Mr. Girishchandra Mukundram Baluni vs Sebi

Date of Decision : 20.06.2017

Appeal No. 260 of 2016

Mr. Girishchandra Mukundram Baluni L-112, Swatantra Senaninagar, Near Akhbarnagar, New Dadaj, Ahmedabad - 380013. ...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

Ms. Vaneesa Agrawal, Advocate with Ms. Surbhi Purohit, Advocate i/b Suvan Law Advisors for the Appellant.

Mr. Aditya Chitale, Advocate with Mr. Pulkit Sukhramani and Mr. Siddha Pamecha, Advocates i/b The Law Point for the Respondent.

CORAM : Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member

Per : Dr. C.KG. Nair, Member (Oral)

1.

Appellant is aggrieved by the order passed by the Whole Time

Member ('WTM' for short) of Securities and Exchange Board of India

('SEBI' for short) dated June 2, 2016. By the said order the appellant, along

with other Directors and the Company (M/s. Neesa Technologies Limited)

have been directed to refund jointly and severally the monies collected by

means of Non-convertible Debentures (NCDs) issued by the Company. The

appellant (and others) are also restrained from dealing in securities from the

date of the order till the expiry of 4 years from the date of completion of

refund of the monies collected from the investors.

2. The decision of the Board of Directors for issuing the NCDs was

taken on November 21, 2011 though the actual issue was done in multiple 2

tranches between April 8, 2013 and August 22, 2013. Ms. Vaneesa Agrawal,

learned counsel for the appellant, stated that the appeal filed by the

Company has been dismissed by this Tribunal vide its order dated April 28,

2017 (Appeal No. 311 of 2016). In the present appeal the question raised is,

why all Directors of the Company including the appellant are held

responsible for refund of the monies collected from the investors. The

appellant herein was a Director from January 21, 2014 to March 30, 2014,

for less than three months. Though he was a Director earlier during

September 12, 2011 - April 24, 2012 he did not participate in the meeting

wherein decision to issue NCDs was taken. Further, when NCDs were

issued and money collected between April 8, 2013 to August 22, 2013 the

appellant was not a Director in the company. Though he rejoined the

Company on January 21, 2014, he resigned on March 30, 2014.

Accordingly, the appellant herein had no role in the collection of money

though issue of NCDs.

3. The learned counsel for the appellant further argued that in the case

of a similarly placed Director, Shri Nimain Charan Biswal, this Tribunal had

remanded the matter to SEBI to pass a fresh order vide order dated July 14,

2016 (Appeal No. 204 of 2016). SEBI vide its order dated September 7,

2016 held that Shri Nimain Biswal was not liable for the violations

committed by the company and certain Directors because he was not a

Director when the NCDs where issued and therefore discharged him from

any liabilities. Since the present appellant's case is similar to that of Shri

Biswal, he should also get the same benefit.

4. Learned counsel for SEBI Shri Aditya Chitale submitted that in the

case of the appellant, unlike the case of Shri Biswal, there is a prior period

of Directorship during September 12, 2011 - April 24, 2012 during which

approval for issue of NCDs was done on November 21, 2011. Moreover, 3

though it is stated by the appellant that he resigned from the second stint of

Directorship on March 30, 2014 as per records available with the Registrar

he continues to be a Director and as such it is continuing liability.

5. The impugned order has not clearly stated whether the appellant has

been found guilty on account of his role as Director during earlier period

(i.e. September 12, 2011 - April 24, 2012) or subsequent to his rejoining on

January 21, 2014. We also note from the statement given by the appellant

relating to the tenure of various Directors including the appellant herein that

many Directors would join for a short period then resign and thereafter

rejoined again after sometime. Whether this is a part of a strategy also needs

to be considered. Therefore, in the facts and circumstances of the matter we

set aside the impugned order dated June 2, 2016 qua the appellant and direct

SEBI to consider the matter afresh and pass fresh order on merit as

expeditiously as possible and in any event within a period of three months

from today.

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

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member

20.06.2017 Prepared and compared by:

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