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TMI Blog2019 (11) TMI 1380X X X X Extracts X X X X X X X X Extracts X X X X ..... esent in the time when the issuance of GDR and execution of the loan and pledge agreements. We are of the opinion that the resolution of January 30, 2008 does not indicate any resolution or execution of the loan or the pledge agreement and, thus, holding the appellant that he was actively involved in the manipulation of the market through this fraudulent scheme is patently erroneous and farfetched. In the light of the aforesaid, we are of the opinion that the order of the WTM debarring the appellant Adi Cooper from accessing the securities market for two years cannot be sustained. Appellant Kishore Hegde Kishore Hegde as an independent director from 2008 to 2013 was part of the scheme through which issue of GDR by the company was effected through a fraudulent arrangement of loan agreement and pledge agreement. We are also of the opinion that the conduct of the appellant Kishore Hegde was inimical to the interest of the company, to the investors, as well as to the shareholders and, the action of the appellant Kishore Hegde was in violation of Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. The order of the WTM debarring the appellant Kishore He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signed a loan agreement with EURAM Bank for a loan of US$ 9.99 Million for the purpose of subscribing to the GDR issue of the company. The pledge agreement signed by Ketan Sheth was made part of the loan agreement. On May 25, 2009, another resolution of the Board of Directors of the company was passed with respect to the end use of the GDR proceeds. On May 26, 2009, the company made a corporate announcement that the GDR issues were successfully subscribed. The company observed that it had issued 19,06,790 GDR raising US$ 9.99 Million which was approximately ₹ 55.3 crores. Vintage after receiving GDR from the company subsequently converted it into equity shares and sold it in the Indian capital market. 4. Investigation revealed that the loan agreement and the pledge agreement enabled Vintage to avail loan from the EURAM Bank for subscribing to GDR of the company. The said GDR issue would not have been subscribed, had the company not given such security towards the loan taken by Vintage. The bank account in which GDR proceeds were held was in the name of the company but the amount deposited in the account was not at the disposal of the company as the same was pledged as sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf did not violate any SEBI laws. Further, the appellant resigned on October 10, 2008 and thereafter had no connection with the affairs of the company. The appellant had nothing to do with the subsequent resolutions of the company dated April 4, 2009 by which the GDR issues were finalized or the resolution of the Board of Directors dated May 25, 2009 finalizing the end use by the GDR proceeds nor had anything to do with the pledging of the GDR proceeds by the Managing Director dated May 5, 2009 nor was involved in the corporate announcement i.e. on May 26, 2009 to the effect that the GDR issues were fully subscribed. It was contended that the appellant has not violated any law as a director and the GDR issues which were issued subsequent to different resolutions of the Board of Directors of the company was made when the appellant had resigned and ceased to be a director of the company. The learned senior counsel further submitted that the resolution dated January 30, 2008 authorizing the bank to use the funds deposited in the bank as security in connection with a loan must necessarily be read as a loan, if any, taken by the company and not in connection with the loan taken by Vint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It may be noted here that when the resolution of January 30, 2008 was passed Vintage was nowhere in the picture. The pledging of the shares on May 5, 2009 in favour of Vintage and the loan taken by Vintage in order to subscribe to the GDR issues was done at a time when the appellant admittedly was not involved in the affairs of the company as he had ceased to be a director prior to that date. There is no evidence to establish that the appellant Adi Cooper remained associated with the company or with other directors even after he resigned on October 10, 2008. 9. We further find that the resolution of January 30, 2008 authorizing the bank to utilize the proceeds as security in connection with a loan cannot be inferred as loan given to Vintage. Such presumption is farfetched and cannot hold that the appellant had intention to manipulate the market or play a fraud. Therefore, the finding of the WTM that the appellant had violated Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations is misconceived and not acceptable. For facility, the said provision of Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations are extracted hereunder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities; (k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors; (r) planting false or misleading news which may induce sale or purchase of securities 10. A perusal of the aforesaid provisions clearly indicates that the appellant Adi Cooper was neither directly or indirectly involved in any fraudulent activity nor employed any scheme to defraud any shareholder or investor. The WTM committed a manifest error in holding that the appellant Adi Cooper cannot be absolved of the consequences of the resolution of January 30, 2008 even though he was not present in the time when the issuance of GDR and execution of the loan and pledge agreements. We are of the opinion that the resolution of January 30, 2008 does not indicate any resolution or execution of the loan or the pledge agreement and, thus, holding the appellant that he was actively involved in the manipulation of the market through this fraudulent scheme is patently erroneous and farfetched. In the light ..... X X X X Extracts X X X X X X X X Extracts X X X X
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