Order dated January 21, 2020 in respect of Legal Representatives of Late Sh.Y.N.Saxena in the matter of SICCL

Under Sections 11, 11(4),11A and 11B of the Securities and Exchange Board of India Act, 1992

In re Deemed Public Issue Norms

In respect of:

Legal Representatives of Late Shri Y.N.Saxena viz., Ms. Madhavi S. Bhikta, Ms. Chavi Srivastava, Ms. Rashmi Saxena Sahni and Ms. Anupam Kulshetra

In the matter of Sahara India Commercial Corporation Limited

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) passed an order dated October 31, 2018, (hereinafter referred to as ‘Order’) inter alia, in respect of Legal Representatives of Late Shri Y.N.Saxena (hereinafter referred to as “Noticee”) in the matter of Sahara India Commercial Corporation Limited (hereinafter referred to as “SICCL”/ “the Company”).

2. SEBI vide said Order dated October 31, 2018 observed that SICCL had engaged in fund mobilising activity from the public, through the Offer of OFCDs (hereinafter referred to as ‘Offer of OFCDs’) during the financial years 1998- 2009 and raised at least an amount of Rs.14,106 Crores from at least

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

1,98,39,939 allottees, which was found to be in violation of provisions of respective provisions of the SEBI Act, 1992, the Companies Act, 1956, and Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (DIP Guidelines) read with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations) and SEBI (Merchant Bankers) Regulations, 1992 (“SEBI Merchant Banker Regulations).

3. In the light of the observations and findings mentioned in Order dated October 31, 2018 (the details are not reiterated for the sake of brevity), the following directions were issued against the Noticee and other entities vide the Order dated October 31, 2018: “…… 87. In view of the aforesaid observations and findings, I, in exercise of the powers conferred under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(4), 11A and 11B of the SEBI Act, hereby issue the following directions: (a) SICCL, Legal Representatives of Late Lt. Col. (Retd) D. S. Thapa as per applicable law, Legal Representatives of Late Shri P.S.Mishra as per applicable law, Legal Representatives of Late Shri Y.N.Saxena as per applicable law, Shri Subrata Roy Sahara, Shri O.P.Shrivastava, Shri J.B.Roy, Lt.Gen.(Retd.) A.S. Rao, and Shri Ranoj Das Gupta shall jointly and severally, forthwith refund the money collected by the Company (SICCL for money collected till date and directors for the moneys collected during their respective period of directorship) through the issuance of OFCDs including the application money collected from investors, pending allotment of securities, if any, with an interest of 15% per annum, from the eighth day of collection of funds, to the investors till the date of actual payment. (b) Shri I. Ahmad, Shri O.P.Dixit, Shri. Asad Ahmad and Shri. A.N. Mukherjee and Shri C.B.Thapa and directors namely, Shri Subrata Roy

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

Sahara, Shri O.P.Shrivastava, Shri J.B.Roy, Legal Representatives of Late Lt. Col. (Retd) D. S. Thapa as per applicable law, Legal Representatives of Late Shri P.S.Mishra as per applicable law, Legal Representatives of Late Shri Y.N.Saxena as per applicable law, Lt.Gen.(Retd.) A.S. Rao and Shri Ranoj Das Gupta jointly and severally are directed to deposit the money collected by the Company through the issuance of OFCDs along with the interest on the aforesaid amount calculated with an interest of 15% per annum, from the eighth day of collection of funds, till the date of actual payment., in an Escrow Account opened with a nationalized Bank. Shri I. Ahmad, Shri O.P.Dixit, Shri. Asad Ahmad and Shri. A.N. Mukherjee and Shri C.B.Thapa and directors namely, Shri Subrata Roy Sahara, Shri O.P.Shrivastava, Shri J.B.Roy, Legal Representatives of Late Lt. Col. (Retd) D. S. Thapa as per applicable law, Legal Representatives of Late Shri P.S.Mishra as per applicable law, Legal Representatives of Late Shri Y.N.Saxena as per applicable law, Lt.Gen.(Retd.) A.S. Rao and Shri Ranoj Das Gupta are directed to compensate from the said deposit the investors in accordance with their subscription money along with interest. (c) The repayments, compensation amount and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order both of which should be crossed as “Non-Transferable”. (d) If the Company had repaid the investors as per their submissions as per section 73(2) of the Companies Act, the above directions in (a) and (b) shall be applicable as modified herein, for the amounts claimed to have been returned to the investors: Such prior repayments should have been made by the Company as per the requirements laid down in paragraph 87(c) above and the same shall be certified by peer reviewed Chartered Accountants, as directed in paragraph 87(j) below. (e) Shri Subrata Roy Sahara, Shri O.P.Shrivastava, Shri J.B.Roy, Lt.Gen.(Retd.) A.S. Rao, Shri Ranoj Das Gupta, Shri I. Ahmad, Shri O.P.Dixit, Shri. Asad Ahmad and Shri. A.N. Mukherjee and Shri

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

C.B.Thapa are directed to provide a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of mutual funds/shares/securities, if held in physical form and demat form. Legal Representatives of Late Lt. Col. (Retd) D. S. Thapa, Late Shri P.S.Mishra, Late Shri Y.N.Saxena as per applicable law are directed to provide a full inventory of all the assets and properties and details of all the bank accounts, demat accounts and holdings of mutual funds/shares/securities, if held in physical form and demat form, inherited from the Late Lt. Col. (Retd) D. S. Thapa, Late Shri P.S.Mishra, Late Shri Y.N.Saxena respectively. (f) SICCL is directed to provide a full inventory of all the assets and properties and details of all the bank accounts, demat accounts and holdings of mutual funds/shares/securities, if held in physical form and demat form, of the company. (g) In view of the order of Hon’ble Supreme court mentioned at paragraph 86, SICCL and Shri Subrata Roy Sahara are permitted to sell the assets of the Company for the sole purpose of making the refunds as directed above and deposit the proceeds in the SEBI Sahara Refund Account. Such proceeds shall be utilized, with the permission of Hon’ble Supreme Court of India, for the purpose of making refund/repayment to the investors of SICCL. (h) Shri O.P.Shrivastava, Shri J.B.Roy, Lt.Gen.(Retd.) A.S. Rao, Shri Ranoj Das Gupta Shri I. Ahmad, Shri O.P.Dixit, Shri. Asad Ahmad and Shri. A.N. Mukherjee and Shri C.B.Thapa are prevented from selling their assets, properties and holding of mutual funds/shares/securities held by them in demat and physical form except for the sole purpose of making the refunds as directed above and deposit the 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 investors till the full refund/repayment/payment as directed above is made.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL (i) SICCL, Shri Subrata Roy Sahara, Shri O.P.Shrivastava, Shri J.B.Roy, Lt.Gen.(Retd.) A.S. Rao, Shri Ranoj Das Gupta, Shri I. Ahmad, Shri O.P.Dixit, Shri. Asad Ahmad Shri. A.N. Mukherjee, Shri C.B.Thapa, Legal Representatives of Late Lt. Col. (Retd) D. S. Thapa as per applicable law, Legal Representatives of Late Shri P.S.Mishra as per applicable law, Legal Representatives of Late Shri Y.N.Saxena as per applicable law shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily with wide circulation, detailing the modalities for refund, including the details of contact persons such as names, addresses and contact details, within 15 days of this Order coming into effect. (j) After completing the aforesaid repayments, SICCL, Shri Subrata Roy Sahara, Shri O.P.Shrivastava, Shri J.B.Roy, Lt.Gen.(Retd.) A.S. Rao, Shri Ranoj Das Gupta, Shri I. Ahmad, Shri O.P.Dixit, Shri. Asad Ahmad and Shri. A.N. Mukherjee, Shri C.B.Thapa, Legal Representatives of Late Lt. Col. (Retd) D. S. Thapa as per applicable law, Legal Representatives of Late Shri P.S.Mishra as per applicable law, Legal Representatives of Late Shri Y.N.Saxena as per applicable law, shall file a report of such completion 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 has been categorized so by the Institute of Chartered Accountants of India ("ICAI") holding such certificate. (k) In case of failure of respective entities to repay as per applicable law as per the aforesaid applicable directions, SEBI, on the expiry of three months period from the date of this Order may recover such amounts, from respective entities to repay, in accordance with section 28A of the SEBI Act including such other provisions contained in securities laws.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL (l) SICCL, Shri Subrata Roy Sahara, Shri O.P.Shrivastava, Shri J.B.Roy, Lt.Gen.(Retd.) A.S. Rao, Shri Ranoj Das Gupta are directed not to, directly or indirectly, access the securities market, by issuing prospectus, offer document or advertisement soliciting money from the public and are further restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, from the date of this Order, till the expiry of 4 (four) years from the date of completion of refunds to investors as directed above. The above said directors are also restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, or any intermediary registered with SEBI from the date of this Order till the expiry of 4 (four) years from the date of completion of refunds to investors. (m)Shri C. B. Thapa, Shri I. Ahmad, Shri O.P.Dixit, Shri. Asad Ahmad and Shri. A.N. Mukherjee are directed not to, directly or indirectly, access the securities market, by issuing prospectus, offer document or advertisement soliciting money from the public and are further restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner till the expiry of 4 (four) years from the date of completion of compensation to investors as directed above. The above said persons are also restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, or any intermediary registered with SEBI from the date of this order till the expiry of 4 (four) years from the date of completion of compensation to investors as directed above. (n) M/s Sahara India is directed not to, directly or indirectly, access the securities market, by issuing prospectus, offer document or advertisement soliciting money from the public and is further restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner for a period of 4

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL (four) years from the date of this Order. It is also restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, or any intermediary registered with SEBI for a period of 4 (four) years from the date of this Order. (o) The entities who are subject to the order of Hon’ble Supreme Court of India mentioned in paragraph 86 of this order shall, in accordance with the directions of the said order deposit the sale proceeds of the assets in the SEBI Sahara Refund Fund. The said fund shall be utilised for the repayment of the investors of this Company with the prior permission of the Hon’ble Supreme Court. 88. The above directions shall come into force with immediate effect subject to paragraph 86. 89. As noted above, Shri Y.N.Saxena has expired on 1.11.2013, Shri P.S.Mishra has expired on 1.07.2012 and Lt. Col. (Retd.) D.S.Thapa expired on 5.9.2005. However, their legal representatives have not been brought on record. Therefore, the directions against Shri Y.N.Saxena, Shri P.S.Mishra and Lt. Col. (Retd.) D.S.Thapa are made contingent on SEBI serving this order to their legal representatives. Therefore, this order will take effect as final order against Legal Representatives of Shri Y.N.Saxena, Shri P.S.Mishra and Lt. Col. (Retd.) D.S.Thapa only on the expiry of 60 days from the date of service of this order to their Legal Representatives, unless legal representatives of Shri Y.N.Saxena, Shri P.S.Mishra and Lt. Col. (Retd.) D.S.Thapa, file reply or seek, by a written request, personal hearing receivable by SEBI within such period of 60 days from the date of service of this order. If reply/request for personal hearing is filed by legal representatives of Shri Y.N.Saxena, Shri P.S.Mishra and Lt. Col. (Retd.) D.S.Thapa, the directions passed herein against their Legal Representatives shall be made applicable subject to the determination on the objections/reply. In the meantime, the Legal Representatives of Shri Y.N.Saxena, Shri P.S.Mishra and Lt. Col. (Retd.) D.S.Thapa shall not buy, sell or otherwise deal in such manner

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL for creation of any third party rights in regards the property so inherited, from the date of this order till the disposal of the objections/reply, if such objections or reply are filed, or till the date of discharge of the liability of refund, if no objections/replies are filed.”

4. In response to the Order as aforesaid, the Legal Representatives of Late Sh. Y.N. Saxena (“LRS”) vide letter dated January 29, 2019 submitted a preliminary application and requested for all the relevant documents and information in the matter and also grant them an opportunity of hearing after the inspection and detailed reply in the matter.

5. In the interest of principles of Natural Justice, the request of the LRs was granted and an opportunity of hearing was scheduled on March 27, 2019 at SEBI which was rescheduled to April 03, 2019. The same was communicated to the LRs vide e-mail dated March 11, 2019. In response, the Authorised Representative of LRs vide e-mails dated March 12, 2019 and March 15, 2019 sought for an adjournment and requested for the softcopy of the relied upon documents and physical inspection of the records. The documents relied upon were sent to the Authorised Representative vide e-mail dated March 11, 2019 and March 22, 2019. Further, vide e-mail dated March 26, 2019, the Authorised Representatives of the LRs were granted an opportunity of inspection of the records on April 03, 2019. Vide e-mail dated March 27, 2019, the Authorised Representative was informed about the opportunity of hearing scheduled on April 16, 2019. The Authorised Representative availed the opportunity of inspection and copy of the documents were given to them in a Compact Disc (CD) during the Inspection and also through letter dated April 08, 2019. However, the CD sent through letter could not be delivered to the Authorised Representatives before the date of hearing, hence, another opportunity of hearing was granted to the LRs through their Authorised Representative on June 04, 2019 at SEBI.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

Personal Hearing and submissions: 6. On June 04, 2019 Mr. Anshumaan Sahni and Mr. Apurv Chandola, Advocates and Authorized Representatives (hereinafter referred to as “ARs”) on behalf of legal representatives of Late Sh. Y.N.Saxena appeared for hearing and submitted reply on merits dated June 01, 2019 (furnished during the hearing on June 4, 2019) to the Order dated October 31, 2018 along with relied upon documents. ARs made oral submissions in line with their earlier preliminary submissions dated January 29, 2019 and Reply on merits dated June 01, 2019. AR was advised to submit their view as to the DIN issued in the name of Late Sh. Y.N. Saxena as a director of SICCL. ARs were granted time upto June 14, 2019 to submit the same and additional written submissions if any, in the matter.

7. The submissions of the LRs made vide letter dated January 29, 2019 and reply dated June 01, 2019 furnished during the hearing on June 04, 2019 summarized as under: A. Preliminary Objection to Proceedings instituted against Late Sh.Y.N. Saxena being null and void: i. LRs submitted that Sh. Y.N. Saxena retired as an employee of Sahara India on 30.10.2012 and on 01.11.2013, due to natural causes he passed away. Show Cause Notice which culminated in the Final Order dated 31.10.2018 was issued by SEBI on 20.02.2015, i.e., almost 2 years after the death of Sh. Y.N. Saxena. It is submitted that the proceedings instituted after the death of Late Sh. Y.N. Saxena and continued even after knowledge of the same during the personal hearing held on 07.02.2018 were in clear violation of the settled legal principle that a "Notice/Notification and resultant proceedings against a dead person are a nullity in law". Reliance is placed on the decisions of several courts viz., Smt. Lila Vati Bai vs. State of Bombay: 1957 AIR SC 521; CIT, Bombay Vs. Amarchand N. Shroff: 1963 AIR SC 1448; Vipin Walla Vs. ITO: (2016) 382 ITR 19 (Del-DB); CIT Vs. Shri. M Hemanathan, Tax Case Appeal No.199 of 2016; Rasid Lala Vs.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

Income Tax Officer, Ward-I (3) (6) in Special Civil Application No.18987 of 2016; Chandreshbhai Jayantibhai Patel Vs. The Income Tax Officer, Special Civil Application No.15172 of 2018; and Alamelu Veerappan vs. ITO: WP No. 30060/2017 & WMP No. 32631/2017 dated Q7.06.2018, Madras HC. ii. It is submitted that as per the Records, the counsels for SICCL informed SEBI about the demise of Sh. Y.N. Saxena and sought time for submission of his death certificate. Further, LRs submitted that in the RoP and the Impugned Final Order SEBI has recorded that SICCL’s counsels appeared on behalf of all the Noticees including Sh. Y.N. Saxena which is incorrect as a deceased ex-employee could not have authorized any such counsels for SICCL to appear on his behalf. Further, the SICCL counsels did not defend any Ex-Director at all in their replies or submissions. There is no averment or evidence of the involvement of any Ex-Director and specifically no averment or evidence of involvement of Late Sh. Y.N. Saxena in any of the alleged violations committed by SICCL and hence Late Sh. Y.N. Saxena was condemned unheard. iii. Reliance is placed upon the orders passed by the Adjudication Officers of SEBI, WTM and SAT from 2006 till 2018 which held that the proceedings against persons who are dead are null and void and have abated said proceedings viz., Chandravadan J. Dalal: SAT Appeal No. 35/2005 dated 15.06.2005; Chandravadan J. Dalal: WTM: M0/54/IVD/11/2006 dated 02.11.2006: In Re: Late Mr. Mahalingam, in the matter of Mis. Shakti Finance Ltd.: Adj. Order No: AK/A0-3112016 dated 14.09.2016: In Re: Prabir Chakravarti, in the matter of M/s. Bhoruka Aluminium Limited: Adj. Order No. ORDER/ SRP/ HK.SI 2018-19/ 11888 dated 23.08.2018 In Re: Jaikumar Vishwanath Mishra (Deceased), in the matter of Bank of Rajasthan Ltd.: Adj. Order No. BM/ A0-46/ 2012 dated 12.09.2012; In Re: Ramnath Raman (Deceased), in the matter of M is. Inland Printers Ltd.: Adj. Order No. AKJ A0-67-73/2 014 dated 30.04.2014; and In Re: Late Mrs. Tribenidevi Poddar, in the matter of Govind rubber Ltd.: Adj. Order No.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

EAD/ PM-AB/ AO/ 2512018-19 dated 31.08.2018. B. Non-Representation and no Knowledge of proceedings: It is submitted that the Show-Cause Notice issued to Late Sh. Y.N. Saxena is unserved. It is reiterated that he could not have been served either, as he was already dead at the time of issuance of the Show-Cause Notice. There is no acknowledgment on the file regarding service attempts/efforts made by SEBI for serving the Show-Cause Notice dated 20.02.2015 on Late Sh. Y.N. Saxena. The SCN was published in newspapers by SEBI in November 2016 and January 2017, three years after the passing of Sh. Y.N. Saxena. This cannot be considered as service effective upon Late Sh. Y.N. Saxena. A bare look at the RoP dated 07.02.2018, would show that Late Sh. Y.N. Saxena could neither be represented nor could defend himself, yet, the Impugned Final Order dated 31.10.2018, indicts him. Since Late Sh. Y.N. Saxena passed away and this Order passed against him was done so after his death and is to be enforced against a dead person, it indicates that the same is Personal in nature, which also as per Succession Act cannot be done after his death. It is also settled law that if the "right to action" had not materialized/ was not acted upon before the death of the Noticee, any proceedings initiated after his death against him, would be a nullity in law [Dassumal Ramrakhiomal & Ors. vs. Mahomed Bux Amir Baksh & Ors. AIR 1937 Sind 208; Smt. Lila Vati Bai vs. State of Bombay: AIR 1957 SC 521]. C. Issue of Abatement of Proceedings: (a) It is submitted that the question of abatement or continuance of proceedings qua Late Sh. Y.N. Saxena, arise in the situation of initiation of proceedings against a person who was not alive, but it seems the Impugned Final Order proceeds on the basis of him being alive at the time of initiation, of him being served and heard; all of which did not happen. The LRs distinguished the case laws cited in the impugned order as follows: i. Meleurath Sankunni Ezhuthassan vs. Thekittil Gopalankutty Nair:

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL (1986) 1 SCC 118: “This judgment was rendered in the case of second appeal abating after the death of the plaintiff. The Court has categorically held in Para 9 of the Judgment that when there is no decree given by the Court in a Civil Suit, and the Plaintiff dies, the cause of action abates. But in a case, where a decree is given and he dies, only then the suit and its resultant appeal continues. This clearly shows that where a person dies before a decree is given against him or in his favour, the suit has to mandatorily abate. This finding would get amplified when applied to quasi-judicial proceedings, Further reliance is placed on a decision of a Five Judge Bench of the Hon'ble Supreme Court in the case of Smt. Lila Vati Devi…”. ii. Girijanandini vs. Brijenra Narain: (1967) 1 SCR 93: AIR 1967 SC 1124: “The Hon'ble Supreme Court observed that in case of personal actions, i.e. the actions where the relief sought is personal to the deceased, the right to sue will not survive to or against the representatives and in such cases the maxim, actio personalis moritur cum persona (personal action dies with the death of the person) would apply. In the instant case, the Impugned Final Order puts a penalty of refund/ recovery of money on Noticee No. 13, this is personal to Late Sh. Y.N. Saxena, and hence comes within the exceptions of S. 306 and thus the proceedings cannot continue when the person was already dead before the proceedings began. This decision cannot be used here to support stance of the SEBI that the refund liability is not personal in nature, it very much is personal in nature. Giving an order to extract the alleged liability from a deceased person's estate does not make it the liability of the estate or his Legal Representatives’, it remains personal to his name. There is no right of SEBI to claim the estate or from the estate of the deceased and that in itself guides the ratio to holding that the alleged refund liability is personal in nature. Thus, as per the case cited

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL above, these proceedings have to abate…” iii. M. Veerappa vs. Evelyn Sequeira & Ors.: (1988) 1SCC 556: “…As per the findings of this case, the genesis of the issue needs to be found in tort or contract and the party suffering default ought to have suffered default on account of the deceased and not by means of a statutory wrong as is the matter in the present case. The cited case deals with suits and suits only under the CPC, 1908 w.r.t. tortious and contractual wrong only and deals with abatement in various situations like when the decree is issued or when in appeal the decree is confirmed or set aside. This case and no other case cited by the SEBI deal with a situation where a proceeding was instituted after the death of the individual. Reliance is also placed on the Five Judge Bench decision of the Hon'ble Supreme Court in the case of Smt. Lila Vati Bai (supra) to show that proceedings and order against a dead person is a nullity in law…” iv. Yallawwa (Smt.) vs. Shantavva (Smt.): (1997) 11 SCC 159: “This is a case between a husband and wife and of divorce. This has implications towards inter-personal and familial relations of the parties and not to a case involving statutory issues and penalty. This cannot be cited in the instant case given the facts and laws surrounding quasi-judicial laws…” (b) Thus, all the cases cited by the Ld. WTM in the Impugned Final Order is distinguished solely on the basis of lack of pendency of proceedings at the time of death of Sh. Y.N. Saxena, thus, eclipsing the issue of, whether personal in nature or not. It is submitted that the right of enforceable action should have materialised before the death of the individual, i.e., there must be a decree/finding before the death; and if this right has not materialised before the death of the individual, then, notices/proceedings/ notifications against the said dead person are null and void and any attempt to bring the Legal Representatives on record is also plainly illegal once the Authority has passed a finding

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL in the name of a dead person. (c) Further, it is submitted that in the context of quasi-judicial proceedings and statutory proceedings and their abatement, the Madras High Court in the case of Savithiri Ammal vs. State of Tamil Nadu: 2006 (3) Mad LJ 389 has clearly held that when a land acquisition notification was issued in the name of a deceased person and the heirs informed the Authority that the said person was no more, yet the Authority went ahead to declare the lands of the person acquired; the Hon'ble High Court by holding that as a general principle of law, proceedings against a dead person are null and void, quashed the Notification and the Acquisition and the complete proceedings thereunder. D. Penalty Personal in Nature: It is submitted that the Impugned Final Order failed to discuss on any evidence about any wrongful gain made or loss averted to cause such disgorgement from Late Sh. Y.N. Saxena. There has been no enquiry done to even find out if he received any funds at all from SICCL.

The Income-tax Returns of Late Sh. Y.N. Saxena show that he was an employee receiving salary from Sahara India Parivar. There is no financial reward/ amount either alleged or proved in the Impugned Final Order as against Late Sh. Y.N. Saxena. Thus, the foisting of liability on Late Sh. Y.N. Saxena to refund the amounts collected by the company simply by virtue of his being a Non- Executive Director without proving he was a Director in charge of the affairs of SICCL is entirely illegal and the liability thus foisted on him, is Personal and Penal in nature, which cannot be passed against a dead person. Furthermore, the finding of joint and several liability on the Directors including on Late Sh. Y.N. Saxena is in violation of the findings of the Hon'ble Supreme Court in the case of Sahara India Real Estate Corpn. Ltd. Vs. SEBI: (2013) 1 SCC 1, wherein the guilt of the orchestrators of the alleged violations has been laid only on those persons who can be considered to have knowledge of the alleged violations as being the orchestrators of the same. Late Sh. Y.N. Saxena was not a part of that Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL category of persons and neither he nor his Legal Representatives are being pursued in Contempt by the Hon'ble Supreme Court.

He is, thus, clearly not an orchestrator of any of the alleged violations committed by Sahara India or any of its constituent companies and cannot be considered to have had knowledge of the alleged violations committed by SICCL nor having any charge over the affairs and decisions of SICCL. E. Role of Late Y.N. Saxena in Sahara India Parivar: i. It is reiterated that Late Sh. Y.N. Saxena was only an employee of Sahara India Parivar. The Applicants do not know which entity of the said Sahara India Parivar, he was employed with. He was neither a shareholder, nor placed in any decision-making capacity, even under the given designation on Non-Executive Director at SICCL or any other entity of Sahara India Parivar. He did not derive, at any time, any benefit, save and except his monthly remuneration, from any of the business activities of Sahara India Parivar or its companies. His remuneration was duly reflected in his Income-tax Returns; He had no role to play in any decisions taken by SICCL or by its Promoter Directors. He had no control over the affairs of Sahara India Parivar; He was neither involved in nor had any knowledge of any non compliance of or contravention of any of the provisions of the Companies Act, 1956 by SICCL and was neither involved in nor had any knowledge of the prospectus, if any, issued by SICCL or of its contents or of any alleged misstatements therein. ii.

It is further submitted that the filings made by SICCL with the MCA i.e., the Annual Return and Balance Sheet for the period from 2008 to 2018, reveal that Late Sh. Y.N. Saxena was simply a non-Executive Director with SICCL and did not sign any financial statement nor any Annual Return nor Balance Sheet and neither were the same uploaded to MCA from his DIN ever. All these Returns have been uploaded either by Shri C.B. Thapa or Sh. O.P. Srivastava. iii. It is submitted that in the instant case, there has been no exercise conducted by the SEBI to find out who was the Director in Default, and Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL without attributing to any knowledge or role of the other directors, especially that of the non executive directors, the Board has held every director to be in default on an assumption of knowledge. This is wholly illegal and incorrect and against settled principles of law. Reliance is placed on decision of Division Bench of the Hon'ble High Court of Delhi in the case of Santanu Roy vs. UOI: (1988) 38 ELT 201 (Del) observed the lifting of the corporate veil to find which Director had committed default, and following the ratio of the above case and in Krishan Kumar Bangar vs. Director General of Foreign Trade: 2006 (88) DRJ 680, it was held in the case of Ved Kapoor vs. UOI & Ors.: (2014) 299 ELT 385 (Del) wherein it was held that in order to sustain the imposition of a punishment on an individual Director it was incumbent on the Respondents to allege and assert the existence of a duty or obligation cast on one or all of the Directors of the defaulting company and the contumacious failure to fulfil it.

8. In addition to the above, the submissions filed by the LRs vide letter dated June 13, 2019 pursuant to the personal hearing are as under: i. As regards the query raised during the course of personal hearing in respect of Directors Identification Number (DIN) of Late Shri Y.N. Saxena. LRs submitted that the issuance of DIN to Late Shri Y.N. Saxena as Director of SICCL was not in personal knowledge of any of the Legal Representatives till the time he was alive and active and hence the said fact cannot be either denied or admitted by the Legal Representatives. Inability of Legal Representatives to discharge the burden of proof of conduct and actions of Late Sh. Y.N. Saxena related to SICCL: ii. LRs submitted that the question put to them i.e., the state of affairs surrounding the issue of DIN to Late Sh. Y.N. Saxena cannot be satisfied by the Legal Representatives in accordance with Rules and Principles of Evidence under the Evidence Act, 1872. It is also submitted that neither the legal representatives were privy to any such information, nor it was in their

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL knowledge till the time Shri Y.N. Saxena was alive hence the question of answering on the DIN does not arise. Link between inability of Legal Representatives to discharge the burden of proof of conduct and actions of Late Sh. Y.N. Saxena related to SICCL and proceedings initiated against a dead person must abate: iii. It is submitted that only the person who signed a document can answer as to the circumstances surrounding which he/ she signed it. Whether, there was coercion or whether there was any sort of fraud would be solely answerable by the person in that situation and by no other person.

Consideration of Issues and Findings 9. I have considered the allegations, the objections/submissions of LRs of Late Sh. Y.N.Saxena along with the documents contained therein and materials available on record. On perusal of the same, the following issues arise for consideration. Each question is dealt with separately under different headings. I. Preliminary Issues: 1) Whether any order finally adjudging the issues has been passed against deceased person Sh. Y.N.Saxena and the proceedings are against dead person 2) Whether non representation and no knowledge of the proceedings subsequent to SCN dated February 20, 2015 vitiates the present proceedings pursuant to the representation of the LRs? II. Issues on Merits: 1) Whether Late Sh. Y.N.Saxena is liable under Section 73(2) and under Section 62(1) of Companies Act 2) Whether refund liability under section 73(2) is penal in nature or strict statutory liability of civil nature and what is the test of the liability is based on any specific role of the officer in default. 3) Whether cause of action under section 73(2) and under Section 62(1) survive the demise of Sh. Y.N.Saxena, If it survives, the extent of liability of Legal Representatives of Sh. Y.N.Saxena.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

I. Preliminary Issues: 1) Whether any order finally adjudging the issues has been passed against deceased person Sh. Y.N.Saxena and the proceedings are against dead person

10. The LRs have placed reliance on several judgments such as Smt. Lila Vati Bai vs. State of Bombay: 1957 AIR SC 521; CIT, Bombay Vs. Amarchand N. Shroff: 1963 AIR SC 1448; Vipin Walla Vs. ITO: (2016) 382 ITR 19 (Del-DB); CIT Vs. Shri. M Hemanathan, Tax Case Appeal No.199 of 2016; Rasid Lala Vs. Income Tax Officer, Ward-I (3) (6) in Special Civil Application No.18987 of 2016; Chandreshbhai Jayantibhai Patel Vs. The Income Tax Officer, Special Civil Application No.15172 of 2018; and Alamelu Veerappan vs. ITO: WP No. 30060/2017 & WMP No. 32631/2017 dated Q7.06.2018, Madras HC, Chandravadan J. Dalal: SAT Appeal No. 35/2005 dated 15.06.2005; Chandravadan J. Dalal: WTM: M0/54/IVD/11/2006 dated 02.11.2006: In Re: Late Mr. Mahalingam, in the matter of Mis. Shakti Finance Ltd.: Adj. Order N o: AK/A0-3112016 dated 14.09.2016: In Re: Prabir Chakravarti, in the matter of M/s. Bhoruka Aluminium Limited: Adj. Order No. ORDER/ SRP/ HK.SI 2018- 19/ 11888 dated 23.08.2018 In Re: Jaikumar Vishwanath Mishra (Deceased), in the matter of Bank of Rajasthan Ltd.: Adj. Order No. BM/ A0-46/ 2012 dated 12.09.2012; In Re: Ramnath Raman (Deceased), in the matter of M is. Inland Printers Ltd.: Adj. Order No. AKJ A0-67-73/2 014 dated 30.04.2014; and In Re: Late Mrs. Tribenidevi Poddar, in the matter of Govind rubber Ltd.: Adj. Order No. EAD/ PM-AB/ AO/ 2512018-19 dated 31.08.2018, to support their contention that the proceedings against dead person are null and void or order passed against a dead person is null and void.

11. In this regard, in the instant case I note that when the SCN dated February 20, 2015 was issued, SEBI had no knowledge of the death of Sh. Y.N. Saxena. SEBI noticed about the death of Sh. Y.N. Saxena from the reply filed by SICCL

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL on February 6, 2018. SICCL had also sought time to produce death certificate of Sh. Y.N. Saxena vide reply filed on behalf of all the Noticees dated February 6, 2018. Precisely for the said reason vide Order dated October 31, 2018 the LRs have been given show cause notice to meet with the principles of natural justice.

12. The Legal Representatives having been put to Notice vide Order dated October 31, 2018, have specific notice of allegations against Late Sh. Y.N. Saxena. Therefore, the contention of the LRs that SCN has been issued against the dead person is not sustainable at this stage.

13. For the reason that the proceedings initiated in the present case for violation of public issue norms and for continued cause of action for refund of illegally collected money of the investors, and therefore, the present proceeding cannot be said to be null and void as the LRs of Late Sh. Y.N.Saxena have been SCN through this present proceedings. In Savithiri Ammal vs. State of Tamil Nadu, the notification under Land Acquisition Act has been issued against a dead person and declaration under section 6 of the Land Acquisition Act has been made that the land is required for a public purpose. In the said case the State had issued SCN to the deceased person irrespective of the knowledge of the death and in the present case SEBI had no knowledge of the death of Sh. Y.N.Saxena while issuing the SCN dated February 20, 2015. It may be noted that in the said case of Savithiri Ammal (supra) as the notification was against a dead person, the Hon’ble Court in this case has given liberty to the government to proceed with the acquisition by initiating fresh proceedings in accordance with law which in effect can be done by issuing fresh notification against the LRs. Therefore, I consider that the said judgment in Savithiri Ammal vs. State of Tamil Nadu does not help the case of the LRs.

14. Further, the observations made by the Hon’ble Supreme court in Smt. Lila Vati Bai vs. State of Bombay: AIR 1957 SC 521 is also not applicable to the present

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL case. In that case an order of requisition was directed against the person who was dead at the time of the order. The Hon’ble Court dismissed the SLP challenging the said order of requisition. In fact, the Apex court held that an order like the one passed under Section 6(4)(a) of the Bombay Land Requisition Act,1948, is not in the nature of an order in judicial proceedings between the Government on the one hand and other parties named. However, while dismissing the SLP the Hon’ble Apex court made an observation that “If the proceedings were intended by the Act in the sense of judicial or quasi-judicial proceedings between named parties, it may have been legitimately argued that an order passed against a dead man is a complete nullity”. The observations made in the judgment is not attracted to the present facts of the case for the simple reason that no order which has attained finality against dead person has been passed vide order dated October 31, 2018 qua the LRs of Late Sh. Y.N.Saxea.

15. In respect of the judgment in Kamal Krishna Rastogi and Others Vs. State of Bihar and Another, 2008 (15) SCC 105, I respectfully record that the ratio laid down in the said case is also not applicable in the present facts of the case, because in that case also, the additional collector has passed an order under the Land Ceiling Act finally determining the extent of land which can be owned as per the Land Ceiling Act and also determined the surplus. The said order which finally determined the entitlement and excess land was passed against a dead person. However, as reiterated earlier, in the instant case the order dated October 31, 2018 has not attained finality qua Late Sh. Y.N.Saxena/his LRs. It is further noted that Hon’ble Apex Court though held the order of Additional Collector as unsustainable, it expressly gave liberty to Government to pass appropriate orders as per law which has the effect of fresh proceedings against the legal representatives, as per law.

16. Therefore, I hold that as no order finally adjudging the issues and finally determining the liability of Late Sh. Y. N. Saxena has been passed in this case

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL vide order dated October 31, 2018, and the present proceedings are not against deceased person, the contention of the LRs that proceedings against the dead person or the order against the dead person are null and void is not applicable in the present state of the proceedings.

2) Whether non representation and no knowledge of the proceedings subsequent to SCN dated February 20, 2015 vitiates the present proceedings pursuant to the representation of the LRs? 17. The SCN dated February 20, 2015 was in fact issued against Late Sh. Y. N. Saxena who was deceased at the time of issuance of SCN therefore, the said SCN has been issued against a dead person. LRs contended that the representation of SICCL on behalf of Late Sh. Y.N.Saxena is not a valid representation. It is accepted that a dead person cannot authorize any one to represent on his behalf. It is a matter of record. However, I note that at the time of issuing the SCN dated February 20, 2015 SEBI had no knowledge of the death of Sh. Y.N.Saxena and the said SCN has been issued based on the material available on record. As noted above, SEBI noticed about the death of Sh. Y.N. Saxena from the reply filed by SICCL on February 6, 2018. SICCL had also sought time to produce death certificate of Sh. Y.N. Saxena vide reply filed on behalf of all the Noticees dated February 6, 2018. Accordingly, LRs have been given fresh SCN vide Order dated October 31, 2018. Therefore, the question of Late Sh. Y. N. Saxena was unrepresented does not arise as the order which is final in nature is to be passed only in the present proceedings qua the LRs after consideration of the case of the LRs.Therefore, I hold that non representation and no knowledge of the proceedings subsequent to SCN dated February 20, 2015 and prior to service of the Order does not vitiate the present proceedings in view of the subsequent representation of the legal representatives for the purpose of representing their case.

II. ISSUES ON MERITS: 18. I note that vide Order dated October 31, 2018, it was found that SICCL issued

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL and allotted OFCDs to at least 1,98,39,939 investors during the financial years 1998-2009 and raised an amount of at least Rs. 14,106 Crores. The issue of OFCDs opened on July 6, 1998 and closed on June 30, 2008. The issue of OFCDs has been determined to be “public issue” in terms of first proviso to section 67(3) of the Companies Act, 1956 and on account of it not being in terms of circumstances mentioned in clauses (a) and (b) of Section 67(3) of the Companies Act,1956. Since, the Offer of OFCDs are public issues, SICCL was mandated to comply with the 'public issue' norms as prescribed under the Companies Act, 1956.

19. Since the offer of OFCDs was found to be a public issue of securities, such securities ought to have been listed on a recognized stock exchange, as mandated under section 73 of the Companies Act, 1956. Neither the Company made an application seeking listing permission from stock exchange nor the liability to refund has been discharged by the Company as envisaged in Section 73(1) and (2) of the Companies Act, 1956 in the instant case. Therefore, I find that SICCL has contravened section 73(1) and (2) of the Companies Act,1956. SICCL has also been found not in compliance with the provisions of section 73(3) which mandates that the amounts received from investors shall be kept in a separate bank account. Therefore, it was held that section 73 of the Companies Act, 1956 has not been complied with.

20. Further, it was also found that SICCL has not complied with sections 56(1) and 56(3) of the Companies Act, 1956. The said sections require, 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 a company, unless the form is accompanied by abridged prospectus, containing disclosures as specified. Neither SICCL nor its directors produced any record to show that it has issued Prospectus containing the disclosures mentioned in section 56(1) of the Companies Act,

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

1956, or issued application forms accompanying the abridged prospectus.

21. Further, the order dated October 31, 2018 also held that SICCL contravened the provisions of section 117C of the Companies Act, 1956 which requires to create a debenture redemption reserve for the redemption of debentures. Further, the Offer of OFCDs was also found to be in violation of relevant provisions pertaining to the DIP Guidelines read with ICDR Regulations.

22. In view of the above violations of public issue norms, vide Order dated October 31, 2018 directions were issued against the Company and its directors, promoters, managers, company secretary and arranger viz., Shri I. Ahmad, Shri O.P.Dixit, Shri. Asad Ahmad and Shri. A.N. Mukherjee and Shri C.B.Thapa and directors namely, Shri Subrata Roy Sahara, Shri O.P.Shrivastava, Shri J.B.Roy, Lt.Gen.(Retd.) A.S. Rao and Shri Ranoj Das Gupta, who were found to be liable to refund the investors of SICCL.

23. I also note that considering the fact that Lt. Col. (Retd) D. S. Thapa, P.S.Mishra, Y.N.Saxena were deceased the said Order dated October 31, 2018 was in the nature a show cause notice(“SCN”) to Legal Representatives of the deceased directors viz., Late Lt. Col. (Retd) D. S. Thapa Late Shri P.S.Mishra and Late Shri Y.N.Saxena. I note that LRs raised the following issues on merits vide their replies/additional reply. The same are dealt under different headings.

ISSUE NO. II (1): Whether Late Sh. Y.N. Saxena is liable under Section 73(2) and under Section 62(1) of Companies Act 24. The LRs disputed the directorship held by Late Sh.Y.N. Saxena, as no one was aware of the same and it is only on the basis of the ‘Impugned Final Order’ and the SEBI Record, that the heirs have come to know that allegedly as per MCA records, he was a Director in SICCL. It is contented that the personal records of Late Sh. Y.N. Saxena show that he was an employee of Sahara

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

India Parivar, drawing a fixed retainership amount. It is further contented that his final ITR showed only pension and the earlier ITRs showed that he was receiving salary from Sahara India, and not from SICCL. Thus it is argued that there is no evidence on record to show that Late Sh. Y.N. Saxena received any amounts from SICCL at all. Thus, it is argued that there was no financial gain to Late Sh. Y.N. Saxena from SICCL and it is further argued that SEBI has not recorded any evidence to show that there has been any such financial relationship between SICCL and Late Sh. Y.N. Saxena or of any financial gain by Late Sh. Y.N. Saxena from SICCL. 24.1. The argument the LRs don’t have personal knowledge of the activities of Late Sh. Y.N. Saxena and therefore they are prejudiced in their defense is a situation which applies to the enforcement agencies as well the legal representatives. If the deceased person is alive at the time of enforcement proceedings he could defend his case based on his personal knowledge. Similarly, the enforcement agencies can collect evidence based on his personal knowledge against him. However, on the death of the person, neither the enforcement agencies nor the legal representatives could avail the aspect of personal knowledge of the deceased against him or in favour of him.

24.2. Recognizing such difficult scenario in the context of rendition of accounts against legal representatives, the Hon’ble High court of Calcutta in Panmal Lodha and Ors. vs. Omraomal Lodha and Ors. (05.08.1952 - CALHC) observed that “If an accounting party is alive, he has to explain, or if necessary vouch for, every item of debit and credit in his books, if he is dead, it may be inordinately difficult for the other side to prove him in the wrong.” “.. In a long and complicated accounting, the other side might not even know, what credits to charge or what debits to allow and be placed in a position of great disadvantage. But this is a position which cannot be helped. No one can guarantee that the accounting party will be alive to render an account personally. If he is dead, the accounts must be taken in Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL the best way that the exigencies of human affairs will allow…”

24.3. As observed earlier such difficulty is inherent in such situation. The contention of the LRs on whether there was coercion or whether there was any sort of fraud in respect of signature of documents by Sh. Y.N. Saxena would be solely answerable by the person in that situation and by no other person comes within the difficulty inherent in the situation which works disadvantageously to both the enforcement agency and the legal heirs who are subjected to those proceedings in their representative capacity. However, the very recognition of the principle of survival of cause of action by law even at this stage and the opportunity of being heard is granted to LRs for defending the case on behalf of the deceased reiterates the position that the adjudication of the issues concerned has to be done in the best way that exigencies of human affairs will allow, despite the disadvantage faced by both parties, that is, enforcement agencies and LRs.

24.4. Further, the present proceedings are not based on the evidence on personal knowledge of Shri Y N Saxeena, instead the proceedings are based on the materials available with the MCA portal and it is an established principle when a particular fact is to be established by production of documentary evidence there is no scope for leading oral evidence and there is no scope for personal knowledge. Moreover, as the present proceedings are not based on the evidence of “personal knowledge” Shri Y N Saxeena, questioning of any evidence which stands on the personal knowledge of Late Sh. Y.N. Saxena does not arise in this case.

24.5. SEBI’s case is that he was a director of the Company during the period of issuance of OFCDs. As per the MCA records with respect to the Directors details, Late Sh. Y.N. Saxena joined the Company on December

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

22, 1998 and resigned on November 30, 2012. LRs submitted that the issuance of DIN to Late Shri Y.N. Saxena as Director of SICCL was not in the personal knowledge of any of the Legal Representatives till the time he was alive and active and hence the said fact cannot be either denied or admitted by them. However, I note that the fact of issuance of DIN or holding of DIN by Shri Y.N. Saxena stand proved on the basis of documentary evidence. The fact that MCA Record with respect to the Directors details shows DIN -00097570 as against the name of Shri Y.N. Saxena, proves the fact of issuance of DIN or holding of DIN by Late Shri Y.N. Saxena. Further in order to establish whether Late Shri Y.N. Saxena was a director of SICCL, the said fact is proved by MCA documents. The fact that Shri Y.N. Saxena was a director of SICCL has not been disputed by SICCL as well. Therefore, based on the documents of MCA records, I find that Late Shri Y.N.Saxena was appointed as director of SICCL with effect from December 22, 1998 till November 30, 2012. In addition, as noted above, Late Sh. Y.N. Saxena was also authorized Sh. C.B. Thapa for carrying out all acts and deeds necessary for the purpose of RHP and Final Prospectus and as per the Directors Report of SICCL, Late Sh. Y.N. Saxena is shown as one of the members of Audit Committee and a Non- Executive Director of Remuneration Committee of SICCL.

24.6. In the present case, I observe that no material is brought on record to show that any of the officers set out in clauses (a) to (c) of Section 5 of the Companies Act, 1956 or any specified director of SICCL was entrusted to discharge the obligation contained in Section 73 of the Companies Act, 1956. Therefore, as per Section 5(g) of the Companies Act, 1956 Shri Y.N. Saxena, along with other directors of SICCL, is also an officer in default and is liable to make refund, jointly and severally, along with interest at the rate of 15 % per annum, under section 73(2) of the Companies Act, 1956 for the non-compliance of the above mentioned provisions. Since, the liability of the company to repay under section 73(2) is continuing and such

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL liability continues till all the repayments are made, Shri Y.N. Saxena is co-extensively responsible along with the Company for making refunds along with interest under section 73(2) of the Companies Act, 1956 read with rule 4D of the Companies (Central Government's) General Rules and Forms, 1956. Therefore, I find that Shri Y.N.Saxena is jointly and severally liable with SCCL and other directors against whom the final order was issued, to refund the amounts collected from the investors with interest at the rate of 15 % per annum, for the non-compliance of the above mentioned provisions. 24.7. I note that the OFCD issue opened on July 6, 1998 and closed on June 30, 2008, therefore, during the financial years 1998-2009, SICCL through Offer of OFCDs, had collected an amount of at least Rs. 14,106 Crores from various allottees. I note that Shri Y.N.Saxena was director of SICCL during financial years 1998-2009. Therefore, in view of Hon’ble Securities Appellate Tribunal (SAT) Order dated July 14, 2017 in the matter of Manoj Agarwal vs. SEBI, I am of the view that the obligation of Late Shri Y.N.Saxena to refund the amount with interest jointly and severally with SICCL and other directors is limited to the extent of amount collected during his tenure as director of SICCL. 24.8. In respect of the liability regarding section 62 of the Companies Act, 1956, I find it apposite to refer and rely upon the section 62 of the Companies Act,1956 which reads as :-“ (1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in or debentures of a company, the following persons shall be liable to pay compensation to every person who subscribes for any shares or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein, that is to say,- ...

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL (d) every person who has authorised the issue of the prospectus: Provided that where, under section 58, the consent of a person is required to the issue of a prospectus and he has given that consent, or where, under sub-section (3) of section 60, the consent of a person named in a prospectus is required and he has given that consent, he shall not, by reason of having given such consent, be liable under this sub-section as a person who has authorised the issue of the prospectus except in respect of an untrue statement, if any, purporting to be made by him as an expert.” 24.9. Late Sh.Y. N. Saxeena is a signatory to the RHP and Prospectus. Since he has given his consent to the prospectus/RHP, he is liable for violation of section 62 of Companies Act for the misstatement and untrue statements in the prospectus as elaborated in paragraphs 43, 48 and 49 of the Order dated October 31, 2018. The same is reproduced hereunder for reference: “43. One of the main investor protection measures in respect of a public issue is that the investors receive large scale disclosures about the company which would have material bearing on the decision making of those investors.

For instance, the prospectus is to contain the credit rating obtained from a Credit Rating Agency and an undertaking by the issuer Company confirming firm arrangements of finance through verifiable means towards seventy-five percent of the stated means of finance excluding the amount to be raised through the proposed public issue. However, no such disclosures have been made. Since there was a misstatement that the issue was private placement while it was in fact public issue, the investors have lost the advantage of taking informed decision which an investor in a public issue would have had. Therefore, the investing public did not have the entire gamut of disclosures which the said investor would have had the benefit, if all the disclosures meant for a public issue is made in the RHP/Prospectus, before his investment. Therefore, the entire subscription money of the investor is a loss incurred to those investors in Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL view of the untrue statement in the prospectus/RHP. Against all the important disclosures contemplated, in the columns in the RHP and prospectus for e.g. regarding names of stock exchanges where application for listing is made, minimum subscriptions, declaration regarding refund under section 73(2),& (2A) of the Companies Act, details regarding debenture trustee, declaration regarding utilization of issue proceeds etc. “Nil/Not applicable/ No listing is envisaged/as decided by the Board” has been stated.

As per section 65 of the Companies Act,1956 which provides for a deeming clause that a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form and context in which it is included and where the omission from a prospectus of any matter is calculated to mislead, the prospectus shall be deemed, in respect of such omission, to be a prospectus in which an untrue statement is included. Since the above said omission to make disclosures are calculated to mislead, the same would be untrue statements. Therefore, I find that the RHP and Prospectus of the Company contain untrue statements in terms of section 62 of the Companies Act, 1956. 48. Further, from the extracts of the inspection report of MCA, it is also observed that SICCL has made false statements in the prospectus dated July 04, 2008 filed with RoC, West Bengal in respect of its proposed investment in various projects. The discrepancies as observed by MCA, in the said inspection report, are summarised below:

a) (i) As per the prospectus, the company had invested in "Aamby Valley City Project". In the aforesaid prospectus the company had stated to have invested Rs. 33,000 Cr. in the project and would realize Rs. 90,211Cr. from the same. However, MCA observed that as on the date of filing of the aforesaid prospectus, the company had already filed a petition with the Hon'ble High Courts of Bombay and Calcutta for Scheme of Arrangement for de-merger of the Aamby Valley undertaking to a separate company. MCA further observed that as per the statement of assets and liabilities of the said undertaking as on March 31, 2006 as given in the Scheme of Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

Arrangement, the company was having assets and liabilities amounting to Rs. 7,695.86 Cr. respectively, which were transferred to the resulting company after passing of orders of Hon'ble High Court. The statement of investment, as mentioned in the prospectus were neither invested nor realized (ii) MCA has further stated that though the company submitted that the project costs and the receipts are 'estimated' as on the date of the prospectus, which is in line with the requirement of the Companies Act provisions, SICCL, as on the date of filing the prospectus, was aware of the proposal of demerger as well as the position of its assets and liabilities and when once being aware of that, the company makes a statement of investment and realization in the prospectus, which can neither be made or realized, it is nothing but false in material particular. As per MCA, the company was collecting funds for the project for a long time and once an estimated amount of investment and realization is given in the prospectus, the same needed to be adhered to b) With regard to other projects, MCA has observed that the company has given statement of investment of Rs. 128836.10 Cr. with realization of Rs. 190826.40 Cr. which has so far neither been made nor realized. MCA has also stated the company has not given details of investment in the projects and realization from said projects in order to justify its claims that the statements given in the prospectus are true. The company has to justify the disclosures made in the prospectus as huge amount of public money has been taken by the company. c) MCA has therefore taken a view that the statements made in the prospectus with respect to investments in projects and realization are not true and the company has given the said statements knowing it to be false in material particular. Thus, SICCL has contravened Section 63 and 68 of the Companies Act, 1956. 49. I have also noted the submissions of the Noticee that there has been no concealment or misrepresentation as in the prospectus as schedule II,

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

Part I, VII (c) and fact of demerger process of Aamby Valley Project has been mentioned. The Noticees have submitted that the scheme of arrangement for demerger of Aamby Valley Division were filed before Hon’ble High Court of Kolkata on 2.5.2007 and High Court of Mumbai on 15.6.2007 and first order of Hon’ble High Court of Mumbai was delivered on 23.11.2007 and High Court of Kolkata on 30.1.2008 and copies of the said demerger orders are marked as ‘material documents’ appearing as Annexure 13 of the prospectus and because of the de-merger of SICCL into two separate companies, namely SICCL and Aamby Valley Limited, the assets and liabilities shown in the scheme of arrangement, as on appointed date, i.e.31.3.2006 is amounting to Rs. 7695.86 crore which is on actual basis. On perusal of the prospectus, I note that the Company has mentioned regarding the demerger of Aamby Valley division. However, I do not find the explanations of the Noticee acceptable as providing details of investment and realization in Aamby Valley despite being aware of the actual position of assets and liabilities of Aamby Valley undertaking and the proposal of demerger of the said undertaking at the time of filing prospectus, amounts to providing mis-statement in the prospectus and in violation of section 62 of the Companies Act. Further, the Company has also not substantiated as to how realization, even if any, from the investments in Aamby Valley will be obtained by the Company after demerger. The Company has not been able to substantiate the sharp variance between the actual state of investment in Aamby Valley and the estimated receipts given by SICCL in the Prospectus, that too after about 10 years from starting to collect money from the public. SICCL has not been able to substantiate the current status of the investments claimed to have been made by it in the different projects in the prospectus. Further, the Company has stated that the figures of investment and realizable receipts mentioned are on estimated basis, that too when the total project would be developed and because of demerger of SICCL into two companies, assets and liabilities as on appointed date, 31.3.2006 amounting to Rs. 7695

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL crores is on actual basis. However, the Noticee has still not substantiated as to whether the investment, as mentioned in the prospectus was actually invested or realized. Therefore, I find that SICCL has made false statements in the prospectus.” These facts/findings were not disputed by the LRs in the present proceeding. Hence, the same as considered and determined in the Order dated October 31, 2018 attained finality qua the LRs as well. 24.10. Thus, in view of section 62 of the Companies Act,1956, Late Sh. Y.N. Saxena is also liable to pay compensation to every person who subscribes for any shares or debentures on the faith of the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein and omissions under section 62(1)(d) of the Companies Act for authorizing the issue of prospectus by giving his consent dated February 01, 2001. As I have already held that there are misrepresentations and omissions in the RHP/Prospectus, Shri Y.N.Saxena, being one of the persons who authorized the RHP/Prospectus through the Power of Attorney is liable for the misrepresentation in the RHP/Prospectus. Since the subscription was made by the subscribers to the issue on the basis of misrepresentation, without the benefit of required disclosures, the entire subscription money is to be considered as loss incurred by the subscribers. Therefore, it would be appropriate that the subscribers to OFCDs be paid back the loss of their subscription with 15% interest as compensation, from all the entities who signed/authorized the RHP/Prospectus including Late Sh. Y.N.Saxena.

ISSUE NO. II (2): Whether refund liability under section 73(2) is penal in nature or strict statutory liability of civil nature and what is the test of the liability is based on any specific role of the officer in default. 25. The LRs contented that the Order dated October 31, 2018 puts a penalty of refund/ recovery of money on Noticee No. 13 viz., Late Sh. Y.N. Saxena and this is personal in nature, and hence comes within the exceptions of Section

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

306 of the Indian Succession Act and thus the proceedings cannot continue when the person was already dead before the proceedings were initiated. I observe that the word ‘penalty’ under the Companies Act, 1956 has been used to convey penalty of “fine” or penalty of “imprisonment”. The very fact that the refund liability created under section 73(2) is joint and several goes against the idea of penalty which as per the Companies Act,1956 comprises of fine and imprisonment which is in the nature of punishment. Perusal of Section 629A of the Companies Act, 1956 would further indicate separate penal provisions provided in the Statute for contraventions of the provisions of the Companies Act where no separate penalty is provided for violations of specific provisions. This further shows that in addition to the civil liability created under section 73(2) on the Company and directors who are ‘officers in default’, penal liability of ‘fine’ which may extend to five thousand rupees, and where the contravention is a continuing one, with a further fine which may extend to certain amount during which the contravention continues, has also been created. Therefore, I find that the liability created under section 73(2) of the Companies Act which is enforced under the present proceedings, is not penal in nature as per the Companies Act. Further, I note that in the present case the direction to refund the money with interest cannot be equated with penalty as it is investors’ money which is illegally collected and at no stretch of imagination, the said refund with interest can be said to be in the nature of a penalty.

26. Further, the LRs relied upon the judgments passed in Santanu Roy vs. UOI: (1988) 38 ELT 201, Krishan Kumar Bangar vs. Director General of Foreign Trade: 2006 (88) DRJ 680, Ved Kapoor vs. UOI & Ors.: (2014) 299 ELT 385 (Del) in order to contend that the role of Sh. Y.N. Saxena as director has not been discussed in the order. It is further contend that nowhere in the Order dated October 31, 2018, Sh. Y.N. Saxena's name figures as to how he was the architect of the alleged violations or if he had knowledge of the alleged violations or for that matter, if he ever acquiesced to the alleged violations. It Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL is further contend that only bald finding has been made, not supported by any facts, arguments or evidence to establish the alleged liability of Late Sh. Y.N. Saxena to refund amounts, neither raised by him nor enjoyed by him. It is also argued that without attribution of any knowledge or role of the other directors, especially that of the non executive directors, the Board has held every director to be in default on an assumption of knowledge. The LRs argues that this is wholly illegal and incorrect.

27. I note that the Hon’ble Delhi High court in the matter of Ved Kapoor vs Union of India & Ors. on 16 September, 2013, while referring to the judgment passed in Santanu Ray vs. Union of India 1988(38) E.L.T. 264 (Del.), observed "the notice was challenged, inter alia, on the ground that the Statute imposed no liability, obligation and responsibility upon the directors of the company to pay the excise duty in a case where manufacture is a company and, therefore, the show-cause notice, issued to the directors were without jurisdiction”. It may be noted that the Companies Act, 1956 by virtue of Section 73(2) creates an express statutory liability on the directors to make a refund unlike the law covered in Santanu Ray vs. Union of India. It is further noted that in Santanu Ray vs. Union of India, the Hon’ble Court, therefore observed that “ It is true that from the juristic point of view, the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members. But, in certain exceptional cases, the court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade. So it is permissible to lift the corporate veil of Duncans to determine whether a particular director could be proceeded against in pursuance to the impugned show-cause notices or whether he is liable for the payment of all duties charged and to all penalties incurred. 12. We can only say this that after the veil of the corporate entity is lifted, the adjudicating authorities will determine as to which of the directors is concerned with the evasion of the excise duty by reason of fraud, collusion or Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL willful mis-statement or suppression of facts, or contravention of the provisions of the Act and the Rules made there under. So far as individual liability of a director to the payment of excise duty and penalty is concerned, no liability can be fastened on him unless the department is able to show as to how and to what extent a particular director is liable. We wish to say no more at this stage."

28. Therefore, it is clear that the ratio is limited to the case where the statutory liability is not provided in the Statute and therefore, corporate veil is lifted on permissible grounds for the purpose of imposing personal liability on the directors of the company whose corporate veil is lifted, for instance on the grounds of “fraud, collusion or willful mis-statement or suppression of facts, or contravention of the provisions of the Act and the Rules…”. It is noted that the instant proceedings are for enforcement of the statutory liability imposed on the directors under section 73(2) of the Companies Act,1956 by the Statute itself and the same liability is not foisted on the directors in the instant case on the grounds of lifting of corporate veil.

29. Similarly, in the matter of Krishan Kumar Bangur vs. Director General of Foreign Trade 2006 (88) DRJ 680, “a company had obtained EPCG licence which carried a condition to export to the extent of four times of CIF value, within a period of five years. The said obligation, however, was not fulfilled. On detecting the failure, notices were issued to the company as well as its directors. It was contended by the appellant that he was not a whole time director and had nothing to do with the day-to-day working. The legal question which arise before the Court was whether solely on the strength of the petitioner being a director of the company, he can be held individually liable for the prosecution/punishment for non-fulfilment of the obligation. Relying upon Santanu Ray (supra), this Court, inter alia, held as under:- "14. In order to sustain the imposition of a punishment on an individual Director it was incumbent on the Respondents to allege and assert the existence of a duty or obligation cast on one or all the Directors of the defaulting Company

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL and the contumacious failure to fulfill it. The Show Cause Notice does not mention the grounds on which individual liability is sought to be fastened on the Director. Neither of the Orders, that is, the Order in Original or the Appellate Order, disclose reasons which have persuaded those Authorities to come to the conclusion that the Petitioner had assumed an obligation or duty in ensuring that exports corresponding to four times the CIF value would be undertaken within the prescribed period. To assume or foist such a liability on the Directors would run counter to the basic tenets of Company law."

30. I observe that in the present facts of the case, the current proceedings are in respect of a liability to refund which is not in the nature of punishment or penalty. Secondly, the facts covered in Krishan Kumar Bangur vs. Director General of Foreign Trade on 17 April, 2006 deal with the situation where the statute does not expressly create any liability on the director for the subject matter of the violations dealt in the judgment. However, that is not the case in respect of the present facts and law of the extant matter. The Companies Act creates a separate refund liability under Section 73(2). Therefore, it is respectfully observed that the ratio of Krishan Kumar Bangur vs Director General of Foreign Trade is not attracted to the facts of the present case.

31. In view of the forgoing discussions, I observe that the ratios laid down in Santanu Roy vs. UOI: (1988) 38 ELT 201 (Del), Krishan Kumar Bangar vs. Director General of Foreign Trade: 2006 (88) DRJ 680, and Ved Kapoor vs. UOI & Ors.: (2014) 299 ELT 385 (Del) are not applicable to the instant case.

32. Keeping in mind that the case laws cited by the LRs do not support the present case, I note that there is a well laid down pre-requisite test as contemplated under Section 73(2) read with Section 5 of the Companies Act,1956. The same is examined in detail as under:

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

Section 73(2) of Companies Act,1956 reads as follows:- “Where the permission has not been applied under sub-section (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 1 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. 33. As per section 73 (2) of the Companies Act, 1956, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange and if permission has not been applied for or not granted, the company is required to forthwith repay with interest all moneys received from the applicants. As stipulated in section 73(2) of the said Act, the company and every director of the company who is an officer in default shall, from the eighth day when the company becomes liable to repay, 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 if the money is not repaid forthwith. With regard to liability to pay interest, I note that as per section 73 (2) of the Companies Act, 1956, the company and every director of the company who is an officer in default is jointly and severally liable, to repay all the money with interest at prescribed rate. In this regard, I note that in terms of rule 4D of the Companies (Central Governments) General Rules and Forms, 1956, the rate of interest prescribed in this regard is 15%.

34. In this context, the definition of officer in default is material for determining the Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL liability of a director to be proved for the purpose of statutory liability of civil nature, under section 73(2) of Companies Act.

Section 5 of the Companies Act, 1956, meaning of "officer who is in default" is reproduced as under:.

“5. For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely:

(a) the managing director or managing directors;

(b) the whole-time director or whole-time directors;

(c) the manager;

(d) the secretary;

(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act;

(f) any person charged by the Board with the responsibility of complying with that provision:

Provided that the person so charged has given his consent in this behalf to the Board;

(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors:

Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form”

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

35. Section 5(g) of the Companies Act, 1956 provides that where any company does not have any of the officers specified in clauses (a) to (c) of Section 5, then any director who may be specified by the Board in that behalf or where no director is so specified then all the directors would be “officer who is in default”. The examination of the provision shows that the officer in default does not prescribe any other ingredient other than whether someone is managing director or other persons mentioned in section 5 or in case absence of any of the officers specified in clauses (a) to (c) of Section 5, then all directors. It is noted that the category of persons defined as officer in default is employed in various provisions of Companies Act in the context of creating civil liability or criminal liability on them. The imposition of joint and several liability on all the directors in the scenario mentioned in section 5(g) further shows that the liability is not based on the role of the directors but it is strict liability irrespective of any specific role attributable to the director in the absence of non-application of Section 5 (a) to (c).

In the present there is no officer who is in default falling under Section 5 (a) to (c). Hence, the golden rule of literal meaning of Section 5(g) is applicable in the present case. If the liability has been role based liability, the intention of the Legislature would not have been creation of joint and several liability on all directors in such a scenario. It may be argued that as per general law in criminal matters, with certain exceptions, for instance in case of vicarious criminal liability created by statute, “actus reus” is required to be proved for commission of offence, therefore, the element of role is inbuilt in the definition of “officer who is in default”. However, perusal of section 73(2) of the Companies Act, 1956 shows that the basis of refund liability prescribed against the directors is in the nature of strict civil liability against the directors in case of failure of company to refund forthwith the money collected. Therefore, importing the definition of “officer who is in default” in Section 73(2) needs to be seen in the context of strict liability created under section 73(2).

Further the proceedings to enforce the said liability are civil in nature. Therefore, I hold that liability under section 73(2) which is sought to be enforced under the present proceedings, is a strict statutory liability of civil

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL nature. Even assuming for a moment, any role is required to be considered for the purpose of deciding the liability of Late. Sh. Y.N. Saxena, I note the following specific material available on record: (i) Late Sh. Y.N. Saxena was a director of SICCL during the period 1998 to 2012 in which OFCDs were issued as per the directors records available on MCA portal (ii) Late Sh. Y.N. Saxena’s signed Power of Attorney authorizing Mr. C.B. Thapa for carrying out all acts and deeds necessary for the purpose of RHP and Final Prospectus. This in fact establishes the director role of Sh. Y.N. Saxena as he has not only knowledge of the issue but also the contents of the prospectus. (iii) As per the Directors Report of SICCL, Late Sh. Y.N. Saxena is shown as one of the members of Audit Committee and a Non-Executive Director of Remuneration Committee of SICCL.

36. It is further noted that the basis of liability on the directors in the instant matter is flowing out of the provisions of Section 73(2) in respect of liability to refund. The said liability is not derived from Section 27 of the SEBI Act. It is noted that the said provision, as it stood on the relevant dates of violation of “public issue” norms is on the liability of “persons in charge of and was responsible to the company for the conduct of the business of the company” and director, manager, secretary or other officer of the company. The first proviso to section 27(1) provides for a defense to “persons in charge of and was responsible to the company for the conduct of the business of the company” on the ground that a) the offence was committed without his knowledge, or (b) that he had exercised all due diligence to prevent the commission of such offence. Similarly in respect of liability of director, manager, secretary or other officer of the company, 27(2) of SEBI Act requires that “offence has been committed with the consent or connivance of, or is attributable to any neglect” on the part of them. Similar provisions along the lines of section 27 of SEBI Act are present in various Statutes, for instance, Section 141 of the Negotiable Instruments

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

Act, 1881, Section 58C of the Reserve Bank Of India Act, 1934, Section 105A of the Insurance Act, 1938, Section 34 of Drugs and Cosmetics Act, 1940, Section 9AA of Central Excise Act, 1944, Section 46 (5) of the Banking Regulation Act, 1949, Section 30 of the Telecom Regulatory Authority of India Act, 1997, Section 24 of the Securities Contracts Regulations Act, 1956.

37. However, as noted earlier the liability of the directors to refund the money in the instant matter is not flowing from Section 27 of SEBI Act, therefore, the defences mentioned or the roles or the specific acts mentioned in Section 27 are not sina qua non for the liability created under Section 73(2) read with Section 5 of the Companies Act,1956.

ISSUE NO. II (3): Whether cause of action under section 73(2) and under Section 62(1) survive the demise of Sh. Y.N.Saxena, If it survives, the extent of liability of Legal Representatives of Sh. Y.N.Saxena.

38. The answer to the issue depends on the answer to the following two sub issues. They are (i) whether the cause of action in the present proceedings are personal in nature in view Section 306 Indian Succession Act? and (ii) whether the present proceedings abates on the demise of Shri Y. N. Saxena, irrespective of whether the right of action is personal in nature, as the same was not initiated against him while he was alive or as the right of enforceable action has not materialised before his demise?

39. The LRs contended that Section 306 of the Indian Succession Act is not applicable in the present case but applies only in the cases of ‘torts’. No case law was cited by the LRs in support of their contention that Section 306 of the Indian Succession Act is applicable only in respect of torts. However, the analysis of the provisions of Section 306 would show that the provision is applicable to torts also and not exclusively to torts. The provision covers “All demands whatsoever and all rights to prosecute or defend any action or special

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL proceeding” for the purpose of stipulating that those covered in Section 306 survive the death of the person and carves out two exceptions of cases which do not so survive the death of the persons. The first exception is cause of action for defamation, assault, as defined in the Indian Penal Code, 1860 (45 of 1860) or other personal injuries not causing the death of the party. The second exception is cases where, after the death of the party, the relief sought could not be enjoyed or granting it would be nugatory. The first exception is for cause of action which are essentially in the nature of tort. This exempted category of actions which is essentially in the nature of tort as stipulated in the provision does not survive the death of the person. Therefore, Section 306 of succession Act covers torts also by stipulating those categories of torts which do not survive the death of the person. The second category of exempted cases are those which are from the perspective of relief and whether such relief cannot be enjoyed by the party to whom the said relief is granted or granting of the relief is nugatory. Once those category of cases are exempted, the sweep of section 306 of Succession Act is broader and covers “all demands whatsoever and all rights to prosecute or defend any action or special proceeding existing in favour of or against a person at the time of his decease”. The inclusion of the word ‘special proceedings’ further reiterates the applicability of the provisions to liability of the nature enforced or defended in the present proceedings.

40. When it comes to the survival of cause of action in respect of liability to pay compensation under Section 62(1) of the Companies Act is concerned, what needs to be seen is the application of the parameters laid down in the section 306 of the Indian Succession Act. If such parameters are applied, the question would arise whether cause of action for enforcing the liability under section 62(1) is for defamation, or assault or other personal injuries not causing the death of the party or where, after the death of the party as exempted under Section 306 of the Indian Succession Act. Invariably, the answer to the question is in the negative. Therefore, what needs to be applied is the other

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL parameter i.e., whether after the death of the party, the relief sought could not be enjoyed or granting it would be nugatory. In the present case, the relief directed can very well be received by the investors whose money has been collected illegally.

41. Even if for a moment, it is considered that the entire sweep of Section 306 is restricted only to the torts, the cause of action envisaged under section 73(2) of the Companies Act, is essentially a statutory strict liability, as the section creates a statutory duty the failure of which gives rise to the strict liability to repay along with interest. The Law commission of India, in its first report while quoting Lord Wright observed as follows, “Breach of statutory duties, which gives rise to liability analogous to torts is treated as a group of torts which are sui generis”. Further, as the liability under Section 73(2) and 62(1) of the Companies Act, 1956 springs from the breach of statutory duties the same are in the nature of ‘statutory torts’. Therefore, even on the basis of arguments that the Section 306 covers torts alone, the present action in respect of the legal representatives is supported under section 306 of the Succession Act.

42. The difference in tort which is also a breach of duty imposed by law or statutory tort of this nature is in the enforcement. In a typical scenario, the enforcement of breach of duty in torts based on common law is through private enforcement of cause of action for damages. However, in case of public law breach of statutory duty, for instance as in the case of section 73(2) of the Companies Act, 1956, though the statutory obligation is imposed by the statute, the enforcement of the same is entrusted to the public law functionaries, as in this case to SEBI. However, the difference in enforcement of the rights through private enforcement of law in the case of common law torts and public law enforcement is not a relevant distinction from the perspective of succession of cause of actions, as the said principles laid down in section 306 of the Succession Act is not based on the forum of enforcement but based on different parameters such as, whether cause of action is for defamation, or Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL assault or other personal injuries not causing the death of the party and where, after the death of the party, the relief sought could not be enjoyed or granting it would be nugatory and not on the basis of whether the cause of action is enforced through private law as in the case of tort (excluding constitutional tort) or through public enforcement. Therefore, the argument that the section 306 of Succession Act is applicable only to the case of ‘Tort’ and not to the statutory violations such as the impugned provisions of law under the Companies Act,1956 is not sustainable.

43. The LRs also supported their argument stating that in statutory proceedings of this nature, the cause of action against Shri Y N Saxena has abated by relying upon the judgment passed in Shabina Abraham vs. CCE & Customs: (2015) 10 SCC 770. I note that the said judgment decides on whether there is any machinery provision in the Central Excises and Salt Act for continuing the assessment proceedings against a dead person’s legal heirs. The Hon’ble Apex court also held in the above judgment that there is no machinery provisions in the following words “It is clear on a reading of the aforesaid paragraph that what revenue is asking us to do is to stretch the machinery provisions of the Central Excises and Salt Act, 1944 on the basis of surmises and conjectures. This we are afraid is not possible”. The importance of clear machinery provisions in the taxing statute is essential as the Constitution of India dealing with imposition and collection of tax states in Article 265 in the following words; “No tax shall be levied or collected except by authority of law”. It is clear that the provisions of law should be present to support the levy as well as the collection of tax. I note without the “machinery provisions” there is no authority of law to collect taxes from the legal heirs. Hon’ble Supreme Court in the final paragraphs of the judgment quoted the essence of interpreting the taxing statutes, in the following words.

“In Cape Brandy Syndicate v. IRC, (1921) 1 KB 64 at 71, Rowlatt J. laid down:

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL “In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”

33. This Court has, in a plethora of judgments, referred to the aforesaid principles. Suffice it to quote from one of such judgments of this Court in Commissioner of Sales Tax Commissioner, Uttar Pradesh v. Modi Sugar Mills, 1961 (2) SCR 189 at 198:- “In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any assumed deficiency.”

44. The principles laid down by the Hon’ble Supreme court that without machinery provisions the tax to be paid by the deceased person cannot be collected from the legal heirs is applicable to the taxing statutes. The Hon’ble Supreme court observed that the decision of Girja Nandini Devi & Ors. v. Bijendra Narain Choudhury, [1967] 1 S.C.R. 93 and Shri Rameshwar Manjhi (deceased) through his son Shri Lakhiram Manjhi v. Management of Sangramgarh Colliery & Ors., (1994) 1 SCC 292 cited in support of “the general principle that an action begun in a court of law by a person does not cease with his death” has no direct bearing on the subject matter in controversy, i.e, the tax liability of the deceased person dischargeable and collectable from the legal heirs.

45. However, the instant proceedings are not in the nature of tax liability. Therefore, the ratio laid down in the Shabina Abraham vs. CCE & Customs is not attracted to the facts of this case. There is yet another reason to hold that Section 306 of the Succession Act is applicable in the present case. Perusal

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL of Section 32 of SEBI Act states that the provisions of SEBI Act is in addition to provisions of any other law for the time being in force. The provisions of the Section 306 of the Succession Act is “any other law for the time being in force”. Therefore, I hold principles embodied in Section 306 of the Indian Succession Act is applicable to the present proceedings. In view of this, the next question that arises for consideration is whether the cause of action under section 73(2) and 62(1) of the Companies Act is personal in nature.

46. On the question of which causes of action survive and which abate I reiterate and place reliance on the decisions of various Courts which are reproduced hereunder: 46.1. The Hon’ble Supreme Court in the matter of Melepurath Sankunni Ezhuthassan Vs Thekittil Gopalankutty Nair, (1986 AIR 411) observed as follows:- “......So far as this country is concerned, which causes of action survive and which abate is laid down in section 306 of the Indian Succession Act, 1925, which provides as follows: 306. Demands and rights of action of or against deceased survive to and against executor or administrator. – All demands whatsoever and all rights to prosecute or defend any action or special processing existing in favour of or against a person at the time of his decease, survive to and against his executors or administrators; except causes of action for defamation, assault as defined in the Indian Penal Code, or other personal injuries not causing the death of the party; and except also cases where, after the death of the party, the relief sought could not be enjoyed or granting it would be nugatory............ …Section 306 further speaks only of executors and administrators but on principle the same position must necessarily prevail in the case of other legal representatives, for such legal representatives cannot in law be in better or worse position than executors and administrators and what applies to executors and administrators will apply to other legal

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL representatives also.” 46.2. In an earlier judgment in Girijanandini Vs Bijendra Narain [1967 SCR (1) 93], Hon’ble Supreme Court observed that “......The maxim ‘actio personalis moritur cum persona’ -a personal action dies with the person has a limited application. It operates in a limited class of actions ex delicto such as actions for damages for defamation, assault or other personal injuries not causing the death of the party......” 46.3. The Hon’ble Supreme Court had another occasion to deal with the meaning of the words “other personal injuries not causing the death of the party” in M. Veerappa Vs Evelyn Sequeira & Ors (1988 AIR 506). In the said case Hon’ble Supreme Court made a reference to the Full Bench decision of the Madras High Court in Rustomji Dorabji v. W.H. Nurse, (1921) ILR 44 Mad 357 wherein Trotter, J. speaking for himself and Ayling, J. set out the law as follows.

“We are therefore driven to the conclusion that the Act must be supposed to have envisaged a logically coherent class of causes of action, and that result can only be achieved by construing ‘personal injuries’ as meaning not ‘injuries to the body’ merely, but injuries to the person in Blackstone's sense, other than those which either cause death or tangible affect the estate of the deceased injured person or cause an accretion to the estate of the deceased wrong doer. In effect, we think that the words which we have to construe are ejusdem generis not merely with the last preceding word ‘assault’, but with the two preceding words ‘defamation’ and ‘assault” 46.4. In its concluding remarks, the Hon’ble Supreme Court in M. Veerappa vs Evelyn Sequeira & Ors, (1988 AIR 506) observed that “.....Thus it may be seen that there is unanimity of view among many High Courts in the country regarding the interpretation to be given to the words ‘other personal injuries not causing the death of the party’ occurring in Section 306 of the Indian Succession Act and that the contrary view taken by the Calcutta & Rangoon HighCourts in the solitary cases referred to above has not commended itself for acceptance to any of the other High

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

Courts. The preponderant view taken by several High Courts has found acceptance with this Court in its decision in Melepurath Sankunni Ezhuthassan's case.....” 46.5. In subsequent case of Smt. Yallawwa Vs. Smt. Shantavva on October 08, 1996, (MANU/SC/0016/1997) the Hon’ble Supreme Court endorsed its earlier view and held that “......Save and except the personal cause of action which dies withe the deceased on the principal of ‘actio personal is moritur cum persona,’ i.e. a personal cause of action dies with the person, all the rest of causes of action which have impact on proprietary rights and socio legal status of the parties cannot be said to have died with such a person......”

47. In the above context, it needs to be seen whether cause of action in the present proceedings is for defamation, or assault or other personal injuries not causing the death of the party and where, after the death of the party, the relief sought could not be enjoyed or granting it would be nugatory. The investors in a public issue like this have already parted with their money to the SICCL. The collection of the money has already been determined and is not disputed by the LRs. Section 73(2) of the Companies Act lays down when a director has to repay the money to the investors along with the interest. The liability to repay the investors is not in results of any injury caused to the “person” of the investors. Instead the liability arises as the investors have parted their ‘property’ in the form of money to the Company. Therefore, the liability for repayment by the director cannot be considered as arising out of injury to the ‘person’ of the investor as the same is arising out of the ‘property’ of the investors. Therefore, I hold that the cause of action under section 73(2) of the Companies Act is not a personal cause of action which dies with the person. It is a cause of action which has impact on proprietary rights of the investors. The relief of repayment can also be enjoyed by the investors and their legal representatives. Therefore, the cause of action under section 73(2) of the Companies Act does not fall under the exception clauses mentioned in Section

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

306 of the Indian Succession Act and therefore, survives the demise of Shri Y N Saxena.

48. Coming to the question of whether the cause of action under section 62(1) of the Companies Act, 1956 is personal in nature and therefore falling within the exception clauses of Section 306 of the Indian Succession Act. In this regard, I find it appropriate to rely and refer to the decision of Hon’ble Bombay High court in Kisan Mehta and Ors. Vs. Universal Luggage Manufacturing Co. Ltd. and Ors. (Decided On: 29.01.198). In the said case an action for compensation was raised for the violation of Section 62(1). The Hon’ble High Court observed that the action for compensation for the misrepresentation in the prospectus under section 62(1) of the Companies Act,1956 “is founded plainly on the principle involved in the "tort of deceit". It further observed that “In the present case, the plaintiffs themselves cannot have any cause of action based on the "tort of deceit" as plaintiff in the said case was not “subscriber”. It may be noted that the present cause of action is not for adjudging a right arising out of ‘tort of deceit’. The remedy for tort of deceit, if any, is elsewhere before the courts. The present proceedings are for enforcing the statutory liability of directors under section 62(1) of the Companies Act. In this context, the following passage of Hon’ble Supreme court in case of N.P.Ponnuswami v. Returning Officer, Namakkal; 1952 AIR 64, is apposite for reproduction.

“It is now well-recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by the statute only must be availed of. This rule was stated with great clarity by Willes J. in Wolverhampton New Water Works Co. v. Hawkesford [1859] 6 CB (NS) 336, at page 356, in the following passage:

'There are three classes of cases in which a liability may be established founded upon statute. One is, where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL peculiar form of remedy different from the remedy which existed at common law; there, unless the statute contains words which expressly or by necessary implication exclude the common law remedy, the party suing has his election to pursue either that or the statutory remedy. The second class of cases is, where the statute gives the right to sue merely, but provides no particular form of remedy; there, the party can only proceed by action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it...... The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to.'"

49. I note as observed by the Hon’ble High court in Kisan Mehta’s case the compensation for the misrepresentation in the prospectus under section 62(1) of the Companies Act,1956 “is founded plainly on the principle involved in the "tort of deceit". Since Section 62(1) the Companies Act,1956 provides for a statutory remedy of compensation and SEBI is the administering authority for the said Section by virtue of section 55A of the Companies Act,1956, the question of whether such statutory liability, founded plainly on the principle involved in the "tort of deceit", survives the death of Shri Y. N. Saxena can be considered on the application of the principles of Section 306 of the Indian Succession Act. Firstly, it may be seen, whether untrue and false statements in the prospectus is in the nature of ‘personal injuries’ to the shareholders. I note that the since the subscription was made by the subscribers to the issue on the basis of misrepresentation, the allottees have parted their property in the form of subscription money to SICCL on the strength of false and untrue statements made by entities including Shri Y. N. Saxena who was one of the signatories/authorizing persons of the Prospectus. Therefore, I find that the cause of action under section 62(1) of the Companies Act,1956 cannot be Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL considered as “personal injuries” and can be considered as proprietary in nature. The relief of repayment can also be enjoyed by the investors and their legal representatives. Therefore, the cause of action under section 62(1) of the Companies Act does not fall under the exception clauses mentioned in Section 306 of the Indian Succession Act and therefore, survives the demise of Shri Y N Saxena.

50. There is yet another reason why the cause of action in the present case i.e. liability of Sh. Y N Saxena survives his death. Hon’ble Supreme Court in catena of cases has held that the Directors owe a fiduciary duty to the company/securites holders and the powers of the directors are fiduciary in nature. In essence the wielder of fiduciary duty is required to act for the benefit of the other as in this case for the company and therefore, by virtue of their fiduciary duty is obligated to cause benefits to the Company and not to harm the Company. The observation of the Hon’ble Supreme court while dealing with fiduciary duties of the director in Dale and Carrington Invt. P. Ltd. vs P.K. Prathapan And Others on 13 September, 2004 is relevant in this context.

“At this stage it may be appropriate to consider the legal position of Directors of companies registered under the Companies Act. A company is a juristic person and it acts though its Directors who are collectively referred to as the Board of Directors. Whatever decisions are taken regarding running the affairs of the company, they are taken by the Board of Directors. The Directors of companies have been variously described as agents, trustees or representatives, but one thing is certain that the Directors act on behalf of a company in a fiduciary capacity and their acts and deeds have to be exercised for the benefit of the company. They are agents of the company to the extent they have been authorized to perform certain acts on behalf of the company. In a limited sense they are also trustees for the shareholders of the company. To the extent the power of the Directors is delineated in the Memorandum and Articles of Association of the company, the Directors are bound to act accordingly. As agents of the company they must act within the scope of their

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL authority and must disclose that they are acting on behalf of the company. The fiduciary capacity within which the Directors have to act enjoins upon them a duty to act on behalf of a company with utmost good faith, utmost care and skill and due diligence and in the interest of the company they represent. They have a duty to make full and honest disclosure to the shareholders regarding all important matters relating to the company. It follows that in the matter of issue of additional shares, the directors owe a fiduciary duty to issue shares for a proper purpose. This duty is owed by them to the shareholders of the company.”

51. The fiduciary duty of disclosures requires the directors not to make false or untrue statements to its shareholders/prospective shareholders. It has already been held that Shri Y. N. Saxena was responsible for false and untrue statement in the prospectus thereby the fiduciary duty reposed on the securities holders have been breached by him. The liability to compensate the securities holders is nothing but the recognition of their fiduciary liability to the shareholders and the consequence of their failure to comply with their fiduciary duty.

52. The Hon’ble Supreme court in Official Liquidator vs. Parthasarathi Sinha and Ors, AIR1983SC188 in respect of abatement of liability based on fiduciary relationship held as follows “The liability arising under the misfeasance proceedings is founded on the principle that a person who has caused loss to the Company by an act amounting to breach of trust should make good the loss”. “...Whenever there is a relationship based on contract, quasi-contract, some fiduciary relation or a failure to perform a duty, there is no abatement of the liability on the death of the wrong-doer”. The ratio laid down by the Hon’ble Supreme court would further show that even without recourse to the Section 306 of the Indian Succession Act, even under the provisions of the Companies Act, the breach of fiduciary duties of the directors resulting in loss to the securities holders survives the death of the director.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

53. Having rendered finding on this, I proceed to consider whether the present proceedings abates on the demise of Shri Y. N. Saxena, irrespective of whether the right of action is personal in nature, as the same was not initiated against him while he was alive or as the right of enforceable action has not materialised before his demise.

54. The LRs cited case laws for substantiating an argument that the proceedings initiated after the death of the person have to mandatorily abate, as if the question of whether a particular proceeding does abate or does not abate arises only when the proceedings have been initiated against a person while he is alive and the death of the person happens when the proceedings are pending against him. It is also argued that in cases where the proceedings have been initiated and subsequently the person dies before a decree/finding is given against him or in his favour, the suit has to mandatorily abate. In support of this proposition, they quoted the judgment of Meleurath Sankunni Ezhuthassan vs. Thekittil Gopalankutty Nair: (1986) 1 SCC 118. As per their argument, the Hon’ble Apex Court has categorically held in Para 9 of the Judgment that when there is no decree given by the Court in a Civil Suit, and the Plaintiff dies prior to that the cause of action abates. But in a case, where a decree is given and he dies, only then the suit and its resultant appeal continues. Noticee argued that this finding gets amplified when applied to quasi judicial proceedings and quoted in support of that proposition judgment rendered by Hon’ble SC in Smt. Lila Vati Bai vs. State of Bombay: 1957 AIR SC 521.

55. Based on that, Noticees contended that the proceedings of SEBI should be pending at the time of death of Sh. Y.N. Saxena. In essence, it further contented that the right of enforceable action should have materialised before the death of Sh. Y.N. Saxena i.e., there must be a decree/finding before his death; and if this right has not materialised before the death of the individual, then, notices/proceedings/ notifications against the said dead person are null

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL and void.

56. I have perused the judgment passed by Honble Apex court in Meleurath Sankunni Ezhuthassan. The original suit was filed by the appellant for defamation. The said suit was dismissed and on appeal before the District Court the appeal was allowed. The second appeal filed against this was allowed by the Hon’ble Kerala High court and reversed the decree passed by the District court. Thereafter, an appeal was filed by the legal heirs challenging the decision of the Kerala High court.

57. It may be kept in mind the subject matter of the suit in that case is claim of damages for defamation. Section 306 of the Indian Succession Act, 1925 clearly states that the right to prosecute or defend any action existing in favour of or against a person at the time of his decease, survive to and against his executors or administrators except causes of action for defamation. In the context of subject matter of defamation, the Apex court observed “Where a suit for defamation is dismissed and the plaintiff has filed an appeal, what the appellant-plaintiff is seeking to enforce in the appeal is his right to sue for damages for defamation and as this right does not survive his death, his legal representative has no right to be brought on the record of the appeal in his place and stead if the appellant dies during the pendency of the appeal. The position, however, is different where a suit for defamation has resulted in a decree in favour of the plaintiff because in such a case the cause of action has merged in the decree and the decretal debt forms part of his estate and the appeal from the decree by the defendant becomes a question of benefit or detriment to the estate of the plaintiff-respondent which his legal representatives is entitled to uphold and defend and is, therefore, entitled to be substituted in place of the deceased respondent-plaintiff”.

58. Firstly, the case deals with a situation where right of action has been agitated by plaintiff and he lost his case and therefore, no decree was passed in his

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL favour as the Hon’ble High Court has reversed the decree passed by the District Court. Therefore, the Hon’ble Apex Court held that when an appeal is filed by that person or LRs before the Hon’ble Supreme Court, the LRs are seeking to enforce in the appeal, their right to sue for damages for defamation and this right does not survive his death. In respect of the position where a decree for defamation has not been passed, when the plaintiff was alive, and there is a death of the party, the right to action does not survive applies only to defamation cases which in any case does not survive and the same does not apply to every case as a general rule as incorrectly argued by the Noticees. However, it may be seen even in such case of defamation which is essentially personal in nature, the Apex court observed, if the decree has been obtained by plaintiff then, in such case the action survives because the cause of action has merged in the decree and therefore, the legal representatives of plaintiff can defend the decree as the decree becomes a question of benefit or detriment to the estate of the plaintiff. In essence, the observation of the Hon’ble Apex court is that even in defamation cases the cause of action survives the death of the person if a decree has been passed in his favour. This ratio does not support, as incorrectly argued by the LRs, the position that as the proceedings should abate as no finding has been rendered while Sh. Y.N. Saxena was alive irrespective of whether the same is personal in nature or not.

59. I have also perused the judgment of Dassumal Ramrakhiomal & Ors. vs. Mahomed Bux Amir Baksh & Ors.: AIR 1937 Sind 208, cited in support of the submission that if the "right to action" had not materialized was not acted upon before the death of the Noticee, any proceedings initiated after his death against him would be a nullity in law. I observe that in effect the principle laid down in Chapman v. Day (1883) 48 L.T. 907 was quoted in Dassumal Ramrakhiomal. The said observation of Lopes, J. is “It is said that the defendant having died, the maxim of actio personalis moritur cum persona applies. I think it does not apply in such a case as this. I think "action" means

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL "right of action", and if that is the true way of looking at it, the right of action here had been determined before the death of the defendant.”

60. The basis of the said opinion is that if the right of action has been determined already before the death of the concerned person, actio personalis moritur cum persona does not apply for the simple reason that the concerned person was a party alive at the time of determination of his rights. It does not lay down any proposition that the proceedings cannot be initiated after the death of the person, for final determination of rights against him arraying his legal representatives as Noticees. If the LRs proposition is accepted no proceedings can be initiated to enforce a cause of action/right of action against the deceased person making LRs as representatives, after the death of the person. However, Dassumal Ramrakhiomal’s case does not provide support for the said proposition of the LRs.

61. In respect of the argument that the proceedings should be pending before the death of the person and therefore, no proceedings can be initiated after the death of the person, the LRs argued that “This case and no other case cited by the SEBI deal with a situation where a proceeding was instituted after the death of the individual” and further quoted Smt. Lila Vati Bai vs. State of Bombay: 1957 AIR SC 521 in support of their contention that proceedings against a dead person is a nullity in law. I note firstly the observation in Smt. Lila Vati Bai’s case relates to an aspect whether an order “against” dead person can be passed. The said case does not deal with a situation of whether proceedings can be initiated after the death of a person. It is apposite to make a distinction between two aspects. One is whether any proceedings can be initiated “against” a dead person. The other is whether any proceedings can be initiated “after” the death of a person. Any citation in support that proceedings cannot be initiated “against” a dead person does not hold good to support the contention that proceedings cannot be initiated “after” the death of a person. Smt. Lila Vati Bai’s case deals with the situation of whether any

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL proceedings can be initiated “against” a dead person and not on the point of whether any proceedings can be initiated “after” the death of a person. Therefore, Smt. Lila Vati Bai’s case does not support the contention of the LRs that no proceedings can be initiated after the death of the person.

62. The plain reading of Section 306 of the Indian Succession Act as interpreted by Hon’ble Supreme court in Girijanandini Vs Bijendra Narain [1967 SCR (1) 93], clearly states ‘Demands and rights of action of or against deceased survive to the legal representatives except the excluded categories’. There is no limitation that Section 306 applies only in cases where the steps in furtherance of the exercise of the rights of action against the deceased person should have been taken while he was alive. Therefore, I hold that proceedings in furtherance of rights of action can be taken after the death of such person against the legal representatives in their capacity as legal representative.

63. Therefore, I find in the negative on the issue of whether the proceedings which are not initiated against a person while he was alive or the right of enforceable action have not materialised before the death of an individual, i.e., by decree/finding before the death of the person, abates on the death of the person irrespective of whether the right of action is personal in nature. In view of this, I find that the argument of the LRs that the proceedings in the form of SCN has to be initiated before the death of Shri Y. N. Saxena or that the action against the legal representatives cannot be sustained as no finding against Shri Y. N. Saxena has been rendered by SEBI before his demise as unsustainable.

64. Therefore, I hold that the legal representatives of Shri Y. N. Saxena are liable in their capacity as legal representatives, to refund the money collected alongwith interest @ 15% through the issuance of OFCDs during the tenure of Shri Y N Saxena. However, this liability is limited to the extent of the value of assets so inherited including the value of assets transferred after inheritance

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL by the LRs. It is also clarified that the liability to refund the investors with interest in the present proceeding qua the LRs of Late Sh. Y.N. Saxena is joint and several with all the officers-in-default mentioned vide order dated October 31, 2018.

65. In summary I find that: - 65.1. (a) Order dated 31.10.2018 did not finally adjudicate the issues or finally determine the liability qua Late Sh. Y. N. Saxena but was effectively in the nature of a SCN to LRs of Late Sh. Y.N. Saxena. Thus, the present proceedings are not against a deceased person but against the Legal heirs of Late Sh. Y. N. Saxena in their capacity as his Legal Representatives.

(b) Non representation in the proceedings subsequent to SCN dated February 20, 2015 and prior to service of the order dated October 31, 2018 which is in the nature of SCN qua the noticees, does not vitiate the present proceedings in view of the subsequent representation of the legal representatives for the purpose of representing their case as the factum of the death of Late Sh. Y.N. Saxena was not brought on record at the time of issuance of SCN dated February 20, 2015. In the order dated October 31, 2018, opportunity is provided to the LRs and accordingly LRs have participated in the present proceedings. Thus, principles of natural justice have been followed in the present case.

65.2. SICCL came out with the Offer of OFCDs. The said OFCD issue opened on July 6, 1998 and closed on June 30, 2008, and during the financial years 1998-2009, SICCL through the Offer of OFCDs, had collected an amount of at least Rs. 14,106 Crores from various allottees. The said Offer of OFCDs was in violation of Section 56, Section 62, Section 73 and section 117C of the Companies Act, 1956.

a) Late Sh. Y. N. Saxena was a Director in SICCL from December 22, 1998 to November 30, 2012. As no material is brought on record to show that Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL any of the officers set out in clauses (a) to (c) of Section 5 of Companies Act, 1956 or any specified director of SICCL was entrusted to discharge the obligation contained in Section 73 of the Companies Act, 1956, as per Section 5(g) of the Companies Act, 1956, Late Sh. Y.N. Saxena, along with other directors of SICCL, was also an officer in default and is liable to make refund, jointly and severally, along with interest at the rate of 15 % per annum, under section 73(2) of the Companies Act, 1956, for money collected during his tenure as Director of SICCL.

b) Late Sh. Y. N. Saxeena was a signatory/authorising person to the RHP and Prospectus. Since he has given his consent to the RHP/Prospectus, he is liable for violation of Section 62 of Companies Act, 1956 for the misstatement and untrue statements in the RHP/Prospectus. Since the subscription was made by the subscribers to the issue on the basis of misrepresentation, without the benefit of required disclosures, the entire subscription money is to be considered as loss incurred by the subscribers. Therefore, it was a liability of Sh. Y.N.Saxena to pay back the loss of subscribers to OFCDs with 15% interest, along with other noticees mentioned in the order dated October 31, 2018 in this regard.

c) The current proceedings are in respect of a liability to refund the money illegally collected from the investors which is not in the nature of punishment or penalty. Section 73(2) of the Companies Act, 1956 shows that the basis of refund liability prescribed against the directors is in the nature of strict liability in case of failure of company to refund forthwith the money collected.

d) The cause of action under Section 73(2) and 62(1) of the Companies Act is not a personal cause of action which dies with the person. It is a cause of action which has impact on proprietary rights of the investors. The relief of repayment can be enjoyed by the investors and their legal

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL representatives. Therefore, the cause of action under Section 73(2) and 62(1) of the Companies Act does not fall under the exception clauses mentioned in Section 306 of the Indian Succession Act and therefore, survives the demise of Sh. Y. N. Saxena.

e) Section 306 of Indian Succession Act, 1925 which deals with the survival of cause of action is applicable to torts also and not exclusively to torts and the same applies to the present proceedings for enforcing the statutory liability. Further, the liability under Section 73(2) and 62(1) of the Companies Act, 1956 are in the nature of ‘statutory torts’.

f) Lack of knowledge on the part of the LRs that Late Sh.Y.N. Saxena was a director in SICCL will also not vitiate the present proceedings since there is uncontroverted documentary evidence from the records of MCA reflecting Late Sh. Y.N. Saxena was a Director during the period in which the impugned OFCDs were issued.

g) The creation of liability on the officers in default to repay the money with interest is nothing but the recognition of their fiduciary liability to the securities holders and the consequence of their failure to comply with their fiduciary duty. The fiduciary duty of disclosures also requires the directors not to make false or untrue statements to its security holders/prospective security holders. Whenever there is a relationship based on contract, quasi-contract, some fiduciary relation or a failure to perform a duty, there is no abatement of the liability on the death of the wrong-doer. Therefore, the cause of action survives on this ground as well to the extent of inheritance.

h) The LRs of Late Sh. Y. N. Saxena are liable in their capacity as legal representatives of the deceased, to refund the money collected through the issuance of OFCDs during the tenure of Sh. Y. N. Saxena to the extent of the assets inherited by the LRs from Late Sh. Y. N. Saxena.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

66. In view of the aforesaid observations and findings, I, in exercise of the powers conferred under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(4), 11A and 11B of the SEBI Act, hereby issue the following directions, without prejudice to the force and effect of directions issued in respect of other entities mentioned in the order dated October 31, 2018: a) Legal Representatives of Late Sh. Y.N.Saxena, in discharge liability under section 73(2) of Companies Act,1956, jointly and severally with SICCL and other directors as per the Order dated October 31, 2018, forthwith refund the money collected by the Company through the issuance of OFCDs including the application money collected from investors, pending allotment of securities, if any, with an interest of 15% per annum, from the eighth day of collection of funds, upto the extent of the assets inherited, to the investors till the date of actual payment to the extent of assets inherited by the LRs. b) Legal Representatives of Late Shri Y.N.Saxena, in discharge liability under section 62 of Companies Act,1956 are, jointly and severally with SICCL and other directors as per the Order dated October 31, 2018, directed to deposit the money collected by the Company through the issuance of OFCDs along with the interest on the foresaid amount calculated with an interest of 15% per annum, from the eighth day of collection of funds, till the date of actual payment, in an Escrow Account opened with a nationalized Bank, upto the extent of the assets inherited by them. Legal Representatives of Late Shri Y.N. Saxena are directed to compensate from the said deposit, the investors in accordance with their subscription money along with interest. c) The repayments and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order both of which should be crossed as “Non-Transferable”. d) Legal Representatives of Late Shri Y.N.Saxena are directed to provide a full inventory of all the assets and properties including details of all the bank

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL accounts, demat accounts and holdings of mutual funds/shares/securities, if held in physical form and demat form, inherited from Late Shri Y.N.Saxena. e) Legal Representatives of Late Shri Y.N.Saxena are jointly and severally with SICCL and other directors mentioned in the order dated October 31, 2018, directed to issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily with wide circulation, detailing the modalities for refund, including the details of contact persons such as names, addresses and contact details, within 15 days of this Order coming into effect. f) After completing the aforesaid repayments, Legal Representatives of Late Shri Y.N.Saxena, shall file a report of such completion 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 has been categorized so by the Institute of Chartered Accountants of India ("ICAI") holding such certificate. g) In case of failure of Legal Representatives of Late Shri Y.N.Saxena to repay as per applicable law as per the aforesaid applicable directions, SEBI, on the expiry of three months period from the date of this Order may recover such amounts to the extent of assets inherited by the Legal Representatives from Sh. Y. N. Saxena in accordance with section 28A of the SEBI Act including such other provisions contained in securities laws.

67. The above directions shall come into force with immediate effect.

68. It is made clear that in case of complete discharge of liability by Legal Representatives of Late Shri Y.N.Saxena pursuant to any one of directions at paragraphs 66(a) or 66(b), it would result in discharge of their liability mentioned in both the paragraphs.

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL

69. The Order shall be sent to the Legal Representatives of Late Shri Y.N.Saxena. Copy of this Order shall be forwarded to the recognised Stock Exchanges, Depositories and Registrar and Transfer Agents for information and necessary action.

70. 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.

JANUARY 21, 2020 MADHABI PURI BUCH PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in respect of Legal Representatives of Late Shri Y.N.Saxena in the matter of SICCL