Final Order in the matter of Matribhumi Projects (I) Limited and Ors.

WTM/RKA/EFD/136/2016 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under Sections 11 (1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 and regulation 28 of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, in respect of: 1. Matribhumi Projects (I) Limited 2. Mr. Rajkrishna Palta 3. Mr. Debapriya Acharya 4. Mr. Netai Palta 5. Mr. Susanta Kumar Chatterjee and 6. Ms. Piyali Sarkar 7. Matribhumi Debenture Trust, represented by Mr. Amitava Ghosh and Mr. Prem Kumar Singh. In the matter of issuance of non-convertible secured redeemable debentures by Matribhumi Projects (I) Limited.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted a preliminary examination into the issuance of Non-Convertible Redeemable Secured Debentures (hereinafter referred to as “NCDs”) by Matribhumi Projects (I) Limited (hereinafter referred to as “the company” or “MPL”) with a view to ascertain the possible violations of the public issue norms stipulated under the Companies Act, 1956 and other applicable laws pertaining to SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (hereinafter referred to as “the ILDS Regulations”). 2. Pursuant to the examination, SEBI passed an interim order dated June 23, 2015 (hereinafter referred to as “interim order”) against the company, its present directors, Mr. Rajkrishna Palta and Mr. Netai Palta, the company’s past directors, Mr. Debapriya Acharya, Mr. Susanta Kumar Chatterjee and Ms. Piyali Sarkar and the Debenture Trustee, Matribhumi Debenture Trust (represented by Mr. Amitava Ghosh and Mr. Prem Kumar Singh) {collectively referred to as “the noticees’ and individually by their respective names}, in view of the following reasons: (i) “………the features of the Offer of NCDs such as amounts raised during the Financial Year 2012–13 i.e. ` 4 Crores and charge created for such Offer i.e. ` 50 Crores, can lead to only one conclusion that MPL, by its non – cooperation, has tried to deliberately conceal the true nature of its fund mobilizing activities. I, therefore, feel it is an eminently reasonable conclusion to draw from the aforesaid facts that the Offer of NCDs would have been subscribed several times beyond the threshold for a private placement. In light of the same, I find that the issue of NCDs was nothing but a public issue of securities….”.

Order in respect of Matribhumi Projects (I) Limited and others (ii) “………MPL is prima facie engaged in fund mobilising activity from the public, through the Offer of NCDs and as a result of the aforesaid activity has violated the aforementioned provisions of the Companies Act, 1956 (Section 56, Section 60 read with Section 2(36), Section 73, Sections 117B–117C) read with the Debt Securities Regulations”.

(iii) “MPL created a charge of `50 Crores and appointed Matribhumi Debenture Trust (represented by Shri Amitava Ghosh and Shri Prem Kumar Singh), as Debenture Trustee for the Offer of NCDs”. “Matribhumi Debenture Trust (represented by Shri Amitava Ghosh and Shri Prem Kumar Singh), has acted as an unregistered Debenture Trustee, which amounts to violation of the abovementioned provisions of the SEBI Act read with the Debenture Trustees Regulations”. 3. In view of the alleged contraventions and for the reasons stated in the interim order, the following directions were issued therein: i. “MPL (PAN: AAHCM5933G) shall forthwith cease to mobilize 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. MPL and its present Directors, viz. Shri Rajkrishna Palta (PAN: BAWPP5444G; DIN: 05113045) and Shri Netai Palta (PAN: AMEPP6310J; DIN: 05127584), 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.

The past Directors of MPL, viz. Shri Debapriya Acharya (PAN: AZEPA7933R; DIN: 05127578), Shri Susanta Kumar Chatterjee (PAN: AJBPC2210J; DIN: 05128212) and Smt. Piyali Sarkar (PAN: DQHPS7079M; DIN: 06601797), 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; iv. MPL and its abovementioned past and present 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; v. MPL shall provide a full inventory of all its assets and properties; vi. MPL's abovementioned past and present Directors shall provide a full inventory of all their assets and properties; vii. MPL and its abovementioned present 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; viii.

MPL and its abovementioned present 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 MPL;

ix. MPL and its abovementioned present Directors shall furnish complete and relevant information (as sought by SEBI letters dated August 25, 2014), within 14 days from the date of receipt of this Order; x. The Debenture Trustee, viz. Matribhumi Debenture Trust (represented by Shri Amitava Ghosh and Shri Prem Kumar Singh), is prohibited from continuing with its assignment as debenture trustee in respect of the Offer of NCDs of MPL and also from taking up any new assignment or involvement in any new issue of debentures, etc. in a similar capacity, from the date of this order till further directions”. 4. The above directions came into force with immediate effect. The interim order advised the company and the aforesaid directors 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 along with interest, if any, promised to investors therein; ii. Directing them to not 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. 5. The Debenture Trustee, viz. Matribhumi Debenture Trust (represented by Mr. Amitava Ghosh and Mr. Prem Kumar Singh) were advised to show cause as to why suitable directions/prohibitions under sections 11(1), 11(4), 11A and 11B of the SEBI Act including restraining from accessing the securities market and further restraining from buying, selling or dealing in securities, in any manner whatsoever, for an appropriate period should not be issued. 6. The noticees were afforded opportunity to file their response within 21 days of receipt of the interim order and to seek a personal hearing, if they desired. Ms. Piyali Sarkar, vide letters dated July 16, 2015 and August 24, 2016 inter alia made the following submissions: (a) She is an innocent person and did not know that she was an erstwhile director of the company. (b) She never handled or carried on any kind of business for the company. Due to her relationship with Mr. Rajkrishna Palta (husband of this noticee), she might have signed in some documents.

However, the same were done without even going through the contents. (c) She has no knowledge about the company and therefore is not in a position to give details about the business activities of the company as sought in the interim order. She does not possess any of the documents/papers/properties and/or money in respect of the company. (d) She is not conversant with the provisions of the Companies Act, 1956 and the provisions of other Act, Rules, Regulations, etc.

(e) After knowing about the activities of her husband, Mr. Rajkrishna Palta and Mr. Netai Palta, she had raised objections. Thereafter, her relationship with her husband turned sour. She is presently not residing with him. She does not know the whereabouts of the aforesaid persons. She is now pursuing her studies with a hope to establish herself in the society. (f) She was not a director when the complaint was made alleging non-payment of amount. She was made a director for a short period of time. She was not given access to any documents and she was kept as a ‘sleeping director’. (g) She did not commit any violation as alleged in the interim order. If any offence was committed and the provisions of the Companies Act, 1956 and SEBI Act/Regulations were found to be violated, the same was done innocently and without having any knowledge. (h) As she is not a present director in the company, there would be no need to continue with the restrictions imposed on her vide the interim order. (i) The noticee submitted that she has no access to the assets of the company and did not take any benefit in any manner from the company.

Therefore, the requirement of providing full inventory of all her assets and properties does not and cannot arise. She has no assets or properties. She therefore requested SEBI to absolve her from the proceedings 7. Mr. Debapriya Acharya inter alia submitted the following vide his replies dated July 17, 2015 and August 25, 2016: (a) He accepted the post of director as offered by Mr. Rajkrishna Palta and joined the company on December 09, 2011 (i.e. on the date of incorporation of the company). (b) His acceptance to be a part of the executives of the company was to make the company a profitable concern by creating several producing units with the funds raised so as to safeguard the interest of the depositors/investors. (c) He signed in Form-10 which was meant to secure the interest of investors by creation of charge. The same was done in April 2012. (d) Within a few months, he realized that the course of business was not running in the mode and manner he wished and were carried out in contravention of his suggestions and opinion. (e) Due to the differences with Mr. Rajkrishna Palta (the Managing Director), the noticee resigned from the post of directorship.

The Managing Director had accepted his resignation on July 03, 2012. (f) He could deposit only Rs.2 lakh as against Rs.5 lakh (to be contributed by each director). After deducting Rs.27,810/- due from him to the company, the Managing Director returned Rs.1,72,190/- to the noticee vide a cheque. (g) All the financial transactions and keeping of important documents/records of the company were exclusively done and maintained by Mr. Rajkrishna Palta. The noticee is therefore not in a position to submit any such information. (h) Out of the meagre remuneration he had received from the company, there was no question of accumulating sufficient money to possess any property of his own. He had to incur huge amount of loans to face the tremendous pressure from investors and related persons. The noticee submitted that he is presently in an awkward situation both socially and financially. (i) He is now serving in a private company to overcome the needs of his family. The noticee requested SEBI to consider his submissions as it was financially difficult for him to attend the personal hearing in Mumbai.

(j) The noticee submitted a copy of his resignation letter dated July 03, 2012 and the same has been accepted by the company on the same day. 8. As the interim order could not be delivered to some of the noticees at their last known address, SEBI made a public notice in the newspapers (in Times of India-Kolkata Edition on August 28, 2016 and in Anand Bazaar Patrika on August 29, 2016) intimating the noticees about the interim order and the personal hearing fixed on September 07, 2016. They were also advised to file their replies before the date of personal hearing. In the personal hearing held on September 07, 2016, Mr. Indrajit Bhattarcharjee, Advocate represented Ms. Piyali Sarkar and reiterated her submissions. Mr. Debapriya Acharya had informed that he would not be able to attend the personal hearing. The other noticees neither filed their replies nor appeared in the personal hearing despite service of notice. Accordingly, the proceedings of personal hearing were concluded and I proceed to consider the case on merits on the basis of material available on record. 9. I have considered the interim order, the submissions of Ms. Piyali Sarkar and Mr. Debapriya Acharya and material available on record.

As per the interim order, the company had issued NCDs during FY 2012-13 and mobilized `4 crores. The company failed to provide the number of allottees from whom such funds were mobilized. Such details are also not provided on the MCA-21 portal. As the company/directors failed to respond to the SEBI letters and also as the company’s registered office premises was closed, the interim order had specifically directed the company and its directors to provide detailed information regarding its offer and issue of NCDs. As mentioned above in this Order, SEBI had issued a public notice in newspapers intimating the noticees about the interim order. However, the noticees failed to provide the required information till date. 10. In view of the same, I agree with the observation made in the interim order that the company/directors have deliberately concealed information regarding the offer of NCDs. The prima facie findings made in the interim order are undisputed. Considering the huge amount mobilized from the public and the creation of charge of `50 crores, I have no reason to differ with the observation made in the interim order that the company made a ‘public issue’ of NCDs in terms of first proviso to section 67(3) of the Companies Act, 1956. As the issuance of NCDs by the company was a ‘public issue’, it ought to have complied with the applicable provisions of the Companies Act, 1956 and the ILDS Regulations as alleged in the interim order.

In the present case, there is no dispute to the fact that the company failed to comply with sections 60 read with sections 2(36),

56(1), 56(3), 73, 117B and 117C of the Companies Act, 1956 and regulations 4(2)(a), (b), (c), (d), 4(4), 5(2)(b), 6, 7, 8, 9, 12, 14, 15, 17, 19 and 26 of the ILDS Regulations. Accordingly, I find the company liable for violating the aforesaid provisions of law. 11. The interim order issued directions against the present and past directors of the company, namely, Mr. Rajkrishna Palta, Mr. Netai Palta, Mr. Debapriya Acharya, Mr. Susanta Kumar Chatterjee and Ms. Piyali Sarkar. As per the RoC records, Mr. Rajkrishna Palta was appointed on December 09, 2011 and Mr. Netai Palta was appointed on January 11, 2014. The details regarding the date of appointment and resignation of the past directors, Mr. Susanta Kumar Chatterjee and Ms. Piyali Sarkar is mentioned in the table below:

S. No. Name Date of appointment Date of cessation 1 Susanta Kumar Chatterjee 09.12.2011 11.01.2014 2 Piyali Sarkar 11.01.2014 25.02.2014

12. The interim order has mentioned that Mr. Debapriya Acharya is a past director. Mr. Debapriya Acharya admitted that he became a director in the company on December 09, 2011. He submitted that he resigned on July 03, 2012 as the business of the company was conducted in contravention of his suggestions. The resignation of this noticee has been accepted by the company as per company’s endorsement seen in the resignation letter dated July 03, 2012. However, it is noted from the MCA/RoC records that he is still shown as one of the present directors of the company. It appears that his resignation has not been intimated by the company to the MCA/RoC and relevant Form has not been filed. In terms of section 303(2) of the Companies Act, 1956, it is the responsibility of a company to file Form-32 with the RoC indicating any change in its directors within the prescribed period of 30 days. As per sections 168 and 170 of the Companies Act, 2013, it shall be the responsibility of the company to file a return with the RoC within a period of 30 days of every appointment or change in the directors. Proviso to section 168(1) of the Companies Act, 2013 provides that a director shall also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within 30 days of resignation. If aggrieved, Mr. Debapriya Acharya is at liberty to take necessary steps available under law to inform the concerned authority regarding his resignation.

13. It is already held above in this Order that the company made a public issue of NCDs and raised `4 crores during FY 2012-2013. As per the facts mentioned above, Mr. Rajkrishna Palta, Mr. Susanta Kumar Chatterjee and Mr. Debapriya Acharya were part of the Board of Directors of the company during FY 2012-2013 when the company made the offer and issued NCDs without complying with the public issue norms. Ms. Piyali Sarkar and Mr. Netai Palta had joined the company’s board pursuant to the offer and allotment of NCDs made during FY 2012-13.

14. 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 will be 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) 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 is on the Company, and every person who is a party to the non-compliance of issuing the prospectus as per the said section. Further, the directors of a company shall be liable for action in case of contravention of the ILDS Regulations. 15. The liability of the company and directors to repay under section 73(2) of the Companies Act, 1956 would remain until the whole of the subscription amount along with interest is refunded to the allottees/investors.

Therefore, the directors (irrespective of whether they continue or resign) who were present during the period when the company made the offer and allotted NCDs shall be liable for violation of sections 56, 60 and 73 of the Companies Act, 1956 and the ILDS Regulations. Further, the persons who join the company’s Board as directors pursuant to the offer and allotment of securities shall also be liable if the company/concerned directors fail to make refunds as mandated under sections 73(2) of the Companies Act, 1956. 16. With respect to the breach of law and duty by a director of a company, I refer to and rely on the following observations made by the Hon’ble High Court of Madras in Madhavan Nambiar vs Registrar of Companies (2002 108 Comp Cas 1 Mad): “13. …. A director either full time or part time, either elected or appointed or nominated is bound to discharge the functions of a director and should have taken all the diligent steps and taken care in the affairs of the company. 14. In the matter of proceedings for negligence, default, breach of duty, misfeasance or breach of trust or violation of the statutory provisions of the Act and the rules, there is no difference or distinction between the whole-time or part time director or nominated or co-opted director and the liability for such acts or commission or omission is equal.

So also the treatment for such violations as stipulated in the Companies Act, 1956.” 17. Mr. Debapriya Acharya has admitted signing the Form-10. Form-10 filed on March 30, 2012, is in respect of registration of creation of charge on March 14, 2012 with respect to issue of NCDs. He has also signed the Mortgage Deed dated March 29, 2012 as the representative of the company. In view of the observations made in the paragraphs above and considering his admission, it becomes clear that he was part of the board of directors of the company during the period when the decision to offer/issue NCDs was taken and implemented. I therefore find him also responsible for the violations committed by the company. Considering this noticee’s submission that he resigned on July 03, 2012, I observe that the above finding on his liability shall hold good even if it is assumed that he resigned as a director with effect from July 03, 2012.

18. Ms. Piyali Sarkar has submitted that she was kept as a ‘sleeping director’ and had no access to the documents or played any role in the affairs of the company. However, having been appointed as a director, Ms. Piyali Sarkar cannot take a plea that she may have signed some ‘documents’ and does not ‘know the contents’ thereof. Accordingly, I do not find merit in her submissions. As she has been appointed a director in the year 2014, i.e. pursuant to the offer and mobilization of public funds during FY 2012-13, she becomes liable for non-repayment of the subscription amounts collected under the impugned NCDs as mandated under section 73(2) of the Companies Act, 1956. 19. In view of the foregoing observations, I hereby find Mr. Rajkrishna Palta, Mr. Susanta Kumar Chatterjee and Mr. Debapriya Acharya liable for the contravention of sections 56, 60 and 73 of the Companies Act, 1956 and the ILDS Regulations committed by the company. Ms. Piyali Sarkar and Mr. Netai Palta shall be liable for default in making refunds in terms of section 73(2) of the Companies Act, 1956. All the aforesaid persons are ‘officers in default’ in terms of section 5 of the Companies Act, 1956. Therefore, the company and the aforesaid persons are liable for the consequences including refund of the subscription money to the allottees along with interest at 15% p.a. as mandated under section 73(2) of the Companies Act, 1956 read with rule 3(c) of the Companies (Prospectus and Allotment of Securities) Rules, 2014.

20. The interim order has observed that the company created a charge of `50 crores and appointed Matribhumi Debenture Trust (represented by Mr. Amitava Ghosh and Mr. Prem Kumar Singh) as the Debenture Trustee. It is alleged that the said Debenture Trustee acted in contravention of section 12(1) of the SEBI Act and regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993. Section 12(1) of the SEBI Act, 1992 mandates that a Trustee shall buy, sell or deal in securities, except under and in accordance with the conditions of a certificate of registration obtained from SEBI. Form-10 filed on March 30, 2012 with respect to registration of charge has been digitally signed by Mr. Prem Kumar Singh. Further, the Mortgage Deed dated March 29, 2012 has been signed by Mr. Amitava Ghosh and Mr. Prem Kumar Singh as Trustees of Matribhumi Debenture Trust. It is an undisputed fact that the above said Trust or the Trustees were never registered with SEBI as a ‘debenture trustee’. In terms of regulation 7 of the Debenture Trustee Regulations, a person can act as a debenture trustee only if he is either a scheduled bank or a public financial institution or an insurance company or a body corporate.

The entity or its representatives are not qualified to be appointed as a ‘debenture trustee’. Accordingly, I find Matribhumi Debenture Trust, Mr. Amitava Ghosh and Mr. Prem Kumar Singh guilty of contravening section 12(1) of the SEBI Act, 1992 and regulation 7 of the Debenture Trustee Regulations. 21. In view of the foregoing, I, in exercise of the powers conferred under sections 11(1), 11(4), 11A and 11B read with section 19 of the Securities and Exchange Board of India Act, 1992 and regulation 28 of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, hereby issue the following directions: (i) Matribhumi Projects (I) Limited (PAN: AAHCM5933G), Mr. Rajkrishna Palta (PAN: BAWPP5444G; DIN: 05113045), Mr. Debapriya Acharya (PAN: AZEPA7933R; DIN: 05127578), Mr. Netai Palta (PAN: AMEPP6310J; DIN: 05127584), Mr. Susanta Kumar Chatterjee (PAN: AJBPC2210J; DIN: 05128212) and Ms. Piyali Sarkar (PAN: DQHPS7079M; DIN: 06601797), shall within a period of three months from the date of this order, jointly and severally refund the money collected through the issue of NCDs to the allottees with interest at the rate of 15% per annum from the date of receipt of money till the date of such refund.

(ii) Such refund shall be made only in cash through a Demand Draft or Pay Order. (iii) Matribhumi Projects (I) Limited and its directors shall within fifteen days from the date of this Order submit to SEBI complete details of their assets (along with proofs thereof) certified by a peer reviewed Chartered Accountant. (iv) Matribhumi Projects (I) Limited and its directors are permitted to sell 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 allottees till the full refund/ repayment as directed above is made. (v) Matribhumi Projects (I) Limited and its directors 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, Matribhumi Projects (I) Limited and its directors 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) Matribhumi Projects (I) Limited, Mr. Rajkrishna Palta, Mr. Netai Palta, Mr. Susanta Kumar Chatterjee, Mr. Debapriya Acharya and Ms. Piyali Sarkar, 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 allottees, whichever is later. (ix) Mr. Rajkrishna Palta, Mr. Netai Palta, Mr. Susanta Kumar Chatterjee, Mr. Debapriya Acharya and Ms. Piyali Sarkar 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 allottees, whichever is later.

(x) Matribhumi Debenture Trust and its representatives, Mr. Amitava Ghosh and Mr. Prem Kumar Singh are prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, in whatsoever manner for a period of four years. (xi) For the purposes of sub-paragraphs (viii) and (ix) above, the period of restraint shall be counted from the date of the interim order. 22. The interim order cum show cause notice dated June 23, 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. 23. The order shall come into force with immediate effect. A copy of the order shall be served on the Noticees to ensure compliance with the above directions. A copy of this Order shall also be forwarded to the recognized stock exchanges and depositories for information and necessary action.

24. 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.

Date : October 3rd, 2016 RAJEEV KUMAR AGARWAL Place : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA