Order in respect of Silicon Projects India Limited and its Directors.

WTM/PS/180/IMD-ERO/MAR/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 In respect of – 1. Silicon Projects India Limited (PAN: AAMCS7625L) and its Directors, 2. Mr. Jugal Kishor Gupta (DIN:02572736, PAN: ALVPG7319N), 3. Mr. Bijay Pratap Mishra (DIN:05253188; PAN: BEYPM5770A), 4. Mr. Swarup Kumar Dutta (DIN:05306588; PAN: ALZPD5431G), 5. Mr. Biswajit Bera (DIN:02529396,PAN: AMGPB2130A), 6. Mr. Tushar Jana (DIN:02529742), 7. Mr. Asesh Mitra (DIN:05220340; PAN:AOHPM4366A), 8. Mr. Debashis Dey (DIN:05255046; PAN: ALAPD5970B) and 9. Mr.Tapan Sahoo (DIN:05257691; PAN: CDGPS2983D) 10. Mr. Afzal Hussain (debenture trustee of company)

Date of hearing: April 22, 2015 Appearance- For noticees: Noticees, Bijay Pratap Mishra and Jugal Kishore Gupta appeared along with their Advocates M/s. Panchu Gopal Ghosh and A. Kumar Mukherjee. Noticees Tapan Sahoo, Asesh Mitra and Swarup Kumar Datta appeared in-person. For SEBI: Ms. Soma Majumder, General Manager, Mr. N. Murugan, Assistant General Manager, Mr. T. Vinay Rajneesh, Assistant General Manager, Mr. Sisir Mondal, Assistant General Manager and Ms. Nikki Agarwal, Assistant Manager. Date of hearing: September 04, 2015 Debenture trustee, Afzal Hussain did not appear.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”), vide an ex-parte interim Order dated January 06, 2015 (hereinafter referred to as the “interim order”) observed that the company, Silicon Projects India Limited (hereinafter referred to as “SPIL” or “the Company”) is prima facie engaged in fund mobilization activity from the public, through its offer and issue of Non-

Convertible Redeemable Debentures (hereinafter referred to as "NCDs") and had allegedly violated the provisions of sections 56, 60 read with section 2(36), 73, 117B and 117C of the Companies Act, 1956 read with the Companies Act, 2013 and the relevant provisions of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (“the ILDS Regulations”). The interim order also alleged that the debenture trustee, Mr. Afzal Hussain allegedly failed to meet the eligibility conditions specified under regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993 ("DT Regulations") and acted as an unregistered debenture trustee in violation of section 12(1) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”).

16. “In order to protect the investors who have subscribed to the impugned offer and issue of NCDs and to ensure that the Company, its directors and debenture trustee are restrained from carrying on with their fund mobilizing activity, SEBI had issued the following directions: In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11(1), 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. SPIL shall not mobilize any fresh funds from investors through the Offer of NCDs 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. SPIL and its Directors, viz. Mr. Jugal Kishor Gupta (DIN:02572736), Mr. Bijay Pratap Mishra (DIN:05253188; PAN: BEYPM5770A), Mr. Swarup Kumar Dutta (DIN:05306588; PAN: ALZPD5431G), Mr. Biswajit Bera (DIN:02529396), Mr. Tushar Jana (DIN:02529742), Mr. Asesh Mitra (DIN:05220340; PAN:AOHPM4366A), Mr. Debashis Dey (DIN:05255046; PAN: ALAPD5970B), Mr.Tapan Sahoo (DIN:05257691; PAN: CDGPS2983D), 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. SPIL 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. SPIL shall provide a full inventory of all its assets and properties; v. SPIL's abovementioned Directors shall provide a full inventory of all their assets and properties;

vi. SPIL 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 NCDs, without prior permission from SEBI; vii. SPIL and its abovementioned present Directors shall not divert any funds raised from public at large through the Offer of NCDs, which are kept in bank account(s) and/or in the custody of SPIL; viii. SPIL shall furnish complete and relevant information within 21 days from the date of receipt of this Order. ix. The Debenture Trustee, viz. Mr. Afzal Hussain, is prohibited from continuing with his present assignment as a debenture trustee in respect of the Offer of NCDs of SPIL 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. x. Mr. Jugal Kishor Gupta, Mr. Biswajit Bera, Mr. Tushar Jana are directed to provide their PAN details along with their reply.

17. The above directions shall take effect immediately and shall be in force until further orders. ………”

2. The copies of the interim order were forwarded to the noticees, the Company, Bijay Pratap Mishra, Biswajit Bera, Asesh Mitra, Tapan Sahoo, Jugal Kishor Gupta, Swarup Kumar Dutta, Tushar Jana, Debashis Dey and Afzal Hussain (debenture trustee).

The letters were delivered on Asesh Mitra, Debashis Dey, Bijay Pratap Mishra and Swarup Kumar Dutta. The letters returned undelivered with respect to the following noticees with the remarks as indicated – a. Company – ‘left’ b. Biswajit Bera – ‘addressee moved’ c. Afzal Hussain – ‘addressee moved’ d. Tushar Jana – ‘refused’ e. Jugal Kishore Gupta – ‘addressee moved’

3. Tapan Sahoo, vide an undated letter (received in SEBI on February 03, 2015) stated that he would comply with the interim order. He submitted that he was a director in the Company from April

17, 2012 to May 27, 2013. The noticee further submitted that he did not attend any board meeting of the Company during his tenure and did not sign any documents or statements as he did not have the power to do so. He requested for a hearing in Kolkata.

4. Asesh Mitra, vide letter dated February 06, 2015, stated that he was a ‘field worker’ of the Company. He stated SEBI has not directed the Chairman, Mr. Shib Narayan Das (who was in CBI custody), to appear and submitted that the Chairman was the ‘owner’ of the Company and could provide all information. The noticee requested for a hearing in Kolkata in view of his financial condition. Noticee, Bijay Pratap Mishra, vide letter dated February 06, 2015, also made submissions similar to that of Asesh Mitra.

5. Noticee, Jugal Kishor Gupta, vide his letter dated February 10, 2015 stated that he worked for the Company. He too made similar submission as made by Asesh Mitra. Vide another undated letter, this noticee had stated as follows: (a) He joined the Company on February 14, 2009 as a Member/Collection agent. Thereafter, on February 23, 2009, he was selected as ‘Executive Developer’. (b) Mr. Shib Narayan Das had signed an undated letter indicating that the member has no liability. (c) The noticee was fraudulently appointed by Mr. Shib Narayan Das, Founder and managing Director of the Company. Notice dated August 30, 2011 indicates that Mr. Shib Narayan Das is the Chairman and Director of the Company. (d) The noticee does not have any bank account. (e) He is willing to co-operate with SEBI and requested SEBI to remove him from the proceedings. (f) This noticee enclosed copies of documents including the following- i. His identity card, offer letter from Silicon Smart Marketing Pvt. Ltd. ii. Certificate of incorporation of the Company iii. Certificate for commencement of business iv. PAN card of the Company v. MoA and AoA dated August 10, 2010

6. Swarup Kumar Dutta, vide letter dated February 23, 2015 submitted that he joined as an agent in the Company as he wanted to earn. He stated that the ‘owner’ of the Company is Mr. Shib Narayan Das, who is in custody of the CBI. He submitted that he was not involved in the affairs of the Company including its mobilization activities. He is now unemployed and requested SEBI to discharge him from the proceedings. He submitted that he would co-operate with SEBI and requested for a hearing in Kolkata.

7. The noticees were afforded an opportunity of personal hearing on April 22, 2015 in the SEBI eastern Regional Office at Kolkata and the same was informed vide SEBI letters dated March 25, 2015. As the interim order could not be delivered on few of the noticees, SEBI made a public notice regarding the proceedings and the schedule of the personal hearing in Times of India dated April 15, 2015 and Ananda Bazar Patrika dated April 14, 2015. The noticees were advised that in case they fail to appear before SEBI on the aforesaid date, the matter would be proceeded ex-parte on the basis of material on record.

8. On the date (i.e. April 22, 2015) of personal hearing, noticees, Bijay Pratap Mishra and Jugal Kishore Gupta appeared along with their Advocates M/s. Panchu Gopal Ghosh and A. Kumar Mukherjee. The advocates and Bijay Pratap Mishra made oral submissions. Noticees Tapan Sahoo, Asesh Mitra and Swarup Kumar Datta appeared in-person and made oral submissions. Swarup Kumar Dutta filed his written submissions in Bengali language, wherein he submitted as follows:

(a) He does not know as to how, when and where he became a director and does not have any documents in this regard. (b) The Company’s ‘owner’ Mr. Shib Narayan Das, for saving himself and with an ulterior motive, had inducted him as a director. (c) Presently, he is unemployed and has become financially weak. (d) The persons who had invested money in the Company as per his advice were forcing him to return the money. The noticee is therefore under mental trauma. (e) The noticee requested SEBI to consider his submissions, take a lenient view and discharge him from the present proceedings.

All the above noticees were advised to file written submissions recording their oral submissions made in the hearing along with copies of all documents, which they wish to rely in the matter.

9. Mr. Tapan Sahoo, vide letter dated April 28, 2015, filed his written statement inter alia submitting as follows:

(a) He was an employee in Silicon Chain Multiservices Limited and Silicon Smart Marketing Pvt. Ltd. as Developer on commission basis. Copies of his Identity card issued by these companies and commission payment vouchers were enclosed. (b) He had to sign many papers under duress without knowing the contents. (c) He was appointed as a director in the Company on April 17, 2012 and resigned on May 27, 2013. (d) During his tenure, he was neither invited to any board meeting nor attended such meetings. (e) He did not draw director’s remuneration or fees from the Company. (f) He was not given power to operate any bank account of the Company. (g) He was never a part of the decision making process in the Company and did not know any other director of the Company. (h) The noticee submitted that he was never involved in any illegal or immoral activities, if any, carried on by the Company and requested SEBI to withdraw the directions.

10. As the name of the noticee, Afzal Hussain was inadvertently not mentioned in the public notice made in the newspapers, SEBI afforded another opportunity to this noticee on September 04, 2015. SEBI made a public notice in the newspapers, Times of India and Anandbazar Patrika dated September 03, 2015, regarding the proceedings initiated vide the interim order against this noticee and the opportunity of personal hearing granted to him on September 04, 2015. Despite the public notice, this noticee failed to appear.

11. The noticees, Bijay Pratap Mishra and Asesh Mitra who were advised to file their written statements during the hearing held on April 22, 2015, did not do so till date. As adequate time and opportunities have been afforded, I consider it appropriate to proceed in the matter on merits.

12. The Company has been alleged of making a public issue of NCDs without complying with the provisions of the Companies Act, 1956 and the provisions of the ILDS Regulations. Therefore, the first question to be determined is whether the Company made a public issue of NCDs. The interim order has alleged that the Company made offer and issued such securities during 2009-2010, 2010- 2011 and 2011-2012 to more than 406 persons and raised more than Rs.18,03,16,702/-. Such observation was made on the basis of the Balance sheet of the Company as at March 31, 2010 and information submitted by the Company vide its letters dated December 18, 2012 and May 24, 2013 to SEBI. The following table provides further details:

Year No. of Face value (in Amount Raised No. of debentures Rs.) (in Rs.) Allottees 2009 – 10 NA 100 2,10,74,802 *not known 2010 – 11 2,32,160 100 2,32,16,000 #368 2011 – 12 13,60,259 100 13,60,25,900 ^38 >15,92,416 18,03,16,702 >406

* Amount raised through NCDs as per the disclosure in Balance Sheet for year ended March 31, 2010. The same has been disclosed as “Secured Loans” and as per Schedule 2 as “Redeemable Debentures”. The Company has not submitted the number of investors.

# Number of investors as disclosed by the Company vide letter dated May 24, 2013 read with the disclosures in the Balance Sheet for 2010-11. Balance Sheet signed by Shib Narayan Das and Tushar Jana.

^ Number of investors as disclosed by the Company vide letter dated December 18, 2012 read with disclosures made in the Balance sheet for 2011-12. As of March 31, 2012, the total outstanding debentures stood at Rs.17,19,16,700/- (a) The Company had passed a Resolution on October 15, 2009 for issuing 5,00,000 debentures of face value of Rs.100/- each aggregating to Rs.5,00,00,000/-. A charge for Rs.5 crores was created on immovable properties, plant and machinery, furniture and fixtures, stock in trade and book debts of the Company on October 21, 2009. Silicon Debenture Trust, managed by trustee Mr. Afzal Hussain was the debenture trustee. The Company had circulated Brochure cum Application Form for solicitation and subscription of the NCDs (Series-I) on the following terms and conditions: Scheme I: multiplier Secures Redeemable Debenture Plan A B C D E Issue Price (Minimum 1,000/- 1,000/- 1,000/- 1,000/- 1,000/- 10 debentures) Maturity value 1,500/- 2,000/- 3,000/- 5,000/- 10,000/- Redemption period 3 Years 5 Years 7 Years 10 Years 14 Years

Scheme II: Regular Income Secured Redeemable debenture Minimum Amount Acceptable is Rs. 50,000/- Interest payable half Yearly Plan Redemption Period Rate of Interest (per year)

G 3 Years (13.2%) 5 Years (14.4%)

The said Brochure cum Application Form, as provided by the Company, inter alia mentioned the following particulars: a. "Issue of Opening date: 21.10.2009 b. The company is managed, superintended and controlled by the Board of Directors of the company. c. The debentures are being issued pursuant to the resolutions passed in the meeting of the Board of Directors of the Company held on 7th September 2009. d. Size of issue is Rs. 500 lakhs with an option to retain additional Rs.500lakhs. While it will be the company's endeavor to allot debentures as indicated, the company has right to increase/decrease the size of the offer. e. The debentures will be secured by creation of charges the assets (movable & immovable) to RoC, Kolkata."

(b) The Board of Directors (on May 30, 2011) of the Company and Shareholders of the Company in its Extraordinary General Meeting held on July 01, 2011 passed resolutions to issue 30,00,000, NCDs of face value of Rs. 100/- each to raise a sum of Rs. 30 Crores through private placement. A charge for Rs.30 crores was created on immovable properties, plant and machinery, furniture and fixtures, stock in trade of the company on July 19, 2011. Here too the debenture trustee was “Silicon Debenture Trust” managed by trustee Mr. Afzal Hussain. The Debenture Trust Deed mentions that the debentures shall consist of a series of 30,00,000 debentures of Rs.100/- each, aggregating to Rs.30 Crores. The debentures were to be issued as per the following schemes, as provided in the Brochure cum Application Form:

Scheme I: multiplier Secures Redeemable Debenture Plan A B C D E Issue Price (Minimum 1,000/- 1,000/- 1,000/- 1,000/- 1,000/- 10 debentures) Maturity value 1,500/- 2,000/- 3,000/- 5,000/- 10,000/- Redemption period 3 Years 5 Years 7 Years 11 Years 15 Years

Scheme II: Regular Income Secured Redeemable Minimum Amount Acceptable is Rs. 50,000/- Interest payable half Yearly Plan Redemption Period Rate of Interest (per year) G 3 Years (13.2%) 5 Years (14.4%)

Brochure cum application form inter alia mentioned as under- a. "Issue of opening date: 2.07.2011 b. The company is managed, superintended and controlled by the Board of Directors of the company. c. The debentures are being issued pursuant to the resolutions passed in the meeting of the Board of Directors of the Company held on 01.07.2011.

d. Size of issue is Rs. 3,000 lakhs with an option to retain additional Rs.3,000 lakhs. While it will be the company's endeavor to allot debentures as indicated, the company has right to increase/decrease the size of the offer. e. The debentures will be secured by creation of charges on the assets (movable & immovable) to the RoC, Kolkata."

(c) The Company had admittedly issued NCDs of face value of Rs.100/- each issued during the financial year (FY) 2010-11 as per details below:

Sr. Opening date of Closing date of Date of No. of No. of No. subscription subscription Allotment debentures allottees 1 01/04/2010 15/04/2010 16/04/2010 6000 10 2 22/04/2010 07/05/2010 10/05/2010 18000 23 3 12/05/2010 05/06/2010 09/06/2010 27270 41 4 14/06/2010 16/07/2010 20/07/2010 25600 39 5 21/07/2010 07/08/2010 12/08/2010 11600 18 6 16/08/2010 06/09/2010 10/09/2010 15050 23 7 14/09/2010 13/10/2010 15/10/2010 27500 41 8 18/10/2010 03/11/2010 08/11/2010 14600 20 9 10/11/2010 07/12/2010 10/12/2010 28280 39 10 14/12/2010 05/01/2011 11/01/2011 14100 27 11 15/01/2011 03/02/2011 19/02/2011 21760 43 12 11/02/2011 04/03/2011 08/03/2011 12000 24 13 10/03/2011 31/03/2011 31/03/2011 10400 20 Total 2,32,160 368

13. The Company had issued NCDs for Rs.2,10,74,802/- during 2009-10, in terms of the Resolution passed on October 15, 2009. Thereafter, the Company had issued NCDs worth Rs.2,32,16,000/- during 2010-11 as per the permission to issue 5,00,000 debentures. Therefore, it can be seen that the NCDs issued during 2009-10 and 2010-11 were pursuant to the Resolution passed on October 15, 2009. The Company had further allotted 13,60,259 NCDs to 38 persons during 2011- 12 and the same was stated (in Balance Sheet for 2011-2012) to be against the permission of Rs.35 crore to be raised through debentures. Therefore, the allotments made during 2009-10, 2010-11 and 2011-12 should be seen as a whole. Accordingly, I note that the Company had allotted NCDs to more than 406 persons and raised Rs.18.03 crore.

14. In order to ascertain whether an issue is a public issue or not, reference needs to be made to section 67(3) of the Companies Act. This provision, as amended by the Companies (Amendment) Act, 2000, with effect from December 13, 2000, states that no offer or invitation shall be treated as made to the public by virtue of sub-sections (1) or (2), as the case may be, if the offer or invitation can properly be regarded, in all 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. More importantly, in terms of the first proviso to the aforesaid section, 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. Therefore, the number of subscribers becomes relevant to judge whether an issue of shares are for public or on a private placement basis, in the light of the above said provision. Therefore, if an offer of securities are made to fifty or more persons, it would be deemed to be a public issue. NBFCs or PFIs are exempted only from the first proviso to section 67(3). Therefore, NBFC or PFI do not have any restriction on the number of allottees as imposed on a company which is not an NBFC or PFI. However, such companies also need to prove that its offer falls either under clause (a) or (b) of section 67(3) to claim such issuance to be a private placement.

15. Though the Company, in its Balance Sheet for 2011-12 has stated that “The Company has raised money by issuing debentures from various parties. These parties are directors and company shareholders, relatives, friends, relative’s friend, friend’s friend and friend’s relative etc”, considering that it had made offer and issued NCDs to more than 406 persons during FY 2009-10, 2010-11 and 2011-12, I conclude that the Company made a public issue of NCDs in terms of the first proviso to section 67(3) of the Companies Act.

16. In terms of section 55A of the Companies Act, 1956, SEBI shall administer various provisions (as mentioned therein) of the said Act with respect to issue and transfer of securities by listed companies, companies that intend to list and also those companies that are required to list its securities while making offer and issue of securities to the public. 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".

17. Under section 11A of the SEBI Act, SEBI is also empowered to regulate, by regulations/general or special orders, the matters pertaining to issue of capital, transfer of securities and matters related thereto. Accordingly, the Company, having made a public offer and issue of securities, as observed above, is under the jurisdiction of SEBI. By making a public issue of NCDs, the Company was mandated to comply with all the legal provisions that govern and regulate public issue of such securities, including the Companies Act, 1956 and the SEBI Act and regulations. In this context, I refer and rely on the below mentioned observation made by 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'): ... ... 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. …".

18. Accordingly, sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 and the provisions of the ILDS Regulations are required to be complied by a company making a public issue of securities. These provisions have been allegedly not adhered to by the Company. In this regard, I note that - (i) 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. 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'.

(ii) By making a public issue, the Company had to compulsorily list such securities in compliance with section 73(1) of the Companies Act, 1956. A Company making a public issue of securities cannot choose whether to list its securities or not as listing is a mandatory requirement under law. As per section 73(1) 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. Further, there is no material to say that the Company has filed an application with a recognized stock exchange to enable the NCDs to be dealt with in such stock exchange. Therefore, the Company has failed to comply with this requirement.

Section 73(2) states that "Where the permission has not been applied under subsection (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, 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".

As the Company failed to make an application for listing of such securities, the Company had to forthwith repay such money collected from investors. If such repayments are not made within 8 days after the Company becomes liable to repay, the Company and every director is liable to repay with interest at such rate. The liability of the Company to refund the public funds collected through offer and allotment of the impugned securities is continuing and such liability would continue till repayments are made. There is no record to suggest that the Company made the refunds as per law. The Hon'ble Supreme Court of India in the Sahara case has examined section 73 and made the following observations: "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. Listing is, therefore, a legal responsibility of the company which offers securities to the public, provided offers are made to more than 50 persons."

As the amounts mobilized through the issue of securities have not been refunded within the time period as mandated under law, it would therefore be appropriate to levy an interest @ 15% p.a. as provided for under the above section read with rule 4D (which prescribes that the rates of interest, for the purposes of sub-sections (2) and (2A) of section 73, shall be 15 per cent per annum) of the Companies (Central Government’s) General Rules and Forms, 1956 on the amounts mobilized by the Company through its offer and issue of NCDs including Rs.18.03 crore as alleged in the interim order, from the date when the same was liable to be repaid till date of actual payment to the investor.

On an examination of the Annual Report of the Company for 2013-2014, it is observed that the Company did not attach the ‘Notes to Accounts’ to the items falling under the head ‘Liabilities’. Therefore, the amount of debentures issued/outstanding could not be ascertained. It is observed at paragraph no. 18 of Annexure –A to the Auditor’s Report made under the Companies (Auditor’s

Report ) Order, 2003, that the total outstanding debentures till March 31, 2014 was Rs.1,35,71,470/-. This amount is also reflected under the head ‘Secured Loan’ in sr. no. 42 at page 9 of Form 23AC (form for filing balance sheet and other documents with the Registrar). However, the Company has not submitted any evidence to substantiate repayments, if any. As mentioned above, the Company had raised more than Rs.18 crore through its offer and issue of NCDs.

(iii) Section 117B of the Companies Act, 1956, prescribes that no company shall issue a prospectus or a letter of offer to the public for subscription of its debentures, unless it has, before such issue, appointed one or more debenture trustees for such debentures and the company has, on the face of the prospectus or the letter of offer, stated that the debenture trustee or trustees have given their consent to the company to be so appointed. The Company has admittedly not filed any Prospectus. Therefore, the said provision has not been fully complied with. Further, appointment of debenture trustee shall be in terms of all applicable law. Further, section 117C stipulates that, where a company issues debentures, it shall create a debenture redemption reserve for the redemption of such debentures, to which adequate amounts shall be credited, from out of its profits every year until such debentures are redeemed. There is no record to suggest that this provision was complied with.

(iv) As NCDs are ‘debt securities’ in terms of the ILDS Regulations, the Company was also mandated to comply with the provisions of the ILDS Regulations in respect of its public issue of NCDs. However, the Company failed to comply with the following provisions of the ILDS Regulations. (a) Regulation 4(2)(a) – Application for listing of debt securities (b) Regulation 4(2)(b) – In-principle approval for listing of debt securities (c) Regulation 4(2)(c) – Credit rating has been obtained (d) Regulation 4(2)(d) – Dematerialization of debt securities (e) Regulation 4(4) – Appointment of Debenture Trustee (f) Regulation 5(2)(b) – Disclosure requirements in the Offer Document (g) Regulation 6 – Filing of draft Offer Document (h) Regulation 7 – Mode of disclosure of Offer Document (i) Regulation 8 – Advertisements for Public Issues (j) Regulation 9 – Abridged Prospectus and application forms (k) Regulation 12 – Minimum subscription (l) Regulation 14 – Prohibition of mis-statements in the Offer Document (m) Regulation 15 – Trust Deed (n) Regulation 16 – Debenture Redemption Reserve (o) Regulation 17 – Creation of security (p) Regulation 19 – Mandatory Listing (q) Regulation 26 – Obligations of the Issuer, etc.

From the foregoing, I conclude that the Company failed to comply with the stipulation under sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 read with Companies Act, 2013 and the aforesaid provisions of the ILDS Regulations, in respect of its offer and issuance of NCDs as discussed in this Order and liable for suitable action under the Companies Act, 1956, the SEBI Act and the ILDS Regulations.

19. The interim order was issued against the following directors (past and present) of the Company: a. Mr. Jugal Kishor Gupta (DIN:02572736), b. Mr. Bijay Pratap Mishra (DIN:05253188; PAN: BEYPM5770A), c. Mr. Swarup Kumar Dutta (DIN:05306588; PAN: ALZPD5431G), d. Mr. Biswajit Bera (DIN:02529396), e. Mr. Tushar Jana (DIN:02529742), f. Mr. Asesh Mitra (DIN:05220340; PAN:AOHPM4366A), g. Mr. Debashis Dey (DIN:05255046; PAN: ALAPD5970B) and h. Mr.Tapan Sahoo (DIN:05257691; PAN: CDGPS2983D)

The following table provides the details regarding their date of appointment and also date of resignation, if applicable:

Noticee Date of appointment as a Date of resignation director Bijay Pratap Mishra 16.04.2012 Continues as a director Biswajit Bera 01.11.2011 20.05.2013 Asesh Mitra 16.04.2012 01.10.2013 Tapan Sahoo 17.04.2012 27.05.2013 Jugal Kishor Gupta 01.11.2011 Continues as a director Swarup Kumar Dutta 30.05.2013 Continues as a director Tushar Jana 07.08.2009 20.05.2013 Debashis Dey 16.04.2012 20.05.2013

Regarding their culpability in this matter, I observe the following:

(a) 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 shall be responsible for the conduct of the business of a company and liable for any non-compliance of law and such liability shall trickle down to individual directors. (b) Accordingly, a director who is part of a company’s board shall be responsible and liable for all acts carried out by a company unless exemptions are provided. (c) With respect to the culpability of a director for breach of law by a company, I refer to and rely on 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. It may be that the petitioner may not be a whole-time director, but that does not mean he is exonerated of the statutory obligations which are imposed under the Act and the rules and he cannot contend that he is an ex officio director and, therefore, he cannot be held responsible. There is substance in the contention advanced by Mr. Sridhar, learned counsel since the petitioner a member of the Indian Administrative Service and in the cadre of Secretary to Government when appointed as a director on the orders of the Government to a Government company or a joint venture company, he is expected not only to discharge his usual functions, but also take such diligent care as a director of the company as it is expected of him not only to take care of the interest of the Government, but also to see that the company complies with the provisions of the Companies Act and the rules framed thereunder. Therefore, the second contention that the petitioner cannot be proceeded against at all as he is only a nominee or appointed director by the State Government, cannot be sustained in law. 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. 15. Section 5 of the Companies Act defines the expression "officer who is in default". The expression means either (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; (g) any director or directors who may be specified by the board in this behalf or where no director is so specified, all the directors. 16. Section 29 of the Companies Act provides the general power of the board and …………...

Therefore it follows there cannot be a blanket direction or a blanket indemnity in favour of the petitioner or other directors who have been nominated by the Government either ex officio or otherwise. Hence the second point deserves to be answered against the petitioner. 17. As regards the first contention, it is contended by Mr. Arvind P. Datar, learned senior counsel appearing for the petitioner that the company or its board had resolved that Thiagaraj S. Chettiar shall be the director in charge of the company of all its day-to-day affairs and, therefore, the petitioner, an ex officio chairman and director, cannot be expected to attend to the affairs on a day-to-day basis. This contention though attractive cannot be sustained as a whole. There may be a delegation, but ultimately it comes before the board and it is the board and the general body of the company which are responsible.” {Emphasis supplied} (d) A person cannot assume the role of a director in a company in a casual manner. The position of a ‘director’ in a public company/listed company comes along with responsibilities and compliances under law associated with such position, which have to be fulfilled by such director or face the consequences for any violation or default thereof.

(e) The allotment of NCDs were made during FY 2009-10, 2010-11 and 2011-12. The Company is found to have contravened the provisions of sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 and the ILDS Regulations. From the above details, it can be inferred that Biswajit Bera, Jugal Kishore Gupta and Tushar Jana were the directors of the Company when the Company made the offer and allotment of NCDs in violation of the law.

(f) Section 56(1) and 56(3) read with section 56(4) imposes the liability for the 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 is on the Company, and every person who is a party to the non-compliance of issuing the prospectus as per the said section. Further, the directors of a company would also be responsible for complying with the provisions of the ILDS Regulations.

(g) The liability of the company and directors to repay under section 73(2) of the Companies Act, 1956 and section 27 of the SEBI Act, is a continuing liability and the same continues till all the repayments are made. Therefore, the directors (irrespective of whether they continue or resign) who were present during the period when the Company made the offer and allotted NCDs shall be liable for violation of sections 56, 60 and 73 of the Companies Act, including the default in making refunds as mandated therein. As the liability to make repayments under sections 73(2) of the Companies Act read with section 27 of the SEBI Act is a continuing liability, the persons who join the Company’s Board pursuant to the offer and allotment of NCDs shall also be liable if the Company and the concerned directors have failed to make refunds as mandated under law.

Accordingly, in addition to Biswajit Bera, Jugal Kishore Gupta and Tushar Jana, the other noticees, namely, Bijay Pratap Mishra, Asesh Mitra, Tapan Sahoo, Swarup Kumar Dutta and Debashis Dey are also responsible for making repayments, in terms of section 73(2) of the Companies Act, 1956 read with section 27 of the SEBI Act, though they joined pursuant to the offer and allotment of securities.

(h) In view of the above observations, the submissions made by noticees Tapan Sahoo, Jugal Kishor Gupta and Swarup Kumar Dutta do not carry merit. Further, it is noted that Mr. Jugal Kishor Gupta and Tushar Tana were signatories in various issue related documents and balance sheets.

(i) In view of the above observations, Biswajit Bera, Jugal Kishore Gupta and Tushar Jana shall be liable for the violations as found against the Company in this Order as well as for making refunds to the investors with attendant interest and for other enforcement action.

(j) Bijay Pratap Mishra, Asesh Mitra, Tapan Sahoo, Swarup Kumar Dutta and Debashis Dey are also liable, as directors of the Company, for making refunds in terms of section 73(2) of the Companies Act read with section 27 of the SEBI Act along with interest as ordered herein along with other enforcement directions.

20. I also note that the interim order has not covered some former directors of the Company, namely, Shib Narayan Das, Antara Mukherjee, Purnendu Mallick and Sayanti Sen, who appear to be in the board of directors of the Company during the period when the offer and issuance of NCDs were made. SEBI is therefore advised to examine the same and initiate appropriate action against them, in accordance with law.

21. The interim order has alleged that the Mr. Afzal Hussain acted as the debenture trustee with respect to the NCDs issued by the Company, without registration from SEBI as required under section 12(1) of the SEBI Act and has also not satisfied the eligibility condition stipulated under regulation 7 of the DT Regulations. As per the trust deed, it is seen that this person has been engaged as a debenture trustee. This noticee has not filed any response despite affording opportunities. In this regard, I note that the noticee is not registered with SEBI to perform the functions of a ‘debenture trustee’ in the capital market. Further, he does do not satisfy the following conditions under regulation 7 of the DT Regulations: "no person should act as a debenture trustee unless he is either – i. a scheduled bank carrying on commercial activity; or ii. a public financial institution within the meaning of section 4A of the Companies Act, 1956; or iii. an insurance company; or iv. body corporate."

Accordingly, the debenture trustee, Mr. Afzal Hussain is found to have violated section 12(1) of the SEBI Act and regulation 7 of the DT Regulations. In view of these observations, it can be said that the provisions of section 117B of the Companies Act, 1956 have not been completely complied with.

22. For the above reasons, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11(1), 11(4), 11A and 11B thereof and regulation 28 of the SEBI (Issue and Listing of Debt Securities) Regulation, 2008 hereby issue the following directions:

(a) The company, Silicon Projects India Limited and its directors (past and present) Bijay Pratap Mishra, Biswajit Bera, Asesh Mitra, Tapan Sahoo, Jugal Kishor Gupta, Swarup Kumar Dutta, Tushar Jana, Debashis Dey, jointly and severally, shall forthwith refund the money collected by the Company through the issuance of Non-Convertible Debentures (which have been found to be issued in contravention of the public issue norms stipulated under the Companies Act, 1956 and the ILDS Regulations), to the investors 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 to investors shall be effected only in cash through Bank Demand Draft or Pay Order.

(c) The Company/its present management 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 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, the Company shall file a certificate of such completion with SEBI, within a period of three months from the date of this Order, 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").

(f) Silicon Projects India Limited and its directors (past and present) Bijay Pratap Mishra, Biswajit Bera, Asesh Mitra, Tapan Sahoo, Jugal Kishor Gupta, Swarup Kumar Dutta, Tushar Jana, Debashis Dey 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.

(g) In case of failure of the company, Silicon Projects India Limited and its directors (past and present) Bijay Pratap Mishra, Biswajit Bera, Asesh Mitra, Tapan Sahoo, Jugal Kishor Gupta, Swarup Kumar Dutta, Tushar Jana, Debashis Dey, in complying 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 appropriate action as deemed fit. e) would also make a reference to the Ministry of Corporate Affairs to flag the names of noticee directors in its database so that information may be perused by RoC or any other regulatory authority.

(h) Silicon Projects India Limited is 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) Bijay Pratap Mishra, Biswajit Bera, Asesh Mitra, Tapan Sahoo, Jugal Kishor Gupta, Swarup Kumar Dutta, Tushar Jana and Debashis Dey are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, with immediate effect. They are also restrained from issuing prospectus, offer document or advertisement soliciting money from the public and 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. The above directions shall come into force with immediate effect and shall continue to be in force from the date of this Order till the expiry of 4 years from the date of completion of refunds to investors, as directed above.

(j) For the violations (i.e. acted as debenture trustee when they were not eligible to act as debenture trustees and acted so without registration from SEBI) committed by Mr. Afzal Hussain, they are hereby restrained from acting as an intermediary, accessing the securities market and further restrained from buying, selling or dealing in securities, in any manner whatsoever, for a period of 4 years.

(k) The above directions shall come into force with immediate effect.

23. As mentioned in paragraph 20 of this Order, SEBI is directed to examine the role of directors, who were not covered in the interim order and who were on the board of Silicon Projects India Limited during the period when the Company had made the offer and issued NCDs and proceed appropriately against them.

24. 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 the Company, its promoters, directors including former directors and other key persons.

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

26. 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.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Date: March 03, 2016 Place: Mumbai