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TMI Blog2022 (6) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... irector Geeta Manoharlal Saraf and the third order has been passed against another Director Manoharlal Saraf whereby a penalty of Rs. 1 crore has been imposed upon the Company and Rs. 25 lakh each has been imposed upon the Directors under Section 15 HA of the SEBI Act, 1992 and Section 23E of the Securities Contracts (Regulation) Act, 1956 ('SCRA' for short) for violation of Regulation 3 & 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ('PFUTP Regulations' for short). Since the facts and issue is common in all the three appeals, the same are being decided together. For facility, the facts narrated in Appeal no. 116 of 2021, Terrascope Ventures Limited is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of proceeds, a show cause notice dated April 27, 2018 was issued by the AO alleging that the appellants did not utilize the proceeds of the preferential issue in accordance with the Special Resolution passed under Section 81(1A) of the Companies Act on October 1, 2012 and that the variance so made between projected utilization of funds and actual utilization of funds was not disclosed under Clause 43 of the Listing Agreement. 6. The AO after considering the reply and material evidence that came on record held that the variance of the utilization of the proceeds from the preferential issue cannot be legitimized by a subsequent ratification by passing a Special Resolution by the shareholders of the Company on September 29, 2017 and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilization of the proceeds as received in the said preferential issue which was in variation to the objects as stated in the notice of EOGM held on October 1, 2012. Once this Special Resolution dated September 29, 2017 is passed, utilization made by the Company towards purchase of shares and giving loans and advances to other companies and entities becomes the object of utilization of the Company. 10. In National Institute of Technology and Another vs. Pannalal Choudhury and Another (2015) 11 SCC 669, the Supreme Court has explained the expression "ratification" as under:- "29. The expression "ratification" means "the making valid of an act already done". This principle is derived from the Latin maxim "ratihabitio mandato aequiparatur" me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholders of the Company, the acts and deeds done by the Company becomes valid and authorized and therefore there was no variation of the utilization of the proceeds. The show cause notice alleging variation in the utilization of the proceeds is, thus, erroneous. 13. For the same reason, since the utilization of the proceeds have been ratified, there was no variance in the utilization of the proceeds and consequently there was no violation of Clause 43 of the Listing Agreement. 14. The decision cited by the learned counsel for the respondent in the matter of Ajay Jain vs. Registrar of Companies NCT of Delhi & Haryana, 2010 (119) DRJ 545 and the decision of the Supreme Court in A. Lakshmana swami Mudaliar and Others vs. Life Insuran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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