Interim order in the matter of SCL Steel Corporation Limited

WTM/SR/WRO/ILO/54/ 03/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI CORAM: S. RAMAN, WHOLE TIME MEMBER ORDER Under Sections 11 (1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992, in the matter of SCL Steel Corporation Limited (CIN: U27100MP2012PLC027659; PAN-AARCS1089F) and its Directors, viz. Shri Joydeb Biswas (PAN- AWLPB2553Q), Shri Avijit Chakraborty(PAN-AMGPC5427P), Shri Prasanta Chatterjee (PAN-ADQPC5674F), Shri Manas Kumar Dan (PAN- ACSPD7017Q), Shri Satya Ranjan Chaudhari (PAN-ACEPC5756F), Smt. Swapna Chaudhuri (PAN-AEIPC6387B), Shri Chatta Ranjan Chaudhuri (PAN-AEOPC1519G) and its Debenture Trustee, viz. SCL Debenture Trust (represented by its Trustee viz. Shri Amal Kumar Chatterjee)

1. Securities and Exchange Board of India ("SEBI") received a reference vide letter dated October 29, 2013 from Registrar of Companies (RoC), Madhya Pradesh, Gwalior inter alia stating that SCL Steel Corporation Ltd. ("SCLL") had issued secured debentures on private placement basis to more than 49 subscribers.

2.1 As a matter of preliminary inquiry, SEBI, vide letters dated December 06, 2013 advised SCLL and its Directors to furnish inter alia the following information in respect of collection of fund through issue of debentures, viz. – i. Details of the past and present directors of the company; ii. Nature of activities being conducted; iii. Date of opening and closing of the issue; iv. Copy of minutes of EGM approving allotment of debentures and board minutes approving allotment; v. Brochures/advertisement pertaining to the debenture issue, which were made available to the public; vi. Copies of duly filed application forms received from investors/applicants who applied in the debenture issue;

vii. Name, address of each investor, date of receipt of payment, amount received for issuance of debentures and date of allotment; viii. Details of properties acquired from the money raised from the said debenture issue; ix. Address of all its branches operating in India; x. Details of any broker employed for said issue including name and amount of brokerage paid; xi. Certified copy of audited financial statement for all the financial years during which funds were raised till 2012-13. Trial Balance for 2013-14 (from April 2013 till date of submission of information); xii. Copy of Income Tax Return filed for the years referred above; xiii. Details of the regulatory approvals obtained, if any, for said debenture issue; xiv. Details of other fund raising from public in form of debentures/ or other manner (if any) by the company or its group/associates company. xv. Details of any action initiated/ taken by any other authority (including any court order) against the company in respect of money raised from public.

2.2 The aforesaid letter sent to SCLL at its registered office was returned undelivered by the postal authorities. The letter to one of the Directors, viz. Shri Avijit Chakraborty was duly acknowledged.

2.3 In response to SEBI letter dated December 10, 2013, RoC vide letters dated December 19, 2013 and December 31, 2013 provided copies of Form 10 filed for registration of charges for debentures by SCLL with RoC and reply submitted by SCLL in respect to queries raised by RoC on said debenture issue. RoC also informed that they had filed prosecution on September 20, 2013 against SCLL u/s 56, 60B, 67(1), 67(2) and 68 of the Companies Act, 1956 at the Hon'ble CJM Court at Gwalior.

2.4 Thereafter, on December 20, 2013 an authorized representative of SCLL, Shri Moloy Seal, visited SEBI -ILO and submitted SCLL's letter dated December 16, 2013 wherein inter alia the following documents were provided:

i. Details of present and past Directors ii. Copies of Extracts of Minutes of the Meeting of the Board of Directors and of the Extraordinary General Meeting iii. Copy of Form 10 (particulars for registration of charges for debentures) iv. Copy of Annual Report for the year 2012-13; v. Copy of Income Tax Return filed for the assessment year 2013-14 vi. Copy of Certificate of Registration of Mortgage/Charge

SCSCL requested for extension of 15 days to submit the balance documents sought by SEBI and inter alia also informed that: i. "Nature of activities – Proposed Steel Plant Project ii. Debenture opening issue date 15/02/2012, Closing date – N.A. iii. Name of Broker – TMS Marketing Limited… iv. Total Fund Collection from Debenture Rs.10,76,69,610/- v. We have no legal allegation by any authority.”

2.5 In addition to the documents yet to be submitted, the authorized representative of SCLL was advised by SEBI to provide certain additional documents/information with regard to its issuance of debentures. In response, SCLL vide letter dated December 30, 2013 submitted the following documents: i. Copy of agreement between SCLL and TMS ii. SCLL’s ledger copy of TMS iii. Copies of Form 27A for TDS

2.6 SEBI also received a request from Superintendent of Police, Nalanda, Bihar to look into the debenture issue of SCLL. They provided inter alia a copy of the application form cum brochure signed by Dr.Satya Ranjan Chaudhuri, Chairman & Managing Director of SCLL.

2.7 As SCLL had submitted only partial information, SEBI vide letter dated March 21, 2014 advised SCLL and its Directors to submit the complete information sought by SEBI. They were also advised to provide the complete list of debenture holders to whom debentures had been allotted.

2.8 In view of receipt of only partial information from SCLL, investigation was initiated by SEBI. SCLL and its Directors were issued summons dated September 15, 2014 to submit the information/documents sought by SEBI. SCLL vide letters dated September 25, 2014 and October 20, 2014 sought repeated adjournments for submission of documents. It is pertinent to mention here that the prima facie findings of the inquiry inter alia indicate that SCLL is engaged in fund mobilising activity from the public through issuance of debentures to more than the prescribed limit of forty nine persons.

2.9 In view of non-submission of information/ documents, SEBI vide letter dated December 05, 2014, gave SCLL and its Directors a final opportunity to submit the information/documents by December 15, 2014. In response, the Directors of the company appeared before SEBI along with letter dated December 15, 2014. The Directors, inter alia also assured to provide a CA certificate towards refund of `6,70,000/-, which has not been provided by SCLL till date.

2.10 SCLL vide letter dated December 15, 2014 has submitted the details of debentures issued, applicants, amount received, names of applicants, etc. and inter alia submitted as follows:

"We had started to sell debentures for steel plant with the company name SWASATA STEEL INDUSTRIES LIMITED with full support and help of TMS Marketing Limited, they was acting as our broker and distributed our form through their associate agent in lieu of commission against the debenture selling, and we also deducted TDS against their commission. They have collected money but it was not enough for steel industries at least rolling mill, so we had stopped the selling of debentures in 2012. Thereafter, our broker house and company secretary demanded another chance to fulfil our motto and found Madhya Pradesh RoC can issue permission to raise bigger fund to establish our steel plant. Therefore, we registered our company with M.P. RoC with the company name SCL Steel Corporation Limited. In April 2013 we have decided to stop collection for the reason of Sharada Scandal......

There are total 10,945 applicants whose investments have resulted into total collection of `10,76,71,616/-.

2.11 SCLL vide letter dated December 15, 2014 has also informed that their group companies have raised money by issue of debentures, which is being examined separately.

3. I have perused the material available on record i.e. the correspondence exchanged between SEBI and SCLL along with the documents contained therein; information/documents obtained from the RoC, Gwalior/Superintendent of Police, Nalanda, Bihar and information/documents obtained from the Ministry of Corporate Affairs' website i.e. 'MCA 21 Portal'. On an examination of the same, it is observed that– i. SCLL was incorporated on February 10, 2012 with the RoC, Gwalior with CIN as U27100MP2012PLC027659 and having its registered office at c/o A.K. Banerjee, Bardadeeh Chowk, Mukhtiyar Gang, Satna, Madhya Pradesh 485001.

ii. The present Directors in SCLL are Shri Joydeb Biswas, Shri Avijit Chakraborty, Shri Manas Kumar Dan and Shri Prasanta Chatterjee. Shri Satya Ranjan Chaudhari, Smt. Swapna Chaudhuri and Shri Chatta Ranjan Chaudhuri are the past Directors of SCLL.

iii. As per the Extracts of the Meeting of the Board of Directors of SCLL held on February 14, 2012 submitted by SCLL vide letter dated December 16, 2013, SCLL passed a resolution "to raise or borrow from time to time at its discretion by issue of secured redeemable non-convertible debentures of Rs.100/- each upto a limit of One Thousand Crores."

iv. A perusal of Form 10 shows that SCLL created a charge of `.1000/- Crores on February 15, 2012 and appointed SCL Debenture Trust (represented by its Trustee, viz., Shri Amal Kumar Chatterjee) as Debenture Trustee.

v. As per the application form cum brochure, the schemes offered for private placement of Secured Non Convertible Redeemable Debentures of Rs.1000 Crore are as follows:

Scheme I-Multipler Secured Debentures Plan A B C D E Issue price (Minimum 10 1000 1000 1000 1000 1000 debentures of Rs.100) Redemption period 5 years 7 years 10 years 13 years 15 years Maturity value (including all taxes) 2000 3000 5000 10000 12000

Scheme II- Regular Income Secured debentures Minimum amount accepable Rs.50000/-. Payable monthly Plan Redemption period Annual rate of interest F 3 years 13% vi. A perusal of the Annual Report for 2012-13 submitted by SCLL shows that:

• SCLL’s total paid up capital as on March 31, 2012 and March 31, 2013 is `.5,00,000/- and it’s shareholders are Shri Satya Ranjan Chaudhuri (50%) and Mrs. Swapna Chaudhuri (49.98%).

• SCLL made investment by way of share application money in its group companies as follows: Swasata Cement Ltd. - `.5,24,00,000/- Chaudhuri Diagnostics & Hospital Pvt. Ltd. - `.1,67,00,000/- Swasta Electricals and Electronics Pvt. Ltd. - `. 24,00,000/-

• SCLL issued 10,50,000 secured debentures of `.100/- each aggregating to `.10,50,00,000/-.

vii. SCLL vide letter dated December 30,2013 has submitted :

Copy of TMS Ledger A/c : As per the details submitted, the month-wise collection by TMS is as follows:

Month Collection in Rupees May 2012 7517500 June 2012 7696475 July 2012 12900000 August 2012 14208460 September 2012 18609008 October 2012 9800000 November 2012 9500000 December 2012 8966173 January 2013 5028000 February 2013 6026000 March 2013 7420000 Total *107671616 *(This amount is mentioned as Rs.10.50 Crores in the Annual Report (point 3 (vi) above) The commission paid included (i) broker commission of 2% on collection and (ii) business development allowance of 4.85%.TDS was paid on total commission.

As per Form 27A (Form for furnishing information with the statement of deduction/collection of tax at source): Commission of `.73,85,939/- was paid to TMS and TDS of `.7,12,950/- was deposited on the Commission paid.

Copy of Debenture Subscription Agreement entered into between SCLL and TMS: The Agreement inter alia states “The company with a view to augment its long term resources to meet its business requirements has by a resolution of its Board of directors dated 15th day of February, 2012 approved the issue of Cumulative Non Convertible Redeemable

Debentures ("Debentures") in one or more tranches up to an aggregate amount not exceeding Rs.10,00,00,00,000/- (Rupees One Thousand Crores Only) to be privately placed with the Company (Second Part) who is associated/ affiliated or otherwise connected in any manner with the SCL group for subscription without giving any advertisement to the general public.”

“The Company states that the Debentures are suitable only for the Company (Second Part) and that the “Offer is Not Made to Public at Large” and that the same is not intended to serve as “Any Advertisement to the Public in General” Similar restrictions on eligibility shall also be mentioned in the Subscription/ application form for subscribing Debentures, wherein the application shall be required to declare that it is 'Associated/ Affiliated or Otherwise Related to the SCL Group'. The fact that the Debentures are not intended to be listed on any stock exchange and that there is not a public market for the Debentures and none is expected to develop in the future shall clearly be stated.”

4. As per the details mentioned above, SCLL had issued and allotted Secured Non Convertible Redeemable Debentures ("Offer of NCDs ") through their marketing agent, TMS Marketing Ltd., in a series of allotments to 10945 investors and raised an amount of approximately `10.77 crores from May 2012 till March 2013.

5. In the context of the abovementioned details of the Offer of NCDs, the issue for determination in the instant matter is whether the mobilization of funds by SCLL through the aforesaid, is in accordance with the provisions of the SEBI Act, 1992 ("SEBI Act") read with the SEBI (Issue and Listing of Debt Securities), Regulations, 2008 ("Debt Securities Regulations"); the Companies Act, 1956.

6. I note that the jurisdiction of SEBI over various provisions of the Companies Act in the case of public companies, when they issue and transfer securities at the relevant time flows from the provisions of Section 55A of the Companies Act, 1956. While examining the scope of Section 55A of the Companies Act, 1956, the Hon'ble Supreme Court of India in Sahara India Real Estate Corporation Limited & Ors. vs. SEBI (Civil Appeal no. 9813 of 2011) (Judgment dated August 31, 2012) (hereinafter referred to as the "Sahara Case"), had observed that:

"We, therefore, hold that, so far as the provisions enumerated in the opening portion of Section 55A of the Companies Act, so far as they relate to issue and transfer of securities and non-payment of dividend is concerned, SEBI has the power to administer in the case of listed public companies and in the case of those public companies which intend to get their securities listed on a recognized stock exchange in India."

7. In this regard – i. Reference is also made to Sections 67(1) and 67(3) of the Companies Act, 1956, which are reproduced as under:

"67. (1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (2) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (3) No offer or invitation shall be treated as made to the public by virtue of sub-section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances- (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation … Provided that nothing contained in this sub-section shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more: Provided further that nothing contained in the first proviso shall apply to non-banking financial companies or public financial institutions specified in section 4A of the Companies Act, 1956 (1 of 1956).”

ii. While examining the scope of Section 67 of the Companies Act, 1956, the Hon'ble Supreme Court of India in the Sahara Case observed that:

"Section 67(1) deals with the offer of shares and debentures to the public and Section 67(2) deals with invitation to the public to subscribe for shares and debentures and how those expressions are to be understood, when reference is made to the Act or in the articles of a company. The emphasis in Section 67(1) and (2) is on the “section of the public”. Section 67(3) states that no offer or invitation shall be treated as made to the public, by virtue of subsections (1) and (2), that is to any section of the public, if the offer or invitation is not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation or otherwise as being a domestic concern of the persons making and receiving the offer or invitations. Section 67(3) is, therefore, an exception to Sections 67(1) and (2). If the circumstances mentioned in clauses (1) and (b) of Section 67(3) are satisfied, then the offer/invitation would not be treated as being made to the public. The first proviso to Section 67(3) was inserted by the Companies (Amendment) Act, 2000 w.e.f. 13.12.2000, which clearly indicates, nothing contained in Sub-section (3) of Section 67 shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. … Resultantly, after 13.12.2000, any offer of securities by a public company to fifty persons or more will be treated as a public issue under the Companies Act, even if it is of domestic concern or it is proved that the shares or debentures are not available for subscription or purchase by persons other than those receiving the offer or invitation. … I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. …"

iii. In the instant matter, for ascertaining whether the Offer of NCDs is a public issue or an issue on private placement basis in accordance with Section 67 of the Companies Act, 1956, the number of subscribers is of utmost importance.

a. From the Annual Report of SCLL for the year 2012-13 submitted by SCLL, it is observed that Secured Debentures amounting to `10.50 Crores were issued.

b. As admitted by SCLL vide letter dated December 15, 2014 and from the documents submitted therein, it is observed that from May 2012 till March 2013, SCLL allotted Secured Non Convertible Redeemable Debentures to 10945 investors through their marketing agent, TMS Marketing Ltd., and mobilized funds amounting to approximately `10.77 Crores under the Offer of NCDs.

c. It is thus apparent from the facts available on record that the said issuance of debentures was nothing but an issue of debentures to the general public. SCLL has mentioned the issuance of Secured Non Convertible Redeemable Debentures as private placement. However, considering the facts and circumstances of the case, it is abundantly clear that the issue was offered to the general public. Hence, merely stating the issue as a private placement shall not make it as such. Considering the terms of the brochure and also taking into account the fact that an amount of approximately `10.77 Crores was raised from as many as 10945 investors clearly indicates that the Offer of NCDs was a public issue of debentures. I therefore, find that the Offer of NCDs was nothing but a public issue of securities under the first proviso to Section 67(3) of the Companies Act, 1956 and SCLL camouflaged the issuance of Secured Non Convertible Redeemable Debentures to public by calling it a private placement.

d. In addition, SCLL is not stated to be a non-banking financial company or a public financial institution within the meaning of Section 4A of the Companies Act and therefore, is not covered under the second proviso to Section 67(3).

e. In view of the aforesaid, the Offer of NCDs would prima facie qualify as a public issue under the first proviso to Section 67(3) of the Companies Act, 1956, which has been elucidated by the Hon'ble Supreme Court of India in the Sahara Case. In this regard, it is pertinent to note that by virtue of Section 55A of the Companies Act, Section 67 of that Act, so far as it relates to issue and transfer of securities, shall also be administered by SEBI.

8. I note that – i. From the abovementioned para, it will follow that since the Offer of NCDs is a public issue of securities, such securities shall also have to be listed on a recognized stock exchange, as mandated under Section 73 of the Companies Act, 1956. In this regard, reference is made to Sections 73 of the Companies Act, 1956, of which sub-Sections (1), (2) and (3) are relevant for the instant case, which is reproduced as under:

"73. (1) Every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange. (1A) Where a prospectus, whether issued generally or not, states that an application under sub-section (1) has been made for permission for the shares or debentures offered thereby to be dealt in one or more recognised stock exchanges, such prospectus shall state the name of the stock exchange or, as the case may be, each such stock exchange, and any allotment made on an application in pursuance of such prospectus shall, whenever made, be void, if the permission has not been granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of the subscription lists : Provided that where an appeal against the decision of any recognised stock exchange refusing permission for the shares or debentures to be dealt in on that stock exchange has been preferred under section 22 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), such allotment shall not be void until the dismissal of the appeal.

(2) Where the permission has not been applied under subsection (1) or such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money. (3) All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled Bank until the permission has been granted, or where an appeal has been preferred against the refusal to grant such permission, until the disposal of the appeal, and the money standing in such separate account shall, where the permission has not been applied for as aforesaid or has not been granted, be repaid within the time and in the manner specified in sub-section (2); and if default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees.”

ii. In the Sahara Case, the Hon'ble Supreme Court of India also examined Section 73 of the Companies Act, 1956, wherein it observed that – "Section 73(1) of the Act casts an obligation on every company intending to offer shares or debentures to the public to apply on a stock exchange for listing of its securities. Such companies have no option or choice but to list their securities on a recognized stock exchange, once they invite subscription from over forty nine investors from the public. If an unlisted company expresses its intention, by conduct or otherwise, to offer its securities to the public by the issue of a prospectus, the legal obligation to make an application on a recognized stock exchange for listing starts. Sub-section (1A) of Section 73 gives indication of what are the particulars to be stated in such a prospectus. The consequences of not applying for the permission under sub-section (1) of Section 73 or not granting of permission is clearly stipulated in sub-section (3) of Section 73. Obligation to refund the amount collected from the public with interest is also mandatory as per Section 73(2) of the Act.

Listing is, therefore, a legal responsibility of the company which offers securities to the public, provided offers are made to more than 50 persons. … … Section 73(2) says that every company and every director of the company who is an officer in default, shall be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed. The scope of the above mentioned provisions came up for consideration before this Court in Raymond Synthetics Ltd. & Ors. V. Union of India (supra), wherein the Court held that in a case where the company has not applied for listing on a stock exchange, the consequences will flow from the company’s disobedience of the law, the liability to pay interest arises as from the date of receipt of the amounts, for the company ought not to have received any such amount in response to the prospectus. I am, therefore, of the view that since Saharas had violated the listing provisions and collected huge amounts from the public in disobedience of law, SEBI is justified in directing refund of the amount with interest."

iii. Having regard to the abovementioned observations of the Hon'ble Supreme Court of India, since the Offer of NCDs is prima facie a public issue in accordance with the provisions of the Companies Act, 1956, the same will attract the requirement of compulsory listing before a recognized stock exchange in terms of Section 73(1) of the Companies Act, 1956 and also compliance with provisions of Sections 73(2) and 73(3) of that Act.

iv. In the facts of the instant case, it prima facie appears that SCLL has violated the provisions of Section 73 of the Companies Act, 1956, in respect of the Offer of NCDs.

9. Under Section 2(36) read with Section 60 of the Companies Act, 1956, a company needs to register its prospectus with the RoC, before making a public offer or issuing the prospectus. As per the aforesaid Section 2(36), “prospectus” means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate. As mentioned above, since the Offer of NCDs was made to fifty persons or more, it has to be construed as a public offer. Having made a public offer, SCLL was required to register a prospectus with the RoC under Section 60 of the Companies Act, 1956. In the instant case, there is no evidence on record to indicate whether or not SCLL has filed a prospectus. In view of the same, I find that prima facie, SCLL has not complied with the provisions of Section 60 of Companies Act, 1956.

10. Under Section 56(1) of the Companies Act, 1956, every prospectus issued by or on behalf of a company, shall state the matters specified in Part I and set out the reports specified in Part II of Schedule II of that Act. Further, as per Section 56(3) of the Companies Act, 1956, no one shall issue any form of application for shares in or debentures of a company, unless the form is accompanied by abridged prospectus, contain disclosures as specified. Based on the material available on record, I find that SCLL has not complied with the provisions of Section 56(1) and 56(3) of the Companies Act, 1956 and therefore prima facie, has violated the aforesaid provisions.

11. Under Section 117B of the Companies Act, 1956, no company shall issue a prospectus or a letter of offer to the public for subscription of its debentures, unless it has, before such issue, appointed one or more debenture trustees for such debentures and the company has, on the face of the prospectus or the letter of offer, stated that the debenture trustee or trustees have given their consent to the company to be so appointed. Further, under Section 117C of the aforesaid Act, where a company issues debentures, it shall create a debenture redemption reserve for the redemption of such debentures, to which adequate amounts shall be credited, from out of its profits every year until such debentures are redeemed. Based on the material available on record, I find that SCLL has not complied with the provisions of Sections 117B–C of the Companies Act, 1956 and therefore, has prima facie violated the aforesaid provisions.

12. In addition to the above, reference may be made to the Debt Securities Regulations, which were framed by SEBI in exercise of its powers under Section 30 of the SEBI Act and are applicable to the public issue and listing of debt securities. It may be relevant to note that under the aforesaid Regulations, 'debt securities' have been defined as 'non-convertible debt securities which create or acknowledge indebtedness, and include debenture…' In this context, I find that SCLL, through the Offer of NCDs, which is a public issue of debt securities, has prima facie violated the following provisions of the aforesaid Regulations, which contain inter alia conditions for public issue and listing of debt securities, viz. i. Regulation 4(2)(a) – Application for listing of debt securities ii. Regulation 4(2)(b) – In-principle approval for listing of debt securities iii. Regulation 4(2)(c) – Credit rating has been obtained iv. Regulation 4(2)(d) – Dematerialization of debt securities v. Regulation 4(4) – Appointment of Debenture Trustee vi. Regulation 5(2)(b) – Disclosure requirements in the Offer Document vii. Regulation 6 – Filing of draft Offer Document viii. Regulation 7 – Mode of disclosure of Offer Document ix. Regulation 8 – Advertisements for Public Issues x. Regulation 9 – Abridged Prospectus and application forms xi. Regulation 12 – Minimum subscription xii. Regulation 14 – Prohibition of mis-statements in the Offer Document xiii. Regulation 15 – Trust Deed xiv. Regulation 16 – Debenture Redemption Reserve xv. Regulation 17 – Creation of security xvi. Regulation 19 – Mandatory Listing xvii.Regulation 26 – Obligations of the Issuer, etc.

13. Upon a consideration of the aforementioned paragraphs, I am of the view that SCLL 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, Section 117B, Section 117C) and the Debt Securities Regulations.

14.1 From the material available on record, it is observed that SCLL created a charge of `1000 Crores on February 15, 2012 and appointed SCL Debenture Trust (represented by its Trustee, viz. Shri Amal Kumar Chatterjee) as Debenture Trustee for the Offer of NCDs by that company.

14.2 Section 12(1) of the SEBI Act states that: "No… trustee of trust deed … shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act". Further, Regulation 7 of SEBI (Debenture Trustees) Regulations, 1993 ("Debenture Trustees Regulations"), provides that: "no person should act as a debenture trustee unless he is either – i. a scheduled bank carrying on commercial activity; or ii. a public financial institution within the meaning of section 4A of the Companies Act, 1956; or iii. an insurance company; or iv. body corporate."

14.3 Based on the material available on record, I find that SCL Debenture Trust (represented by its Trustee, viz. Shri Amal Kumar Chatterjee) has acted as unregistered Debenture Trustee, which amounts to violation of the abovementioned provisions of the SEBI Act read with the Debenture Trustee Regulations (Regulation 7, as mentioned in 14.2 above).

15. Upon a consideration of the aforementioned paragraphs, I am of the view that SCLL 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, Section 117B, Section 117C) and the Debt Securities Regulations.

16. SEBI has a statutory duty to protect the interests of investors in securities and promote the development of, and to regulate, the securities market. Section 11 of the SEBI Act has empowered it to take such measures as it thinks fit for fulfilling its legislative mandate. Further, as per the provisions of Section 55A of the Companies Act, 1956 administrative authority on the subjects relating to public issue of securities is exclusively with SEBI. For this purpose, SEBI can exercise its jurisdiction under Sections 11(1), 11A, 11B and 11(4) of the SEBI Act read with Section 55A of the Companies Act, 1956 over companies who issue Secured Non Convertible Redeemable Debentures to fifty persons or more, but do not comply with the applicable provisions of the aforesaid Companies Acts and the Debt Securities Regulations. Steps therefore, have to be taken in the instant matter to ensure only legitimate fund raising activities are carried on by SCLL and no investors are defrauded. This is specially so in view of SCLL's intention to raise an amount of `1000/-Crores through issue of Secured Redeemable Non-Convertible Debentures as stated in the Extracts of the Meeting of the Board of Directors of SCLL held on February 14, 2012. In light of the same, though SCLL has contended that they have stopped fund raising, I find there is no other alternative but to take recourse through an interim action against SCLL and its Directors alongwith its SCL Debenture Trust (represented by its Trustee, viz. Shri Amal Kumar Chatterjee) for preventing that company from further carrying on with its fund mobilising activity under the Offer of NCDs.

17. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11(1), 11(4), 11A and 11B of the SEBI Act read with the Debt Securities Regulations and the Debenture Trustee Regulations, hereby issue the following directions – i. SCLL shall forthwith cease to mobilize any 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. SCLL (CIN: U27100MP2012PLC027659; PAN-AARCS1089F) and its Directors, viz. Shri Joydeb Biswas (PAN-AWLPB2553Q), Shri Avijit Chakraborty (PAN- AMGPC5427P), Shri Prasanta Chatterjee (PAN-ADQPC5674F), Shri Manas Kumar Dan (PAN-ACSPD7017Q), Shri Satya Ranjan Chaudhari (PAN- ACEPC5756F), Smt. Swapna Chaudhuri (PAN-AEIPC6387B) and Shri Chatta Ranjan Chaudhuri (PAN-AEOPC1519G) 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. SCLL 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. SCLL shall provide a full inventory of all its assets and properties; v. SCLL's abovementioned Directors shall provide a full inventory of all their assets and properties;

vi. SCLL 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. SCLL 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 SCLL; viii. SCLL shall furnish complete and relevant information within 21 days from the date of receipt of this Order; ix. SCLL shall provide to SEBI all information regarding repayments made to the holders of Secured Redeemable Non-Convertible Debentures including name of the debenture holder, address, amount mobilized, number of Secured Redeemable Non- Convertible Debentures issued, promised maturity amount with date of maturity, amount refunded and date thereof; x. The Debenture Trustee, viz. SCL Debenture Trust (represented by its Trustee, viz. Shri Amal Kumar Chatterjee), is prohibited from continuing with his present assignment as a debenture trustee in respect of the Offer of NCDs of SCLL 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.

18. The above directions shall take effect immediately and shall be in force until further orders.

19. The prima facie observations contained in this Order are made on the basis of the material available on record i.e. the correspondence exchanged between SEBI and SCLL along with the documents contained therein; information/documents obtained from the RoC, Gwalior/Superintendent of Police, Nalanda, Bihar and information/documents obtained from the Ministry of Corporate Affairs' website i.e. 'MCA 21 Portal'. In this context, SCLL and its abovementioned Directors are advised 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 Secured Non Convertible Redeemable Debentures 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. Directions restraining them from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period.

20. SCLL and its abovementioned Directors, may, within 21 days from the date of receipt of this Order, file their replies, if any, to this Order and may also indicate whether they desire to avail themselves an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard.

21. Similarly, the Debenture Trustee, viz. SCL Debenture Trust (represented by its Trustee, viz. Shri Amal Kumar Chatterjee), are 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 them from accessing the securities market and further restraining them from buying, selling or dealing in securities, in any manner whatsoever, for an appropriate period should not be issued.

22. The Debenture Trustee, viz. SCL Debenture Trust (represented by its Trustee, viz. Shri Amal Kumar Chatterjee) may, within 21 days from the date of receipt of this Order, file their reply, if any, to this Order and may also indicate whether they desire to avail themselves an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard.

23. This interim order cum show cause notice is without prejudice to the right of SEBI to take any other action that may be initiated against SCLL and its abovementioned Directors and its Debenture Trustee, viz. SCL Debenture Trust (represented by its Trustee, viz. Shri Amal Kumar Chatterjee) in accordance with law.

Place: Mumbai S. RAMAN Date: March 19, 2015 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA