Dr. Jugal Kishore Satapathy vs Sebi

Date of Decision : 28.06.2019

Appeal No. 283 of 2018

Dr. Jugal Kishore Satapathy Plot No. A/7, Phase II, Krishna Garden Complex, Barabari, Bhuvaneshwar - 751 030. ..... 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

Ms. Kainaz Irani, Advocate with Mr. Balram Mohanty, Advocate i/b Mohanty & Associates.

Mr. Kevic Setalvad, Senior Advocate with Mr. Kunal Shah, Advocate i/b MDP & Partners for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1.

The Whole Time Member ('WTM' for short) of the

Securities and Exchange Board of India ('SEBI' for short) by

the impugned order dated June 5, 2018 found that the 2

Company, namely, Micro Finance Limited ('MFL' for short)

had come out with an offer of Cumulative Convertible

Preference Shares ('CCPS' for short) in violation of Sections

56, 60 and 73 of the Companies Act, 1956 read with the

relevant provisions of SEBI (Disclosure and Investor

Protection) Guidelines, 2000 ('DIP Regulations' for short)

and SEBI (Issue of Capital and Disclosure Requirements)

Regulations, 2009 ('ICDR Regulations' for short). The WTM

found that the appellant being a Director of the Company was

an officer in default as per Section 5(g) of the Companies Act,

1956 was therefore responsible along with Company for

making refunds along with interest under Section 73(2) of the

Companies Act, 1956. The WTM accordingly directed that

the appellant and other directors are jointly and severally

liable with the Company to refund the money collected by the

Company along with interest and other directions were also

issued against the appellant.

2. We have heard Ms. Kainaz Irani, the learned counsel for

the appellant and Shri Kevic Setalvad, the learned senior

counsel for the respondent.

3

3. It was urged that the appellant was appointed as an

honorary director after the issuance of the CCPS. It was urged

that the appellant had never signed any resolution of the board

of directors and that the main persons who were responsible

in the issuance of CCPS were Mr. Ashok Kumar Patnaik and

Mr. Durga Prasad Misra who have accepted their liability to

repay the amount on behalf of the Company and other

directors as held by the Chief Judicial Magistrate in its order

dated June 29, 2017 and July 18, 2017. It was, thus, urged that

the appellant should not be made responsible for refund of the

money towards the CCPS which was collected by the

Company and other directors.

4. Upon perusal of the record, we find that Mr. Durga

Prasad Misra was a managing director of the Company and

was also found to be responsible for the issuance of CCPS of

the Company by the Chief Judicial Magistrate.

5. In the light of the aforesaid fact which is not disputed by

the learned senior counsel for the respondent. We find that

Section 5(g) of the Companies Act makes it apparently clear

that if there is a Managing Director appointed in a company,

he would be an officer in default. Further in the absence of a

Managing Director all the Directors by a deeming fiction 4

would be an officer in default. Since in the instant case, there

is a Managing Director, the appellant cannot be deemed to be

a Managing Director.

6. Consequently, the impugned order cannot be sustained

and is quashed. The appeal is allowed. In the circumstances,

there shall be no order on costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 28.06.2019 Prepared and compared by: msb