Order in the matter of Amazan capital Limited

WTM/PS/12 /ERO/MAY/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI ORDER Under Sections 11, 11A, 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 read with SEBI (ICDR) Regulations, 2009, against Amazan Capital Limited and its Directors namely Shri Joydeb Garai (PAN-AEPPG8484F) (DIN - 02626788), Shri Basudeb Garai (PAN-AGNPG3984G) (DIN - 02652917), Smt. Gargi Biswas (PAN-BMEPB2162H) (DIN - 02626808), Shri Parag Keshar Bhattacharjee (PAN-ACWPB8279J) (DIN - 00081899), Shri Manigrib Bag (PAN-AIAPB0966A) (DIN - 03525192) and Shri Dillip Kumar Gangopadhyay (PAN-ADXPG0369E) (DIN - 03525194.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) received a reference through the Minutes of State Level Co-ordination Committee of Reserve Bank of India dated Jan 04, 2012 and July 25, 2012, regarding the collection of money by Amazan Capital Ltd. (hereinafter referred to as "the Company") from the public by way of issuance of equity shares and preference shares. The company had also issued an advertisement in the newspaper "The Telegraph" on September 14, 2011 for mobilization of money through issuance of debentures. 2. In order to examine the issuance of Non-Convertible Debentures / preference shares, SEBI sought the following details by letter dated September 24, 2012 and September 21, 2012, from the company and Registrar of Companies, West Bengal respectively. 1. A certified copy of the Memorandum and Articles of Association of the company. 2. Audited Balance Sheet and Profit & Loss account of the company for last 3 years. 3. Name, addresses and occupation of all the promoters/directors of the company 4. Names and details of the Key Managerial Personnel of the company. 5. Other information in respect of every series of debentures/ Preference shares issued by the company, as given below:

a. Copy of details regarding the filing of Prospectus / Red Herring Prospectus/Information memorandum with RoC for issuance of debentures/preference shares. b. Date of opening and closing of the subscription list for the said debentures/preference shares c. Details regarding the number of application forms circulated inviting subscription for debentures/ preference shares d. Details regarding the number of applications received e. Details regarding the number of allotees f. List of such allottees g. Number of debentures allotted and value of such allotment against each allotee’ s name h. Details regarding subscription amount raised i. Date of allotment of the debenture/ preference shares j. Copies of the minutes of Board/committee meeting in which the resolution has been passed for allotment k. Date of dispatch of debenture certificates etc. l. Copies of Statement in lieu of prospectus, if any, filed by the company with RoC for issue of said debentures / preference shares m. Details of the total number of applicants for each of its scheme besides the list of final allottees. n. Copies of application forms, RHP, pamphlets, advertisements and other promotional material circulated for issuance of debentures/ preference shares o. Terms and conditions of the issue of debentures/ preference shares 3. The company by its letter dated November 05, 2012 replied to the letter of SEBI dated September 24, 2012. 4. SEBI also received a reference dated June 2, 2013 from the Ministry of Corporate Affairs indicating the findings of the Inspection conducted by it under section 209A of the Companies Act, 1956 in respect of the issuance of equity shares and preferential shares made by the Company during the period of 2010-11 and 2011-12. Subsequently, the Ministry of Corporate affairs vide its letter dated April 02, 2014 forwarded the extract of the Inspection

Report to SEBI bringing out the findings of inspection on the violation of sections 73(3) and 299 of the Companies Act, 1956 while issuing equity shares by the company during the period of 2010-11 and 2011-12. 5. The material available on record including those submitted by the company and the extract of the Inspection Report of the Ministry of Company Affairs and the details taken from MCA Portal 21, have been examined. On an examination of the same, it is observed that – i. Amazan Capital Ltd. was an unlisted Non Banking Financial Company ( NBFC) having its registered office at Infinity Infotech Park, Tower-1, 2nd Floor, Plot No- A3, Block-GP, Sector V, Saltlake City, Kolkata-700091. The company was originally incorporated as Thirdwave Securities Pvt Ltd on 11/09/1995. The name of the company was changed to Amazan Capital Private Ltd. Subsequently, post conversion of the company from Private Limited to Public Limited, the name of the company was changed to Amazan Capital Limited with effect from 28/06/2010. The corporate identity number of the company is U67190WB1995PLC074186. ii. The company issued equity shares as shown in the following table. Table Year Date of Type of Security No of No. of Total allotment equity allottees Amount shares (Rs) 2010-11 31/12/2010 Equity shares of 2,21,490 478 2.21 Cr Rs. 10 at premium of Rs. 90/- 20/02/2012 Equity shares of 16,92,620 49 1.69 Cr Rs. 10/- 22/ Equity 2, 4 0 0 shar 2 es of 2011-12 / Rs. 2 10/- 0 1 2 24/02/2012 Equity shares of 4,14,100 49 0.41 Cr

Year Date of Type of Security No of No. of Total allotment equity allottees Amount shares (Rs) Rs. 10 27/02/2012 Equity shares of 8,74,500 49 0.87 Cr Rs. 10 28/02/2012 Equity shares of 4,05,500 49 0.40 Cr Rs. 10 29/02/2012 Equity shares of 1,28,500 30 0.13 Cr Rs. 10 01/03/2012 Equity shares of 9,98,500 49 1.00 Cr Rs. 10 05/03/2012 Equity shares of 5,44,500 49 0.54 Cr Rs. 10 07/03/2012 Equity shares of 1,98,900 20 0 .19 Cr Rs. 10 Total in the year 2011-12 55,07,620 393 5.49 Cr Grand Total 57,29,110 871 7.70 Cr iii. As stated in the Table, the Company had allotted 2,21,490 equity shares of face value of Rs.10/- for Rs. 2.21 Cr to 478 investors on December 31, 2010 and 55,07,620 shares for the face value of Rs.10/- within 17 days from Feb 20, 2012 to March 07, 2012 to 393 investors as mentioned in the above said Table, for a total amount of Rs. 5.49 crore. Thus, in total, the Company issued 57,29,110 shares to 871 allottees for a value of 7.70 Cr during the financial years 2010-11 and 2011-12. iv. This offer and allotment of equity shares were allegedly done without filing Prospectus and other disclosure requirements. The Company has submitted copies of its Annual Returns for the year 2008-09, 2009-10 and 2010-11. v. Present directors of the company as on this date, are Shri Joydeb Garai (DIN - 02626788), Shri Basudeb Garai (DIN - 02652917), Smt. Gargi Biswas (DIN - 02626808). vi. Shri Parag Keshar Bhattacharjee (DIN - 00081899), Shri Manigrib Bag (DIN - 03525192) and Shri Dillip Kumar Gangopadhyay (DIN - 03525194) are the other directors of the company who ceased to be directors on February 14, 2014.

6. In view of the allegations against the Company in the reference sent by the Ministry of Corporate affairs, the question that arises for consideration is whether the offer and allotment of the aforesaid equity shares mentioned in the Table above, by the Company, were done in accordance with the provisions of the Companies Act, 1956, the SEBI Act, 1992 and the relevant regulations framed there-under. 7. As noted above in the Table, the Company, in total, issued 57,29,110 shares to 871 allottees for a value of 7.7 Cr. 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) ... (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. The following observations of the Hon'ble Supreme Court of India in the 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'), 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. A public company can escape from the rigor of provisions, if the offer is made by companies mentioned under Section 67(3A), i.e. by public financial institutions specified under Section 4A or by non-banking financial companies referred to in Section 45I(f) of the Reserve Bank of India Act, 1934. Following situations, it is generally regarded, as not an offer made to public.  Offer of securities made to less than 50 persons;  Offer made only to the existing shareholders of the company (Right Issue);  Offer made to a particular addressee and be accepted only persons to whom it is addressed;  Offer or invitation being made and it is the domestic concern of those making and receiving the offer.

86. Resultantly, if an offer of securities is made to fifty or more persons, it would be deemed to be a public issue, even if it is of domestic concern or proved that the shares or debentures are not available for subscription or purchase by persons other than those received the offer or invitation.…"

9. 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 ("PFIs") from the applicability of the first proviso. Simply put, the requirements of public offer under the Companies Act, 1956, would not be triggered for an NBFC or PFIs making an offer of shares or debentures in terms of Section 67 of that Act, to fifty or more persons, if the concerned NBFC or PFI can show that the offer was a private placement in terms of the aforesaid Section 67(3). 10. 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. 11. In the instant case, I find that the company surrendered the original certificate of registration as NBFC on November 11, 2011. Prior to its surrender, the Company has allotted 2,21,490 equity shares pursuant to subscription on December 31, 2010. No material has been brought to my notice to the effect that this issuance was as per section 67(3) (a) or (b) of Companies Act, 1956. The fact that 478 persons have received allotment on December 31, 2010, shows that the offer was one calculated to result, directly or indirectly, in the shares becoming available for subscription or purchase by persons other than those receiving the offer or invitation. Therefore the benefit of exemption from the public offer requirement is not available to the company for the said issuance as the NBFC.

12. It can be seen that the allotment of equity shares made by the company between February 20,2012 and March 07,2012 were made subsequent to the company surrendering the certificate of registration as NBFC. I further find from the extract of the Inspection Report of the Ministry of Corporate Affairs, that the allotment money for the issuance of equity shares made between February 20, 2012 and March 07, 2012 as brought out in the Table were received by the company prior to the allotment. It shows clearly that the company is aware of the total number of the allotees prior to the allotment. In order to make an appearance as if the issue is only private placement, the company has chosen to allot the above said equity shares in tranches of 49 and in two tranches allotment was less than 49 (allotment dated Feb 29, 2012 and Mar 07, 2012). This is clearly a ploy to make the issue appear compliant with section 67(3) of Companies Act, 1956. 13. In this context, I refer to the below mentioned observation made by the Hon'ble Supreme Court of India in the matter 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 there-under, the Companies Act, pertaining to the public issue. …" 14. As the Company has offered and allotted equity shares during FY 2011-12 to more than 49 persons knowing well the total number of allottees are more than 49, it had, made a public offer of such securities and was mandated to comply with the 'public issue' norms as prescribed under the Companies Act, 1956 including sections 56, 60 [read with section 2(36)] and 73 of the Companies Act, 1956. 15. 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. I find that there is no record to show that the Company has filed a Prospectus and complied with the above provisions. 16. Further, by issuing equity shares to more than 49 persons, the Company had to compulsorily list such securities in compliance with section 73 of the Companies Act, 1956. As per section 73(1) and (2) of the Companies Act, 1956, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange and if permission has not been applied for or not granted, the company is required to forthwith repay with interest all moneys received from the applicants.

I find no records to indicate that it has made an application seeking listing permission nor refunded the amounts on account of such failure. Therefore, the Company has contravened the said provisions. I further find that the Company has also not complied with the provisions of section 73(3) of Companies Act, 1956 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) of the said Act as observed above. 17. I note that the jurisdiction of SEBI over various provisions of the Companies Act, 1956 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"

18. In this regard, it is pertinent to note that by virtue of Section 55A of the Companies Act, sections 56, 60 [read with section 2(36)] and 73 of the Companies Act, 1956, so far as it relates to issue and transfer of securities, shall also be administered by SEBI in the case of companies who intend to get their securities listed. The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("the ICDR Regulations") also govern and regulate the issuance of equity shares as they are specified securities within the ambit of the ICDR Regulations). Therefore, the Company was also mandated to comply with the provisions of the ICDR Regulations including the following:

- Application for listing of specified securities on one or more recognized stock exchange (Regulation 4(2)(d), - Appointment of merchant banker and other intermediaries (Regulation 5), - Filing of draft offer document with SEBI and the designated stock exchange and RoC (Regulation 6), - Obtaining in-principle approval from the recognized stock exchanges in which the specified securities are to be listed (Regulation 7), - Satisfy the conditions of initial public offer (Regulation 25 and 26), - Lock-in of specified securities held by promoters and persons other than promoters (Regulation 36 and 37) - Keeping the public issue open for the specified period (Regulation 46), - Pre issue advertisement for public issue (Regulation 47) - Manner of disclosures in the offer documents (Regulation 57) - Refrain from offering any incentive to any person making application for allotment of specified securities (Regulation 59).

19. In view of the forgoing findings, I am of the view that the Company is engaged in fund mobilizing activity from the public, through the offer and issuance of equity shares and has contravened the provisions of sections 56, 60 and 73 of the Companies Act, 1956 and the provisions of the ICDR Regulations.

20. Accordingly, the directors of the Company namely Shri Joydeb Garai, Shri Basudeb Garai, Smt. Gargi Biswas, Shri Parag Keshar Bhattacharjee, Shri Manigrib Bag and Shri

Dillip Kumar Gangopadhyay being the 'officers in default', are found responsible for the alleged contraventions committed by the Company. The Company and the aforesaid persons, have failed to make repayments to the persons (from whom monies were mobilized through issue of equity shares) in accordance with section 73(2) of the Companies Act, 1956.

21. At this stage, it is not clear, in the absence of information from the Company, as to whether the Company has mobilized funds beyond March 2012 and it is also not clear whether still the company is mobilizing funds. It becomes necessary for SEBI, as the regulator for the securities market, to intervene and issue suitable directions in order to ensure that the Company and its promoters and directors do not continue to collect public funds in contravention of the law. Further, the interest of the investors also need to be protected to ensure that public funds are not diverted. It is also required, in order not to defeat the liability of the company and the officers in default, to repay to the concerned shareholders along with interest, the status quo in respect of the properties of the company and the officers in default needs to be maintained. 22. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 and sections 11(1), 11(4), 11A and 11B thereof read with regulations 107 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, hereby issue the following directions: Amazan Capital Limited, its promoters and directors including Shri Joydeb Garai (PAN- AEPPG8484F) (DIN - 02626788), Shri Basudeb Garai (PAN-AGNPG3984G) (DIN - 02652917), Smt. Gargi Biswas (PAN-BMEPB2162H) (DIN - 02626808), Shri Parag Keshar Bhattacharjee (PAN-ACWPB8279J) (DIN - 00081899), Shri Manigrib Bag (PAN- AIAPB0966A) (DIN - 03525192) and Shri Dillip Kumar Gangopadhyay (PAN- ADXPG0369E) (DIN - 03525194):- (a) are restrained from mobilizing funds through the issue of securities to the public, and/ or invite subscription from the public, in any manner whatsoever, either directly or indirectly or through other companies in which they are directors/promoters, till further directions.

(b) 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 or through other companies in which they are directors/promoters, till further directions. (c) shall not dispose of any of the properties or alienate the assets of the Company or dispose off any of their properties or alienate their assets. (d) shall not divert any funds raised from public at large through the issuance of the impugned equity shares, kept in its bank accounts and/or in the custody of the company without prior permission of SEBI until further orders. (e) are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities in any manner whatsoever, either directly or indirectly, till further directions. (f) are directed to provide to SEBI, within twenty one days from the receipt of this order, 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 and details of companies in which the above said directors and promoters of the company hold substantial or controlling interest.

23. The above directions shall come into force with immediate effect and shall continue to be in force till further directions. 24. Amazan Capital Limited, its promoters and directors including Shri Joydeb Garai, Shri Basudeb Garai, Smt. Gargi Biswas, Shri Parag Keshar Bhattacharjee, Shri Manigrib Bag and Shri Dillip Kumar Gangopadhyay are advised to show cause as to why suitable directions/prohibitions, under the sections 11(1), 11(4), 11A and 11B of the SEBI Act read with the ICDR Regulations, including the following, should not be taken/imposed against them : a) directing them jointly and severally to refund the money collected through the issue of equity shares that are impugned in this Order, along with interest at 15% per annum from the date when the refunds became due to the investors till the date of repayment; b) directing them to not to issue 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, through other companies in which they are directors/promoters, for an appropriate period; c) restraining them from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period; d) directing the directors and the promoters not to associate with any other companies in their capacity as directors and promoters for an appropriate period. e) any other necessary and consequential directions.

25. Amazan Capital Limited, its promoters and directors including Shri Joydeb Garai, Shri Basudeb Garai, Smt. Gargi Biswas, Shri Parag Keshar Bhattacharjee, Shri Manigrib Bag and Shri Dillip Kumar Gangopadhyay may file their replies/submissions, treating the findings of this order as allegations against them, within a period of 21 days from the date of receipt of this Order and may also indicate whether they desire to avail an opportunity of personal hearing in the matter. 26. This Order is without prejudice to the right of SEBI to take any other action including prosecution proceedings under section 24 of the SEBI Act and section 621 of the Companies Act, 1956 read with the relevant provisions of the Companies Act, 2013 and adjudication proceedings under the SEBI Act, against Amazan Capital Limited, its promoters and directors including Shri Joydeb Garai, Shri Basudeb Garai, Smt. Gargi Biswas, Shri Parag Keshar Bhattacharjee, Shri Manigrib Bag and Shri Dillip Kumar Gangopadhyay, in accordance with law.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Date : May 25th, 2015 Place: Mumbai