SEBI lodged a complaint before learned Judge, Special Court, Kolkata. 29. Learned Judge Special Court, Kolkata, in the impugned order reasoned out the basis on which he found "a prima facie case to proceed against the accused petitioners" who had prayed for their discharge. In his order learned Judge, Special Court referred to the proviso to section 27(1) of the SEBI Act which lays down the onus of the petitioners who shall have to prove that the contravention was committed without their knowledge or that they exercised all due diligence to prevent the commission of such contravention....
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.... the Directors from which a reasonable inference can be drawn that they could also be vicariously liable. In these circumstances, therefore, we find ourselves in complete agreement with the argument of the High Court that no case against the Directors (accused Nos 4 to 7) has been made out ex facie on the allegations made in the complaint and the proceedings against them were rightly quashed." 32. In reply learned advocate for Opposite Party No. 2 argued that in the petition of Complaint it has been specifically averred that the accused no. 2 to 13 are the directors/promoters/managers/key management personnel/persons in charge of business of the accused company and are responsible for the day to day affairs of the company and such averments are sufficient to bring the petitioners under the dragnet of section 27 of the SEBI Act. In support of his argument learned advocate for the opposite party no. 2 placed reliance upon the decisions in the case of S.M.S Pharmaceutical Ltd. Vs Neeta Bhalla & Anr. (2005) 8 SCC 89, wherein after considering the decision in Municipal Corporation of Delhi Vs. Ram Krishan Rohatgi; (1983) 1 SCC 1, it has been laid down that to make a director liable for....