Mr. Balvir Singh vs Sebi

Date of Decision : 11.07.2023

Misc. Application No. 768 of 2023 And Appeal No. 584 of 2023

Mr. Balvir Singh Flat No. 401, Tower No. 12, Royal Estate, Ambala Road, Zirakpur, Mohali - 140 603. ...Appellant

Versus

Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Sharad Bansal, Advocate with Mr. Sumit Agrawal, Mr. Pratham Darad, Ms. Krishi Jain, Mr. Tarun Toprani and Ms. Ujjwal Agarwal, Advocates i/b Regstreet Law Advisors for the Appellant.

Mr. Vishal Kanade, Advocate with Mr. Ravishekhar Pandey, Ms. Rasika Ghate, Ms. Shefali Shankar and Mr. Amarpal Singh Dua, Advocates i/b. MDP & Partners for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per : Justice Tarun Agarwala, Presiding Officer (Oral) 2

1.

There is a delay in the filing of the appeal. For the reasons

stated in the application, the delay is condoned. The application

is allowed.

2. The appellant has challenged the order dated March 20,

2023 passed by the Whole Time Member ('WTM') of the

Securities and Exchange Board of India ('SEBI' for short)

wherein the appellant along with the Company and other

directors has been directed to refund the amount collected

through redeemable preference shares (RPS) along with interest.

The appellant has also been restrained from buying, selling or

otherwise dealing in securities market for a period of four years

from the date of completion of refund to the investors as

directed above.

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

the appellant was appointed as a director from November 2,

2005 to October 15, 2013 in Alchemist Holdings Limited

('AHL' for short). During his period the Company AHL made

an offer of RPS on the following dates:-

No. of shares of Date of Issue / face value Rs.

Sr. allotment of Amount raised 10/- each No. the preference (Rs.) approved for shares allotment 1. 25.03.2006 46,71,200 4,67,12,000 2. 04.06.2006 2,43,25,300 24,32,53,000 3

3. 31.08.2006 3,81,53,400 38,15,34,000 4. 14.02.2007 8,34,64,400 83,46,44,000 5. 31.05.2007 4,74,67,500 47,46,75,000 6. 25.09.2007 5,79,47,500 57,94,75,000 7. 29.02.2008 5,01,45,500 50,14,55,000 8. 30.06.2008 4,40,50,400 44,05,04,000 9. 31.10.2008 5,42,02,900 54,20,29,000 10 28.02.2009 4,02,44,700 40,24,47,000 Total 44,46,72,800 444,67,28,000

4. A perusal of the aforesaid table indicates that between

2006 to 2009 the Company allotted 44,46,72,800 shares and

raised 444,67,28,000. This allotment of shares was found to be

in violation of the Companies Act, 1956. Accordingly, an

interim order dated September 20, 2013 was issued followed by

confirmatory order dated August 14, 2015 directing the

Company and its directors to refund the amount. Some of the

noticees had filed an appeal before this Tribunal which was

affirmed by an order dated June 29, 2018. This Tribunal found

that the allotment of shares were violative of Section 73(2) of

the Companies Act, 1956 and accordingly affirmed the direction

of WTM to refund the amount to the investors along with 15%

interest.

5. Notices to some of the directors could not be issued or was

not served and therefore they were left out from the order dated

August 14, 2015. Eventually, the WTM passed another order

dated June 18, 2021 holding the appellant liable to refund the 4

monies collected along with the Company and the other

directors. This order dated June 18, 2021 was challenged by the

present appellant before this Tribunal which was allowed by an

order dated May 31, 2022 holding that the appellant was not

served and accordingly remitted the matter to the WTM to

decide the matter afresh after providing an opportunity of

hearing. Based on the aforesaid directions the impugned order

was passed after hearing the appellant.

6. We have heard Shri Sharad Bansal, the learned counsel

with Shri Sumit Agrawal, Shri Pratham Darad, Ms. Krishi Jain,

Shri Tarun Toprani and Ms. Ujjwal Agarwal, the learned

counsel for the appellant and Shri Vishal Kanade, the learned

counsel with Shri Ravishekhar Pandey, Ms. Rasika Ghate,

Ms. Shefali Shankar and Shri Amarpal Singh Dua, the learned

counsel for the respondent.

7. The submission of the learned counsel for the appellant is,

that even though he was an executive director he was not

responsible as he was not involved in the day to day affairs of

the Company and that the board resolution through which

preferential issue was finalized not signed by the appellant. In

support of his contention the learned counsel placed reliance 5

upon a decision of this Tribunal in Inventure Growth and

Securities Ltd. & Ors., Appeal 361 of 2018, 2019 SCC OnLine

SAT 283 contending that the directors are not responsible.

8. Having heard the learned counsel for the parties, we find

that the appellant's case is squarely covered by a decision of this

Tribunal in Alchmist Hlding Ltd., Appeal no. 423 of 2015

decided on June 29, 2018. No distinguishing factors have been

placed before us to distinguish the aforesaid decision.

9. From a perusal of the record and the impugned order we

find that the appellant was an executive director and therefore

was involved in the day to day affairs of the Company. Nothing

has been brought on record to indicate that he was not involved

in day to day affairs of the Company and that he had no

responsibility of any sort while being the director from 2006 to

2013. The mere fact that the appellant was not a signatory when

the resolution for preferential shares was adopted by the board

of directors does not mean that he was not involved in the

issuance of the preferential shares. There is ample evidence to

indicate his role as a signatory to the balance sheet and the

annual reports which is indicated in Table - 8 of the impugned

order and which leads to an irresistible inference that the 6

appellant was involved in the day to day affairs of the

Company.

10. We are also of the opinion that in the absence of any

Managing Director in the Company the appellant was also an

officer in default under Section 5(g) of the Companies Act. The

contention that paragraph 12 of the show cause notice indicated

that one Mr. Gupta was in-charge of the issuance of the

preferential shares cannot lead to a conclusion that he was the

Managing Director or was solely responsible for the affairs of

the Company. In the absence of any evidence the appellant was

rightly categorized as an officer in default.

11. The decision cited by the appellant in the matter of

Inventure Growth and Securities Ltd. is distinguishable and is

not applicable. The said decision was in relation to an

independent director. The Tribunal held that an independent

director was not liable for non-disclosure in the prospectus and

therefore the said case is distinguishable. In the instant case the

appellant was an executive director at the time when the RPS

were issued. The liability of an executive director cannot be

equated with independent director who may not be involved in

the day to day affairs of the Company.

7

12. In view of the aforesaid, we do not find any error in the

impugned order. The appeal fails and is dismissed.

13. This order will be digitally signed by the Private Secretary

on behalf of the bench and all concerned parties are directed to

act on the digitally signed copy of this order. Certified copy of

this order is also available from the Registry on payment of

usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup Technical Member 11.07.2023 MADHUKAR Digitally signed by MADHUKAR SHAMRAO SHAMRAO BHALBAR msb BHALBAR Date: 2023.07.12 15:12:26 +05'30'