Akhil Chandra Saha vs Sebi

Date of Decision : 27.11.2017

Appeal No. 316 of 2017

Akhil Chandra Saha 9J, Bhattacharjee Para Road, Kolkata - 700063, West Bengal. .....Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ......Respondent

Mr. S.N. Bhalerao, Advocate i/b S.N. Bhalerao & Co. for the Appellant.

Mr. Karan Bhosale, Advocate with Mr. Vivek Shah, Advocate i/b ELP for the Respondent.

CORAM : Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member

Per : Dr. C.K.G. Nair, Member (Oral)

1.

This appeal is filed by the appellant to challenge the order passed by

the Whole Time Member ('WTM' for short) of Securities and Exchange

Board of India ('SEBI' for short) on October 12, 2015. By the said order

Suraksha Agrotech Industries Limited ('the Company' for short) and its

directors, including the appellant, inter alia, are jointly and severally

directed to refund the money collected by the Company through the

issuance by Redeemable Preference Shares ('RPS' for short) with interest at

the rate of 15% from the date when the repayment became due till the date

of actual payment.

2

2. The facts relevant to the matter are as follows:-

The Company admittedly collected a total amount of Rs. 11.46 crore

by means of issuing RPS during the period 01.04.2009 to 11.08.2011 to

13612 investors. Since the number of investors exceeded 49 RPS issue is a

deemed public issue which could have been issued following the relevant

provisions of the Companies Act, 1956 as well as SEBI Act and

Regulations. It is admitted by the Company that the said amount had been

collected and they refunded Rs. 5.49 crore (approximately) till the date of

their personal hearing before the WTM of SEBI on April 22, 2015.

3. Mr. S.N. Bhalerao, Learned Counsel for the appellant submitted that

the appellant was not in the day-to-day management of the Company. He

was only associated with the dairy projects being a technical person with

long years of experience and agricultural qualifications. He resigned in May

2013. Since he was not in-charge of day-to-day management of the

Company he is not responsible for any fund raising activities of the

Company including that of the RPS and not liable for making any refund.

4. In order to substantiate his argument that Directors not in-charge of

day-to-day management of a Company are not liable, Learned Counsel for

the appellant relied on a few judgments- (i) Judgment of the Apex Court in

the matter of K.K. Ahuja vs V.K. Vora & Anr. [Criminal Appeal Nos. 1130-

31 of 2003 decided on July 6, 2009], (ii) Order of this Appellate Tribunal in

the case of Rahul H. Shah vs SEBI [Appeal No. 133 of 2003 decided on

15.09.2004]. Further, he has also relied on the Order passed by this

Appellate Tribunal in the case of Mr. Barun Kumar Nandi vs SEBI [Appeal

No. 47 of 2017 decided on 01.08.2017] whereby the joint and several

liability of the appellant therein has been held to be limited to the period of 3

his directorship of the same Company and submitted that the same benefit

should be given to the appellant in this appeal as well.

5. Learned Counsel Mr. Karan Bhosale appearing on behalf of the

respondent submitted that unlike in the case of Mr. Barun Kumar Nandi in

Appeal No. 47 of 2017 (supra) who was Director of the Company only upto

15.05.2010, appellant in the present appeal was Director during 2007-2013.

Further, even subsequent record of the Registrar of Companies shows that

he continued to be a Director of the Company.

6. Learned counsel for the respondent also submitted that the ratio of

this Tribunal's order in the case of Manoj Agarwal vs SEBI [Appeal No. 66

of 2016 decided on 14.07.2017] whereby it was held that a Director is

accountable for the actions of the Company is applicable in the present

matter.

7. We find no merit in the arguments of the appellant. The appellant

was a Director of the Company during the entire period 01.04.2009 to

11.08.2011 during which the RPS was issued and monies collected from the

investors. As such he was present during the entire period and therefore no

benefit of apportioning the time period is available to him as in the case of

Mr. Nandi. The accountability of a Director to the actions of the Company is

now well settled in law as particularly set out in the judgment passed by the

Apex Court in the matter of N. Narayanan vs Adjudicating Officer,

Securities and Exchange Board of India decided on April 26, 2013 and

reported in 12 Supreme Court Cases 152. Reliance placed by Counsel for

the appellant in K.K. Ahuja (supra) and Rahul H. Shah (supra) are not

relevant as those decisions are in the context of the role of the Director as an

officer in default under the Negotiable Instruments Act. In the present 4

context the role of the Director is to be seen as under the provisions of the

Companies Act, 1956, SEBI Act, 1992 and SEBI (Disclosure and Investor

Protection) Guidelines, 2000 / SEBI (Issue of Capital and Disclosure

Requirements) Regulations, 2009. When the appellant was a Director of the

Company, the Company mobilized resources by issuing RPS to the public,

which is not in dispute. As such, the impugned order holding the appellant

jointly and severally liable for the action of the Company cannot be faulted.

8. Accordingly, the appeal is dismissed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member

27.11.2017 Prepared and compared by:msb