TaxTMI 
TaxTMI 
2025 (11) TMI 444
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....cating Officervide Order dated 14.10.2016 under Section 15D of the SEBI Act, SEBI. 2. Brief facts of the case are, appellant joined Air Force in 1992 and served for about 18 years. Later, he worked as a Company Secretary with Saradha Realty India Ltd. ('Saradha Realty' for short) between February 15, 2011 and September 25, 2012. 3. On December 15, 2011, SEBI issued a Show Cause Notice ('SCN' for short) to Saradha Realty India Ltd. and others alleging certain violations regarding Collective Investment Scheme ('CIS' for short) run by Saradha Realty Ltd. After adjudication, the WTM, SEBI passed his order dated April 23, 2013 directing winding up of the scheme and refund of contributions to the investors within three months therefrom. Appellant was not a noticee in the said proceedings. Saradha Realty Ltd did not comply with the said order. SEBI issued a Show Cause Notice SCN dated August 11, 2015 for non-compliance of the WTM's order and called upon the noticees to show cause why inquiry be not held in terms of Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 read with Section 15I of the SEBI Act and penalty be not imposed....
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....nary of the Company and he is duty-bound to ensure that the business activities of the Company are carried out within the framework of law. 8. SEBI's defence is that appellant had sufficient knowledge of the proceedings and failed to appear before the SEBI authorities. To support this contention, SEBI has relied upon a letter written by the appellant on January 12, 2017 stating that no board meeting was convened during his tenure and he has never met the Board of Directors nor did they seek any advice from him and letters dated to the August 31, 2017 and September 1, 2017 to the Recovery Officer requesting him to defreeze his pension account. Thus, according to the SEBI, this appeal has been filed with a delay of 2537 days and therefore, liable to be dismissed on the ground of delay alone. 9. We have carefully considered the rival contentions and perused the records. 10. In view of certain stark facts, we have considered this appeal on both delay and merits. 11. Indubitably, the impugned order is in furtherance to the first order passed by the WTM in the case of Saradha Realty India Ltd on April 23, 2013. The said order is on record as Exhibit 'C'. The operative portion....
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...., 2016 the AO held that the appellant and notice no. 6 to 11 were not the directors of the company at the relevant time and not liable for the non-compliance of the original SEBI order dated April 23, 2013. 13. It was argued before us by the appellant that he had not received any notice or communication from SEBI and this contention was countered by the learned Advocate of SEBI by making reference to appellant's letters Dated January 12, 2017, August 23, 2017, August 31, 2017, September 1, 4, 6 and 14 of 2017. SEBI is right to the extent that the appellant has written letters to SEBI's Recovery Officer during August and September, 2017. Appellant has also placed on record an email written by appellant's daughter Ms. Aparajita Mishra on December 11, 2023 addressed to SEBI's Recovery Officer. The narration in the said email is heart wrenching. In substance, appellant's daughter has written that a sum of Rs. 93,000 was debited from her joint account held with her father. It was an education loan amount under SBI's Scholar Loan Scheme for her education fees and other day to day requirements. She has also adverted to her father's hand-written letter. A hand-written letter written by ....
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..... Thanks & Regards, Recovery Cell Securities and Exchange Board of India, Eastern Regional Office, L&T Chambers, 3rd Floor 16 Camac Street, Kolkata -700 017. Ph: 033-23023000/3109" 15. Appellant's daughter promptly replied to SEBI's email as follows, which is also noteworthy. "Aparajita Mishra <aparajita [email protected]> Mon, Dec 11, 2023 at 8:12 PM To: Recovery ero<[email protected]>, [email protected] Cc: ARVIND KUMAR MISHRA <[email protected] OKUMAR KALURI <[email protected]>, Sudhansu Seth <[email protected]> Dear Sir, Thank you for considering the matter and giving a prompt reply, and providing us with an opportunity to keep our parts on table. With regards to the hearing schedule. I would like to mention that due to my ongoing examinations at the university, I would not be able to accompany my father (Mr. Arvind Kumar Mishra) during the process, But he would duly present my views and concerns on the same. Adding on to whatever discussions that are supposed to happen, "I would like to share that Mr. Arvind Kumar Mishra was ....
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....Secretary of Saradha Realty on February 15, 2011 and resigned on September 25, 2012 and that he was never appointed as a Director. 17. It is also pleaded and argued before us that appellant was arrested by Police and remained in custody from July 30, 2017 to August 13, 2017. It was sought to be clarified by Shri Kanade that appellant's detention was due to the fact that the appellant did not appear before the jurisdictional court in the prosecution proceedings initiated by SEBI. 18. We may record that in the first place, appellant was not a noticee in the original proceedings initiated for violation of CIS SEBI (Collective Investment Schemes) Regulations, 1999 Regulations. Secondly, by the first order Dated April 23, 2013, the WTM has issued directions to the Company and it's Managing Director. The appellant was not a party in the said proceedings and therefore, the said order did not bind him at all. Thirdly, in the adjudication proceedings initiated for non-compliance of WTM's order, the AO has held in his order Dated October 14, 2016 that the appellant was a Company Secretary and not a Director, therefore he could not be made liable for non-compliance of WTM's dire....
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....rue that the SCN was issued to the appellant and he has not replied. We may hasten to add that the finding recorded by the WTM in the impugned order at para No. 3.2(ix) that appellant was responsible for the day to day affairs of Saradha Realty during the period when it was carrying out CIS without obtaining the certificate is unsustainable in law because during 2008- 09, the period under consideration, the appellant was not in service with Saradha Realty and he joined on February 15, 2011 and this fact is not controverted. 22. The records disclose that the Recovery Officer also not acted in a prudent manner. As noted hereinabove, appellant had written several letters to the Recovery Officer between January and September 2017. The Recovery Officer has attached appellant's pension account and also his daughter's educational loan account. Such illegal and callous acts without proper application of mind on the part of Recovery Officers, are highly reprehensible. A Recovery Officer is duty bound to examine every objection/representation submitted for his consideration with due care and caution. In response to the detailed email written by appellant's daughter objecting to attachment....
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....rdingly, the application is allowed and delay in filing this appeal is condoned. Per: Dr. Dheeraj Bhatnagar, Technical Member & Ms. Meera Swarup, Technical Member 24. We concur with the order per the Hon'ble Presiding Officer. In continuation of the same, we are adding the following paragraphs: 25. Vide the impugned order, by invoking section 15 I(3), the Ld. WTM has revised the order of the AO dated October 14, 2016 by holding the appellant liable for penalty under Section 15D of the SEBI Act on the premise that a Secretary is also duty-bound to ensure that the business activities of the Company are carried out within the relevant legal framework. 26. The relevant Sub-section (3) of section 15-I, which was brought on statute with effect from March 28, 2014, reads as under: "(3) The Board may call for and examine the record of any proceedings under this section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass an order enhancing the quantum of penalty, if the circumstance....