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TMI Blog2020 (2) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... ant was involved in the decision making process relating to the issuance of debentures is factually incorrect and based on surmises and conjectures. The said finding in the light of the aforesaid cannot be sustained. Admittedly, the appellant was appointed as an independent director and was not involved in the day to day affairs. Section 42(10) of the Companies Act, 2013 indicates that where the company makes an offer or accepts monies in contravention of this Section in that case the company and its promoters and directors shall be liable for penalty. The provision makes it apparently clear that the liability of director is only to the extent of penalty and not for the refund of the monies collected from the subscribers. The liability t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l by an order dated May 20, 2019. On the application of Appellant No. 3, P. Parameswaran the order dated August 20, 2019 was recalled only in so far as Appellant No. 3 was concerned and to that extent the appeal was restored. The appeal relating to Appellant Nos. 1, 2, 4 and 5 remained dismissed. 2. The facts leading to the filing of the present appeal is, that an ex-parte interim order dated July 31, 2015 and November 20, 2015 was passed restraining the directors and the promoters of the company from accessing the securities market and were also restrained from taking up any new assignment in any issue of debentures. By the said interim orders the company and its directors were found to have contravened the provisions of Sections 56(1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on July 18, 2014 and that he had attended several Board Meetings from November 21, 2014 onwards and came to the conclusion that the appellant was involved in the decision making process relating to the issuance of debentures in these Board Meetings and therefore was liable for refund of the monies collected by the company in terms of Section 73(2) of the Companies Act, 1956. The WTM found that the issuance of debentures of the company and the collection of money thereupon was in violation of the Companies Act, ICDR Regulations and SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013. The WTM accordingly directed the appellant that he is liable jointly and severally along with others to refund the money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said finding in the light of the aforesaid cannot be sustained. 7. Admittedly, the appellant was appointed as an independent director and was not involved in the day to day affairs. Section 42(10) of the Companies Act, 2013 indicates that where the company makes an offer or accepts monies in contravention of this Section in that case the company and its promoters and directors shall be liable for penalty. The provision makes it apparently clear that the liability of director is only to the extent of penalty and not for the refund of the monies collected from the subscribers. The liability to refund the amount under Section 42(10) of the Companies Act, 2013 is fastened upon the company. Thus, the direction of the WTM directing the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and until a finding is given that the appellant is an officer in default, the mandate provided under Section 73(2) cannot be invoked against the appellant. In the instant case, the appellant has annexed documents to indicate that the company had a managing director, namely, Mr. Indranath Daw and, therefore, as per the provisions of Section 5 the managing director would be an officer in default. We also find that there is no finding given by the WTM that the appellant was the managing director or whole time director or was a person charged by the Board with the responsibility of compliance with the provisions of the Companies Act and, consequently, could not be made responsible for refunding the amount under Section 73(2). This Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere fact that a person is a Director would not make him automatically responsible for refund of monies under Section 73(2) of the Companies Act. 28. In the light of the aforesaid, we find that the WTM has given a categorical finding that Shri Shib Narayan Das was responsible for the affairs of the Company. It was not open for the WTM to pass further orders on the other Directors, namely, the appellant especially when there is no finding nor there is a shred of any evidence to indicate that the appellant was also responsible for the affairs of the Company. 29. Thus, the direction of the WTM against the appellant that she is also liable to refund the monies collected by the Company during the respective period of Directorship of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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