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TMI Blog2020 (5) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956 (hereinafter referred to as "Companies Act") were complied with or not in the alleged issuance of RPS by the Company. On enquiry by SEBI, it was observed that OIL had issued RPS and the amount mobilized by the company are as follows: Financial Year No. of allottees Amount (Rs.) 2011-12 319 38,57,000 2012-13 3872 5,07,91,000 2013-14 1 50,000 Total 4192 5,46,98,000 The number of allottees and funds mobilized has been collated from the information on Ministry of Corporate Affairs (MCA) Portal and the documents received from the complaint. As the above said Offer of RPS was found prima facie in violation of respective provisions of the SEBI Act, 1992 and the Companies Act. 3. SEBI passed an interim order dated July 05, 2019 (hereinafter referred to as "Interim Order") and issued directions mentioned therein against OIL and its Directors viz. Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati, Mohammed Afaque Ahmad, Santanu Sen Choudhury (hereinafter referred to individually by their respective names and collectively referred to as "Noticees"). 4. Prima facie findings/allegations: 4.1 In the said Interim Order, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed OIL and the Noticees to show cause as to why suitable directions/prohibitions under section 11, 11(4), and 11B of the SEBI Act, 1992 should not be issued/imposed against them, including the following directions, namely: - "Para 22.... (a) Orion Industries Ltd. and its directors Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati, Mohammed Afaque Ahmad, to jointly and severally refund the money collected from the public through the offer and allotment of RPS, without complying with the public issue norms, with an interest of 15% per annum {the interest being calculated from the date when the repayments became due in terms of Section 73(2) of the Companies Act, 1956 till the date of actual payment} within a period of ninety days and file a certificate of two independent Chartered Accountants to the satisfaction of SEBI (to be submitted within seven days of completion of the refund); and (b) The Noticees to be restrained/prohibited from accessing the securities market by issue of prospectus/offer document/advertisement and buying, selling or otherwise dealing in securities in any manner whatsoever, either directly or ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not his responsibility to comply with Section 56, 60, 73(1), 73(3) of the Companies Act.. iv. That as he was never involved in issuing any type of securities, he cannot be held responsible for the said non-compliances and cannot be considered as the officer in default. v. That he does not have any knowledge of the said funds mobilized by the Company as he never had nor in present associated with the Company. vi. The Direction issued in the interim order is not binding upon him since he was not the promoter of the company. 3 Md. Mahfuz Alam (hereinafter referred to as "Mahfuz") Vide letter dated September 24, 2019, stated that due to delay in receiving the interim order, sought for extension of time for 60 days to reply to the interim order. 4 Ms. Punam Bharati (hereinafter referred to as "Punam") Vide letter dated August 14, 2019, stated that she was appointed as Director on March 07, 2011 and ceased to be Director on May 16, 2014. She was Director for approx. 3years, was appointed to look in to the matter of appointment of field worker. Sought an extension of time of 120 days to collect the documents advised in the interim order. 5 Shri Kamal Koushar (hereinafter ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent undated letter received by SEBI on December 09, 2019, following Noticees made written submission: 7.3.1 Parwez and Manzur: reiterated the submission made by them earlier and in addition stated that they have made efforts to collect the requisite documents stated in the interim order and sought for adjournment of hearing. 7.3.2 Salimuddin: reiterated the submission made by him earlier and said he could collect limited documents as advised in the interim order. 8. The Noticees viz., Salimuddin, Mahfuz, Kamal, Afaque and the Authorized Representatives (Mr. Monish Kumar and Mr. Rohitash Gupta) of Santanu appeared for the personal hearing held on the said date and made oral submissions, which are stated below: 8.1 Mahfuz and Kamal : i. The Company was managed by its six directors viz., Md Mahfuz Alam, Parwez Alam, Md. Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam and Punam Bharti. There is no Managing Director in the Company. ii. The Noticees submitted that they are ready to make the refund to its investors. iii. They claimed that they had refunded approximately Rs. 2-2.5 crores to the investors. The list of investors to whom refunds were already made was prepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing submission, relevant portions of which are summarized below: 9.1 That they are the directors of the company M/s Orion Industries Limited registered with the Registrar of Companies Jharkhand, Bihar Patna bearing its CIN No- U01403JH2010PLC014555 having its registered office at the address of K-4, Kalpatru, Jalan Road, Ranchi, Jharkhand -834001. That, the date of incorporation of the Company is 15-12-2010 and the PAN of the company is AABCO3919J. But the registered office has been closed and there is no other office as of date. 9.2 That, the list of the Promoters/Directors of the Company are as follows: * Md Mahfuz Alam - Director cum Promoter * Md Parwez Alam - Director cum Promoter * Md Kamal Kausher - Director cum Promoter * Md Salimuddin Ansari - Director cum Promoter * Md Manzur Alam - Director cum Promoter * Punam Bharti - Director * Afaque Ahmad - Director 9.3 That Mr. Santanu Sen Choudhary was appointed in the company as director and Promoter and worked in the company for a period of 3 months. After completion of his tenure of three months, he was terminated from the company. 9.4 That Mr. Afaque Ahmad was also one of the directors in the company havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that they are in consensus with the written submissions made vide letter dated December 20, 2019. 11. OIL, pursuant to interim order did not file any reply nor appeared for personal hearing despite the notification through paper publication the date of personal hearing. In this regard, the direction of interim order dated July 05, 2019 is reproduced below: "Para 23 "the Noticees were given the opportunity to file their replies, within 21 days from the date of receipt of the said Interim Order. The order further stated the Noticees may also avail an opportunity of personal hearing by seeking a confirmation in writing from SEBI for the same within 45 days from the date of receipt of the said Interim Order. In the event of the Noticees failing to replies within 21 days or requesting for an opportunity of personal hearing within the said 45 days, the preliminary findings a paras 11 to 20 of this Order shall become final and absolute against the respective Noticees automatically, without any further orders. Consequently, the Noticees shall automatically be bound by the respective directions contained in Paragraphs 21 and 22." 11.1 In view of the above, the directions state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (2) any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (3) No offer or invitation shall be treated as made to the public by virtue of sub- section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances- (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if it is of domestic concern or it is proved that the shares or debentures are not available for subscription or purchase by persons other than those receiving the offer or invitation." 15.3 Section 67(3) of Companies Act, provides for situations when an offer is not considered as offer to public. As per the said sub section, if the offer is one which is not calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation, or, if the offer is the domestic concern of the persons making and receiving the offer, the same are not considered as public offer. Under such circumstances, they are considered as private placement of shares and debentures. It is noted that as per the first proviso to Section 67(3) Companies Act, the public offer and listing requirements contained in that Act would become automatically applicable to a company making the offer to fifty or more persons. However, the second proviso to Section 67(3) of Companies Act, exempts NBFCs and Public Financial Institutions from the applicability of the first proviso. 15.4 In the instant matter, I find t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(1) and (2) of the Companies Act, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange and if permission has not been applied for or not granted, the company is required to forthwith repay with interest all moneys received from the applicants. 15.10 The allegations of non-compliance of the above provisions were not denied by OIL or its directors. I also find that no records have been submitted to indicate that it has made an application seeking listing permission from stock exchange or refunded the amounts on account of such failure. Therefore, I find that OIL has contravened the said provisions. Moreover, the allegations of non-compliance of the above provisions are not denied by the Directors of the company. Therefore, I find that OIL has contravened the provisions of sections 73(1) and (2) of the Companies Act. 15.11 Moreover, no material is available on record or submitted by the aforesaid Directors of OIL to show that the amount collected by the company was kept in a separate bank account. Therefore, I find that of OIL has also not complied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 55A of the Companies Act, so far as they relate to issue and transfer of securities and nonpayment of dividend is concerned, SEBI has the power to administer in the case of listed public companies and in the case of those public companies which intend to get their securities listed on a recognized stock exchange in India." "SEBI can exercise its jurisdiction under sections 11(1), 11(4), 11A(1)(b) and 11B of SEBI Act and Regulation 107 of ICDR 2009 over public companies who have issued shares or debentures to fifty or more, but not complied with the provisions of Section 73(1) by not listing its securities on a recognized stock exchange" 15.15 In this regard, it is pertinent to note that by virtue of Section 55A of the Companies Act, SEBI has to administer Section 67 of that Act, so far as it relates to issue and transfer of securities, in the case of companies who intend to get their securities listed. While interpreting the phrase "intend to get listed" in the context of deemed public issue the Hon'ble Supreme Court in Sahara Case observed- "...But then, there is also one simple fundamental of law, i.e. that no-one can be presumed or deemed to be intending something ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company had delayed in filing his resignation with MCA. In this regard, I note from the submission made by Directors of the company, vide joint letter dated December 20, 2019 that the Directors have admitted that Afaque submitted his resignation after three months of his appointment as Director and No Objection and No due clearance certificate was issued to him. During the personal hearing also the Directors admitted that the company was managed by six directors by naming the other directors except Afaque. On perusal of these evidences, I find that the letter of resignation is dated February 10,2012, and as far as the evidence of the receipt of this letter, though it was stated by Afaque that the same was received by the Company on February 14,2012, there is no evidence of receipt of the letter by the Company on February 14,2012. However, there is evidence of acceptance of resignation on March 15, 2012 signed by five directors namely, Salimuddin, Parvez, Mahfuz, Kamal and Manzur on behalf of the Company. Further those five directors have not disputed his resignation after three months of his appointment as director. Therefore, though documents uploaded in MCA portal, shows the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim made by Santanu that his signature has been forged, I note that in cases wherein persons allege forgery, the burden of proof lies upon the person who alleges the same. In the instant case the obligation to prove the same lies upon the Noticee. The said principle has also been recognized by various courts in catena of cases. In this regard, I note the following observations of the Hon'ble Securities Appellate Tribunal in the matter of Kalidas Dutta v. SEBI [Appeal No. 262 of 2016, dated 23-1-2018]: "we are of the considered opinion that this appeal can be disposed of with a direction to the appellant to obtain appropriate documents/orders from the competent authority to the effect that he was fraudulently appointed as director of the company in question on 10th February, 2015. For this purpose, the appellant is granted time up to one year to do the needful and submit the same to SEBI". 16.6 Therefore, I am of the considered view that Santanu may be granted 365 day's time to obtain appropriate order from the competent authority with respect to his allegations of forgery. The said order, if any, shall reach SEBI within 365 days from the date of this order. Till tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is so specified, all the directors. 16.10 Reliance on the judgment of this Court by the respondent in the case of Manoj Agarwal v. SEBI [Appeal No. 66 of 2016, dated 14-7-2017] is not applicable and is distinguishable. The Tribunal in the case of Manoj Agarwal found that there was no material to show that any of the officers set out in clauses (a) to (c) of Section 5 or any specified director of the said company was entrusted to discharge the application contained in Section 73 of the Companies Act. In the instant case, there is sufficient material on record to show that there was a managing director and in the absence of any finding that the appellant was entrusted to discharge the application contained in Section 73 of the Companies Act, the direction to refund the amount along with interest from the appellant is wholly illegal...." 16.11 In the present case, Noticees namely Mahfuz, Parwez, Kamal, Salimuddin, Manzur, Punam have admitted there is no Managing Director in the company and the company is managed by these Noticees who act as Directors of the company. Considering the above and that there is no material has been brought on record to show that any of the officers set ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting investors' claims; urging SEBI to take over all the assets and neutralize their liability) the directors are trying to discharge their liability and transfer the liability of refunding the investors to a third party. It is to be noted that the onus of fulfilling the liability of refund lies on the Company and Directors of the Company who are the officers in default. In view of the same, the repayment plan submitted by the directors cannot be accepted. Further, the Noticees in their submissions have also stated that they have refunded approximately Rs. 2-2.5 crores to the investors, some in cash and some through banking channels and the list of investors to whom refunds are made was prepared by their CA. In this regard, the Noticees were asked to submit the bank statements with respect to the refunds already made along with the corresponding list of investors. However, the Noticees have not submitted any proof for the aforesaid claim. Therefore, I find that the Company/Noticees have not produced adequate evidence regarding the refund claimed to have been made. Further, it would be in the interest of the investors that SEBI should consider the requirement of repayment fulfil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst OIL and the Noticees viz. Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati and Santanu Sen Choudhury. 17. In view of the aforesaid observations and findings, I, in exercise of the powers conferred under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(4), 11A and 11B of the SEBI Act, hereby issue the following directions: a. Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati shall jointly and severally with OIL forthwith refund the money collected by the Company, during their respective period of directorship, through the issuance of RPS including the application money collected from investors during their respective period of directorship, till date, pending allotment of securities, if any, with an interest of 15% per annum, from the eighth day of collection of funds, to the investors till the date of actual payment. b. If the Company, OIL, had repaid part of the amount collected through RPS as stated in its reply to its investors as per section 73(2) of the Companies Act, along with promised returns, the above directions and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including the details of contact persons such as names, addresses and contact details, within 15 days of this Order coming into effect. h. After completing the aforesaid repayments, Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam in their personal capacity and on behalf of the company and Punam Bharati in her personal capacity shall file a report of such completion with SEBI, within a period of three months from the date of this order, certified by two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. For the purpose of this Order, a peer reviewed Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by the Institute of Chartered Accountants of India holding such certificate. i. In case of failure of Md Mahfuz Alam, Parwez Alam, Md Kamal Koshar, Mohammad Salimuddin Ansari, Manzur Alam, Punam Bharati jointly with OIL to comply with the aforesaid applicable directions, SEBI, on the expiry of three months' period from the date of this Order may recover such amounts, from the company and the directors liable to refund as specified in paragraph 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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