Order in respect of Rightmax Technotrade International Limited

WTM/RKA/EFD/126/2016 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 in respect of: 1) Rightmax Technotrade International Limited, 2) Shri Srinivasan Kozhinjapara Ramasamy, 3) Shri Sivakumar Gangadharan and 4) Shri Rabindra Kumar Jena. In the matter of issuance of Redeemable Preference Shares by Rightmax Technotrade International Limited. 1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) conducted a preliminary examination into the issuance of Redeemable Preference Shares (hereinafter referred to as ‘RPS’) by Rightmax Technotrade International Limited (hereinafter referred to as ‘RTIL’ or ‘the company’) with a view to ascertain the possible violations of the public issue norms stipulated under the Companies Act, 1956. Pursuant to the examination, SEBI passed an interim order dated February 20, 2015 (hereinafter referred to as “interim order”) against RTIL and its directors namely Shri Srinivasan Kozhinjapara Ramasamy, Shri Sivakumar Gangadharan and Shri Rabindra Kumar Jena (hereinafter collectively referred to as “the Noticees” and individually by their respective names) in view of the following: “9. iii. … a. … it is observed from the information/documents available from MCA portal that RTIL allotted 13,203 RPS to 2,763 investors and mobilised funds amounting to Rs.13.13 Crores during FY 2010-11. SEBI letters dated November 27, 2014 to RTIL and December 04, 2014 to its directors seeking information/clarification in this regard were returned undelivered by postal authorities….” 2. The following directions were issued against the Noticees vide the interim order: “i. RTIL shall not mobilize any fresh funds from investors through the offer of RPS 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. RTIL and its Directors, viz. Shri Srinivasan Kozhinjapara Ramasamy (DIN:02913852), Shri Sivakumar Gangadharan (DIN:02916854) and Shri Rabindra Kumar Jena (DIN:03009645, PAN: AGMPJ0750E) are prohibited from issuing prospectus or any

Order in respect of Rightmax Technotrade International Limited and others.

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. RTIL 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. RTIL shall provide a full inventory of all its assets and properties; v. RTIL's abovementioned Directors shall provide a full inventory of all their assets and properties; vi. RTIL 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 offer of RPS, without prior permission from SEBI; vii. RTIL and its abovementioned Directors shall not divert any funds raised from public at large through the offer of RPS, which are kept in bank account(s) and/or in the custody of RTIL; viii. RTIL and its abovementioned Directors shall furnish complete and relevant information within 21 days from the date of receipt of this Order.” 3. The interim order advised the Noticees to file their replies within 21 days from the date of its receipt and also to seek an opportunity of personal hearing.

The interim order was forwarded to the Noticees vide respective letters all dated February 20, 2015, however, all these had returned undelivered. Thereafter, attempts were made to deliver the interim order by pasting on the last known addresses of the Noticees. SEBI proceeded further and granted an opportunity of personal hearing to the Noticees on August 31, 2016. The scheduled date was communicated to the Noticees vide letter dated August 02, 2016. The same was also communicated vide the public notice dated August 23, 2016, in the newspapers namely ‘Times of India’, ‘Vijay Karnatka’, ‘Daily Thanthi’ and ‘Samaja’. Vide the public notice the Noticees were also advised to file their replies before the date of personal hearing. The Company and its directors were advised that in case they fail to appear before SEBI on the aforesaid date, then the matter would be proceeded ex-parte on the basis of material available on record. 4. The Noticees neither filed their replies nor appeared in the personal hearing. Accordingly, the hearing proceedings were concluded and I proceed to consider the case on merits on the basis of material available on record.

5. I have considered the interim order and material available on record. The prima facie findings made in the interim order are undisputed as none of the noticees have filed their response. As per the interim order, RTIL had issued RPSs during the financial year 2010- 11 to 2,763 allottees and mobilised funds to the tune of `13,12,75,110. The details of allotment of RPS, as also noted in the interim order are as under:

Table A S. No. Date of Allotment/ No. of RPS Number of Amount raised Board resolution allotted Allottees (`) 1 October 08, 2010 6,830 7 6,79,60,110 2 October 15, 2010 1,061 483 1,05,35,000 3 October 30, 2010 926 456 92,20,000 4 November 13, 2010 1,047 501 1,04,20,000 5 December 03, 2010 2,432 887 2,41,75,000 6 January 06, 2011 907 429 89,65,000 Total 13,203 2,763 13,12,75,110

6. From the above, I note that the Company had issued RPS to more than 49 persons. Considering the available facts and the conduct of the Noticees in not providing the information, I find no reason to differ with the observation made in the interim order that the company made a ‘public issue’ of RPS in terms of first proviso to section 67(3) of the Companies Act, 1956. As the issuance of RPS by the company was a ‘public issue’, it ought to have complied with the applicable provisions of the Companies Act, 1956 as alleged in the interim order. In the present case, there is no dispute to the fact that the company failed to comply with the provisions of law regulating such public issues i.e. Section 56, 60 read with Section 2(36) and 73 of the Companies Act, 1956. Accordingly, I find the company liable for violating the aforesaid provisions of law.

7. I note that the jurisdiction of SEBI in respect of issuance of securities including RPS, intention/ obligation of the issuer to list such securities, etc. have been settled by the Hon’ble Supreme Court in its judgment and order dated August 31, 2012, in matter of Sahara India Real Estate Corporation Limited & Ors. Vs SEBI & Anr. - Civil Appeal No. 9813 and 9833 of 2011 [(2013) 1 SCC 1] (hereinafter referred to as “the Sahara Order”).

8. The interim order was issued against the directors of the company namely Shri Srinivasan Kozhinjapara Ramasamy, Shri Sivakumar Gangadharan and Shri Rabindra Kumar Jena. The details of the appointment and resignations of directors of the company are as under: Table B Name Date of Appointment Date of Cession Shri Srinivasan Kozhinjapara Ramasamy 01/04/2010 Continuing as director Shri Sivakumar Gangadharan 09/06/2010 Continuing as director Shri Rabindra Kumar Jena 09/06/2010 Continuing as director 9. I note that Shri Srinivasan Kozhinjapara Ramasamy, Shri Sivakumar Gangadharan and Shri Rabindra Kumar Jena were in the Board of Directors of the company and instrumental in formulation of a plan to mobilize public funds without complying with the public issue norms. In terms of section 291 of the Companies Act, 1956, the Board of Directors of a company shall be entitled to exercise all such powers and do all such acts and things as the company is authorized to exercise and do. Therefore, the Board of Directors being responsible for the conduct of the business of a company will be liable for any non-compliance of law and such liability shall be upon the individual directors also.

Section 56(1) and 56(3) read with section 56(4) of the Companies Act, 1956 imposes the liability for the non-compliance of the said provisions, on the company, every director, and other persons responsible for the issuance of the prospectus. 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. The liability of the company and directors to repay under section 73(2) of the Companies Act, 1956 would remain until the whole of the subscription amount along with interest is refunded to the allottees/ investors. In this regard, I refer to the following observations made by the Hon’ble High Court of Madras in Madhavan Nambiar vs Registrar of Companies (2002 108 Comp Cas 1 Mad): “13. …. A director either full time or part time, either elected or appointed or nominated is bound to discharge the functions of a director and should have taken all the diligent steps and taken care in the affairs of the company. 14. In the matter of proceedings for negligence, default, breach of duty, misfeasance or breach of trust or violation of the statutory provisions of the Act and the rules, there is no difference or distinction between the whole-time or part time director or nominated or co-opted director and the liability for such acts or commission or omission is equal.

So also the treatment for such violations as stipulated in the Companies Act, 1956.” 10. Therefore, all the above persons being officers in default, in terms of section 5 of the Companies Act, 1956, are responsible for the contravention committed by the company as found above and liable for the consequences of such default. The non-consequence of the aforesaid violations is refund of the subscription money by the company and its directors to the allottees along with interest under section 73(2) of the Companies Act, 1956. In this regard, I further note that in terms of rule 4D of the Companies (Central Government's) General Rules and Forms, 1956 read with rule 3(c) of the Companies (Prospectus and Allotment of Securities) Rules, 2014, the rate of interest prescribed in this regard is 15%.

11. In view of the foregoing, I, in exercise of the powers conferred under sections 11(1), 11(4), 11A and 11B read with section 19 of the Securities and Exchange Board of India

Act, 1992 and regulation 107 read with regulation 111 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, hereby issue the following directions: (i) The Noticees i.e. Rightmax Technotrade International Limited and its directors namely Shri Srinivasan Kozhinjapara Ramasamy [DIN: 02913852], Shri Sivakumar Gangadharan [DIN: 02916854] and Shri Rabindra Kumar Jena [PAN: AGMPJ0750E] shall within a period of three months from the date of this order, jointly and severally refund the money collected through the issue of Redeemable Preference Shares to the allottees with interest at the rate of 15% per annum from the date of receipt of money till the date of such refund. (ii) Such refund shall be made only in cash through a Demand Draft or Pay Order. (iii) Rightmax Technotrade International Limited and its directors shall within fifteen days from the date of this Order submit to SEBI complete details of their assets (alongwith proofs thereof) certified by a peer reviewed Chartered Accountant. (iv) Rightmax Technotrade International Limited and its directors are permitted to sell assets of the company and deposit the sale 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 allottees till the full refund/ repayment as directed above is made. (v) Rightmax Technotrade International Limited and its directors shall issue a public notice, in all editions of one English national daily and one vernacular daily 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. (vi) Within seven days of completion of refund/ repayment as directed hereinabove, Rightmax Technotrade International Limited and its directors 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. Such certificate shall be issued by the Chartered Accountants after verifying the relevant documents including bank accounts of the Noticees and satisfying themselves that the refund has actually been made. (vii) 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.

(viii) Rightmax Technotrade International Limited and its directors namely Shri Srinivasan Kozhinjapara Ramasamy, Shri Sivakumar Gangadharan and Shri Rabindra Kumar Jena are restrained from, directly or indirectly, accessing the capital market by issuing prospectus, any offer document or advertisement soliciting money from the public and are further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, in whatsoever manner for a period of four years or till the date of refund of money to the allottees, whichever is later. (ix) Shri Srinivasan Kozhinjapara Ramasamy, Shri Sivakumar Gangadharan and Shri Rabindra Kumar Jena are also restrained from associating themselves, with any listed public company and any public company which intends to raise money from the public, for a period of four years or till the date of refund of money to the allottees, whichever is later. (x) For the purposes of sub-paragraphs (viii) and (ix) the period of restraint shall be counted from the date of the interim order. 12. The interim order dated February 20, 2015, is disposed off accordingly. The above directions are without prejudice to the right of SEBI to take any other appropriate action for the violations found in this case or to initiate any action in case of failure to comply with the above directions, in accordance with the provisions of applicable laws including the proceedings under the provisions of section 28A of the SEBI Act. 13. The order shall come into force with immediate effect. A copy of the order shall be served on the Noticees to ensure compliance with the above directions. A copy of this Order shall also be forwarded to the recognised stock exchanges and depositories for information and necessary action.

14. 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

DATE : SEPTEMBER 21st, 2016 RAJEEV KUMAR AGARWAL PLACE : MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA