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TMI Blog2021 (1) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, it is the consistent case of the appellant that he was a practicing chartered accountant and a non-executive independent director and was only involved in policy decisions. These facts have not been disputed nor controvert by any documentary evidence before the WTM. Reliance of section 27 of the SEBI Act is patently erroneous. Section 27 is not applicable if the offence is committed without the knowledge of the incumbent. We have already held that there is no finding given by the WTM that the appellant was involved in the day-to-day affairs and management of the Company. On the other hand, a specific case was stated by the appellant that the fraud was committed by the mastermind, namelyly, the chairman, managing director and the authorized signatory/director Mr. Rajinder Singh Negi and that he had no knowledge of the violation committed by the masterminds of the PFUTP Regulations. This fact has not been denied by the respondent. In our view Section 27 of the SEBI Act has no application. The impugned order insofar as it relates to the appellant cannot be sustained and is quashed. - Appeal No. 217 of 2020 - - - Dated:- 19-11-2020 - Tarun Agarwala, Presiding Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, be and is hereby authorized to draw cheques and other documents, and to give instructions from time to time as may be necessary to the said Banco Efisa S.A. or any of branch of Banco Efisa S.A., including the Offshore Branch, for the purpose of operation of and dealing with the said bank account and carry out other relevant and necessary transactions and generally to take all such steps to do all such things as may be required from time to time on behalf of the Company. Resolved further that the Bank be and is hereby authorized to use the funds so deposited in the aforesaid bank account as security in connection with loans if any as well as to enter into any Escrow Agreement or similar agreements if and when so required. 3. It transpires that thereafter on October 29, 2007 the Credit Agreement was executed between Clifford Capital Partners A.G.S.A. ('Clifford' for short) with Banco wherein Banco agreed to give a loan to Clifford. On October 30, 2007 Account Charge Agreement was executed by the director of the Company Mr. Rajinder Singh Negi with Banco on the basis of which it enabled Clifford to avail a loan from Banco for subscribing to the GDR. Based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector was responsible and equally guilty of the violation of section 12A of SEBI Act and Regulations 3 and 4 of the PFUTP Regulations. 7. In this regard we have heard Shri Ravichandra Hegde assisted by Shri Robin Shah, the learned counsel for the appellant and Shri Shyam Mehta, the learned senior counsel assisted by Shri Mihir Mody with Shri Shehaab Roshan, the learned counsel for the respondent through video conference. 8. Though a large number of grounds have been raised in the appeal, the appellant has only argued on one point, namely, that the appellant was a non-executive independent director in the Company and was not involved in the day-to-day affairs of the management of the Company and was only involved in policy decisions. It was urged that the appellant was a signatory to the resolution of October 19, 2007 which only allowed for opening of a bank account with Lisbon bank for the purpose of receiving subscription money in respect of the GDR. It also authorized to use the subscription money as security in connection with loans if any . It was urged that the word in connection with loans only relates to loans taken by the Company and could not be stretched for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 :- 12A. No person shall directly or indirectly- (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (c) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 9. In the light of the aforesaid decision, it was urged that the finding of the Tribunal in Adi Cooper's matter is squarely covered with the facts of the present appeal and, on that basis, the appeal should be allowed and the order should be quashed insofar as it relates to the appellant. 10. On the other hand, Shri Shyam Mehta, the learned senior counsel for the respondent submitted that the appellant was a director in the Company for more than 10 years i.e. February 20, 2004 to May 29, 2014 during the period when the GDR was issued. The appellant was also the sig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity in connection with loans if any . The Tribunal held that the loans could be taken by the Company and GDR subscription to be used as security. It was never fathomed that the subscription amount would be used for giving loans to a third party, namely, Clifford in the instant case. 13. In addition to the aforesaid, we find that at the time when the resolution of October 19, 2007 was passed Clifford was nowhere in the picture and therefore the concept of fraud emerging through this resolution of October 19, 2007 does not arise. There is no finding of the WTM that the appellant was aware of this arrangement of giving a loan to Clifford was in existence or the fact that a Credit Agreement or an Account Charge Agreement would be executed in the future. In the absence of any finding, the charge of collusion and/or fraud has not been proved. Further, by a deeming fiction, liability and/or culpability cannot be fastened upon the appellant only on the basis of a resolution dated October 29, 2007. 14. We also find that there is no finding of the fact that the appellant was involved in the day-to-day affairs of the management of the Company. The submission of Shri Shyam Mehta, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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