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TMI Blog2022 (7) TMI 1477X X X X Extracts X X X X X X X X Extracts X X X X ..... eing part of such resolution does not make the appellant part of a fraudulent scheme in as much the resolution of 16th March, 2010 does not by itself makes it a fraudulent resolution. It is the subsequent acts of the Company and its Managing Directors by issuing a pledge agreement for the purpose of providing guarantee to Vintage so that it could secure a loan for the purpose of subscribing to the GDR issue makes it fraudulent. However, there is no evidence to indicate that the appellant was party to the execution of the pledge agreement nor there is anything on record to indicate that he was aware of the loan agreement or the pledge agreement. A specific assertion was made by the appellant that he was not part of the day to day affairs and management of the Company. This fact has not been disputed by the respondent. Therefore, unless and until there is further evidence to indicate that the appellant had participated in the issuance of GDR and/or knew about the fraudulent scheme, in our opinion, the restraint order passed by the WTM and the penalty imposed by the AO on the ground that the appellant was part of the fraudulent scheme cannot be sustained. In view of the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RTHER THAT Mr. Ratanlal Mardia, Director of the Company, be and is hereby authorized to sign, execute, any application, agreement, escrow agreement, document, undertaking, confirmation, declaration and other paper(s) from time to time, as may be required by the Bank and to carry and affix, Common Seal of the Company thereon, if and when so required. ... 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 arrangements if and when so required. 5 3. Investigation revealed that the Company had issued 50 lakh GDR amounting to USD 22.40 million on 20th May, 2010 and that one Vintage FZE (hereinafter referred to as Vintage ) was the sole subscriber to the GDR issue. Investigation further revealed that Vintage was granted a loan by EURAM Bank by way of a loan agreement dated 7th May, 2010 for the purpose of making payment, transfer subscription of the GDR issue by the Company. The investigation further revealed that the Company stood guarantor in respect of the loan availed by EURAM Bank by depositing the entire GD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 6. Having heard Mr. Dinesh Guchiya, Advocate for the appellants and Mr. Suraj Chaudhary, Advocate assisted by Ms. Nidhi Singh, Ms. Binjal Samani, Ms. Aditi Palnitkar and Ms. Moksha Kothari, Advocates for the respondent, we are of the opinion that merely by participating as an Independent Director in the resolution of the Board of Directors on 16th March, 2010 does not make the appellant a part of the fraudulent scheme and arrangement of the Company with regard to the issuance of the GDR. 7. Resolution of 16th March, 2010 only directs opening of a bank account with EURAM Bank account for the purpose of receiving subscription money in respect of GDR and authorises the Managing Director to sign such documents as required. By being part of such resolution does not make the appellant part of a fraudulent scheme in as much the resolution of 16th March, 2010 does not by itself makes it a fraudulent resolution. It is the subsequent acts of the Company and its Managing Directors by issuing a pledge agreement for the purpose of providing guarantee to Vintage so that it could secure a loan for the purpose of subscribing to the GDR issue makes it fraudulent. However, there is no evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Chairman of the Audit Committee does not mean that he was party to the fraudulent scheme, if any. The observations made by the authorities in the impugned orders that he should have raised questions as to why the GDR proceeds was not brought into the Company s account or why the loan was given to the Vintage from the GDR proceeds are not matters which comes under the purview of the audit committee. In any case, we find that there was no need to raise such questions as the loan in one case was paid immediately and in the other case was paid within a couple of months. Further, the evidence which has come on record indicates that the GDR proceeds were utilized for the purpose for which the resolution for issuance of the GDR was passed. Thus, the finding of the authorities that a fraud has committed by the Company is patently erroneous. When the proceeds have come into the Company and have been utilized for the purpose of setting up a subsidiary in UAE the funds have been utilized for the purpose for which the GDR was issued. Thus, in our view merely because the appellant Mr. I.S. Sukhija was part of the resolution which approved the issuance of the GDR and opening of a bank accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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