2017 (11) TMI 2043 - AT - SEBI

Company mobilized resources by issuing RPS to the public - Number of investors exceeded for RPS Redeemable Preference Shares issue - accountability of a Director to the actions of the Company - demanding refund the money collected by the Company through the issuance 'RPS' with interest at the rate of 15% from the date when the repayment became due till the date of actual payment - liability of Directors not in-charge of day-to-day management of a Company - HELD THAT - The appellant was a Director of the Company during the entire period 01.04.2009 to 11.08.2011 during which the RPS was issued and monies collected from the investors. As such he was present during the entire period and therefore no benefit of apportioning the time period is available to him as in the case of Mr. Nandi. The accountability of a Director to the actions of the Company is now well settled in law as particularly set out in the judgment passed in the matter of N. Narayanan vs Adjudicating Officer, Securities and Exchange Board of India 2013 (4) TMI 652 - SUPREME COURT Reliance placed by Counsel for the appellant in K.K. Ahuja 2009 (7) TMI 758 - SUPREME COURT and Rahul H. Shah 2004 (9) TMI 702 - SECURITIES APPELLATE TRIBUNAL, MUMBAI are not relevant as those decisions are in the context of the role of the Director as an officer in default under the Negotiable Instruments Act. In the present context the role of the Director is to be seen as under the provisions of the Companies Act, 1956, SEBI Act, 1992 and SEBI (Disclosure and Investor Protection) Guidelines, 2000 / SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. When the appellant was a Director of the Company, the Company mobilized resources by issuing RPS to the public, which is not in dispute. As such, the impugned order holding the appellant jointly and severally liable for the action of the Company cannot be faulted.

Summary

Issues:
Challenge to SEBI order directing refund of money collected through issuance of Redeemable Preference Shares (RPS) with interest.

Analysis:
1. The appeal challenged an order by SEBI directing a company and its directors to refund money collected through RPS issuance with interest. The company collected Rs. 11.46 crore through RPS from 13612 investors, exceeding the limit for a public issue. The appellant argued he was not involved in day-to-day management and should not be liable for refunds.

2. The appellant cited judgments to support his argument that directors not involved in daily operations are not liable. However, the respondent contended the appellant was a director during the RPS issuance period, making him accountable. The Tribunal noted the appellant's directorship during the entire collection period and held him accountable, citing established legal principles.

3. The Tribunal rejected the appellant's argument, emphasizing his presence as a director during the RPS issuance period. The accountability of directors for company actions is well-established in law. The Tribunal distinguished previous judgments cited by the appellant, stating they were not relevant to the current context. The appellant's liability for the company's actions in issuing RPS to the public was upheld.

4. The Tribunal dismissed the appeal, with no costs awarded. The decision highlighted the director's responsibility under relevant laws and regulations, affirming the SEBI order for refunding money collected through RPS issuance with interest.