TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 542
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.... and (r) of SEBI (PFUTP) Regulations, 2003 (SEBI (Prohibition of Unfair Trade Practices Relating to Securities Market) Regulations, 2003) under Section 15HA of the SEBI Act, 1992. Feeling aggrieved, the Appellant challenged the same before this Tribunal in Appeal No.283 of 2022 and the same was allowed vide order dated November 1st 2022. SEBI challenged the said order before Hon'ble Supreme Court of India in Civil Appeal No.527 of 2023 and the Apex Court has remanded the matter to this Tribunal for a decision afresh. 2. Brief facts of the case are: (i) The appellant was a Company Secretary in Deccan Chronicle Holdings Ltd (DCHL) for two years during 2009-2011. SEBI conducted an investigation in the scrip of DCHL and issued a show cause notice (SCN) to the appellant on August 3, 2017 alleging that, the company had understated the outstanding loans and interest in finance charges etc., in the annual reports for the year 2008-2009, 2009-2010 and 2010-2011 and being a signatory to the public announcement made by the company for the buy back of its equity shares without having adequate free reserves, appellant had misled the investors/ shareholders. (ii) After adjudication, SEBI ha....
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....sible for company's finances apart from the MD and Whole Time Director. In support of his submissions, he relied upon Prakash Kanungo vs. SEBI (Prakash Kanungo vs SEBI (Appeal No. 709 of 2022 along with other connected Appeals, SAT Order dated November 6, 2023)), New Delhi Television Limited & Ors. v/s SEBI New Delhi Television Limited & Ors. v/s SEBI ( Appeal No. 150 of 2018, Order dated August 7, 2019), Sudar Industries vs. SEBI Order against Sapna Karmokar (Sudar Industries vs SEBI Order dated May 9, 2023 against Sapna Karmokar) * It is always the Board of Directors who are responsible for the information contained in the public announcement and other documents even though they are signed by the secretary on behalf of the Board of Directors. * SEBI has exonerated the statutory auditor who prepared and certified the books of accounts and financial statements. * There were no procedural lapses or non- compliances relating to the buy-back announcement. * SEBI has not charged the merchant banker with failure to comply with the regulations on account of the free reserves being overstated in the public announcement making it clear that SEBI does not interpret the regulations a....
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....cement of a buyback by the company secretary is also a ministerial act undertaken on behalf of the Board of Directors. The disclosures with respect to buyback are required to be vetted by a merchant banker who is required to confirm that they are true, fair and adequate. * The appellant was entitled to rely on the multiple tiers of oversight over the financial statements by competent bodies entrusted under the listing Agreement, with the duty to check the financial statements i.e. the Audit Committee, the Board of Directors, the Auditors, the CEO/CFO. The appellant did not have a role in the preparation of the financial statements and therefore cannot be held liable for any misstatement in the accounts or for the overstatement of the free reserves in the public announcement. * The order passed by this Tribunal in Bhuwneshwar Mishra v/s SEBI and Brooks Laboratories Ltd v/s SEBI (SAT Appeal No.7 of 2014, decided on July 31, 2014.) relied upon by the SEBI are not applicable because those cases relate to timely and accurate disclosures of shareholding of the promoters of the Company. With these submissions, Shri Venkataraman prayed for allowing this appeal. 5. Shri J.P. Sen, learn....
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....e in the nature of non-convertible debentures and the issue of debentures require board's approval, which needs to be recorded in the Register and Index of Debenture Holders, which cannot be said to be not known to the appellant. * Since the appellant was concerned with the buy back based on 'unaudited results' in the middle of the financial year he was obligated to diligently examine the liability reflecting in the relevant books. * The impugned order has rightly rejected appellant's reliance on Section 215 of the Companies Act, 1956 by following the Judgment of this Tribunal in Bhuwneshwar Mishra vs. SEBI. * Appellant's argument that, he is not in charge of the accounts and therefore cannot be held liable for attestation is irrelevant, as it was his duty to check the NCDs/loans reflecting in the books as on 6th May 2011 when signing the public announcement. Ministry of Law, Justice and Company Affairs Circulars relied upon by the appellant in regard to section 215 are irrelevant and MCA Circulars are merely advisory in nature. In support of his submissions, he relied on Bhagwati Developers vs Peerless General Finance & Investment Co (2005) 6 SCC 718, para 7. * Section 77A....
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....l security provided by the promoters. Loan transactions by the Company require Board resolutions under Section 292 of the Companies Act. The appellant, being the Compliance Officer during the tenure cannot claim that he was unaware of the same. It only indicates that there was a willful default by the appellant therefore the Appeal may be dismissed. With these submissions, respondent prayed for dismissal of the appeal. 6. We have carefully considered the rival contentions and perused the records. 7. The specific allegation against the appellant recorded in the impugned order reads as follows: Name of the Noticee Violations in brief Violation of the provisions Penal provisions V Shankar (Company Secretary, DCHL) (Noticee 6) DCHL understated outstanding loans and interest and finance charges in the annual report for the FY 2008- 09, 09-10 & 10-11. As signatories to the public announcement made by the Company on May 6, 2011 for buy back of its equity shares without having adequate free reserves which misled the uninformed investors/ shareholders about the perceived valuation/strong financials/adequate free reserves of the company and these actions  ....
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....finance charges in the annual reports for FYs 2008-09, 2009-10 and 2010-11 and thereby overstated the profits of the Company for all the three successive financial years. 69. Thus, it is not in dispute here that the Noticee 6 was acting as the Company Secretary of DCHL during the FY 2010-11 when buyback offer worth Rs. 270 crore was made by the Company. It is also an admitted fact that the Noticee had ascribed his signature on the public announcement for buyback in his capacity as a Company Secretary of DCHL. In this regard, I would once again like to rely upon the findings of the Hon'ble Tribunal in the matter of Mr. Bhuwneshwar Mishra vs SEBI (Supra) and my observations recorded in above paragraphs of this Order about the roles & responsibilities vested in the Noticee 6 as the Company Secretary, towards the Company and its board of directors. I reiterate that as a statutory official of the Company, the Noticee 6 should have exercised utmost due diligence and checked the veracity of the buyback offer document and its legal compliances before authenticating such a document and signing the aforesaid public announcement which apparently violated the provisions of the Companies Act,....
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....portion of the order reads as follows: "11. Regulation 19(3) of the SEBI (Buyback of Securities) Regulations, 1998 requires the company to nominate a compliance officer and an investors' service centre. The purpose of the nomination is twofold, namely (i) to ensure compliance with the buyback Regulations; and (ii) to redress the grievances of investors. There is a patent error on the part of the Tribunal in interpreting the Regulations. The Tribunal held that the role of the respondent, who was a Company Secretary, compliance officer, was limited to redressing the grievances of investors. In arriving at the finding, the Tribunal has relied upon the latter part of Regulation 19(3) which deals with redressal of the grievances of investors. The crucial point which has been missed by the Tribunal is that the compliance officer is also required to ensure compliance with the buyback regulations. Regulation 19(3) of the Regulations expressly so stipulates. Since the interpretation which has been placed by the Tribunal on the interpretation of 19(3) is contrary to the plain terms of Regulation 19(3), we set aside the impugned decision and remit the proceedings back to the Tribunal for co....
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....nipulated the accounts and disseminated incorrect information to the public. 18. The finding against the appellant is recorded in para 46 of the impugned order extracted above. It is relevant and surprising to note that in one breath the adjudicating authority records that the provisions of Section 215 of the Companies Act, 1956 fasten a duty on the Company Secretary to authenticate the Balance Sheet and the Profit and Loss Account of the Company on behalf of the Board of Directors and in the next breath he holds that the appellant was not merely required to attest but ought to have verified if the audited accounts had contained all the assets and liabilities or other facts needed to be incorporated in the accounts. This implies that according to the Adjudicating Officer appellant was required to sit in appeal over the audited accounts. We may record that the audited accounts are certified by a qualified Chartered Accountant and approved by the Board of Directors. Therefore, in our opinion, the finding that the appellant ought to have verified whether the audited accounts had contained the assets and liabilities is wholly untenable and liable to be set aside. The AO has not suppor....