Final Order in the matter of Astha India Infra-Tech Limited & Ors

WTM/RKA/EFD-DRA-III/154 /2016

SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTIONS 11, 11A AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AND REGULATION 28 OF THE SEBI (ISSUE AND LISTING OF DEBT SECURITIES) REGULATIONS, 2008. In respect of:

Sl. No. Company 1 Astha India Infra-Tech Limited Sl. No. Directors PAN DIN 2 Mr. Partha Sarkar BAXPS2458G 02751479 3 Mr. Subhash Kar AOZPK6009G 02759004 4 Mr. Sujit Das ASSPD0181D 02844400 5 Mr. Suma Kardas BLUPK3807K 03267030 6 Mr. Sandip Pal BEBPP8154A 03388230

In the matter of issuance of Non-convertible Redeemable Debentures by Astha India Infra-Tech Limited

1. Securities and Exchange Board of India (“SEBI”) conducted a preliminary inquiry into the issuances of non-convertible debentures (NCDs) by Astha India Infra-Tech Limited (hereinafter referred to as 'Astha India' or 'the company') with a view to ascertain the possible non-compliances with the public issue norms stipulated under the provisions of the Companies Act, 1956/2013 and other applicable laws including the Securities and Exchange Board of India Act, 1992 (SEBI Act, 1992) and the SEBI Regulations/Guidelines. Pursuant to the preliminary inquiry, SEBI passed an ad interim ex parte order dated August 12, 2015 (hereinafter referred to as “interim order”) in respect of Astha India and its present/past directors, viz. Mr. Partha Sarkar, Mr. Subhash Kar, Mr. Sujit Das, Mr. Suma Kardas and Mr. Sandip Pal (hereinafter collectively referred to as “the Noticees” and individually by their respective names), inter alia, in view of the following: “ …………………………………….

Order in the matter of Astha India Infra-Tech Limited ii. The present Directors in AIIL are Shri Partha Sarkar, Shri Subhash Kar, Shri Sujit Das, Shri Suma Kardas and Shri Sandip Pal. iii. From the documents annexed with the complaints received against AIIL, it is observed that – a. AIIL issued NCDs ("Offer of NCDs") during the Financial Years 2011–12 and 2012–13, details of which are provided below – Years Type of Security Number of Allottees** 2011–12 Non–Convertible Secured 51 2012 – 13 Redeemable Debentures 3 **Figures collated from the Non-Convertible Debenture Certificates, submitted by the complainants. The 51 allottees mentioned against Financial Year 2011-12 include 39 single holders and 12 joint holders. AIIL has not filed its Balance Sheet for any Financial Year with the ROC. Further, AIIL has filed its Annual Return (Form 20B) with RoC only for the Financial Year ending March 31, 2011. Therefore, details of amount mobilized through the Offer of Redeemable Preference Shares are not available. b. Copies of Redeemable Preference Shares Certificates issued by AIIL to a total of 10 persons during the Financial Year 2012-13, were also received from the complainants. …………………………………………….” 2. By the interim order following interim directions were issued against the Noticees: “i.

AIIL shall forthwith cease to mobilize fresh funds from investors through the Offer of NCDs or through the issuance of equity shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions; ii. AIIL and its Directors, viz. Shri Partha Sarkar (PAN: BAXPS2458G; DIN: 02751479), Shri Subhash Kar (PAN: AOZPK6009G; DIN: 02759004), Shri Sujit Das (PAN: ASSPD0181D; DIN: 02844400), Shri Suma Kardas (PAN: BLUPK3807K; DIN: 03267030) and Shri Sandip Pal (PAN: BEBPP8154A; DIN: 03388230), are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, till further orders; iii. AIIL and its abovementioned Directors, are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions; iv. AIIL shall provide a full inventory of all its assets and properties; v. AIIL's abovementioned Directors shall provide a full inventory of all their assets and properties; vi.

AIIL and its abovementioned Directors shall not dispose of any of the properties or alienate or encumber any of the assets owned/acquired by that company through the Offer of NCDs, without prior permission from SEBI; vii. AIIL and its abovementioned Directors shall not divert any funds raised from public at large through the Offer of NCDs, which are kept in bank account(s) and/or in the custody of AIIL;

viii. AIIL and its abovementioned Directors shall furnish complete and relevant information (as sought by SEBI letter dated April 10, 2015), within 14 days from the date of receipt of this Order.” 3. Vide the interim order, the Noticees were called upon to show cause as to why suitable directions/prohibitions under sections 11(1), 11(4), 11A and 11B of the SEBI Act including the following, should not be taken/imposed against them: “i. Directing them jointly and severally to refund money collected through the Offer of NCDs alongwith interest, if any, promised to investors therein; ii. Directing them not to issue prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, for an appropriate period; iii. Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period.” 4. Vide the interim order the Noticees have also been advised that they may file their objections, if any, within twenty one days from the date of this interim order and, if they so desire, may avail themselves of an opportunity of personal hearing before SEBI, on a date and time to be fixed on a specific request, received from them.

5. I note that though a copy of the interim order was served on all the abovementioned Noticees, they have failed to submit any reply till date. However, none of the Noticees have filed any reply to the interim order. 6. In the interest of natural justice, an opportunity personal hearing was granted on September 20, 2016 and the same was communicated to the Noticees vide separate letters dated August 23, 2016 and through public notices published in the newspapers “Anand Bazar Patrika” and “Times of India” both dated August 28, 2016. However, on the date of personal hearing none of the Noticees appeared in person or through authorised representative. I note that the Noticees have failed to avail the opportunity of personal hearing. 7. In view of the above facts and circumstances, I am of the view that the Noticees are deliberately keeping away from these proceedings and are not willing to cooperate. Considering the above, I find that the principles of natural justice have been complied with in these proceedings. I am of the view that sufficient opportunities to file reply/submissions and appear for personal hearing have been provided to the Noticees and this matter should now be disposed of on the basis of the material available on record.

8. I have considered the interim order, the allegations levelled against the Noticees therein and the material available on record. The core allegation in the interim order is that Astha India made a “public issue” of Non–Convertible Secured Redeemable Debentures without complying with provisions of law regulating such public issues, i.e., sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 and regulations 4(2)(a), 4(2)(b), 4(2)(c), 4(2)(d), 4(4), 5(2)(b), 6, 7, 8, 9, 12, 14, 15, 16, 17, 19 and 26 of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (hereinafter referred to as “Debt Securities Regulations”). I note that there is an inadvertent mention of “Redeemable Preference Shares” at para 3(iii) (a) and (b) in the interim order instead of “Non–Convertible Secured Redeemable Debentures” (as mentioned elsewhere in the interim order) and, therefore, may be read as such. The said change will have no bearing on the finding/directions of the interim order. 9. As noted in the interim order, during the period FY 2011-12 to FY 2012-13 Astha India had issued “Non-Convertible Secured Redeemable Debentures” to 51 allottees and 3 allottees, respectively.

These findings of the interim order have not been disputed by any of the Noticees. Thus, by virtue of the proviso to section 67(3) of the Companies Act, 1956 the issuances of debentures by Astha India were public issues. In this regard, it is important to mention that all the controversies with regard to questions such as whether an offer to 50 persons or more is a public issue or private placement, SEBI's jurisdiction on issuance of securities including debentures, intention/obligation to list such securities, etc. have been settled by the Hon'ble Supreme Court in its judgment and order dated August 31, 2012 in the matter of Sahara India Real Estate Corporation Limited & Ors. Vs SEBI & Anr. - Civil Appeal No. 9813 and 9833 of 2011 [(2013) 1 SCC 1] (hereinafter referred to as “the Sahara Order"). 10. I note that since the issuances of debentures by Astha India during the period FY 2011-12 to FY 2012-13 were public issues, it ought to have complied with the applicable provisions of the Companies Act, 1956 (read with the corresponding provisions of Companies Act, 2013) and the Debt Securities Regulations as noted in the interim order.

In the present case, there is no dispute as to the fact that Astha India while making the aforesaid “public issues” of debentures had not complied with the provisions of sections 56, 60, 73, 117B and 117C of the Companies Act, 1956, regulations 4(2)(a), 4(2)(b), 4(2)(c), 4(2)(d), 4(4), 5(2)(b), 6, 7, 8, 9, 12, 14, 15, 16, 17, 19 and 26 of the Debt Securities Regulations. Since the requirements of these applicable provisions and the relevant observations of the Hon’ble Supreme Court in the Sahara Order have been clearly stipulated in the interim order, I do not deem it necessary to reiterate the same and burden this order with the same findings. 11. In terms of section 291 of the Companies Act, 1956, the board of directors of a company shall be entitled to exercise all such powers and do all such acts and things as the company is authorized to exercise and do. Therefore, the Board of Directors being responsible for the conduct of the business of a company are liable for any non-compliance of law and such liability shall be upon the individual directors also. Section 56(1) and 56(3) read with section 56(4) of the Companies Act, 1956 imposes the liability for the non-compliance of the said provisions, on the company, every director, and other persons responsible for the issuance of the prospectus.

The liability for non-compliance of section 60 of the Companies Act, 1956 is on the Company, and every person who is a party to the noncompliance of issuing the prospectus as per the said section. Further, the directors of a company are also liable for action in case of contravention of the Debt Securities Regulations. 12. There is no dispute as to the fact that Mr. Partha Sarkar, Mr. Subhash Kar, Mr. Sujit Das, Mr. Suma Kardas and Mr. Sandip Pal were the directors of Astha India at the time when Astha India authorized the issuances of debentures to 51 investors. The board of directors of Astha India at the time of the above mentioned issuances of debentures being in control of their affairs, was under an obligation to ensure that these issuances were in compliance with all the applicable provisions of the Companies Act, 1956 and SEBI Act/Regulations/Guidelines. In my view, the above named directors of Astha India at the time of the above mentioned issuances are also "officers in default" as defined under section 5 of the Companies Act, 1956 read with section 2(60) of the Companies Act, 2013. I, therefore, find that the above named directors of Astha India are also responsible for its acts and omissions in this case.

13. Considering the above, I find that in respect of the issuances of debentures by Astha India during the financial years 2011-12 to 2012-13, the Noticees have failed to comply with the above-mentioned provisions of Companies Act, 1956 (read with the corresponding provisions of Companies Act, 2013) and the Debt Securities Regulations. 14. It is important to mention that one of the consequence of the aforesaid non-compliance/violations is refund/repayment of subscription money to the allottees with interest as provided in section 73 read with section 56 of the Companies Act, 1956. With regard to liability to pay interest on the subscription money, I note that as per section 73 (2) of the Companies Act, 1956 read with section 40(3)(b) of the Companies Act, 2013, the company and every director of the company who is an officer in default is jointly and severally liable, to repay all the money with interest at prescribed rate. In this regard, I note that in terms of rule 4D of the Companies (Central Government's) General Rules and Forms, 1956 read with rule 3(c) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, the rate of interest prescribed in this regard is 15%.

Accordingly, the Noticees are liable to pay interest to the allottees at such statutory rate of interest.

15. In view of the foregoing, I, in exercise of the powers conferred upon me under sections 11, 11(4), 11A and 11B read with section 19 of the SEBI Act, hereby issue the following directions: (i) The Noticees shall within a period of three months from the date of this order, jointly and severally refund the money collected through issuances debentures to the investors with interest at the rate of 15% per annum from the date of receipt of money till the date of such refund or the redemption value as promised and accrued till the date of refund, whichever is higher. (ii) Such refund shall be made only in cash through a Demand Draft or Pay Order. (iii) The Noticees shall within fifteen days from the date of this Order submit to SEBI complete details of their assets (alongwith proofs thereof) certified by a peer reviewed Chartered Accountant. (iv) The Noticees are permitted to sell the assets of the company and deposit the sale proceeds in an Escrow Account opened with a nationalized bank. Such proceeds shall be utilized for the sole purpose of making refund/repayment to the investors (holders of debentures) till the full refund/ repayment as directed above is made.

(v) The Noticees shall issue a public notice, in all editions of one English national daily and one vernacular daily with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this order. (vi) Within seven days of completion of refund/repayment as directed hereinabove, the Noticees shall file a certificate of such completion with SEBI from two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. Such certificate shall be issued by the Chartered Accountants after verifying the relevant documents including bank accounts of the Noticees and satisfying themselves that the refund has actually been made. (vii) For the purpose of this order, a peer reviewed Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by the Institute of Chartered Accountants of India. (viii) The Noticees are restrained from, directly or indirectly, accessing the capital market by issuing prospectus, any offer document or advertisement soliciting money from the public and are further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, in whatsoever manner for a period of four years or till the date of refund of money to the investors (holders of debentures) whichever is later.

(ix) Mr. Partha Sarkar, Mr. Subhash Kar, Mr. Sujit Das, Mr. Suma Kardas and Mr. Sandip Pal are also restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, for a period of four years or till the date of refund of money to the holders of debentures, whichever is later. (x) For the purposes of above clauses, the period of restraint shall be counted from the date of the interim order. 16. The interim order cum show cause notice dated August 11, 2015 is disposed off accordingly. The above directions are without prejudice to the right of SEBI to take any other appropriate action for the violations found in this case or to initiate any action in case of failure to comply with the above directions, in accordance with the provisions of applicable laws including the proceedings under the provisions of section 28A of the SEBI Act. 17. The order shall come into force with immediate effect. A copy of this Order shall be forwarded to the recognized stock exchanges and depositories for information and necessary action.

18. A copy of this Order shall also be forwarded to the Ministry of Corporate Affairs/concerned Registrar of Companies for their information and necessary action.

Sd/-

DATE: OCTOBER 21st, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA