Order in the matter of Cell Industries Limited

WTM/GM/EFD/ 52/2018-19

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, the Companies Act, 1956 and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 and in continuation to Interim Order dated March 17, 2015 and Final Order dated May 12, 2016. In respect of – S. No. Noticees CIN/ DIN PAN 1. Cell Industries Limited U52190WB2010PLC154842 AAECC2069A 2. Kumar Kanti Bhattacharya 01576626 ADXPB7335B 3. Rajesh Jaiswal 01675141 AAPPJ0891B 4. Sekh Rezaul Karim 03410690 AKOPK3769L

1. Securities and Exchange Board of India (“SEBI”), vide Final Order dated May 12, 2016 held that Cell Industries Limited (“CIL” or “Company”) and its directors namely, Kumar Kanti Bhattacharya, Debi Prasad Mookherji, Sourav Bardhan, Ashim Gupta, Asraf Ali Shaikh, Shaikh Ajgar Ali, Saik Majaffar, Rajesh Jaiswal, Sekh Rezaul Karim and Koushik Mukherjee were liable for engaging in fund mobilizing activity from the public through the offer and issuance of Redeemable Preference Shares (“RPS”) and Non-Convertible Debentures (“NCDs”) since they had contravened the provisions of sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 and the provisions of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008. The Final Order also held that the Company had appointed Ashish Kumar De Sarkar and Abdul Basad Molla, as Debenture Trustees in respect of its offer and issuance of NCDs and that the trustees did not satisfy the eligibility conditions under regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993 (“the DT Regulations”) and acted as unregistered debenture trustees in violation of section 12(1) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”). Order in the matter of Cell Industries Limited

2. In view of the same, SEBI vide Final Order dated May 12, 2016 issued the following directions to CIL and Kumar Kanti Bhattacharya, Debi Prasad Mookherji, Sourav Bardhan, Ashim Gupta, Asraf Ali Shaikh, Shaikh Ajgar Ali, Saik Majaffar, Rajesh Jaiswal, Sekh Rezaul Karim and Koushik Mukherjee to :

(a) CIL and others to refund the money collected by the Company through the issuance of Non-Convertible Debentures and Redeemable Preference Shares, 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 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.

(c) The Company and others named above 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.

(d) 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"). (e) Cell Industries Limited, Mr. Kumar Kanti Bhattacharya, Mr. Debi Prasad Mookherji, Mr. Sourav Bardhan, Mr. Ashim Gupta, Mr. Asraf Ali Shaikh, Mr. Shaikh Ajgar Ali, Mr. Saik Majaffar, Mr. Rajesh Jaiswal, Mr. Sekh Rezaul Karim and Mr. Koushik Mukherjee 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.

3. Against the aforesaid final order, Kumar Kanti Bhattacharya, Shaikh Rezaul Karim and Rajesh Jaiswal (hereinafter collectively referred to the “Appellants”), directors of the company preferred separate appeals before Hon’ble Securities Appellate Tribunal (SAT). All the three matters were listed before the SAT on November 09, 2016, but in the mean time Rajesh Jaiswal, one of the directors of the company vide letter dated November 08, 2016 forwarded a Demand Draft bearing number ‘216848’ dated November 07, 2016 for Rs. One crore in favour of SEBI payable at Kolkata citing it as an interim arrangement for the purpose of paying back to the investors.

4. Hon’ble SAT vide order dated November 9, 2016 permitted the appellants to file a representation before SEBI within two weeks. Accordingly, the Noticees were granted liberty to make a representation to SEBI, setting out the mode and the manner in which the refunds, as claimed by them have been made and balance refunds as contemplated, would be made to the remaining investors, in accordance with the Final Order dated May 12, 2016. SEBI was directed to consider such representation of the appellants relating to extension of time to make refunds to the investors and also reconsider the request of the appellants relating to the restraint order passed against the appellants.

5. The appellants viz. Rajesh Jaiswal and Kumar Kanti Bhattacharya vide separate letters dated November 23, 2016 filed their representations with SEBI pursuant to the above-mentioned order of Hon’ble SAT. Shaikh Rezaul Karim has not filed any representation till date. The representations submitted by Rajesh Jaiswal and Kumar Kanti Bhattacharya inter-alia stated that:

a. That as per the adjudication done by WTM, SEBI, a total of Rs. 15.61 Crores is payable by the company and the persons named in the final order. b. The final order directed the said sum of Rs.15.61 Crores was to be paid with interest at @15% per annum from May 12, 2016. c. At the time when the WTM passed the interim order dated March 17, 2015 or the final order dated May 12, 2016, the payments already made by the company had not been taken into consideration by WTM. d. That they are willing to produce the affidavits sworn in and submitted by the investors while taking their monies and giving due discharge to Cell Industries Limited and all concerned. e. They are also ready and willing to get the accounts and transactions reviewed by a Peer Reviewed Chartered Accountant in accordance with law in order to prove his bonafides.

6. The above named two directors had also submitted a Compact Disc (CD) along-with their individual reply having an excel sheet containing details of refunds made. On a perusal of the same, it is observed that in the aforesaid excel sheet information regarding Customer ID No., Customer Name, Deposited Amount, Deposit Date, Payment Amount, Payment Method (Cash/Bank) and Payment Financial year for 13561 entries were submitted in both the CDs.

7. Considering the representations of the two directors expressing their readiness and willingness to get the accounts and transactions reviewed by Peer Reviewed Chartered Accountant in order to prove their bonafides regarding repayment, SEBI vide letter dated July 20, 2017 directed CIL and the two directors to engage two independent peer reviewed Chartered Accountants who were in the panel of any public authority or public institution to get the fact of repayment certified, as directed in para no.33( e ) of SEBI Order dated May 12, 2016. They were further directed to advise the Auditors to do an actual verification of the documents evidencing repayment by examining relevant documents, such as bank account statements of the company, full and final settlement receipts from the investors, other documents of transfer of funds with interest from the company to the investors etc.

8. In response to the SEBI letter, one of the directors of the company viz. Kumar Kanti Bhattacharya, vide letter dated January 24, 2018 submitted that :- a) Despite their sincere efforts they were unable to find out Peer Reviewed Chartered Accountants empanelled with Public Authorities who were willing to undertake the responsibility of checking and certifying the payments made to the investors for quite a long time. It took a substantial time for us to complete the exercise. b) Though qualified Chartered Accountants were available, yet since the requirement was of Peer Reviewed Chartered Accountants empanelled with Public Authorities, they could not request for or even suggest appointment of such Chartered Accountants. Now after being able to find out Peer Reviewed Chartered Accountants namely, M/s. Mallick, & Co. and M/s. R.S.Ray Associates, empanelled with Public Authorities, they have forwarded the aforesaid names of Peer

Reviewed Chartered Accountants empanelled with Public Authorities to SEBI, by way of the instant letter, immediately upon getting the consent from them without any delay.

9. In response to the said request, SEBI vide letters dated February 21, 2018, advised CIL and the two directors, to be guided by the directions in SEBI Final Order dated May 12, 2016 and ensure the conclusion of verification and repayment certification process within a period of four weeks from the receipt of the aforesaid letter. Apart from CIL and the two directors, the copy of the letter was also sent to the two Advocates of the directors who represented them before Hon’ble SAT. The aforesaid letters were sent by Speed Post Acknowledgement Due (SPAD) and as per the records available, the letters were served on all except CIL.

10. As no certification of repayment by Peer Reviewed Chartered Accountants was received by SEBI from the two directors, CIL and the two directors were again advised vide letters dated April 5, 2018, to submit the same immediately. The copy of the letter was also sent to the two Advocates of the directors. The aforesaid letters were sent by SPAD and as per the records the same were served on all except CIL. In spite of reminder, CIL and the two directors failed to submit the certificate of repayment by Peer Reviewed Chartered Accountants. In view of these facts and circumstances, I deem it appropriate to decide the matter on the basis of materials available on record.

11. I have considered the representation of the two directors. The third director Sekh Rezaul Karim had not filed any representation as directed by Hon’ble SAT. I note that CIL and the two directors have failed to submit certificate of repayment by Peer Reviewed Chartered Accountants as directed in the final order and in spite of their assurance to do the same. I also note that sufficient time and opportunities were granted to CIL and its two directors to submit certificate of repayment by Peer Reviewed Chartered Accountants and their failure to comply appears more like a ploy for delaying and protracting the issue.

12. Apart from the above, I have also analyzed the excel sheet submitted by the two directors. In the excel sheet submitted by the two directors, they have submitted the details of repayments to investors as follows :-

S. No Year Repayment by Banking Channel Repayment by Cash No. of investor Amount in Rs. Amount in Rs. No. of investor IDs IDs 1. 2013-14 89,79,397 446 3,27,60,657 3,196 2. 2014-15 5,87,08,478 3,906 2,43,08,970 3,954 3. 2015-16 1,12,61,712 273 66,74,643 658 4. 2016-17 2,42,51,274 1,127 Nil NIL Total 10,32,00,861 5,752 6,37,44,270 7,808

13. Thus, if the submissions of the directors are accepted for argument’s sake, then more than 60% of the repayment to investors were made through the banking channel mode and I find no reason why the same if properly placed before Peer Reviewed Chartered Accountants cannot be certified. I have also noted that in the excel sheet submitted by the two directors dates of repayment are missing (financial year is submitted) though deposit date is clearly mentioned. This casts a pall of doubt on the veracity of claim of repayment.

14. At this juncture, it is also pertinent to mention that even though the two directors have submitted that they have made all the re-payments to investors as directed in the final order along with interest, SEBI is in receipt of several complaints post the passing of the final order, alleging inter alia that Cell Industries Limited is misguiding the customers and creating pressure to take only 60-90 percent of their invested amount in the company/take whatever the company is giving them/not honoring the maturity of their investments. I have also noted the fact that some of the investors have also filed a Writ Petition before Hon’ble High Court of Calcutta against the company and its directors, stating that they are yet to receive any amount from the company.

15. I have also noted the fact that though CIL and its directors were directed in the Final order dated May 12, 2016, to repay the investors with an interest of 15%, but there are several instances in the repayment details submitted by them in the excel sheet, which show that interest was not paid to the investors, even after the directions in the final order, as shown below :-

SL CUSTOMER DEPOSIT DEPOSIT NO. ID NO. CUSTOMER NAME AMOUNT DATE PAYMENT AMOUNT 2756 P2577 AJAY KUMAR PAL ₹ 50,000.00 31/07/12 ₹ 50,000.00 2778 P5768 AMITAVA GHOSH ₹ 1,50,000.00 28/09/12 ₹ 1,50,000.00 2779 P5769 AMITAVA GHOSH ₹ 1,50,000.00 28/09/12 ₹ 1,50,000.00 2758 P2591 ANIL KUMAR DOLAI ₹ 1,00,000.00 12/06/12 ₹ 1,00,000.00 2760 P2902 ANIL KUMAR DOLAI ₹ 1,00,000.00 12/06/12 ₹ 1,00,000.00 2752 P10996 ANITA BURNWAL ₹ 30,000.00 02/02/13 ₹ 30,000.00 2874 001/54025 ASIM PAL ₹ 2,50,000.00 27/12/12 ₹ 2,50,000.00 2803 14921 BHARAT SUBBA ₹ 3,00,000.00 08/03/11 ₹ 3,00,000.00 2789 P6143 BINAPANI ADAK ₹ 10,000.00 19/11/12 ₹ 10,000.00 2811 001/24857 BINAPANI BASU ₹ 1,00,000.00 11/08/11 ₹ 1,00,000.00 2824 001/31767 BISWA DAS MODAK ₹ 30,000.00 12/12/11 ₹ 30,000.00 2830 001/33905 BISWA DAS MODAK ₹ 30,000.00 30/03/12 ₹ 30,000.00 2831 001/33906 BISWA DAS MODAK ₹ 30,000.00 31/03/12 ₹ 30,000.00 2834 001/36127 BISWAJIT CHATTERJEE ₹ 1,00,000.00 23/11/11 ₹ 1,00,000.00 2875 001/54064 BISWANATH BHATTACHARJEE ₹ 1,00,000.00 25/01/13 ₹ 1,00,000.00 BRINDABAN CHANDRA 2835 001/36138 PRAMANIK ₹ 1,00,000.00 30/11/11 ₹ 1,00,000.00 BRINDABAN CHANDRA 2842 001/40966 PRAMANIK ₹ 1,00,000.00 20/02/12 ₹ 1,00,000.00 2745 P10707 CHAYANA DAS ₹ 10,000.00 10/12/12 ₹ 10,000.00 2840 001/40183 CHHABI CHATTERJEE ₹ 3,00,000.00 04/02/12 ₹ 3,00,000.00 2757 P2587 DILIP GHANTA ₹ 50,000.00 15/06/12 ₹ 50,000.00 2794 P6889 DILIP GHANTA ₹ 50,000.00 21/12/12 ₹ 50,000.00 2816 001/27134 DWIPENDRANATH GHOSH ₹ 1,00,000.00 16/08/11 ₹ 1,00,000.00 2826 001/31773 GAUTAM MODAK ₹ 30,000.00 12/12/11 ₹ 30,000.00 2847 001/44767 GAUTAM MODAK ₹ 30,000.00 31/03/12 ₹ 30,000.00 2855 001/45764 GAUTAM MODAK ₹ 30,000.00 30/03/12 ₹ 30,000.00 2784 P5866 GOUTAM KUMAR SARKAR ₹ 50,000.00 10/10/12 ₹ 50,000.00 2746 P1078 GOUTAM PAUL ₹ 50,000.00 13/06/12 ₹ 50,000.00 2849 001/45028 KAMAL DAS ₹ 60,000.00 31/03/12 ₹ 60,000.00 2732 P0329 KUMAR SANKAR HALDER ₹ 1,00,000.00 30/03/12 ₹ 1,00,000.00 2837 001/36162 MANJU SAHA ₹ 50,000.00 28/08/12 ₹ 50,000.00 2807 001/23207 MAYA CHAKRABARTY ₹ 50,000.00 30/06/11 ₹ 50,000.00 2808 001/23209 MAYA CHAKRABARTY ₹ 10,000.00 30/06/11 ₹ 10,000.00 2809 001/23210 MAYA CHAKRABARTY ₹ 10,000.00 30/06/11 ₹ 10,000.00 2781 P5776 NAYANESH CHANDRA KUNDU ₹ 50,000.00 28/07/12 ₹ 50,000.00 2751 P10984 PANCHU KODALI ₹ 10,000.00 20/12/12 ₹ 10,000.00

SL CUSTOMER DEPOSIT DEPOSIT NO. ID NO. CUSTOMER NAME AMOUNT DATE PAYMENT AMOUNT 2754 P1466 PANCHU KODALI ₹ 10,000.00 31/12/12 ₹ 10,000.00 2767 P3785 PANCHU KODALI ₹ 30,000.00 11/10/12 ₹ 30,000.00 2788 P6140 PANCHU KODALI ₹ 10,000.00 05/10/12 ₹ 10,000.00 2728 P0109 PRABIR KUMAR MONDAL ₹ 2,00,000.00 07/11/12 ₹ 2,00,000.00 2727 P0108 PRAFULLA CHANDRA MONDAL ₹ 50,000.00 30/11/12 ₹ 50,000.00 2787 P5905 PRATAP CHANDRA MONDAL ₹ 10,000.00 10/10/12 ₹ 10,000.00 2766 P3784 PRATAP KODALI ₹ 10,000.00 19/11/12 ₹ 10,000.00 2759 P2593 PULAK MAITI ₹ 10,000.00 16/03/12 ₹ 10,000.00 2862 001/49217 PURABI SARKAR (MONDAL) ₹ 3,00,000.00 31/07/12 ₹ 3,00,000.00 2819 001/30184 RANI BALA GANGULY ₹ 50,000.00 18/06/12 ₹ 50,000.00 2797 P7230 SABITA DAS ₹ 10,000.00 04/12/12 ₹ 10,000.00 2881 001/57175 SADHANA MODAK ₹ 50,000.00 28/01/13 ₹ 50,000.00 2863 001/49425 SAJAL DAS ₹ 1,00,000.00 13/06/12 ₹ 1,00,000.00 2761 P2933 SANAT KUMAR GUCHHAIT ₹ 1,00,000.00 08/06/12 ₹ 1,00,000.00 2780 P5771 SANTANU ROY ₹ 60,000.00 19/11/12 ₹ 60,000.00 2825 001/31769 SHEFALI MODAK ₹ 30,000.00 12/12/11 ₹ 30,000.00 2856 001/45765 SHEFALI MODAK ₹ 30,000.00 31/03/12 ₹ 30,000.00 2857 001/45924 SHEFALI MODAK ₹ 30,000.00 30/03/12 ₹ 30,000.00 2827 001/31823 SHEFALI MODAK ₹ 30,000.00 16/12/11 ₹ 30,000.00 2729 P0110 SHREEDHANYA MONDAL ₹ 50,000.00 07/11/12 ₹ 50,000.00 2786 P5900 SHREEDHANYA MONDAL ₹ 50,000.00 08/09/12 ₹ 50,000.00 2793 P6475 SK ALTAP HOSSEN ₹ 3,00,000.00 27/12/12 ₹ 3,00,000.00 2817 001/28303 SMT KAMALI HANSDA ₹ 1,00,000.00 06/09/11 ₹ 1,00,000.00 2854 001/45639 SOMA GANGULI ₹ 80,000.00 23/07/12 ₹ 80,000.00 2725 11207 SUBHAMOY MUKHERJEE ₹ 20,000.00 29/11/12 ₹ 20,000.00 2775 P4989 SUDEB KARMAKAR ₹ 10,000.00 19/12/12 ₹ 10,000.00 2782 P5777 TANUSHREE MONDAL ₹ 7,50,000.00 31/07/12 ₹ 7,50,000.00 2785 P5898 TANUSHREE MONDAL ₹ 50,000.00 10/10/12 ₹ 50,000.00 2737 P0951 TAPAN KUMAR GHOSH ₹ 50,000.00 31/01/12 ₹ 50,000.00 2764 P3782 TARAK ADAK ₹ 10,000.00 04/12/12 ₹ 10,000.00 2768 P3786 TUMPA KODALI ₹ 10,000.00 30/07/12 ₹ 10,000.00 2769 P3788 TUMPA KODALI ₹ 10,000.00 26/07/12 ₹ 10,000.00 2770 P3789 TUMPA KODALI ₹ 20,000.00 07/06/12 ₹ 20,000.00 2798 P7232 TUMPA KODALI ₹ 40,000.00 30/06/12 ₹ 40,000.00 2765 P3783 UTTAM KUMAR LAHA ₹ 10,000.00 05/12/12 ₹ 10,000.00

16. In this regard, it is noted that the final order had explicitly directed that in case the Company had made refunds, as claimed in its representation, it shall submit a certificate of completion of repayment by peer reviewed Chartered Accountants. However, no proof in support of this repayment has been submitted to SEBI in spite of the final order and Order of Hon’ble SAT dated November 9, 2016 to do so.

17. In the absence of any proof, no conclusion can be drawn in relation to the number of investors already repaid and yet to be repaid by the company. I am of the opinion that the company and its two directors are just engaging SEBI in correspondence with the idea of delaying and protracting compliance with the final order. This is also to avoid other actions being taken against them for the failure or delay in compliance of the final order. Hence, I am of the view that the proposal put forward by the Noticees do not merit any consideration.

18. In view of the above and in the interest of investors, I direct that Recovery proceedings be immediately initiated against CIL and its directors. SEBI may initiate any other proceedings as mentioned in para 33(g) of the final order dated May 12, 2016, as deemed fit in the facts and circumstances of the case.

Date: September 5, 2018 G. MAHALINGAM Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA