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TMI Blog2021 (9) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... e when the facts and modus operandi were all common. We are of the opinion that the regulator should be consistent in its stand and should not take contradictory views on the same issue. In view of the categorical finding that being a non-executive independent director, the said appellant was never involved in the day-today affairs of the Company nor was part of the decision making process relating to the GDR issue, the said appellant cannot be held guilty only on the basis of being a signatory to a resolution. In Prafull Anubhai Shah vs. SEBI, [ 2021 (6) TMI 1159 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] we have held that being a signatory to a resolution is not sufficient to point fingers of committing a fraud. Thus, the order of the AO imposing a penalty upon Mr. H.S. Anand and the order of the WTM debarring him for one year cannot be sustained. Non-executive independent director [Mr. I.S. Sukhija] the application of the respondent seeking permission to bring on record the additional documents cannot be allowed as it does not come within the parameters of the grounds given in Order 41 Rule 27 of the Code of Civil Procedure. Nothing has been stated as to why these documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck Exchange under the Listing Agreement the penalty of Rs. 20 lakh in each GDR issue would be just and proper in the circumstances of the case and the debarment against Mr. Gurmeet Singh is upheld. - And Appeal No. 100 of 2021, With Appeal No. 101 of 2021, Appeal No. 102 of 2021, Appeal No. 337 of 2021, Appeal No. 338 of 2021, And Appeal No. 339 of 2021 Justice M.T. Joshi, Judicial Member For the Appellant : Mr. Prakash Shah, Advocate with Mr. Kushal Shah, Chartered Accountant i/b Prakash Shah Associates and Mr. Gurmeet Singh For the Respondent : Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Mr. Arnav Misra and Mr. Mayur Jaisingh, Advocates i/b K. Ashar Co. ORDER PER : JUSTICE TARUN AGARWALA, PRESIDING OFFICER 1. These ten appeals have been filed against four orders. Two orders have been passed by the Adjudicating Officer ( AO for short) and two orders have been passed by the Whole Time Member ( WTM for short) of the Securities and Exchange Board of India ( SEBI for short). Appeal no. 406 of 2020 has been filed by Mr. Gurmeet Singh against an order dated June 30, 2020 whereby the AO has imposed a penalty of Rs. 1 crore. Appeal no. 408 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the GDR revealed that the Company did not make adequate disclosure under the Listing Agreement and that certain monies had also been diverted. Accordingly, separate show cause notice was issued alleging that the sole subscriber to the GDR issue was Vintage FZE (hereinafter referred to as Vintage ) and the subscription amount paid by Vintage was through a Loan Agreement with Euram Bank. This loan was secured through an Account Charge Agreement with Euram Bank by the Company. It was alleged that the Account Charge Agreement was the integral part of the Loan Agreement which allowed Vintage to avail the loan in order to subscribe to the GDR issue which was fraudulent and such Loan Agreement and Account Charge Agreement was not disclosed to the Stock Exchange. Based on the replies filed by the appellants the authorities found that GDR issue was prearranged and premeditated plan of the Company and whereas Vintage was the sole subscriber which received loan in order to subscribe to the GDR issue which device / scheme was fraudulent and such non-disclosure of the Loan Agreement and Pledge Agreement created a false impression in the minds of genuine investors. The authorities held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurity for any loan in an overseas bank. 8. In our opinion the subsequent order of the AO finding the Director Anand guilty is patently erroneous and cannot be sustained. Once an AO comes to a conclusion that Mr. H.S. Anand had nothing to do with the day-to-day affairs of the Company and was only associated in providing technical expertise on product quality and was not involved in any financials of the Company it was no longer open to the AO to take a different view on another GDR issue when the facts and modus operandi were all common. We are of the opinion that the regulator should be consistent in its stand and should not take contradictory views on the same issue. 9. We are further of the opinion that in view of the categorical finding that being a non-executive independent director, the said appellant was never involved in the day-today affairs of the Company nor was part of the decision making process relating to the GDR issue, the said appellant cannot be held guilty only on the basis of being a signatory to a resolution. In Prafull Anubhai Shah vs. SEBI, Appeal No. 389 of 2021 decided on June 28, 2021, we have held that being a signatory to a resolution is not suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 account with Euram Bank does not lead to a conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in Adi Cooper vs Securities and Exchange Board of India (Appeal No. 124 of 2019 decided on November 5, 2019), Adesh Jain vs Securities and Exchange Board of India (Appeal no. 217 of 2020 decided on November 19, 2020), Govind Das Pasari vs Securities and Exchange Board of India (Appeal no. 201 of 2019 decided on April 30, 2021), Prafull Anubhai Shah vs. SEBI (Appeal No. 389 of 2021 decided on June 28, 2021), Rajesh Shah vs Securities and Exchange Board of India (Appeal no. 433 of 2021 decided on July 5, 2021) and S.N. Sharma vs Securities and Exchange Board of India (Appeal no. 472 of 2020 decided on September 7, 2021). 14. For the reasons stated aforesaid, the impugned orders insofar as it relates to the appellants in Appeal no. 408 of 2020 (Mr. I.S. Sukhija vs. SEBI), Appeal no. 491 of 2020 (Mr. I.S. Sukhija vs SEBI), Appeal no. 101 of 2021 (Mr. I.S. Sukhija vs SEBI), Appeal no. 102 of 2021 (Mr. H.S. Anand vs SEBI), Appeal no. 337 of 2021 (Mr. I.S. Sukhija vs SEBI) and Appeal no. 338 of 2021 (Mr. H.S. Anand) are quashed and appeals are allowed. Appeal no. 406 of 2020 (Mr. Gurmeet Singh vs SEBI) and Appeal no. 339 of 2021 (Mr. Gurmeet Singh) insofar as it relates to Mr. Gurmee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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