Order in respect of Magnox Infraprojects Ltd

Under sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992, in the matter of Magnox Infraprojects Limited (PAN: AAHCM5168P) and its Directors, viz. Shri Dipankar Das (PAN: AUQPD9877J;DIN: 03622654), Shri Sudip Rauth (PAN: AVPPR3521H;DIN: 06746403), Shri Debasish Debnath (PAN: AHVPD3975F;DIN: 06775846), Shri Samrat Bikash Barua (PAN: BINPB8759D;DIN: 06775849), Shri Vim Cent Pal (PAN: BWIPP4358K; DIN:06775851) and Shri Purnendu Sekhar Halder (PAN: AIKPH5179H; DIN: 06786986).

1.1 Magnox Infraprojects Limited ("MIL" or "Company"), having its Registered Office at Chandberia, Mecheda Bye Pass, near Chandi Mandir Contai, Purba Medinipur, Contai, West Bengal–721401, was incorporated on October 28, 2011, with the ROC, Kolkata, West Bengal with CIN No. as U45400WB2011PLC168933. 1.2 Securities and Exchange Board of India ("SEBI") received a copy of Writ Petition No. 13997 of 2014 – Ashru L. Das vs. UOI & Others filed before the Hon'ble Calcutta High Court, wherein it was, inter alia, stated that Magnox Infraprojects Limited ("MIL") was mobilizing funds through issue of redeemable preference shares ("RPS"). 1.3 On enquiry by SEBI, it was observed that MIL had issued Redeemable Preference Shares to 2110 persons in the year 2012-13 ("hereafter referred to as Offer of RPS"), and collected an amount of Rs. 2.31 crores. 2.1 As the above said Offer of RPS was found prima facie in violation of respective provisions of the SEBI Act, 1992 ("SEBI Act"), the Companies Act, 1956, SEBI passed an interim order dated August 22, 2014 (hereinafter referred to as “interim order”) and issued directions mentioned therein against MIL and its Directors, Shri

Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder. 2.2 Prima facie findings/allegations: In the said interim order, the following prima facie findings/allegation were recorded. MIL made an Offer of RPS to 2110 number of investors in the financial year 2012-13 and the same was a deemed public issue of securities under the first proviso to Section 67(3) of the Companies Act, 1956. Accordingly, the resultant requirement under Section 60, Section 56(1) and 56(3), Sections 73(1) (2) (3) of the Companies Act were not complied with by MIL. 2.3 In view of the prima facie findings on the violations, the following directions were issued in the said interim order dated August 22, 2014 with immediate effect. i. “MIL shall not mobilize funds from investors through the Preference Shares Issue 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. MIL and its Directors, viz. Shri Dipankar Das (DIN: 03622654), Shri Sudip Rauth (DIN: 06746403), Shri Debasish Debnath (DIN: 06775846), Shri Samrat Bikash Barua (DIN: 06775849), Shri Vim Cent Pal (DIN: 06775851) and Shri Purnendu Sekhar Halder (DIN: 06786986), 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.

MIL and its abovementioned Directors, are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions; iv. MIL shall provide a full inventory of all its assets and properties; v. The abovementioned Directors of MIL shall provide a full inventory of all their assets and properties; vi. MIL 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 Preference Shares Issue, without prior permission from SEBI; vii. MIL and its abovementioned Directors shall not divert any funds raised from public at large through the Preference Shares Issue, which are kept in bank account(s) and/or in the custody of MIL; viii. MIL and its abovementioned Directors shall, within 21 days from the date of receipt of this Order, provide SEBI with all relevant and necessary information, as sought vide SEBI letter dated June 20, 2014”. 3.1 Vide the said interim order MIL and its abovementioned Directors were given the opportunity to file their replies, within 21 days from the date of receipt of the said interim Order.

The order further stated the concerned persons may also indicate whether they desired to avail themselves an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard. 4.1 Service of interim order: The copy of the said interim order was sent to the above mentioned entities by letter dated August 25, 2014 through speed post acknowledgement due. The copy of the interim order sent to the company and to Shri Dipankar Das returned undelivered. However, the same when sent through hand delivery on October16, 2014 was received on their behalf. The copies of the interim order sent to Shri Samrat Bikash Barua, Shri Purnendu Sekhar Halder, Shri Debasish Debnath and Shri Vim Cent Pal returned undelivered. The interim order sent to Shri Sudip Rauth was delivered. 4.2 Subsequently, vide notification dated April 14, 2015, published in newspaper Ananda Bazar Patrika, and notification dated April 15, 2015 published in newspaper Times of India, MIL and the directors were notified by SEBI, that they will be given the final opportunity of being heard on April 22, 2015 at the time and the venue mentioned therein.

5.1 Hearing and submissions: MIL and the directors did not avail the opportunity of hearing held on April 22, 2015. No submissions were made either by the Company or by the directors. 6.1 I have considered the allegations, and materials on record including documents

Petition No.13997 of 2014 – Ashru L. Das vs. UOI & Others. SEBI is arrayed as fourth respondent in the said writ petition filed by five investors. The petitioners aver that the Company is collecting money in violation of Section 67 and 73 of the Companies Act, 1956. The Petitioners therein prayed for directions against respondents including SEBI for taking appropriate steps as per law including direction for refund and till date no order against SEBI has been passed in the said writ petition. On perusal of the materials on record, the following issues arise for consideration. Each question is dealt with separately under different headings. 1. Whether the company came out with the Offer of RPS ? 2. If so, whether the said issues are in violation of Section 60, Section 56(1) and 56(3), Sections 73(1) (2) (3), the Companies Act,1956? 3. If the findings on question No.2 are found in the affirmative, who are liable for the violation committed? 7.1 Whether the company came out with the Offer of RPS ? : I have perused the interim order dated August 22, 2014 for the allegation of Offer of RPS.

I note that neither the company nor the directors filed any reply disputing the same. 7.2 I have also perused the documents/ information obtained from the 'MCA 21 Portal' other documents filed before the Registrar of Companies. The perusal of Form 2 filed pursuant to the allotment dated August 4, 2012 shows that MIL had issued and allotted to RPS to 2110 investors during the financial year 2012-13 and collected an amount of approximately Rs. 2.31 crore from the investors. 8.1 If so, whether the said issues are in violation of Section 60, Section 56(1) and 56(3), Sections 73(1) (2) (3), the Companies Act,1956:- 8.2 The provisions alleged to have been violated and mentioned in Issue No.2 are applicable to the offer made to the public. Therefore the primary question that arises for consideration is whether the issue of preference shares covered in Issue No 1 is ‘public issues’. At this juncture, reference may be made to section 67(1) & (3) of the Companies Act, 1956: "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)any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended 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. (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).” 8.3 The following observations of the Hon'ble Supreme Court of India in Sahara India Real Estate Corporation Limited & Ors. Vs. SEBI (Civil Appeal no. 9813 and 9833 of 2011) (hereinafter referred to as the 'Sahara Case'), while examining the scope of Section 67 of the Companies Act, 1956, are worth consideration:- "84.

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. 85. 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, after 13.12.2000, any offer of securities by a public company to fifty persons or more will be treated as a public issue under the Companies Act, even if it is of domestic concern or it is proved that the shares or debentures are not available for subscription or purchase by persons other than those receiving the offer or invitation. …”(Emphasis supplied) 8.4 Section 67(3) provides for situations when an offer is not considered as offer to public. As per the said sub section, if the offer is one which is not 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 {(section 67(3)(a)}, or, if the offer is the domestic concern of the persons making and receiving the offer {(section 67(3)(b)}, the same are not considered as public offer. Under such circumstances, they are considered as private placement of shares and debentures. It is noted that as per the first proviso to Section 67(3) Companies Act, 1956, the public offer and listing requirements contained in that Act would become automatically applicable to a company making the offer to fifty or more persons.

However, the second proviso to Section 67(3) exempts NBFCs and Public Financial Institutions from the applicability of the first proviso. 8.5 In the instant case, as the offer of RPS has been made in the financial year 2012-13 and allotment to 2110 persons have been made by MIL on August 4, 2012, the offer of RPS falls within the first proviso of section 67(3) of Companies Act, thereby such issues are deemed to be public issues and was mandated to comply with the 'public issue' norms as prescribed under the Companies Act, 1956. 8.6 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, containing disclosures as specified. Section 2(36) of the Companies Act read with section 60 thereof, mandates a company to register its 'prospectus' with the RoC, before making a public offer/ issuing the 'prospectus'.

As per the aforesaid Section 2(36), “prospectus” means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate. 8.7 The allegation of non-compliance of the above provisions were not denied by the company or directors. Neither the company nor the directors produced any record to show that MIL has issued Prospectus containing the disclosures mentioned in section 56(1) of the Companies Act, 1956, or filed a Prospectus with ROC or issued application forms accompanying the abridged prospectus. Therefore, I find that, MIL and the persons responsible for the failure to issue prospectus have not complied with Section 56(1), 56(3) and 60 of the Companies Act, 1956. 8.8 Further, by issuing RPS to 2110 persons, MIL 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 within 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.

8.9 The allegation of non-compliance of the above provisions were not denied by the company or directors. I find that no records have been submitted to indicate that it has made an application seeking listing permission from stock exchange nor refunded the amounts on account of such failure. Thus, MIL has contravened the said provisions. MIL has not provided any records to show that the amount collected by MIL are kept in a separate bank account. Therefore, I find that MIL 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. 8.10 I note that the jurisdiction of SEBI over various provisions of the Companies Act, 1956 including the above mentioned, in the case of public companies, whether listed or unlisted, when they issue and transfer securities, flows from the provisions of Section 55A of the Companies Act, 1956. While examining the scope of Section 55A of the Companies Act, 1956, the Hon'ble Supreme Court of India in Sahara Case, had observed that: "We, therefore, hold that, so far as the provisions enumerated in the opening portion of Section 55A of the Companies Act, so far as they relate to issue and transfer of securities and non-payment of dividend is concerned, SEBI has the power to administer in the case of listed public companies and in the case of those public companies which intend to get their securities listed on a recognized stock exchange in India."

" SEBI can exercise its jurisdiction under Sections 11(1), 11(4), 11A(1)(b) and 11B of SEBI Act and Regulation 107 of ICDR 2009 over public companies who have issued shares or debentures to fifty or more, but not complied with the provisions of Section 73(1) by not listing its securities on a recognized stock exchange" 8.11 In this regard, it is pertinent to note that by virtue of Section 55A of the Companies Act, SEBI has to administer Section 67 of that Act, so far as it relates to issue and transfer of securities, in the case of companies who intend to get their securities listed. 8.12 In view of the forgoing findings, I am of the view that MIL was engaged in fund mobilizing activity from the public, through the offer and issuance of RPS and has contravened the provisions of sections 56, 60 and 73 of the Companies Act, 1956. 9.1 If the findings on question No.2 are found in the affirmative, who are liable for the violation committed?:

9.2 Section 56(1) and 56(3) read with section 56(4) imposes the liability on the company, every director, and other persons responsible for the prospectus for the compliance of the said provisions. The liability for non-compliance of Section 60 of the Companies Act, 1956 is on the company, and every person who is a party to the non-compliance of issuing the prospectus as per the said section. 9.3 As far as the liability for non-compliance of section 73 of Companies Act, 1956 is concerned, 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.

9.4 I find from the extract of “Registrar of Directors, Managing Directors, Manager and Secretary etc” sent by the Ministry of Corporate Affairs to SEBI, the following directors have joined and continue as directors as shown in the following table. Date of Date of Name of the directors appointment cessation Shri Dipankar Das 28/10/2011 - Shri Sudip Rauth 15/06/2012 - Shri Debasish Debnath 15/06/2012 - Shri Samrat Bikash Barua 15/06/2012 - Shri Vim Cent Pal 15/06/2012 - Shri Purnendu Sekhar Halder 30/12/2013 -

9.5 In view of the provisions of law, MIL and Shri Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder being the directors are responsible for the non-compliance of the above provisions. The liability of the company to repay under section 73(2) is continuing and such liability continues till all the repayments are made. Therefore, the directors who joined subsequent to the impugned public issuance are also officers in default in not making the refund, if the company do not repay the money collected, as mandated in section 73(2) of the Companies Act, 1956. 9.6 I note that Shri Purnendu Sekhar Halder who has joined subsequent to the impugned allotment, has not exercised necessary diligence after becoming director in the Company. Nor did he make any attempts to report the wrongdoings of the company to appropriate authorities. The very inaction by him against the existing management (for violating the public issue norms as stipulated under the Companies Act, 1956 while making the offer and issuing the preference shares), even after the receipt of the interim order, leads one to conclude on a possible collusion at his end with the Company and its previous management.

Further, Shri Purnendu Sekhar Halder has also not taken any step to remedy the violations committed. Therefore, I hold that Shri Purnendu Sekhar Halder to be 'officer in default' and hence liable for the contraventions found against the Company and also for the consequences of such violations. 9.7 In view of the foregoing, the natural consequence of not adhering to the norms governing the issue of securities to the public and making repayments as directed under section 73(2) of the Companies Act, 1956, is to direct the Company, its directors Shri Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder, to refund the monies collected, with interest to such investors. Further, in view of the violations committed by the Company and its former directors, to safeguard the interest of the investors who had subscribed to such RPS issued by the Company, to safeguard their investments, and also to ensure that the Company does not collect any further monies pursuant to its offer of RPS, it also becomes necessary for SEBI to issue appropriate directions against the Company and the other noticees.

10.1 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), 11(4), 11A and 11B thereof, hereby issue the following directions : a) The Company, namely, Magnox Infraprojects Limited and its directors Shri Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder, shall forthwith refund the money collected by the Company through the issuance of RPS, including the money collected from investors, till date, pending allotment of securities, if any, with an interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became due (in terms of Section 73(2) of the Companies Act, 1956) to the investors till the date of actual payment. b) The repayments and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order. c) Magnox Infraprojects Limited and its present management is permitted to sell the assets of the Company only for the sole purpose of making the repayments including interest, as directed above and deposit the proceeds in an Escrow Account opened with a nationalized Bank. d) Magnox Infraprojects Limited and its directors, Shri Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily (in Bengali) with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect. e) After completing the aforesaid repayments, Magnox Infraprojects Limited and its directors, Shri Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder 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"). f) Magnox Infraprojects Limited and its directors, Shri Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder, 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 shares/securities, if held in physical form. g) In case of failure of Magnox Infraprojects Limited and its directors, Shri Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder, to comply with the aforesaid directions, SEBI, on the expiry of the three months period from the date of this Order,- a. shall recover such amounts in accordance with section 28A of the SEBI Act including such other provisions contained in securities laws. b. may initiate appropriate action against the Company, its promoters/directors and the persons/officers who are in default, including adjudication proceedings against them, in accordance with law. c. would make a reference to the State Government/ Local Police to register a civil/ criminal case against the Company, its promoters, directors and its managers/ persons in-charge of the business and its schemes, for offences of fraud, cheating, criminal breach of trust and misappropriation of public funds; and d. would also make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the Company. h) Magnox Infraprojects Limited, and its directors Shri Dipankar Das, Shri Sudip Rauth, Shri Debasish Debnath, Shri Samrat Bikash Barua, Shri Vim Cent Pal and Shri Purnendu Sekhar Halder, 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 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 four years from the date of completion of refunds to investors. i) The above directions shall come into force with immediate effect. 11.1 This Order is without prejudice to any action, including adjudication and prosecution proceedings that might be taken by SEBI in respect of the above violations committed by Magnox Infraprojects Limited, its promoters, directors and other key persons.

11.2 Copy of this Order shall be forwarded to the recognised stock exchanges and depositories for information and necessary action. 11.3 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 the individuals.

Date :August 13, 2015 PRASHANT SARAN Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA