Order in respect of Greater Kolkata Infrastructure Limited ;

WTM/PS/69/ERO/FEB/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 in respect of - (1) Greater Kolkata Infrastructure Limited; its Directors, (2) Mr. Subir Dutta, (3) Mr. Nakhat Sing Agarwalla and (4) Mr. Bimalendu Rakshit; and its Debenture Trustee, (5) Mr. Bimalendu Rakshit, (6) Mr. Sujay Roy Choudhury and (7) Smt. Sherrie Lal Vasdev

Date of personal hearing : August 07, 2014 Appearance : For the noticees : Mr. Bichitra Nanda Muni, Advocate For the Securities and Exchange Board of India : 1. Ms. Anitha Anoop, Deputy General Manager 2. Mr. T. Vinay Rajneesh, Assistant General Manager 3. Mr. Sumit Sarraf, Assistant Manager

1. Securities and Exchange Board of India (hereinafter referred to as "the SEBI") had received references dated October 12, 2012 and October 26, 2012 from the Office of the Director, Bureau of Investigation (E.O.), Guwahati, Assam, inter alia stating that the company, Greater Kolkata Infrastructure Limited (hereinafter referred to as "the Company" or "GKIL") has issued Non- Convertible Redeemable Debentures to the public without permission from SEBI.

2. On receipt of such reference, SEBI initiated an examination into the affairs relating to the issue of securities by the Company. During the preliminary examination, SEBI inter alia observed/found that - (a) The Company (CIN No. U45400WB2009PLC138699) was incorporated on October 05, 2009 with the RoC, Kolkata, West Bengal. (b) The registered office of the Company was at 22/2, Gariahat Road, Kolkata – 700029, West Bengal, India.

(c) The Directors of the Company are Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit. (d) The Company has invited subscription for its Secured Non-convertible Redeemable Debentures ("NCDs") and that the Company claimed that it made its offer of NCDs to “only to the registered member of the Calcutta Government Employee's Shelter and Welfare Association, a registered association under the provisions of West Bengal Society Registration Act, 1961 … on purely Private Placement Basis”. (e) Since its incorporation, the Company had issued NCDs to a large number of investors, as per details below: No. of Total Amount (`in Year Type of Security Subscribers to Crores) the Issue 2009 – 10 Secured Non – Convertible Redeemable Debenture 5,356 1.02 2010 – 11 Secured Non – Convertible Redeemable Debenture 4,198 5.77 2011 – 12 Secured Non – Convertible Redeemable Debenture 529 2.21 Total 10,083 9.00 (f) As the Company had allotted the aforesaid securities to more than 49 investors, its offer and issue of NCDs was deemed to be a public issue of such securities in terms of the first proviso to section 67(3) of the Companies Act, 1956. The Company had to therefore comply with the provisions of sections 56, 60 read with section 2(36), 73, 117B and 117C of the Companies Act and the provisions of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 ("the ILDS Regulations"). It appeared that the Company failed to comply with such statutory provisions in respect of its offer and issue of NCDs. (g) The Company had also not complied with the provisions of sections 117B (appoint a debenture trustee) and 117C (creation of a debenture redemption reserve) of the Companies Act, 1956. In this regard, it was also observed that the Company had appointed Mr. Bimalendu Rakshit, Mr. Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev as its Debenture Trustees. However, the said persons did not prima facie satisfy the eligibility criteria specified under the SEBI (Debenture Trustees) Regulations, 1993 ("the DT Regulations") and therefore had acted as unregistered debenture trustees in violation of section 12(1) of the SEBI Act read with the DT Regulations.

3. In order to protect the interest of investors, to ensure only legitimate fund raising activities are carried on by the Company and to prevent the Company from further carrying on with its fund mobilizing activity under its offer of NCDs, SEBI passed an ex-parte interim Order dated May 30, 2014 (hereinafter referred to as "the SEBI Order"), wherein the following directions were issued against the Company, its directors and persons named as debenture trustees: " ........................... 13. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11, 11(4), 11A and 11B of the SEBI Act read with the Debt Securities Regulations and the Debenture Trustee Regulations, hereby issue the following directions – i. GKIL shall not mobilize funds from investors through the issue of Secured Non–Convertible Redeemable Debentures or through the issuance of equity shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions; ii. GKIL and its Directors, viz. Shri Subir Dutta, Shri Nakhat Sing Agarwalla, Shri Bimalendu Rakshit, are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, till further orders; iii.

GKIL shall provide a full inventory of all its assets and properties; iv. GKIL and its abovementioned Directors shall not dispose of any of the properties or alienate or encumber any of the assets owned/acquired by that company through the issue of Secured Non– Convertible Redeemable Debentures, without prior permission from SEBI; v. GKIL and its abovementioned Directors shall not divert any funds raised from public at large through the issue of Secured Non–Convertible Redeemable Debentures, which are kept in bank account(s) and/or in the custody of GKIL; vi. GKIL shall produce proof for its claim (made vide letter dated October 1, 2013) that it has already "paid entire amount of Debentures, which were raised in purely private placement basis, pending the remaining amount of `53,28,000 and the interest calculated thereon for the same `8,30,000 ", by providing a Certificate from a Chartered Accountant in the panel of any public authority or public institution, who would examine the veracity of such claim. This certificate shall be submitted by GKIL within a period of 30 days from the date of receipt of this Order. vii.

Shri Bimalendu Rakshit, Shri Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev are prohibited from continuing with their present assignment as debenture trustees in respect of the issue of Secured Non–Convertible Redeemable Debentures of GKIL and also from taking up any new assignment or involvement in any new issue of debentures, etc. in a similar capacity, from the date of this order till further directions.

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

15. The prima facie observations contained in this Order are made on the basis of the material available on record i.e. correspondences exchanged between SEBI and GKIL alongwith the documents contained therein. In this context, GKIL and its abovementioned Directors; its Debenture Trustees, viz. Shri Bimalendu Rakshit, Shri Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev may, within 21 days from the date of receipt of this Order, file their reply, if any, to this Order and may also indicate whether they desire to avail themselves an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard.

16. .................................. "

4. Mr. Sujoy Roy Choudhury vide letter dated June 23, 2014 stated that he had submitted his resignation from the office of trustee of the Greater Kolkata Infrastructure Debenture Trust on January 20, 2011, which was accepted by the Trust and communicated to him vide letter dated January 31, 2011. He stated that he has no connection with the Trust thereafter.

5. Vide letter dated June 24, 2014 (stated to be the reply of the Company and all its directors), the following submissions were inter alia made : o It is an admitted fact that the Company, after obtaining due permission from the concerned RoC, proceeded in issuing the Secured Non-Convertible Redeemable Debentures ("SNCRDs") not exceeding Rs.9 crores which was repayable on or before 6 1/2 years from the date of issue of the said securities. o The offer of such SNCRDs was made to only a registered association namely the Calcutta Government Employees' Shelter and Welfare Association, registered under the provisions of the West Bengal Society Registration Act, 1961 on a purely private placement basis. Subsequently, the said Association, being the original allottee of SNCRDs issued by the Company requested for transfer of such SNCRDs in favour of a total of 10,083 members of the Association during the years 2009-2010 to 2011-2012 amounting to a total of Rs.8.92 crores. o The Company had made payments against some debentures, thereby reducing its liability. o However, due to inadvertence and oversight, the Company in its earlier letters to SEBI informed that the original allottees where the members of the registered association rather than mentioning that those members were mere transferees/nominees of the SNCRDs.

o Such mistake on the part of the Company was purely a mistake of facts inadvertently. Such allotment and subsequent transfers made by the Company amply proves that the original allotment made by the Company was to a single body and not to many persons. As a result, the offer of SNCRDs was made to less than the maximum as per the provisions of the Companies Act, 1956 and hence cannot be treated or deemed to be a public issue as provided under section 67 of the Companies Act, 1956. o The Company is neither a non-banking financial company nor a public financial institution within the meaning of section 4A of the Companies Act, 1956. As the securities were issued/offered initially to the registered association, the Company was not required to list such securities on a recognised stock exchange as prescribed under section 73 of the Companies Act, 1956. o The payments of interest to the debenture holders were either 'properly appropriated/paid by the company' as and when such debentures were/are redeemed. o As the SNCRDs were issued on a private placement basis, there was no need to register the Prospectus with the RoC.

Therefore, the provisions of section 60 read with section 2(36) and 56 of the Companies Act, 1956 are not applicable to the Company in this case. Therefore, the IDLS Regulations are also not applicable. o Though the Company did not create or maintain a Debenture Redemption Reserve Account for the purpose of redemption of debentures, the Company was doing the necessary redemptions from time to time effectively. o The properties, as mentioned in the agreement for issuance of the SNCRDs, were equitably mortgaged with Greater Kolkata Infrastructure Debenture Trust (a private trust registered under the Indian Trust Act, 1882) against the SNCRDs which were issued. The agreement of mortgage with the trustee was a pre-requirement of filing of Form-10 (as available in MCA 21 portal) with the concerned RoC. Some of the mortgaged properties, under mortgage of the debenture trustee, for securing the debentures, belonged to the directors of the Company and others were third party security. o The properties charged with the Debenture Trustess had an estimated value of Rs.9.64 crores and none of the properties (which were charged against the issuance of debentures) belongs to the Company directly.

Accordingly, the value of fixed assets including its capital work in progress of the Company as on March 31, 2010 totals Rs.1.67 crore as reflected in the Balance Sheet of the Company made upto March 31, 2010.

o As the issue of SNCRDs was duly covered by sufficient assets the interests of the debenture holders of the Company are/were fully protected and hence the Company has full ability to fulfill its obligation in redeeming the debentures on maturity. Therefore, the debt-equity ratio of 180:1 as alleged does not apply to the Company. o The Company has decided to redeem the balance debentures which are lying unpaid with the Company and that the Company has already started the process of redeeming and repaying the unpaid SNCRDs in consultation with the Debenture Trustees.

The Company and its directors also undertook - (i) not to mobilize any fund from investors by further issuance of equity shares or any other securities, or by way of any invitation from public, either directly or indirectly, or through any unsecured loans either directly or indirectly; (ii) not to issue any prospectus or any offer documents or issue advertisement soliciting money from the public by issue of any sort of securities either directly or indirectly; (iii) to provide full inventory of its assets and properties; (iv) not to divert/dispose/alienate/encumber any assets and properties of the Company; (v) to submit necessary certificates regarding unpaid debentures;

The Company submitted that as it has taken appropriate steps for earlier redemption of the unpaid debentures, it was desirable that the case be closed and no further action against the Company/its directors should be contemplated by SEBI. The Company further stated that SEBI is at liberty to verify the facts and can call upon the directors of the Company to place necessary documents as may be proper. The Company further requested SEBI to recall the SEBI Order.

6. The Greater Kolkata Infrastructure Debenture Trust (this entity is not registered with SEBI as a debenture trustee), vide letter dated June 26, 2014, inter alia made the following submissions: "On receipt of your letter under reference the undersigned took up the matter with M/s Greater Kolkata Infrastructure Limited wherein the undersigned was informed that a similar letter under reference was also forwarded to the said company and necessary reply to the said letter has already been sent to your good office. On perusal of such reply of the company the undersigned came to a conclusion that the company has already made necessary arrangements for repayment of the balance unpaid / due amount of issued Debentures.

The said private trust being run and managed by remaining two trustees, as because one of the trustee named as Mr. Sujoy Roy Choudhury resigned from trusteeship vide his resignation letter dated 20/11/2011, and the Board of the Trustee of the said private trust, accordingly released him from such duty. The said private trust who always works on behest of the protection of interest of such debenture holders of the company and one of such trustee named as Mr. Bimalendu Rakshit, being the director (nominee) of the said company and acting as nominee director of the said company with effect from 01/04/2011.

After due payment all such unpaid / outstanding dues arising from issuance of such privately placed debentures, the undersigned with the directors of the said company necessary steps will be taken forthwith satisfaction of the charge created by the company, in accordance to law and further the said private trust will release the balance immovable properties as lying with the trustee as mortgage."

The Trust requested that the notice issued to it be withdrawn.

7. In response to the notice informing the date of personal hearing, Mr. Sujoy Roy Choudhury vide letter dated July 02, 2014, while reiterating his earlier submission (made vide his letter dated June 23, 2014) stated that his presence in the personal hearing is not required and requested SEBI to appreciate his submissions.

8. An opportunity of personal hearing was afforded in the matter on August 07, 2014, when Mr. Bichitra Nanda Muni, Advocate submitted that he represents the Company, its directors and Debenture Trustees and filed a statement stating that the Company has complied with paragraph 13 of the SEBI Order and that - (a) the Company and its directors have stopped the activities of mobilizing funds through the impugned debentures; (b) the list of immovable properties and assets of the Company were claimed to be attached; (c) the Company has a liability of Rs.61,58,000/- (including interest of Rs.8,30,000/- as on October 01, 2013). The Auditor's Certificate was stated to have been submitted earlier.

The Advocate also undertook to furnish a fresh Auditor's Certificate and the debenture liability as on date (i.e., as on the date of hearing).

9. I have considered the allegations and observations made in the SEBI Order, the submissions made by the Company, its directors and debenture trustees and the material available on record.

The Company is alleged to have contravened the provisions relating to the norms for issuing securities to the public stipulated under section 56, 60 read with 2(36) and 73 of the Companies Act, 1956 and the relevant provisions of the ILDS Regulations in respect of its issuance of NCDs. As per the SEBI Order, the Company had issued NCDs since incorporation to the a large number of investors as per details below:

Year Type of Security No. of Subscribers to the Issue Total Amount (`in Crores) 2009 – 10 Secured NCDs 5,356 1.02 2010 – 11 Secured NCDs 4,198 5.77 2011 – 12 Secured NCDs 529 2.21 Total 10,083 9.00

As per the above details, the Company has issued NCDs during the years 2009-2010 to 2011-2012 and has mobilised an amount of Rs.9 crores. The Company has admitted that it had, after obtaining due permission from the concerned RoC, proceeded in issuing the Secured NCDs not exceeding Rs.9 crores which was repayable on or before 6 1/2 years from the date of issue of the said securities.

10. The Company had initially submitted (vide letter dated November 23, 2012) that it had issued such securities to the members of the Calcutta Government Employees' Shelter and Welfare Association, registered under the provisions of the West Bengal Society Registration Act, 1961, on a purely private placement basis. However, vide its reply dated June 24, 2014, to the SEBI Order, the Company and its directors have contended that the offer of such SNCRDs was made only to the Calcutta Government Employees' Shelter and Welfare Association and that the said Association (being the original allottee of SNCRDs) had subsequently requested the Company for transfer of such NCDs in favour of a total of 10,083 members of the Association during the years 2009-2010 to 2011-2012 amounting to a total of Rs.8.92 crores. The Company further submitted that due to inadvertence and oversight, it informed SEBI that the original allottees were the members of the registered association instead of submitting that those members were mere transferees/nominees of the NCDs. However, the Company or its directors did not file any documents with respect to this contention and have merely stated that its directors could be called for placing the documents.

11. During the personal hearing too, the Advocate did not present the above contention with supporting documents and had on the other hand stated that the Company has redeemed the debentures and has a liability of only Rs.61,58,000/- against the unpaid debentures and interest. The Company had also submitted that it is taking steps for early redemption of the debentures. Considering the above facts and circumstances, I find that the contentions now made by the Company are not supported by documents and therefore dismissed accordingly. I also note that SEBI has made a reference to the Director, Economic Offences Cell, Finance Department, Kolkata referring to the Company's submission that 'it has allotted debentures to the registered members of the Government Employees' Association' and that "it is possible that illegal allotment might have been made to the government employees, we request you to take necessary action".

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

A reading of the above, makes it clear that in terms of the first proviso to section 67, the provisions of Section 67(3) shall not apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. In this case, in all the above financial years i.e, 2009- 2010, 2010-2011 and 2011-2012, the number of investors to whom the NCDs were allotted exceed 50 persons. Therefore, without any iota of doubt the issue of NCDs made by the Company during the aforesaid period is a public issue of such securities and that the offer of such NCDs was made to the 'public'. While examining the scope of section 67 of the Companies Act, 1956, the Hon'ble Supreme Court of India in the matter of Sahara India Real Estate Corporation Limited & Ors. Vs. SEBI (Civil Appeal no. 9813 and 9833 of 2011) (hereinafter referred to as the 'Sahara Case'), had observed that:

"Section 67(1) deals with the offer of shares and debentures to the public and Section 67(2) deals with invitation to the public to subscribe for shares and debentures and how those expressions are to be understood, when reference is made to the Act or in the articles of a company. The emphasis in Section 67(1) and (2) is on the “section of the public”. Section 67(3) states that no offer or invitation shall be treated as made to the public, by virtue of subsections (1) and (2), that is to any section of the public, if the offer or invitation is not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation or otherwise as being a domestic concern of the persons making and receiving the offer or invitations. Section 67(3) is, therefore, an exception to Sections 67(1) and (2). If the circumstances mentioned in clauses (1) and (b) of Section 67(3) are satisfied, then the offer/invitation would not be treated as being made to the public.

The first proviso to Section 67(3) was inserted by the Companies (Amendment) Act, 2000 w.e.f. 13.12.2000, which clearly indicates, nothing contained in Sub-section (3) of Section 67 shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. …

Resultantly, if an offer of securities is made to fifty or more persons, it would be deemed to be a public issue, even if it is of domestic concern or proved that the shares or debentures are not available for subscription or purchase by persons other than those received the offer or invitation. … ... ... that any share or debenture issue beyond forty nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. …"

[Emphasis supplied]

Having therefore made a public issue of NCDs during 2009-2010, 2010-2011 and 2011-2012, the Company was mandated to comply with all the applicable provisions of the Companies Act, 1956 including compliance with sections 56, 60 and 73 of the Companies Act, 1956. In terms of the section 2(36) of the Companies Act read with section 60 thereof, a company needs to register its 'prospectus' with the RoC, before making a public offer/ issuing the 'prospectus'. In terms of section 56(1) of the Companies Act, 1956, every prospectus issued by or on behalf of a company, shall state the matters specified in Part I and set out the reports specified in Part II of Schedule II of that Act. Further, as per section 56(3) of the Companies Act, 1956, no one shall issue any form of application for shares in a company, unless the form is accompanied by abridged prospectus, contain disclosures as specified. The Company has not allegedly complied with these provisions of law. Further, by offering and issuing NCDs to more than 50 persons, the Company had to compulsorily list such securities in compliance with section 73 of the Companies Act, 1956. As per section 73(1) and (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. The Company appears to have contravened the said provisions as it has neither made an application seeking listing permission nor refunded the amounts on account of such failure. The Company has also not complied with the provisions of section 73(3) as it has not kept the amounts received from investors in a separate bank account and failed to repay the same in accordance with section 73(2) as observed above.

In the matter of the Saharas, the Hon'ble Supreme Court of India, while examining the provisions of section 73 of the Companies Act, 1956 has observed as under :

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

94. Listing is, therefore, a legal responsibility of the company which offers securities to the public, provided offers are made to more than 50 persons. ... ... A company cannot be heard to contend that it has no such intention or idea to make an application to the stock exchange. "

The above requirements are statutory in nature and a company which has made a public issue of securities cannot have any option but to comply with such statutory provisions. The Company has belatedly contended that it has allotted securities to the Association and therefore it is not required to comply with the above provisions. The above contention has already been dismissed as made without any supporting documents. Therefore, I hereby conclude that the Company has failed to comply with the provisions of sections 56, 60 read with 2(36) and 73 of the Companies Act, 1956 in respect of its offer and issuance of NCDs during the aforesaid Financial Years.

13. The Company is also alleged of failing to comply with the following provisions of the ILDS Regulations in respect of its offer and issuance of NCDs:

i. Regulation 4(2)(a) – Application for listing of debt securities ii. Regulation 4(2)(b) – In-principle approval for listing of debt securities iii. Regulation 4(2)(c) – Requirement of Credit rating iv. Regulation 4(2)(d) – Dematerialization of debt securities v. Regulation 4(4) – Appointment of Debenture Trustee vi. Regulation 5(2)(b) – Disclosure requirements in the Offer Document vii. Regulation 6 – Filing of draft Offer Document viii. Regulation 7 – Mode of disclosure of Offer Document ix. Regulation 8 – Advertisements for Public Issues x. Regulation 9 – Abridged Prospectus and application forms xi. Regulation 12 – Minimum subscription xii. Regulation 14 – Prohibition of mis-statements in the Offer Document xiii. Regulation 15 – Trust Deed xiv. Regulation 16(1) – Debenture Redemption Reserve xv. Regulation 17 – Creation of security xvi. Regulation 19 – Mandatory Listing xvii. Regulation 26 – Obligations of the Issuer, etc.

In view of the above finding that the offer and issuance of NCDs by the Company was a public issue of such securities, the Company was mandated to comply with the provisions of the ILDS

Regulations as the NCDs are in the nature of 'debt securities' as defined under the ILDS Regulations. The Company admittedly did not comply with the same and has contended that the said regulations are not applicable to its offer and issue of NCDs. However, in view of the above observations, I hereby find the Company culpable of having failed to comply with the ILDS Regulations also in respect of its offer and issue of NCDs.

14. I also note that the SEBI had inter alia observed " GKIL was incorporated on October 5, 2009. The Offer of NCDs was stated to have been made on a private placement basis pursuant to the Resolution passed at the Board Meeting of GKIL held on November 5, 2009. The "Offer of NCDs" therefore, occurred immediately within a month of GKIL's date of incorporation". The SEBI Order has also observed "From the Balance Sheet for the year ending March 31, 2012, it is observed that there was a significantly high Debt–Equity ratio i.e. 180:1. Such a high Debt–Equity ratio is prejudicial to the interest of the debenture holders and may significantly hamper the ability of the company to fulfill its obligation of redeeming the debentures on maturity". While perusing the Balance Sheet for the year 2011-2012, I note that the Company has stated that it has issued Secured Bonds/debentures for Rs.9,00,00,000/- as on March 31, 2012 and the said figure for the year ended March 31, 2011 was Rs.6,79,15,400/-.

15. As regards the Debenture Trustees, namely, Mr. Bimalendu Rakshit (one of the Company's directors), Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev, the SEBI Order has observed "11.1 From information obtained by SEBI from the MCA 21 Portal, it is observed that GKIL appointed Shri Bimalendu Rakshit, Shri Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev as Debenture Trustees for the issue of NCDs by that company. Further, it is observed that an Agreement for issue of NCDs was executed between GKIL and Shri Bimalendu Rakshit, Shri Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev (representing Greater Kolkata Infrastructure Debenture Trust) on November 7, 2009." The SEBI Order has alleged that the above persons appointed as 'debenture trustees' of the Company do not meet the eligibility criteria specified under regulation 7 of the DT Regulations and that the said debenture trustees are not registered with SEBI as required under section 12(1) of the SEBI Act.

I have perused Form-10 (particulars of registration of charges for debentures) with respect to 'Creation of Charge', wherein it is mentioned that the Trustees of Greater Kolkata Infrastructure Debenture Trust are 'the trustee of debenture holders or charge holder'. As per this document, the date of creation of charge was on November 07, 2009. The charge was for 'Entire series of debentures' and the date of issue of series was on November 07, 2009.

I have also perused a copy of the Agreement dated November 07, 2009 executed between the Company and the Greater Kolkata Infrastructure Debenture Trust with respect to securing the NCDs so issued by the Company. As per this Agreement, the Trustees of the above Trust are Mr. Bimalendu Rakshit (Managing Trustee), Mr. Sujay Roy Choudhury (Debenture Trustee) and Smt. Sherrie Lal Vasdev (Debenture Trustee), and that they have been appointed on November 05, 2009. The Greater Kolkata Infrastructure Debenture Trust, Mr. Bimalendu Rakshit and Smt. Sherrie Lal Vasdev, while not refuting the allegations leveled against them in the SEBI Order have submitted that the Company 'has already made necessary arrangements for repayment of the balance unpaid / due amount of issued Debentures.' It was further submitted that "After due payment all such unpaid / outstanding dues arising from issuance of such privately placed debentures, the undersigned with the directors of the said company necessary steps will be taken forthwith satisfaction of the charge created by the company, in accordance to law and further the said private trust will release the balance immovable properties as lying with the trustee as mortgage". As the Trust and its Trustees are not registered with SEBI as "Debenture Trustees" and are not eligible in terms of regulation 7 of the DT Regulations, I hereby find that such persons have contravened section 12(1) of the SEBI Act. This finding shall hold good as against Mr. Sujay Roy Choudhury also regardless of the fact that he had resigned as a trustee during 2011.

The SEBI Order has also alleged that the Company has contravened sections 117B and 117C of the Companies Act, 1956. By failing to file a Prospectus and stating that the Company has appointed a Debenture Trustee and further stating on the face of it that the debenture trustees have consented for being appointed, the Company has contravened section 117B of the Companies Act. The Company has admitted that it did not create a debenture redemption reserve for the redemption of such debentures. In view of the same, the Company has contravened section 117C of the said Act. I also note that SEBI has referred the above violations to the Regional Director, Ministry of Corporate Affairs and requested them to take necessary action.

The SEBI Order has alleged that the charge created for securing the debentures was not supported by adequate assets/security. In this regard, I note the following observation from the SEBI Order : "Form 10 (filed by GKIL with the ROC in accordance with the provisions of the Companies Act, 1956), reveals that GKIL created Charge for an amount of `9 Crores on November 7, 2009, in respect of the Offer of NCDs. Further, the aforesaid document reveals that the debentures so issued, shall be secured by way of deposit of title deeds of immovable property (value of which was estimated at `9.64 Crores) with the Debenture Trustee. However, from the Balance Sheet for the year ending March 31, 2010 (as submitted by GKIL), it is seen that the value of fixed assets including capital work-in-progress (WIP) was only `1.67 Crores. The aforesaid fact clearly indicates that Charge created by GKIL to secure the issuance of debentures, was not backed by sufficient assets."

In this regard, the Company submitted that the properties charged with the Debenture Trustess had an estimated value of Rs.9.64 crores and none of the properties belonged to the Company directly and further submitted " .....the value of fixed assets including its capital work in progress of the Company as on March 31, 2010 totals Rs.1.67 crore as reflected in the Balance Sheet of the Company made upto March 31, 2010". The Company has submitted that the properties kept as security with the Debenture Trustees do not belong to the Company and that some of the mortgaged properties (for securing the debentures) belonged to the directors of the Company and third parties. In view of such submissions, it is not clear as to how the Company has secured the entire series of debentures totaling Rs.9 crores issued by it.

16. The SEBI Order has stated that as per the details submitted by the Company, its directors are Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit. As per the information ('List of Signatories' and 'Companies in which a person is/was a director') available from the website of the Ministry of Corporate Affairs, the following are their details : List of Signatories Present residential Date of Date of original DIN/DPIN/PAN Full Name Designation address Appointment appointment 49/58PRINCE GOLAM MD SHAH ROAD LP 31/13/4, 01642274 SUBIR DUTTA Director 04/03/2013 KOLKATA, 700045, West 05/10/2009 Bengal, INDIA 99/1B LAKE TERRACE 02732014 NAKHAT SING AGARWALLA KOLKATA-700029, KOLKATA, Director 21/02/2013 700029, West Bengal, INDIA 05/10/2009 5/21CHITTARANJAN COLONY, KOLKATA MUNICIPAL 03145637 BIMALENDU RAKSHIT JADAVPUR SOUTH 24 Director 01/04/2011 PARGANAS, KOLKATA, 700032, 01/04/2011 West Bengal, INDIA

As mentioned above, Mr. Subir Dutta and Mr. Nakhat Sing Agarwalla were appointed as a director on October 05, 2009. Mr. Bimalendu Rakshit was appointed on April 01, 2011. These persons were in-charge of the affairs of the Company during the period when the impugned offer and issue of securities were made to the public. Accordingly, Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit are liable, as the directors of the Company during the relevant period, for the contraventions committed by the Company in respect of its issue of NCDs.

17. In view of the above violations and irregularities committed by the Company and its directors in raising funds against issuance of debentures, the natural consequence would be to direct the Company/its directors to refunds the money so collected from the investors with returns that were promised under such debentures. I also note that SEBI is in receipt of complaints from investors who had subscribed to the debentures offered and issued by the Company, alleging that the Company has, through its agent, collected the original debenture certificates and has not redeemed the debentures and paid them their dues.

18. During the personal hearing, the Company through its Advocate, has submitted that the Company has a liability of Rs.61,58,000/- only (including interest of Rs.8,30,000/- as on October 01, 2013) under its debentures. In this regard, I note the following contents made in the Certificate dated June 24, 2013 issued by the Chartered Accountant of the Company, as tendered during the personal hearing : "........... .....certify that upto 20th day of June, 2013, the company collected the fund of Rs.9,00,00,000.00 [Rupees nine crore only] ............ Secured Redeemable Non-Convertible Debenture from Calcutta Government Employee's Shelter and Welfare Association .... also the above mentioned society (had) raised those funds from their 10,083 members. I also certify that upto 20th day of June, 2013, the company has already redeemed the Secured Redeemable Non-Convertible Debenture of Rs.8,38,41,100.00 .... as on 20th day of June 2013 as per books of accounts of the company, the outstanding balance of Secured Redeemable Non-Convertible Debenture is Rs.61,58,900.00...."

However, the Company has not produced any other evidence (bank statements, receipts etc) to prove its claimed refunds to the investors. Though the Advocate had assured during the personal hearing that the Company would file a latest statement regarding its liability, it has not been done.

19. In view of the foregoing 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(1), 11A, 11B and 11(4) thereof and regulation 28 of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, hereby issue the following directions :

(a) Greater Kolkata Infrastructure Limited (CIN No. U45400WB2009PLC138699 and PAN – AADCG5611P), its promoters and directors including Mr. Subir Dutta (PAN - AFYPD5024N and DIN - 01642274), Mr. Nakhat Sing Agarwalla (DIN - 02732014) and Mr. Bimalendu Rakshit (PAN - AVIPR2257F and DIN - 03145637), shall jointly and severally, forthwith refund the money collected by the Company through its illegal and irregular offer and allotment of NCDs including the money collected from investors, till date, pending allotment of securities, if any, with interest of 15% per annum from the date of receipt of money from the investors till the date of repayment. (b) The repayments to investors shall be effected only in cash through Bank Demand Draft or Pay Order. (c) The Company and its directors, Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit are permitted to sell the assets of the Company only for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalised Bank. (d) The Company and its directors, Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit are also directed to provide a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/securities, if held in physical form.

(e) Greater Kolkata Infrastructure Limited, its promoters and directors including Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily (in Bengali) with wide circulation, detailing the modalities for refund, including details on contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect. (f) After completing the aforesaid repayments, the Company shall file a certificate of such completion with SEBI from 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"). (g) As the Company has claimed to have repaid a sum of Rs.8,38,41,100/- to its investors through redemption of debentures, the claimed repayments shall also be certified by Chartered Accountants, as directed in sub-paragraph (f) above.

(h) Greater Kolkata Infrastructure Limited and its directors Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit are directed not to, directly or indirectly, access the capital 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 years from the date of completion of refunds to investors as directed above. (i) Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit are restrained from associating themselves, as a director or a promoter, with any listed public company and any public company which intends to raise money from the public, from the date of this Order till expiry of 4 years from the date of completion of refunds to investors as directed above. (j) Mr. Bimalendu Rakshit, Mr. Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev, the persons who were been appointed as debenture trustees in contravention of law, shall not offer themselves to be engaged as debenture trustees or in any capacity as an intermediary in the securities market, without obtaining a certificate of registration to undertake that assignment as required under law. Further, these individuals are restrained from accessing the securities market and are further restrained from buying, selling or dealing in securities, in any manner whatsoever, for a period of 4 years. (k) The period of debarment as directed against Mr. Bimalendu Rakshit in sub-paragraphs (h) and (j) shall run concurrently. (l) The above directions shall come into force with immediate effect. 20. In case of failure of the company, Greater Kolkata Infrastructure Limited and its directors Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit to comply with the aforesaid directions, SEBI shall take appropriate action against them and other persons/officers who are in default, including launching of prosecution proceedings, adjudication proceedings and recovery proceedings against them, in accordance with law.

21. This Order shall be without prejudice to any further action that may be initiated by SEBI, in accordance with law, against the Company and its directors/promoters for the violations as observed in this Order.

22. Copies of this Order shall be served on the recognised stock exchanges and depositories for information and necessary action.

23. 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 with respect to the directions/restraint imposed above against the Company and its directors.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Date : FEBRUARY 06, 2015 Place: Mumbai