Final Order in the matter of M/s Weird Infrastructure Corporation Limited

WTM/GM/EFD/76/2020–21 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 19 READ WITH SECTIONS 11(1), 11(4), 11A AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 IN THE MATTER OF M/S WEIRD INFRASTRUCTURE CORPORATION LIMITED – NOTICEES DIN 1. RAKESH KUMAR 03346913 2. BIMAL KUMAR JHA 02803464 3. AMRENDRA PRASAD SINGH 06432050

BACKGROUND –

1. Securities and Exchange Board of India (“SEBI”) had issued an Order dated July 24, 2015 (“Final Order”) against M/s Weird Infrastructure Corporation Limited (“WICL/the Company”) and its Promoters/Directors including Bimal Kumar Jha, Rakesh Kumar and Amrendra Prasad Singh and the Debenture Trustee, for engaging in fund mobilising activity from the public through the issue and allotment of 1,62,794 Secured Non–Convertible Redeemable Debentures (“NCDs”) and mobilization of an amount of approximately ₹16.28 Crore as on March 31, 2012. In the Final Order, SEBI had observed that the aforementioned issue and allotment of NCDs qualified as an offer made to the public in terms of Section 67(3) of the Companies Act, 1956 (“Companies Act”) and was in violation of the provisions of Section 56, Section 60 read with Section 2(36), Section 73, Sections 117B and 117C of the Companies Act and Regulations 4(2), 4(4), 5(2), 6, 7, 8, 9, 12, 14, 15, 16, 17, 19 and 26 of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (“Debt Securities Regulations, 2008”).

2. Vide the Final Order, SEBI had inter alia directed the above mentioned entities – a. To jointly and severally refund the money collected by the Company through the issuance of NCDs (which have been found to be issued in contravention of the public issue norms stipulated under the Companies Act), to the investors including the money collected from investors, till date, pending allotment of securities, if any, with an interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became

Order in the matter of M/s Weird Infrastructure Corporation Limited due (in terms of Section 73(2) of the Companies Act) to the investors till the date of actual payment.

3. From the Final Order, the following paragraph is noted –

18. “From the information available from the MCA website, the Company has following directors: DIN Name Date of Appointment 02803464 Bimal Kumar Jha 21/02/2015 03346913 Rakesh Kumar 21/02/2015 05309921 Sekh Ranjan Ali 12/05/2014 06432050 Amrendra Prasad Singh 21/02/2015 06560350 Sachin Kumar Thakur 12/05/2014 06630049 Somnath Santra 12/05/2014 06685477 Sanatan Banerjee 12/05/2014

It is noted that Mr. Bimal Kumar Jha, Mr. Rakesh Kumar, Mr. Sekh Ranjan Ali, Mr. Amrendra Prasad Singh, Mr. Sachin Kumar Thakur, Mr. Somnath Santra and Mr. Sanatan Banerjee are the current directors in the Company. Being the present directors in the Company, they are also under liability to make repayments to investors in terms of Section 73 of the Companies Act, 1956. In view of the same, SEBI is advised to issue a show cause notice to these for any further appropriate directions in case the Company and Directors fail to refund the amounts collected from investors against offer and/or allotment of NCDs.”

4. The Final Order was challenged by Bimal Kumar Jha and Rakesh Kumar, before the Hon’ble Securities Appellate Tribunal (“SAT”) in (a) Appeal No. 527/2015 and (b) Appeal No. 528/2015, respectively. Vide an Order dated February 23, 2016, the Hon’ble SAT had directed as under:

1. “Appellants in these two appeals are aggrieved by the Order passed by the Whole Time Member (“WTM” for short) of SEBI on July 24, 2015. By the said Order, Weird Infrastructure Corporation Limited (“WICL” for short) and its Directors including the appellants herein are inter alia directed to refund the monies collected by the company through the issuance of NCDs to the investors with interest at the rate of 15% per annum from the date when the repayments became due till the date of actual payment. 2. Basic grievance of the appellants is that they were not the Directors of the company, WICL and they have not signed FORM DIR–2. Although on the website of Registrar of Companies (ROC)/Ministry of Corporate Affairs (MCA) FORM DIR–2 is uploaded with the signatures of the appellants to act as Directors, it is submitted that the said signatures are forged. Apart from the above, it is submitted that the appellants were not served with the notice of hearing and therefore the ex–parte order passed against the appellants be quashed and set aside. 3. On perusal of para 1 of the impugned Order it is seen that on September 24, 2014, ex– parte interim order was passed against the Company and its Directors wherein the names of the appellants do not appear. Moreover, nothing is recorded in the impugned Order to suggest that subsequent to the ex–parte interim order dated September 24, 2014, the WTM of SEBI deemed it necessary to treat the appellants as Directors of the company and accordingly, issue notice to that effect to the appellants. In the absence of any finding recorded in the impugned Order to the effect that the notice of hearing was in fact served upon the appellants, in our opinion, the impugned Order passed against the appellants cannot be sustained. 4. In these circumstances, we quash and set aside the impugned Order dated July 24, 2015, in so far as it relates to the appellants are concerned and direct the WTM of SEBI to issue show cause notice to the appellants if deemed fit and pass appropriate order thereon in accordance with law after giving an opportunity of hearing to the appellants. …”

5. Subsequently, Amrendra Prasad Singh had challenged the Final Order before the Hon’ble SAT in Misc. Application No. 46 of 2016 and Appeal No. 67/2016. Vide an Order dated May 6, 2016, the Hon’ble SAT had directed as under:

3. “Accordingly, for the reasons stated in our Order dated 23rd February, 2016 passed in Appeal No.527 of 2015, we quash and set aside the impugned Order dated 24th July, 2015 qua the Appellant and direct the WTM of SEBI to issue show cause notice to the Appellant, if deemed fit, and pass appropriate order on merits and in accordance with law. …”

SHOW CAUSE NOTICE DATED APRIL 12, 2019 –

6. Thereafter, SEBI issued a show cause notice dated April 12, 2019 (“SCN”), against Bimal Kumar Jha (“Noticee no. 1”), Rakesh Kumar (“Noticee no. 2”) and Amrendra Prasad Singh (“Noticee no. 3”) (collectively referred to as “Noticees”) inter alia alleging that since the Noticees were Directors of WICL from February 21, 2015 onwards, they were responsible for the conduct of the business of the Company which included necessary legal compliances under the Companies Act and the Debt Securities Regulations, 2008. Further, the SCN alleged that despite the illegal mobilization of funds by WICL through placement of NCDs, the Noticees along with other Directors of the Company who were liable to make repayments to investors, had failed to ensure such repayments in terms of Section 73 of the Companies Act. The Noticees were alleged to be responsible for the violation by WICL of the provisions of the Companies Act i.e. Section 56, Section 60 read with Section 2(36), Section 73, Sections 117B and 117C, along with the provisions of the Debt Securities Regulations, 2008 i.e. Regulations 4(2), 4(4), 5(2), 6, 7, 8, 9, 12, 14, 15, 16, 17, 19 and 26. Accordingly, the Noticees were called upon to show cause as to why appropriate directions including ensuring refund under Section 73 of the Companies Act, should not be issued against them.

7. In response to the SCN, Noticee nos. 1 and 2 had filed an undated reply (received at SEBI on May 24, 2019) while Noticee no. 3 had filed a reply dated December 27, 2019 (received at SEBI on December 31, 2019).

PERSONAL HEARING: –

8. On a consideration of the above mentioned replies, SEBI had granted an opportunity of personal hearing to the Noticees on August 26, 2020 and September 9, 2020. Noticee nos. 1 and 2 appeared for the hearing through Mr. Abhishek Singh, Advocate while Noticee no. 3 appeared for the hearing through Mr. Kamal, Advocate and Ms. Sanchita Bhardwaj, Advocate. Noticee nos. 1 and 2 reiterated the submissions contained in their reply dated July 20, 2020. Noticee no. 3 reiterated the submissions contained in his reply dated December 27, 2019. The Noticees were directed to submit additional written submissions by September 25, 2020 inter alia (a) detailing the steps taken by them to address the issue of the fraudulent resolution passed by the Company for appointing them as Directors in February 2015 and (b) providing evidence of the ROC/MCA having accepted their submissions for their resignation as Directors of the Company in April 2015. Thereafter, Noticee nos. 1 and 2 submitted additional written submissions vide a letter dated October 3, 2020. Noticee no. 3 submitted additional written submissions vide an e– mail dated October 7, 2020. The contents of the aforementioned replies/submissions are discussed and dealt with in seriatim at paragraphs 8.2–8.5.

8.1 As per the SCN, WICL was engaged in fund mobilizing activity from the public through the issue and allotment of 1,62,794 NCDs and mobilization of approximately ₹16.28 Crore as on March 31, 2012 (“Offer of NCDs”) and as a result of the aforesaid activity, had violated the provisions of the Companies Act and the Debt Securities Regulations, 2008. The SCN states that as per records available on the Ministry of Corporate MCA21 Portal, it was observed that the Noticees were appointed as Directors of the Company with effect from February 21, 2015. Accordingly, the Noticees as Directors of WICL were alleged to be responsible for the conduct of the business of the Company including for ensuring repayment to investors in terms of Section 73 of the Companies Act.

8.2 In response, Noticee nos. 1 and 2 have inter alia submitted as under:

a. On March 19, 2015, a Form DIR–12 showing Noticee nos. 1 and 2 have been appointed as Directors of WICL, was fraudulently prepared and uploaded on the website of the ROC/MCA wherein it was shown as if the Noticees have been appointed as Directors of WICL with effect from February 21, 2015. Noticee nos. 1 and 2 had never signed the Form DIR–2 (Consent to act as a Director of WICL) and their signatures on the said Form was forged. b. The Form DIR–12 provided by SEBI vide its e–mail dated April 20, 2020, was incomplete in so far as it was not accompanied by the attachments to the Form. With the aid of the copy of the complete Form DIR–12 as uploaded on March 19, 2015 on the MCA/ROC website and downloaded by the Noticee (which was also filed before the Hon’ble SAT), it was explained that the said Form is fraudulent and the signatures of the Noticees on the attachments to the said Form were forged. c. Immediately on coming to know of such fraud being perpetrated, Noticee nos. 1 and 2 addressed a letter dated March 23, 2015 (annexed with the submissions), to the ROC, Kanpur, inter alia requesting that remedial action be taken and that the matter be inquired at the earliest.

Thereafter, Noticee nos. 1 and 2 had caused to publish public notices in certain newspapers that their names were being fraudulently shown on the website of the MCA/ROC as Directors of WICL. Copy of newspaper notices dated April 1, 2015 are annexed with the submissions. d. On April 11, 2015, WICL had uploaded another Form DIR–12, removing Noticee nos. 1 and 2 from the post of Director of the Company enclosing therewith a resolution dated April 3, 2015, passed by the Company, wherein it was admitted that the Noticees and others were fraudulently appointed as Directors of WICL without their knowledge or consent. A copy of the Form DIR–12 uploaded on April 11, 2015, on the website of the MCA/ROC and downloaded by the Noticees (which was also filed before the Hon’ble SAT) is annexed with the submissions. Further, the Noticees had obtained a certified copy of the aforementioned records from the ROC, Kanpur and have submitted the same as part of their reply dated October 3, 2020. e. In light of the above, it is evident that Noticee nos. 1 and 2 were never appointed as Directors of WICL but were falsely shown to have been appointed as Directors of the Company with effect from February 21, 2015 vide a Form DIR–12 dated March 19, 2015, as filed by WICL with the MCA.

Further, upon the aforesaid fraud being pointed out to the concerned ROC and the Company, the necessary action was taken to correct and rectify the records. f. In response to the query raised during the personal hearing, it is submitted that at the relevant time, a police complaint was indeed made by Noticee nos. 1 and 2; however, on account of lapse of time, the Noticees are not in possession of the said police complaint.

8.3 In response to the allegations contained in the SCN, Noticee no. 3 inter alia submitted as under:

A. I am a Director of Lemons Infrastructure Corporation Limited (“Lemons Infrastructure”) having its registered office at Patna. I am engaged in the business of selling and purchasing of property on commission basis and construction of residential buildings. I was earlier employed with ICICI Bank, Patna and also worked with Bajaj Capital where I met one R. K. Jaiswal, who had introduced himself as an agent of WICL. Eventually, I started my own business in the name of Lemons Infrastructure and had no concerns with WICL. B. In March 2015, while going through the Director Master Data on the MCA21 portal, the secretarial department engaged for Lemons Infrastructure informed me that my name was appearing as a Director of WICL. From a perusal of the information obtained from the MCA21 portal, it was noted that WICL had filed Form DIR–12 on March 19, 2015 and fraudulently appointed me as a Director with effect from February 21, 2015. The attachment to the said Form contained a consent letter with my forged signature. The consent letter so attached had never been signed by me. Further, an extract of the resolution passed in the Board meeting held on February 21, 2015, along with an appointment letter in my name as Director of WICL was attached to the aforesaid e–Form DIR–12, which was signed by Sekh Ranjan Ali (then Director of WICL). The e–Form DIR–12 was also digitally signed by Sekh Ranjan Ali and was certified by a Company Secretary, Suresh Chandra Pal. The said e–

Form DIR – 12 also contained the appointment letters of Gopal Dalapati, Sanjay Kumar Das, Rakesh Kumar and Bimal Kumar Jha, as Directors of WICL. C. I immediately filed Form DIR–11 on March 31, 2015 with the ROC, Kanpur for intimating my fraudulent appointment as Director and immediately resigned from the Company with effect from February 21, 2015. As an attachment to e–Form DIR–11, I also filed an affidavit stating that I had never consented for any appointment as a Director and that my signatures are forged in the consent letter for appointment. A copy of the e–Form DIR–11 is annexed with the submissions. D. I had also served a legal notice dated April 1, 2015, on WICL and upon all the Directors of the Company as were shown directors of WICL on MCA21 portal, specifying my concerns on fraudulent appointment and forged signatures. I had called for compensation of ₹1,00,00,000 for causing irreparable damage and mental agony caused to me by fraudulently appointing me as Director without my knowledge and consent. A copy of the legal notice and speed post receipts are annexed with the submissions. E. Pursuant to the aforesaid legal notice, the Company then accepted the fraud committed and passed a resolution in its meeting of Board of Directors held on April 3, 2015, wherein it noted that no meeting was ever convened and no records exist with the Company for the invalid meeting date 21.02.2015. The board resolution and annexures at page No. 46-48 (Board resolution dated 03.04.2015 with annexure) of the reply submitted by the Noticee state the same. The meeting and documents related thereto are denied by the Board of WICL in toto. Being nullified by the Board of Directors of the Company along with declaration that documents related to the meeting as false and forged documents, the agenda therein has no effect whatsoever. The Company took note of my resignation as Director in the Company and filed the aforesaid resolution in e– Form DIR–12 for my cessation as Director with the MCA on April 11, 2015. My name was thereafter, removed from the list of Director/ signatories of the Company with effect from April 3, 2015. F. In response to the query raised during the personal hearing, it is submitted that at the relevant time, I had not filed a police complaint.

I have considered the Final Order dated July 24, 2015; the SAT Orders dated February 26, 2016 and May 6, 2016 along with all other material available on record in light of the submissions made by the Noticees. The issue for determination in the instant proceedings is whether Noticee nos. 1, 2 and 3 were Directors of WICL and if so, whether they are responsible for repayment to investors on account of the illegal fund mobilization by the Company through the issue and allotment of NCDs?

8.4 The SCN issued against Noticee nos. 1, 2 and 3 has sought to fasten liability on the aforementioned entities on the basis that the records available on the MCA21 portal showed them as Directors of WICL with effect from February 21, 2015. Accordingly, they were alleged to be responsible for the conduct of the business of the Company including ensuring necessary legal compliances under the Companies Act and the Debt Securities Regulations, 2008, for the mobilization of funds by the Company through the Offer of NCDs. From the material available on record including information concerning Director details obtained from the MCA21 portal i.e. Form DIR–12 dated March 19, 2015, it is observed that Noticee nos. 1, 2 and 3 were appointed as Independent Directors of WICL on February 21, 2015 (as authorised by the Board of Directors of WICL vide resolution no. 102, dated February 21, 2015). However, from the material available on record including the subsequent Form DIR–12 dated April 11, 2015 (certified copy as obtained by Noticee nos. 1 and 2 from the ROC, Kanpur and submitted to SEBI), the following is noted:

A. Noticee nos. 1 and 2 had addressed a letter dated March 23, 2015 to the ROC, Kanpur, inter alia requesting that remedial action be taken regarding their illegal appointment as Directors of WICL and that the matter be inquired since (1) their signatures on the consent letter was forged, (2) dates of signing on the consent letter was not mentioned and (3) as per the Companies (Appointment and Qualification of Directors) Rules, 2014, there must be ID proof, proof of residence, mobile no., income tax PAN no. of the Director to be appointed and their copies as attachment along with Form DIR–2, which were not available as part of the documents filed by WICL i.e. Declaration of the appointee Director in Form DIR–2 dated March 19, 2015. Further, Noticee no. 3 had filed Form DIR–11 on March 31, 2015 with the ROC, Kanpur intimating about the fraudulent appointment as Director of WICL and had also served a legal notice dated April 1, 2015, on WICL and its Directors inter alia regarding the said fraudulent appointment.

B. A meeting of the Board of Directors of WICL was held on April 3, 2015 and a resolution was approved on that date for the removal of illegally appointed Directors and further, for authorizing any of the Directors of the Company to sign and file forms in respect of the same (certified true copy having the signatures of the Directors of WICL at the relevant time i.e. Sanatan Banerjee and Somnath Santra–relied upon. See also Table at paragraph 3 for names of Directors of WICL at the relevant time).

C. The attachments to Form DIR–12 dated April 11, 2015 i.e. Annexure to Resolution passed at the Board meeting held on April 3, 2015 (certified true copy having the signatures of Sanatan Banerjee and Somnath Santra) states:

“We have come to know that on the basis of extract of so called board meeting of the Company, allegedly held on 21/02/2015 at its registered office at 10:30am and (1) Mr. Gopal Dalapati, (2) Bimal Kumar Jha, (3) Rakesh Kumar, (4) Amarendra Prasad Singh have been appointed as Managing Directors of the Company with effect from 21/01/2015 and (5) Mr. Sanjay Kumar Das with effect from 22/02/2015. It is hereby clarified that neither such board meeting of the Company has been held on 21/02/2015 at 10:30am, nor the aforesaid persons have ever been appointed as the MD of the Company. In this regard, none of the aforesaid five persons have ever approached the Company for being appointed as Managing Director of the Company, nor the Company has ever approached them for the same. It is further clarified that Mr. Suresh Chandra Pal (shown as Company Secretary having membership no. 32198 and Certificate of Practice no. 11952 in Form DIR–12) has not been engaged by the Company for the purpose of Certification of Form DIR–12. The extract of the board meeting has been signed by Ramjan Ali and the declaration in the said form, Form DIR–12 has been signed by Sekh Ranjan Ali, authorized by the Board of Directors of the Company vide resolution no. 102 passed on 21/02/2015, but all those information were also fake since neither of such resolutions authorizing Mr. Sekh Ranjan Ali for the same purpose has been certified by the board. Thus, it is clarified that aforesaid resolution no. 102 (dated) 21/02/2015 does not exist; even the letter of appointment shown to have been issued by Ramjan Ali is a fake one and no such appointment letter exists in the record of the Company nor the same has been issued to the aforesaid five persons. The consent letters (Form DIR–2) shown to have been issued by aforesaid five persons also does not exist in the record of the Company.

… Some people have committed forgery by indulging in creating papers in the name of the above mentioned persons. And the said Company Secretary Mr. Suresh Chandra Pal seems to have certified the Form DIR–12 in connivance of those unknown persons, who were involved in this illegal act. None of the aforesaid five persons have been appointed as managing director of the Company on that aforesaid dates, their names appearing in the MCA/ROC website is unauthenticated and fake. Hence unanimously decided by the Board of Directors of the Company to remove all directors illegally appointed dated 21.02.2015 and 22.02.2015 from the Board of Directors of the Company.”

D. From the above, it is noted that:

(1) No Board meeting of WICL was held on February 21, 2015, wherein the Noticees were purportedly appointed as Directors. (2) None of the Noticees purportedly appointed as Directors of WICL on February 21, 2015, had ever approached the Company for being appointed as Directors prior to the said appointments. (3) The extract of the Board meeting and the declaration in the Form DIR–12 which had been signed by Sekh Ranjan Ali, as authorized by the Board of Directors of the Company vide a resolution no. 102 passed on February 21, 2015, were all false since no such resolution authorizing him for such purpose had been certified by the Board of WICL. (4) Suresh Chandra Pal (shown as Company Secretary having membership no. 32198 and certificate of practice no. 11952) had not been engaged by the Company for the certification of Form DIR–12. (5) Neither the resolution no. 102, appointment letters, consent letters, the extracts of the Board meeting held on February 21, 2015, exist in the records of the Company. (6) Forgery has been committed in so far as the signatures of the five individuals on the Declaration of the appointee Director in Form DIR–2 dated March 19, 2015, are concerned.

E. As per Form DIR–12 dated April 11, 2015, filed by WICL with the ROC, Kanpur, the date of cessation of directorship of Noticee nos. 1, 2 and 3 was indicated as April 3, 2015.

8.5 On a consideration of the aforementioned paragraphs, I find that Noticee nos. 1, 2 and 3 were never appointed as Directors of WICL (on February 21, 2015) with their consent, as mandated under the provisions of the Companies Act 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014. Further, upon obtaining knowledge of their fraudulent/illegal appointment as Directors of WICL, I note that the aforementioned Noticees had taken immediate steps to ensure action by the ROC, Kanpur and the Company for rendering such appointment as invalid. I therefore, find that the Noticees cannot be held to be responsible for repayment to investors on account of the illegal fund mobilization by WICL through the Offer of NCDs, as has been alleged in the SCN. I am of a considered view that in order to meet the ends of justice, the present proceedings be disposed of without any further directions against Noticee nos. 1, 2 and 3.

ORDER –

9. I, in exercise of the powers conferred upon me under Section 19 read with Sections 11(1), 11(4), 11A and 11B of the SEBI Act, 1992, hereby dispose of the proceedings initiated vide the SCN dated April 12, 2019, against Bimal Kumar Jha, Rakesh Kumar and Amrendra Prasad Singh, without any further directions.

10. This Order comes into force with immediate effect.

11. A copy of this Order shall be forwarded to the Noticees, recognized Stock Exchanges, Depositories and Registrars and Transfer Agents (RTA) of mutual fund for information and necessary action.

PLACE: MUMBAI G. MAHALINGAM DATE: FEBRUARY 26, 2021 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA