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2023 (3) TMI 1214 - HC - SEBIOffences by Companies - Prohibition on acceptance of deposits from public - Public issue of debentures without filing any offer document - Responsibility of directors - accused persons also failed to file the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India and violated the provisions of Section 73 of the Companies Act, 1956, and have also not complied with the aforesaid provisions for public issue of shares and thereby violated provisions of Sections 56, 60 and 70 read with Sections 56, 60 read with Sections 2(36), 73 of the companies Act, 1956 - HELD THAT - The order of the SEBI passed in April 2016 at page 27 held that the petitioner among some of the other directors had joined the board pursuant to the allotment. So it is apparent that the petitioner is not connected with the allotment of NCDs. The tenure of the petitioner was from August to November, 2013.Section 27 of the SEBI Regulation relates to procedure for action in case of violation of regulations and inspecting board therein. The petitioner was a director from August, 2013 (Four months). And documents showing he had submitted his resignation is on record.As per Section 168 of the companies Act, it is the duty of the company who SHALL inform the ROC about the said resignation and process the same. The petitioner MAY also inform the ROC. Thus the resignation of the petitioner is in accordance with the provision of Section 168 of the Companies Act. For continuing liability which continues till the present.There is thus no such material on record against the Petitioner No. 1 to proceed towards trial and in the interest of Justice the proceedings against the petitioner is liable to be quashed.
Issues Involved:
1. Quashing of the proceeding under various sections of the Companies Act, SEBI Regulations, and SEBI Act. 2. Petitioner's involvement and liability concerning the issuance of Non-Convertible Debentures (NCD). 3. Whether the petitioner's resignation was valid and effectively communicated. 4. Continuing liability of the petitioner as a director post-resignation. Summary: Quashing of Proceedings: The petitioner sought quashing of the proceedings in Special Case No. SEBI/27/2017 under Sections 56, 60, and 70 read with Sections 2(36), 73 of the Companies Act, 1956, Section 465 of the Companies Act, 2013, SEBI (ICDR Regulations) 2009, SEBI (ILDS Regulations) 2008, and Section 12(1) of the SEBI Act, 1992, pending before the 5th Special Court, Kolkata, including the order dated 29th July 2019. Petitioner's Involvement and Liability: The petitioner argued that he joined the company in November 2012 as an advisor and later as an Additional Director on 3rd July 2013, resigning on 28th November 2013. The SEBI order dated 20th April 2016 recorded that the allotment of NCDs took place during the financial year 2012-2013, before the petitioner's tenure as a director. The petitioner contended that he was not responsible for the issuance of NCDs and thus not liable under Section 27 of the SEBI Act, 1992. Validity and Communication of Resignation: The petitioner claimed that his resignation was submitted and recorded by SEBI. The court noted that the petitioner's resignation was in accordance with Section 168 of the Companies Act, which requires the company to inform the Registrar of Companies (ROC). The petitioner also informed SEBI about his resignation. Continuing Liability: The court examined the concept of "continuing liability" under Section 73(2) of the Companies Act and Section 27 of the SEBI Act, which holds directors liable until all repayments are made. However, the court found no material evidence showing the petitioner's involvement in the day-to-day affairs of the company during his tenure. Court's Decision: The court concluded that there was no material on record against the petitioner to proceed towards trial. Therefore, in the interest of justice, the proceedings against the petitioner were quashed. The court allowed CRR 773 of 2021, quashing the proceedings in Special Case No. SEBI/27/2017 and all orders passed therein, including the order dated 29th July 2019, as they pertain to the petitioner. Additional Orders: - No order as to costs. - All connected applications disposed of. - Interim order, if any, stands vacated. - Copy of the judgment to be sent to the learned Trial Court for compliance. - Urgent certified website copy of the judgment to be supplied expeditiously upon compliance with necessary legal formalities.
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