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TMI Blog2019 (4) TMI 1794X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of Whole Time Member (for short 'WTM') of Securities and Exchange Board of India (for short 'SEBI') dated June 2, 2016 holding the present appellants jointly and severally liable for contravention of the provisions of Sections 56, 60, 73, 117C of the Companies Act, 1956 (hereinafter referred to as, Companies Act) and Regulations in respect of offer and issue of the Non-Convertible Debentures (NCDs) by the Neesa Technologies Ltd. (hereinafter referred to as, 'NTL') without complying with the listing provisions, all the present appellants allegedly being directors, the present appeals are preferred. 2. So far as the present appellants are concerned by the impugned order they are restrained from accessing securities market and further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, with immediate effect. They are also restrained from issuing prospectus, offer document or advertisement soliciting money from the public and associating themselves with any listed public company and any public company which intends to raise money from the public, or any intermediary registered with SEBI. It was also directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including the NTL. The appellant had no knowledge regarding the mobilization of funds and, therefore, requested the WTM to remove his name from the proceedings. In the appeal, the appellant filed an additional affidavit and submitted that in fact one Mr. Manoj Singhal was the managing director of NTL as can be seen from the information he has received from M/s. IDBI Trusteeship Services Limited (ITSL) which was the debenture trustee appointed by NTL. ITSL has sent a copy of the letter sent by it to the Ministry of Corporate Affairs on October 29, 2014 wherein said Mr. Manoj Singhal was described as a managing director of NTL. Vide the said letter, it is clarified that Debenture Trust cum Hypothecation Deed (DTD) was entered into by NTL with ITSL only after ITSL was provided with the security of Rs. 11,50,78,019/- by way of assets and the said fact is not taken into consideration by WTM. 8. Further, in additional affidavit in rejoinder filed by the appellant dated September 6, 2017, the appellant additionally submitted that in fact, the whole scheme was started by Chairman Mr. Sanjay Gupta, appellant in Appeal No. 156 of 2017 and his family members. He additionally submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. Appeal No. 156 of 2017 Mr. Sanjay Raghunath Prasad Gupta 12. The appellant replied to the WTM as under :- 1. The Company is the IT arm of the Neesa group and NCDs were issued by NTL through private placement and cannot be termed as public issue. 2. The NCDs were issued under various series. Though the total number of investors may be more than 300, NTL had issued this through private placement which would be less than 49 in numbers only per series, and as such cannot be called as public issue. 3. Thereafter, NTL suffered acute financial crisis. Income tax department also started taking action. NTL has made a MOU with the group of NCD investors for making the payments though with some delay. 4. NTL is in constant contact with NCD investors. Payments have been made to the investors to the extent possible during the financial crunch. 5. During the period of private placement, appellant Mr. Sanjay Gupta was not on the board of the company. Financial affairs of NTL were being looked after by Mr. Yogesh Gemawat (Appellant in Appeal No. 227 of 2016) and other directors. 6. He had joined NTL as an additional director on July 12, 2013 and resigned from the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed specifically for generating funds by various means including NCDs and, therefore, in view of the Sections 5 and 73(2) of the Companies Act the appellants would not be liable. 18. The relevant provisions read as under :- "5. MEANING OF "OFFICER WHO IS IN DEFAULT" For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely : (a) the managing director or managing directors; (b) the whole-time director or whole-time directors; (c) the manager; (d) the secretary; (e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act; (f) any person charged by the Board with the responsibility of complying with that provision : Provided that the person so charged has given his consent in this behalf to the Board; (g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government's) General Rules and Forms, 1956 and Form of consent is Form 1AB. In the absence of any document to show that any director was specified as per Clauses (a) to (c) of Section 5 of the Companies Act or any valid document to show that any person was authorized by the Board of Directors, the appellant cannot escape the liability as per Clause (g) of Section 5 of the Companies Act. 21. Similar is the case regarding the other appellants. The WTM in his order dated June 3, 2015 has relied on the ratio of the decision of High Court of Madras in the matter of Madhavan Nambiar vs. Registrar of Companies (2001 108 Comp Cas 1 Mad) which reads as under :- "13. It may be that the petitioner may not be a whole-time director, but that does not mean he is exonerated of the statutory obligations which are imposed under the Act and the rules and he cannot contend that he is an ex officio director and, therefore, he cannot be held responsible. There is substance in the contention advanced by Mr. Sridhar, learned counsel since the petitioner a member of the Indian Administrative Service and in the cadre of Secretary to Government when appointed as a director on the orders of the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X
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