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TMI Blog2023 (11) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the Tribunal has held that non-disclosure of the loan agreement and the pledge agreement was totally fraudulent and violative of the Listing Agreement. This Tribunal also held that the Company and its MDs were aware of the execution of the pledge agreement as well as loan agreement and it was no longer open to them to deny the existence of the said agreements. This Tribunal also held that the Company and its Directors misled SEBI into believing that there were more subscribers to the issue and not one subscriber. We also held that Company and its MDs were aware of the pledge agreement, non-disclosure of the pledge agreement and loan agreement invited penalty. Further, the corporate announcement did not disclose the fact that the subsisting pledge agreement facilitated the subscribers to subscribe to the GDR issue. The corporate announcement was misleading and presented a distorted version to the investors and created a false version inducing the investors to deal in securities. See Sibly Industries Ltd. vs SEBI . [ 2022 (7) TMI 1478 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] , Aksh Optifibre Ltd. [ 2022 (6) TMI 1441 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] and Praveen Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Appeal no. 452 of 2022 against the order dated May 26, 2022 of the Adjudicating Officer ( AO for short) of the Securities and Exchange Board of India ( SEBI for short) imposing a penalty of Rs. 10,00,000/- under Section 15HA and 15A(a) of SEBI Act, 1992. The appellant has also filed Appeal no. 453 of 2022 challenging the order of the Whole Time Member ( WTM for short) dated October 22, 2021 debarring the appellant from accessing the securities market for 2 years. Since the issue is common and arises from a common dispute, both the appeals are being decided together. 2. The facts leading to the filing of the present appeal is, that the Board of Directors of the Company known as Southern Ispat and Energy Ltd. (SIEL) passsed a resolution for opening a bank account with European American Investment Bank AG (hereinafter referred to as EURAM Bank ) for depositing the GDR proceeds. 3. The resolution approved by the Board of Directors resolved that a bank account would be opened with EURAM Bank for the purpose of receiving the subscription money in respect of GDR issue. Further, the Managing Director of the Company was authorised to sign and execute an agreement as may be requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using the GDR proceeds to fund a subscriber to the GDR issue was a fraudulent scheme and violative of Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations. The AO found that the GDR was subscribed by one entity, namely, Vintage. The AO further found that on account of the pledge created by the Company with EURAM Bank the funds were not made available at the Company s disposal and the same became available in tranches as and when the loan amount was repaid by Vintage. Further, the loan agreement was not disclosed to the stock exchange and to the Indian investors. Further, the disclosure made by the Company to the stock exchange that the GDR issue was fully subscribed was misleading as the investors were not informed that the GDR was subscribed by only one entity and, therefore, the scheme hatched by the Company and its Directors was violative of Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations. 8. The WTM and the AO found that the non-disclosure of the loan agreement and the pledge agreement was violative of Clause 36 of the Listing Agreement as well as Section 21 of the SCRA Act read with Clause 32 and 50 of the Listing Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Company and was also not aware that Vintage was the sole subscriber to the GDR or that there was a loan agreement or pledge agreement executed by the Company or the loan agreement executed between the bank and Vintage. 13. In this regard the WTM and the AO while admitting that the appellant was a non-executive independent director and had resigned on February 7, 2012 found that he was a member of audit committee and also became chairman of the audit committee at a later point of time which is depicted in the annual report of the Company 2010-11 and therefore it was his responsibility to monitor the end use of the funds and that he was required to ensure all the transfer of the GDR proceeds to the accounts of the Company in India. As per Section 177(4)(viii) of the Companies Act, 2013 the authority has also concluded that because that he had long association with the Company and therefore he was instrumental in the issuance of the GDR and therefore violated 12A of the SEBI Act. 14. The finding given by the WTM and the AO cannot be accepted. There is nothing on record to indicate that the matter relating to GDR issue was placed by the Company before the audit committee. In t ..... 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