Mondal Construction Company Ltd. & Ors. vs Sebi

Date of Decision : 29.1.2020

Appeal No.24 of 2020

1.

Mondal Construction Company Ltd.

Uttarayan, Station Road, Chinsurah District-Hooghly, Pincode-712102, West Bengal.

2. Shri Samarjit Mondal Uttarayan Para, Kodalia, Chinsurah Station Road, Hooghly, Pincode-712102, West Bengal.

3. Shri Swapan Kumar Mondal Uttarayan Para, Kodalia, Chinsurah Station Road, Hooghly, Pincode-712102, West Bengal.

4. Shri Sachi Dulal Mondal Khaja Anowarber, Burdwan, Pincode - 713103, West Bengal.

5. Shri Sanjiv Jain 4N, Nandaram Sen Street, Kolkata-700005, West Bengal.

6. Shri Indranil Chattopadyay (correct surname is Chatterjee) Sener Bagan, G.T. Road (West), P.O.-Chandannagore, Hooghly, Pincode-712136, West Bengal. ..... Appellants

Versus 2

1. Recovery Officer Securities and Exchange Board of India, Kolkata L & T Chambers, 3rd Floor, 16 Camac Street, Kolkata-700017.

2. Adjudicating Officer Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G- Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051.

3. Securities and Exchange Board of India SEBI Bhavan, C-4A, G- Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051. ......Respondents

Mr. Chandra Sekhar Jha, Advocate for the Appellant.

Mr. Vikram Nankani, Senior Advocate with Mr. Vivek Shah and Mr. Abhiraj Arora, Advocates i/b. ELP for the Respondent.

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

Per : Justice Tarun Agarwala (Oral)

1. The appellants have prayed for the following reliefs:

"a) The present appeal under Section 15(T) of the Securities and Exchange Board of India Act, 1992 be admitted;

b) The Impugned the Notice of Demand Certificate No: RC2648 of 2019 dated November 27, 2019 with 3

Notice of Attachment No.5417 of 2019 for Bank Account and Notice of Attachment No.5418 of 2019 for MF & Demat Account, as issued by the respondent no.1 to execute a full freeze on the bank, MF & Demat accounts of the appellants be quashed and set aside;

c) Declaration that there is no breach of or non-

compliance of the Order dated April 28, 2016 passed by this Hon'ble Tribunal.

d) Ad interim order in terms of prayers above;

e) Costs of and incidental to the appeal be paid by the respondents;

f) Such further or other order or orders be passed and/or direction or directions be given as to which this Hon'ble Tribunal may deem fit and proper."

2. The facts leading to the filing of the present appeal is,

that the appellant issued Redeemable Preference Shares

(hereinafter referred to as 'RPS') to 3981 persons during the

period 2005-06 to 2012-2013 and collected an amount of

Rs.2,51,94,100/-. Since the same was in violation of

Securities and Exchange Board of India Act, 1992

(hereinafter referred to as 'SEBI Act') an interim order dated

15th December, 2014 was issued restraining the appellant and

its Directors from mobilizing any further funds from the

investors through offer of RPS and further restrained them

from disposing of any properties. Thereafter, a final order 4

dated 15th January, 2016 was passed by the Whole Time

Member (WTM) holding that the offer of RPS made by the

Company was in violation of 60, 56(1) and 56(3) and

Sections 73(1), (2) and (3) of the Companies Act, 1956

(hereinafter referred to as 'Companies Act') and accordingly

issued a slew of directions for refund of money so collected

by the Company alongwith interest. Two such directions

contained in paragraph 11.1(e) and (f) which is relevant to the

present controversy are extracted hereunder:-

"e) The Company, namely, Mondal Construction Company Limited and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily (in Bengali) 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 coming into effect.

f) After completing the aforesaid repayments, Mondal Construction Company Limited and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, shall file a report of such completion of repayment with SEBI, within a period of three months from the date of this order, certified by two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. For the purpose of this Order, a peer reviewed Chartered Accountant shall mean a Chartered Accountant, who 5

has been categorized so by the Institute of Chartered Accountants of India ("ICAI")."

3. Against the order of the WTM, the appellant and its

Directors filed Appeal no.76 of 2016 before this Tribunal

which was disposed of by an order dated 28th April, 2016. It

was asserted by the appellants that out of Rs.2,51,94,100/-

collected, the appellants had already refunded

Rs.2,43,81,600/- and only a balance amount of Rs.8,12,500/-

remained with the appellant since the RPS holders were not

coming forward to receive the balance amount. The appellant

further contended that they are willing to comply with the

conditions set out in para 11.1(e) and (f) of the order of the

WTM. The Tribunal, after considering the submissions made

by the appellant, disposed of the appeal by issuing certain

directions. For facility, the entire order of the Tribunal dated

28th April, 206 is reproduced here under for facility of

reference:

"1. Appellants are aggrieved by the order passed by the Whole Time Member ("WTM" for short) of Securities and Exchange Board of India ("SEBI" for short) on 15th January, 2016. By the said order, appellants are directed to refund the monies collected by the appellant No.1-Company through issuance of Redeemable Preference Shares ("RPS" for short) with 6

15% interest per annum compounded at half yearly intervals from the date when the repayments became due.

2. It is the case of the appellants that the total amount collected by appellant No.1 under the RPS was Rs.2,51,94,100 and out of the said amount the appellants had already refunded Rs.2,43,81,600 to the RPS holders prior to the impugned order dated 15th January, 2016. It is further submitted that since the balance RPS holders are not coming forward to receive the balance amount of Rs.8,12,500, the appellants are willing to deposit the balance amount of Rs.8,12,500 with SEBI. Counsel for appellants submitted that the appellants would comply with conditions set out in para 11.1(e)&(f) of the impugned order within a period of three weeks from today and submitted that the interest liability @ 15% be restricted to the unpaid amount of Rs.8,12,500 which amount the appellants are willing to deposit with SEBI.

3. In these circumstances, we pass the following order:-

(a) Appellants are directed to deposit Rs.8,12,500 with SEBI within a period of one week from today.

(b) Appellants are directed to comply with the conditions set out at para 11.1(e)&(f) of the impugned order within a period of three weeks from today.

(c) If appellants comply with conditions set out in para 11.1(e)&(f) of the impugned order within a period of three weeks from today, then, SEBI within a period of three weeks thereafter shall ascertain as to whether the appellants are justified in contending that Rs.2,51,94,100 has already been repaid to the concerned RPS holders and also determine the rate and quantum of interest amount payable by the appellants after taking into consideration the amount already repaid to the 7

RPS holders in full and final settlement of their claim.

(d) If SEBI is satisfied that Rs.2,51,94,100 has already been repaid to the RPS holders, then subject to the appellants depositing the amount of Rs.8,12,500 within one week from today and the interest amount that may be quantified by SEBI within such time as is permitted by SEBI, the impugned order shall stand complied with.

e) If SEBI finds that the amount of Rs.2,51,94,100 has not been repaid to the concerned RPS holders then, the impugned order shall stand revived and SEBI shall be entitled to enforce the same in accordance with law.

4. Appeal is disposed of in the above terms with no order as to costs."

4. The learned counsel for the appellant contended that the

directions given in para 3(a) was complied by the appellant

on 3rd May, 2016 and on 16th May, 2016, the appellant filed a

report alongwith supporting documents with regard to

payment of Rs.2,43,81,600 to the RPS holders. For facility,

para 8 of the memo of appeal is extracted hereunder:-

"8. Thereafter, in compliance of the Order dated April 28, 2016 passed by Hon'ble Securities Appellate Tribunal, Mumbai, the appellants, by a letter dated May 16, 2016 filed a report with support documents pertaining to such completion of repayment of Rs.2,43,81,600/- with the respondents.

8 Copies of letter dated May 16, 2016 along with support documents evidencing completion of repayment of Rs.2,43,81,600 are annexed hereto and collectively marked with the letter "E"."

5. It may be pointed out that Exhibit 'E' is a letter dated

3rd May, 2016 which also encloses a list of holders of RPS

giving details of the payments made which lists runs from

page 72 to page 192 of the memo of appeal. It was

contended that the directions given by the Tribunal was duly

complied and the respondent without ascertaining as to

whether the appellant had complied with the order of the

Tribunal and without determining as to whether any amount

was still payable or not has issued the notice of demand

Certificate dated 27th November, 2019 and notice of

attachment for Bank account as well as notice of attachment

for the Mutual Fund and demat account. The appellant has

accordingly filed the present appeal praying for the quashing

of the aforesaid Recovery Certificate and notice of attachment

and for a declaration.

6. We have heard Mr. Chandra Sekhar Jha, Advocate for

the Appellant and Mr. Vikram Nankani, Senior Advocate 9

assisted by Mr. Vivek Shah and Mr. Abhiraj Arora,

Advocates for the Respondent.

7. The learned counsel for the appellant contended that the

directions contained in the order of the Tribunal in para 3(a)

and 3(b) was duly complied with within the stipulated period

and, therefore, the Recovery Certificate and the attachment of

the Bank account and the Demat account could not be issued

without ascertaining as to whether the appellant was still

required to pay any further amount. It was contended that the

list of payments was duly supplied as far back as on 16th May,

2016 which list has been annexed as Exhibit 'E' running from

page 72 to 192.

8. The said contention of the learned counsel for the

appellant was seriously opposed by the learned Senior

counsel for the Respondent contending that no such list was

ever supplied to SEBI vide letter of the appellant dated

16th May, 2016. Faced with this situation, the Tribunal by an

order dated 28th January, 2020 directed the appellant to file an

affidavit of a responsible Officer indicating with clarity as to

when the list which starts from page no.72 of the memo of

appeal was filed before SEBI through a covering letter. 10

9. On the basis of the said order, an affidavit has been filed

today by Swapan Mondal who alleges himself to be the

Director of Appellant no.1. In paragraphs 9 of the affidavit it

is stated that by letter dated 5th December, 2014 Form SH7

was submitted to the respondent indicating payments made to

the RPS holders. In para 11 of the affidavit it has been stated

that extract of Form SH7 runs from page 71 to 191.

10. We find that the contents of para 8 of the memo of

appeal and para nos.9 and 11 of the affidavit dated 28th

January, 2020 are contradictory as well as false. The list

which has been alleged to have been supplied in Form SH-7

and which has been annexed as Exhibit 'E' to the memo of

appeal running from page 72 to 192 also shows alleged

repayments made after 16th May, 2016 to 8th August, 2019.

Such list could not have been supplied either by letter dated

16th May, 2016 or by letter dated 5th December, 2014. When

this fact was pointed out to the learned counsel for the

appellant he had no answer to it. We are of the opinion, that

in view of this glaring discrepancy for which no suitable

explanation was forthcoming the appellant and in particular 11

Swapan Mondal has committed perjury for stating false facts

on oath.

11. In any case, we find that the directions contained in

order of the Tribunal in para 3(b) has not been complied till

date. The conditions stipulated in para 11.1(e) and (f) of the

order of the WTM was required to be complied by the

appellant namely i.e. list/report was not signed by two peer

reviewed Chartered Accountants who are in the panel of any

public authority or public institution. There is nothing to

indicate that the list which has been annexed to Exhibit 'E'

had been verified by two peer reviewed Chartered

Accountants as per para 11.1(f) of the order of the WTM.

Further, we find that SEBI had issued several emails directing

the appellants to file supporting documents like bank

statement, cash vouchers relied upon by Chartered

Accountants, contact details of the investors to whom refunds

have been made etc. These documents were necessary in

order for the respondent to ascertain as to whether the

appellants were justified in contending that Rs. 2,43,81,600/-

had already been refunded. We do not find any document in

support of the submission made by the appellant. 12

12. In the light of the aforesaid fact coupled with the fact

that the false facts have been stated before this Tribunal the

appeal lacks merit and is dismissed at the admission stage

with costs of Rs.2 lakhs which shall be paid by the appellants

within two weeks from today before the Registrar of this

Tribunal failing which SEBI would recover the same from the

appellants and deposit it with the Registrar.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 29.1.2020 Prepared & Compared by RHN