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TMI Blog2021 (6) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for issuance of GDR and for opening a bank account. Resolution does not given any indication that the appellant had knowledge beforehand that the GDR issue was the purpose to manipulate the price or the market or that a fraud would be played upon the shareholders and the investors. Finding of the WTM that the resolution of the Board of Directors dated June 27, 2006 provides execution of a pledge or execution of a charge agreement is wholly erroneous, perverse and based on no evidence. The resolution also does not stipulate that the proceeds could be utilized by the bank as security in connection with a loan taken by another entity. Appellant cannot be debarred only on the basis of being present in the resolution of the Board of Directors dated July 27, 2006. In the absence of any evidence that the appellant had a role to play in the issuance of the GDR, the mere presence of the appellant in the resolution of the Board of Directors dated July 27, 2006 does not make him liable for the alleged fraud that had been committed by the Company. After the judgment was reserved, the respondent have submitted a short note contending that the appellant was also chairman of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution dated July 27, 2006 for issuance of Global Depository Receipts ( GDRs‟ for short). The board of directors also resolved in this resolution to open an account with Banco Efisa, S.A. ( Banco‟ for short), a bank based in Lisbon, Portugal for the purpose of deposit of the GDR proceeds and to use the proceeds as security in connection with a loan. The resolution also authorized one Mr. Sunil Patel as the authorized signatory to sign relevant documents on behalf of the Company. Based on this resolution the Company issued 18,50,000 GDRs for USD 17.2975 million wherein each GDR represented 10 equity shares of the Company. 3. Investigation in the issuance of the GDR revealed that the GDR was not issued with a proper consideration and without making adequate disclosure under the Listing Agreement. Accordingly, a show cause notice was issued on July 21, 2017 alleging that Whiteview Trading Corporation ( Whiteview‟ for short) was the only entity who subscribed to 1.85 million GDRs amounting USD 17.29 million and that the subscription amount was paid by Whiteview by obtaining a loan under a loan agreement with Banco wherein the bank agreed to lend USD 18.5 million ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned, no finding whatsoever has been given as to whether the appellant had any role to play in the issuance of the GDR. The only finding given in paragraph 48 of the impugned order is a finding of a general nature, namely, that the Board of Directors plays a key role in balancing the interests of managements and shareholders and that the directors are required to ensure fairness and transparency in the dealings of the Company. It was also indicated by the WTM in the same paragraph that if an act or omission occurs through board processes then directors including such non-executive directors can be held liable. The WTM thereafter concluded that since the appellant had participated in the resolution of the Board of Directors, he did not act diligently and since he was aware of the authorization of the pledge agreement executed by the Company the WTM concluded that such execution of the pledge agreement should have been objected by the appellant which he did not do so and accordingly issued an order debarring the appellant from accessing the securities market. 8. We have heard Ms. Yugandhara Khanwilkar along with Ms. Aishwarya Shubhangi, the learned counsel for the Appellant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 :- 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 up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion, that the controversy involved in the present appeal is squarely covered by a decision of this Tribunal in Adi Cooper (supra) matter. In Adi Cooper (supra) the Tribunal interpreted the relevant words of the resolution to use the fund so deposited in the aforesaid bank account as security 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 cul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there any allegation in the show cause notice to the effect that the appellant was the chairman of the audit committee. Thus, these facts which are coming up for the first time in the short note after the conclusion of the arguments and which facts were not raised during the course of the hearing before this Tribunal cannot be taken into consideration. 15. Even otherwise, such annual reports cannot be taken into consideration nor can it be brought on record unless it was filed as additional evidence on an application as per the provisions of Order 41 Rule 27 of the Code of Civil Procedure which principles are applicable before the Tribunal. In the absence of any application supported by an affidavit, such additional evidence cannot be brought on record nor can it be considered. 16. We are further of the view that in the absence of any allegation that the GDR proceeds had been diverted to the effect, the fact that the appellant was chairman of the audit committee has no relevance. Until and unless there is evidence to prove that the appellant had a role to play in the issuance of the GDR the additional fact is only fact is being brought on record which is wholly irrelevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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