Order in the matter of Greentouch Projects[SAT Appeal No.:496/2015]253/2019]

WTM/PS/95/ERO-IMD/DEC/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 In respect of - S. No. Name of the noticee CIN/PAN/DIR 1. Greentouch Projects Limited CIN - U45400WB2010PLC152162 PAN: AADCG9096Q 2. Shyam Sundar Dey DIN – 02787439 PAN: AHHPD9400B 3. Snehasish Sarkar DIN: 03085611 PAN: AXIPS2067E 4. Sujoy Sinha DIN: 05316019 PAN: BBBPS5913B 5. Sumon Sarkar DIN: 02767331 PAN: BJGPS2760H 6. Greentouch Projects Debenture Trust (represented by its Trustee, Swagata Kumar Maiti)

Dates of personal hearing: March 27, 2015 and June 01, 2015 Appearance: For Greentouch Projects Limited: 1. Mr. Ajesh Kumar Shankar, Advocate 2. Mr. Joby Mathew, Advocate 3. Mr. Vijay Viswanathan, Chartered Accountant 4. Mr. Shyam Sundar Dey, Director of Greentouch Projects Limited For the Securities and Exchange Board of India: 1. Dr. Anitha Anoop, General Manager 2. Mr. Prasenjit Dey, Assistant General Manager 3. Mr. T. Vinay Rajneesh, Assistant General Manager

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”), vide an ex-parte interim Order dated August 07, 2014 (hereinafter referred to as the “interim order”) read with Corrigendum dated September 05, 2015 (in terms of this corrigendum, Sujoy Saha shall be read as Sujoy Sinha)

observed that the company, Greentouch Projects Limited (hereinafter referred to as “Greentouch” or “the Company”) is prima facie engaged in fund mobilising activity from the public, by its offer and issue of Secured 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 Section 465 of 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, Greentouch Projects Debenture Trust (represented by its trustee, Swagata Kumar Maiti) had 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”).

2. In order to protect the investors who have subscribed to the impugned offer and issue of NCDs and to ensure that the Company and its directors (Shyam Sundar Dey, Snehasish Sarkar, Sujoy Sinha and Sumon Sarkar) are restrained from carrying on with their fund mobilizing activity, SEBI had issued the following directions:

8. “In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11, 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. GTPL shall not mobilize 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. GTPL and its Directors, viz. Shri Shyam Sundar Dey (DIN: 02787439), Shri Snehasish Sarkar (DIN: 03085611), Shri Sujoy Saha (DIN: 05316019) and Shri Sumon Sarkar (DIN: 02767331), 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. GTPL 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. GTPL shall provide a full inventory of all its assets and properties; v. GTPL's abovementioned Directors shall provide a full inventory of all their assets and properties;

vi. GTPL 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. GTPL and its abovementioned 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 GTPL; viii. GreenTouch Projects Debenture Trust (represented by its Trustee, viz. Swagata Kumar Maiti) is prohibited from continuing with its present assignment as a debenture trustee in respect of the Offer of NCDs of GTPL 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.

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

For sake of convenience, the aforesaid Company and its directors, Mr. Shyam Sundar Dey, Mr. Snehasish Sarkar, Mr. Sujoy Sinha and Mr. Sumon Sarkar and the debenture trustee, GreenTouch Projects Debenture Trust (represented by its Trustee, viz. Swagata Kumar Maiti) shall be collectively referred to as “the noticees”).

3. In response to the interim order, M/s. Joby Mathew & Associates, Advocates, vide letter dated January 15, 2015 stated that they represent the Company and inter alia made the following submissions:

(a) The Company was incorporated under the Companies Act, 1956, having its Registered Office at P164/1, 1st floor, CIT Road, Scheme -7M, Ultadanga, Kolkata 700054.

(b) The main objects (as extracted from the object clause of the Articles of Memorandum of Association) for which the Company was incorporated are : (i) To invest in real estate, including purchase and sale of land, apartments, buildings and in materials related hereto. (ii) To act as builder and developers of land, buildings, township etc. (c) The main promoters and directors of the Company in the present and past are:

(i) Mr. Shyam Sundar Dey (ii) Mr. Sumon Sarkar (iii) Mr. Snehashish Sarkar (iv) Mr. Sujoy Sinha (ex-director)

(d) The Company was incorporated by the promoters with a noble intent to look at an opportunity for purchasing land and developing it by putting up world class residential projects. This was conceived to be not only profitable but also to have a social object whereby housing would be given to the people who can pay and a small portion of houses will be provided at subsidized cost to economically weaker sections of the society.

(e) It was submitted that in the year 2010, the Government of India had given special emphasis for entrepreneurs to develop housing project and the company decided to acquire plots of land in and around Kolkata. According to the Company, it had acquired several plots of lands and details whereof were mentioned in Annexure B of its reply.

(f) It was submitted that due to the laws of India and compliance issues since incorporation of the Company, the process of acquisition of land had taken a large amount of time for two reasons, the first one being that the Company has to be completely satisfied with the legal titles of the vendors and the second being that the Company had to be satisfied as to the viability of the developing of the said lands. The Company has acquired title to the aforesaid lands as per the title deeds and copies of the same could be produced, if required.

(g) The Company has not encumbered the said lands and to the best of the information and knowledge, the same are free from third party claims, encumbrance and liens.

(h) It was submitted that the Company was and is in the process of identifying architects and thirty party person who would, with their skills and expertise, can come out with the plans for development of the said land. The intent of the Company was to develop the said lands and as stated hereinabove, to put up residential projects and offer them for sale to various customers and third parties.

(i) It was submitted that the total cost and expense incurred by the company for the purpose of acquisition of land in real terms had been about Rs.17.86 crores. This does not include the time, effort and other expenses incurred by the Company for the said object. The Company has broadly estimated that the total cost of construction and development of the said lands optimally would be about Rs.66.18 crores (including the cost and fees of architect, contractors and payments to all the other third party agencies who would provide skills, services, material etc.)

(j) It was submitted that as against an investment of Rs.84.04 crores towards cost of development of the said lands, the Company estimates that cash flow into the Company would be in excess of Rs.142. 85 crores. The method of ascertaining the cash inflow to the Company is quite transparent and based on the market values for similar projects. The present approximate market value for residential projects in the areas in which the Company own land were mentioned in Annexure C to the response.

(k) It was submitted that from the total parcel of 1,54,344.60 sq.ft of land by investing a sum of Rs.17.86 crores, the Company would be able to build 4,41,186.30 sq.fts at a cost of about Rs.66.18 crores. According to the Company, it would earn a pre-tax income of about Rs.58.92 crores.

(l) It was submitted that Banks and Financial Institutions do not advance money towards the purchase of land and they are very particular that money would be given only towards construction finance. The promoters of the company hail from middle class background. Their income returns were annexed at Annexure D to the response. The said income tax returns would reflect that the promoters of the Company lead a very normal middle class life. In order to overcome the challenge of achieving the objects of the company and to ensure that the Company does not get into a debt trap with Banks and Financial Institutions and also to be a zero debt company, the Company’s promoters who enjoy a very good reputation and good will, requested and encouraged many friends and relatives to invest small amounts of money for the purposes of achieving the aforesaid objects. The promoters of the Company being the sons of the soil and first generation entrepreneurs wanted to secure their friends and relatives who trusted them and therefore without completely understanding all the details and legal issues or impediments, thought it fit to offer some kind of security to their investors.

(m) It was submitted that the promoters of the Company wanted to secure their friends and relatives and in that regard they decided to offer a suitable document to the investors. The Company submitted that the promoters have now learnt that the issuance of an instrument named as secured non-convertible debentures is not a simple affair and requires compliance at various levels with several “regulated” authorities.

(n) The promoters with honest intent wanted to secure investors and therefore, as suggested by one of its advisors, approached the Registrar of Companies to create a charge on the property. The said advisors could have misled the promoters of the company to assume that the Registrar of Companies would only register a charge in respect of the company’s property only if a particular nomenclature which was recognized by them (i.e. Secure Non-Convertible Redeemable Debentures) was used to secure the charge.

(o) It was submitted that in the interest of the Company and to secure the friends and relatives who had invested into it and as advised by its advisers and notwithstanding the fact that ignorance is not an excuse under law, the Company arranged for certain documents to be drawn up and executed with the hope that the same would give sufficient security to their investors.

(p) It was submitted that upon receipt of the interim order passed by SEBI, the promoters of the Company examined the same and also approached learned counsels who were well acquainted with the company law and the rules and regulations of SEBI and sought suggestions from them as to what was to be done next. The Company’s promoters never intended at any point of time to be non-compliant with any law. The Company drew attention to the fact that it registered the charge on its properties with the Registrar of Companies by filing Form-10, which would not have been done if the Company/its promoters had any wrong intent.

(q) It was submitted that after the interim order was passed by SEBI, the Company has not only ceased to accept any applications for new debentures but also returned/repaid a sum of Rs.36,25,06,842/-. It was submitted that the Company has engaged the services of a very reputed Chartered Accountant Firm (“CA Firm”) to instantly assess the following :

(i) The quantum of money to be repaid to each of the individual investors. (ii) To ascertain from any of the investors if they would like to retain the built up area in the project of the Company. (iii) To ascertain from the investors as to what would be the time period, which would be acceptable by them for the repayment of the money due to them. (r) It was submitted that the CA firm informed that they would complete their exercise (which commenced from November 15, 2014) by the end of March 2015. The Company stated that it also requested the said CA firm to work out the best way to repay the investors of the Company by either (with the consent of SEBI) selling the properties of the company or by entering into a suitable transaction with a third party whereby the maximum amount of money is realized (after considering the cash flow in a suitable manner) and the same is used towards repaying the investors of the company.

(s) It was submitted that each and every property of the Company has been purchased only after its incorporation and by utilizing the funds received from the investors. The Company stated that it is very sensitive to the fact that all the friends and relatives have invested with it and it (including its promoters) are completely obliged and committed to repay the investors as per commercial terms committed and agreed to with them. The Company submitted that it would not, under any circumstances, like to put the investors at risk or loss even for a moment.

(t) It was submitted that the Company and its promoters have been advised that notwithstanding the fact that they had no intent to violate any of the provisions of the SEBI Act or the rules and regulations under the same or the provisions of the Companies Act, their act of retuning the money to the investors would bring a quietus to the matter and it would serve the purpose of the law if they would expeditiously return the sums of the money to the investors at the earliest.

(u) The Company submitted that in view of its submissions and in particular considering the fact that the Company had already engaged the CA firm, the Company felt that all other restrictions on them to prevent them from doing any further business is very harsh as that would nip at the bud, the future life of the promoters. It was submitted that the promoters of the Company have always been honest and compliant by law and there is no case pending against them before any court, be it Civil or Criminal. It was further submitted that no complaint has ever been made by any investors or other person against the Company.

(v) According to the Company, while it was legally obliged and its promoters were also personally obliged to comply all the orders of SEBI and which they would do so, it was submitted that it would be unfair and cause irreparable injury and hardship to them if the promoters are debarred from doing any business. The promoters of the Company solemnly undertake to be more prudent in all their future activities and would not violate any of the provisions of the SEBI Act or the rules and regulations therein or the provisions of the Companies Act.

(w) It was also submitted – “3. In view of the foregoing facts and circumstances, our clients and their promoters request that the aforesaid facts and circumstances be taken on record and a date be fixed for their and CA firm to come and meet SEBI to try and come out with a proposal for resolution of the issues. Our client also prays that SEBI may give them and their promoters an opportunity of being heard in person before any further orders are passed by SEBI, as there are certain personal restraints in the said order. 4. In the meanwhile, our client has also instructed us to prepare and file an application for a consent order/ settlement with SEBI in terms of the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014”.

4. The noticees were afforded an opportunity of personal hearing on March 27, 2015, when the Company was represented by Mr. Ajesh Kumar Shankar, Advocate, Mr. Joby Mathew, Advocate, Mr. Vijay Viswanathan, Chartered Accountant and Mr. Shyam Sundar Dey, Director of Greentouch. The other noticees i.e. the directors and debenture trustee did not appear. The Advocates requested time of 45 days to file documents/affidavits to show that allotments were made only to family, relatives and friends. This request was allowed. As requested by the representatives, another opportunity of personal hearing was fixed on June 01, 2015.

5. In the personal hearing held on June 01, 2015, the aforesaid representatives of the Company appeared and made submissions. The record of proceedings of the said hearing are as follows: 1. “In today's personal hearing, the Company was represented by its Advocates, Chartered Accountant and director, Mr. Shyam Sunder Dey (one of the noticees). 2. Advocate, Mr. Ajesh Kumar Shankar made oral submissions. The Advocates referred to a few affidavits from investors and submitted that they would file the affidavits with SEBI. 3. The Company is directed to submit, within a period of 4 weeks, the list of investors (as available with the Company without deleting or modifying any of the fields therein) along with details such as amount collected from investors against issue of NCDs, details of repayment (cheque nos., date, amount) supported by relevant bank statements. Entries showing repayments in the bank statements shall be highlighted.

4. The Company and the other noticees are also allowed to submit - a) further documents, if any, in the matter; b) affidavits from investors; and c) written submissions, if any, within the period of 4 weeks as granted above. 5. Personal hearing in the matter is concluded”.

6. Thereafter, vide letter dated July 03, 2015 enclosing the Written Submissions along with few documents, the counsel for the Company, stated as follows: (a) The Company reiterated its submissions made in its reply dated January 15, 2015. (b) Written submissions (Annexure 1) contained four annexures – Annexure A - Sale deeds relating to 22 items of property Annexure B – Joint venture/investment agreements Annexure C – Mortgage Deed for the debentures Annexure D – Chartered Accountant’s Certificate regarding repayments (c) Affidavits (enclosed as Annexure 2) executed by 50 persons (taken at random from amongst the total investors) in support of the Company’s submission that the NCDs were issued only to the Company’s promoters’ family and friends. (d) No case was made out against the noticees and requested that they be discharged from the present proceedings.

Vide the aforesaid Written Submissions filed on behalf of the Company, the following submissions were inter alia made: (a) The Company in continuation with its intent to carry out the objects as set out in its Memorandum and Articles of Association has engaged inter alia in Real Estate Business. (b) In continuation of the aforesaid object, the Company had approached its promoter’s known acquaintances and friends in order to raise funds for its real estate real projects. During the relevant point of time in 2012, the Company was intending to undertake development of the following projects : Sr. No. Name of the Project Location Quantum of Investments 1 STAR GREEN, RAJARHAT KOLKOTA 817,65.834

2 STAR GREEN DUM DUM PARK I KOLKOTA 200,81,544 3 STAR SHELTER, DUM DUM KOLKOTA 56,090,519 NEW TOWN LAND, RAJARHAT (2,99 4 KATHA) KOLKOTA 115,10,000 5 LAND (NEW) RAJARHAT (108 KATHA) KOLKOTA 736,50,000 6 EASTERN HIGH HOUSING, RAJARHAT-I KOLKOTA 79,52,198 SIDDHA PINE WOODS,RAJARHAT 7 (1005SFT) KOLKOTA 31,73,421 8 ASHOK NAGAR LAND NO. 1 KOLKOTA 587,652 9 ASHOK NAGAR LAND NO.2 KOLKOTA 3,81,314 10 ASHOKNAGAR LAND NO. 3 KOLKOTA 1,58,826 11 LAND AT HABRA KOLKOTA 17,03,699 12 TAJPUR LAND 55 DECIMAL KOLKOTA 78,36,994 13 TAJPUR LAND 100 DECIMAL KOLKOTA 70,15,140 14 STAR RESIDENCY (13373 SFT) KOLKOTA 450,37,500 15 DREAM ECO CITY KOLKOTA 15,38,518 16 KESTOPUR FLAT, M/S CG ENTERPRISES KOLKOTA 56,46,484 17 EASTERN HIGH HOUSING RAJARHAT - 2 KOLKOTA 73,59,373 18 EASTERN HIGH HOUSING, RAJARHAT-3 KOLKOTA 91,41,265 19 AGRA PROPERTY (OFFICE) AGRA 91,05,500 20 BARSAT FLAT KOLKOTA 16,56,252 21 STAR PRIME (FY 2014-15) Salt Lakes KOLKOTA 903,50.000 22 BENGAL UNITECH UNIVERSAL KOLKOTA 161,68,484 (c) The Company was the absolute owner of item nos.1 to 22 of the aforesaid projects as per the Sale Deeds (enclosed and collectively marked as Annexure A to the written submissions) and that additionally the other projects named above was in the nature of a Joint Venture/Investment Agreement with the land owners. The Company has enclosed Sale Deeds with respect to the projects 1 to 22 owned by it in order substantiate the above submission. The joint venture / investment agreement/s with respect to the land owned by it or jointly developed by it in which it has invested as to projects 1 to 22 annexed hereto and marked as Annexure B to the Written Submissions.

(d) The promoters of the Company with an intent to raise adequate funding for the aforestated projects and to carry out its business enterprise was advised to execute a mortgage deed. Accordingly, the Company executed 3 mortgage deeds and the final of which was annexed as Annexure C to the written submissions.

(e) The mortgagee, Mr. M Swagata Kumar Maiti described himself as the Trustee of an enterprise known as Green touch Debenture Trust having their office at 3/1, Srima Road, PO, Rabindra Nagar, Kolkata, wanted the charge to be created on the Company. In continuation with the agreement entered into with the said person, the Company finally uploaded form no. 10 on March 30, 2012 in order to give effect to the said Mortgage deed.

(f) The Company submitted that the following was the stage of development of the aforesaid projects: Sr. No. Project Name Stage of Development Amount on final realisation 1 STAR GREEN, RAJARHAT Completed 100,700,000 2 STAR GREEN DUM DUM PARK I Completed 293,88,000 3 STAR SHELTER, DUM DUM Project just started 132,272,000 NEW TOWN LAND, RAJARHAT (2,99 4 KATHA) Project just started 484,38,000 LAND (NEW) RAJARHAT (108 5 KATHA) Project just started 4031,07,840 EASTERN HIGH HOUSING, 6 RAJARHAT-I Completed 107,25,000 SIDDHA PINE WOODS,RAJARHAT 7 (1005SFT) Near Completion 41,18,500 8 Ashok Nagar LAND NO. 1 Project yet to start 2117,01,600

9 ASHOK NAGAR LAND NO.2 Project yet to start 548,85,600

10 ASHOKNAGAR LAND NO. 3 Project yet to start ?? 11 LAND AT HABRA Project yet to start 66,86,600 12 TAJPUR LAND 55 DECIMAL Project yet to start ??

13 TAJPUR LAND 100 DECIMAL Project yet to start 5031,18,000

14 STAR RESIDENCY (13373 SFT) Completed 539,80,100 15 DREAM ECO CITY Project just started 36,96,000 KESTOPUR FLAT, M/S CG 16 ENTERPRISES Completed 60,77,200 EASTERN HIGH HOUSING 17 RAJARHAT - 2 Completed 97,50,000

Sr. No. Project Name Stage of Development Amount on final realisation

EASTERN HIGH HOUSING, 18 RAJARHAT-3 Completed 107,25,000

19 AGRA PROPERTY (OFFICE) Completed 91,05,500 20 BARSAT FLAT Completed 16,56,252

21 STAR PRIME (FY 2014-15) Salt Lakes Project in Progress 1571,70,0000

22 BENGAL UNITECH UNIVERSAL 161,68,484 (g) SEBI issued a notice on December 10, 2013 inter alia seeking information with regarding to the activities of the noticee Company. It appeared that the trigger for the said show cause notice was the filing of the Form 10 submitted by the company to the Registrar of the Companies on March 30, 2012. The Company submitted that though it laid out its defense vide its letter dated January 30, 2014 and offered to clarify any doubts, the interim order came to be passed without any prior notice. The Company contended that the interim order cannot be sustained for more than one reason as set out hereunder :

A. Ex parte Order: “13. The aforesaid order dated August 7, 2014 is passed under section 11, 11(4), 11A and 11B. A careful and close reading of section 11 of the Act would go to show that it provides for the functions of the Board in order to protect the interest of the investors in securities and to promote the development of, and to regulate the securities market. Sub section (3) of the section 11 clearly provides that the proceedings there under shall be in compliance with the Code of Civil Procedure, sub section (4) of section 11 clearly mandates that an opportunity of hearing shall be provided for and there is no express provision for passing an ex parte order. 14. It is submitted that the all actions by SEBI are governed by the provisions of the SEBI Act, 1992, and there is limited discretion granted to SEBI by the SEBI Act and if at all the same has to be exercised within the four walls of the statute and nothing more. In order for any law to be held legal, it should meet test of Article 13 of the Constitution and therefore, the principles of natural justice and the requirement of Audi Altem Pattern will have to be read with each every statute.

There is no again saying that the principles as enunciated by various courts in India while incorporating the provisions of CPC will have to be kept in mind exercising the powers under section 11 of SEBI Act. 15. It is most respectfully submitted that SEBI does not have any inherent powers like a Court of Civil Jurisdiction or the High Court or the Hon’ble Supreme Court. While exercising its statutory powers, SEBI cannot ignore the requirements under existing laws of the land and especially with reference to natural justice, thus, SEBI cannot exercised jurisdiction in the nature of inherent jurisdiction, which is not expressly vested in it and thereby pass an ex parte order against the noticee company. 16. The records reveal that there was no notice settling out the charges against the noticee company was issued either by the Eastern Regional Office of SEBI or by the Hon’ble Whole Time Member of SEBI and wherein the noticee company was never put to notice prior to the Order dated August 7, 2014 being passed. The said order is therefore, fact ultra vires the provisions of the SEBI Act, 1992 and cannot be sustained.

17. It is submitted that when the Parliament in its wisdom has not expressly provided for SEBI to pass any interim Ex parte Order such a power could hot have been assumed by SEBI on its own and on this ground alone the order dated August 7, 2014 is liable to be set aside”. B. Non Consideration of the defense of the noticee company: “18. That the specific case of the noticee company is that : (a) There was no offer made to public and (b) The invitation to subscribe did not at the same time exceed 50 or more persons simultaneously. 19. It is submitted that a careful reading of sub section 3 of the section 67 of the Companies Act, 1956 and more specifically the words therein “can properly be regarded” contemplates that certain amount of evidence is required to be adduced to conclude as to whether the offer of noticee company would fail the test contained sub section 3 of the Act and therefore, be subject to the first proviso of sub section 3(i) or (2) of section 67 and be treated as a public offer. 20. It is submitted that the records reveal that save and except for considering the law laid down by the Hon’ble Supreme Court in the Sahara Case Real Estate / Corporate case and extracting parts of the judgment, the order dated August 7, 2014, there is no evidence to substantiate the charges that noticee company made a public offer of its Debentures.

On the other hand, the said order has failed to consider the defense made by the noticee company that in order to conclude that noticee company, has met or not with the test with reference to “properly be regarded” as contemplated under sub section 3 of section 67. 21. It is a matter of practice and equity based on the principles of natural justice that there is a dispute question of fact then it is mandatory that both the parties be examined and conclusions drawn thereafter. It is in this context that sub section 11 was introduced. 22. Most respectfully, the aforesaid order has not been passed on merits and has been passed without considering the defense of the noticee company; rather it has been passed on presumption, assumptions and speculations and not entirety of the facts. 23. It is submitted that for the reason also the aforesaid order dated August 7, 2014 cannot be sustained. 24. It is submitted that in the reply dated January 30, 2014, the noticee company has clearly laid out its defense and the same is extracted hereunder:

“In continuation to the above documents we are putting forward the following details in compliance to your letter. In respect to the issue of debenture, we hereby affirm that we have issued secured non-convertible redeemable debentures by constituting and securing a charge (mortgage) on the immovable assets of the company in a registered process and complying with all the guidelines as approved by RoC (Registrar of Companies). The Secured Non-convertible Redeemable Debenture is issued timely only for the purpose of projects of the company through private placement towards closed references.” “As stated above that the issue of secured NCDs is through private placement and closed personal references, so we have not promoted, printed, distributed and circulated any sorts of pamphlets, advertisements and other promotional material in connection for issuance of Debentures. We hereby furnish you as an attachment the application form for issue of debentures. All the terms and conditions of the issue of debentures are displayed in the application form attached”. 25. It is submitted that the noticee company has provided its application it is expressly provided as NOT FOR GENERAL CIRCULATION and in the 1st page it is also expressly written that it is “for private offer for secured non-redeemable Debenture” and that the offer is made to the specific named person and it is a confidential document.

26. It is submitted that the first line below the address of noticee company in the application form also says “for private and confidential placement”. 27. It is submitted that even though the officer of SEBI at Kolkata may have wished to interpret the word “Private” supra in the document produced by the noticee company as being a public offer, the order dated August 7, 2014 could not have been passed ex parate. Most respectfully, it is submitted that the Hon’ble Whole Time member would have been placed to have considered the effect of aforesaid words in the Application form and asked for evidence. 28. It is submitted that the defense of a person, be it the noticee company or any others, can be accepted or rejected but however, it cannot be overlooked and not considered arbitrarily. It is the law laid down by the Hon’ble Supreme Court and various other courts that each and every aspect or stance of the parties would have to be considered and rejected or accepted on merits. In the instant case the order dated August 7, 2014 does not disclose as to whether the noticee company’s defense has been considered.

29. It is submitted that even though in paragraph 3 of the order dated August 7, 2014 it is stated that the Application form was examined, the conclusion at paragraph 3 (iii) in page 3 of the said order says that “GRPL” invited subscription from the public through the issuance of NCDs (“offer of NCDs) in accordance with the following scheme and terms and conditions. This is an erroneous statement of facts. The records do not speak of such statement in view of this being a disputed statement of facts based on admitted documents, it is most respectfully submitted that such an conclusion could not have been drawn. 30. It is submitted that in sub paragraph (iv) of the paragraph 3 in page 4 of the said order once again there is a disputed fact as therein its stated “it is noticed that GPL Issued NCDs on several occasions since incorporation to the general public” here again the said order dated August 7, 2014 contradicts the facts as set out by the noticee company when the cause of the noticee company is quite simple i.e. it has made a private offer to its named, known persons and its not admitted to have made any offer to public, then such a disputed question has not only recorded wrongly in the order dated August 7, 2014, but further it has been the basis for passing the ex parte interim order.

This has tainted the said order and the order ought to bte set aside on this ground alone 31. It is submitted that the facts borne out by the records are not accurately recorded in the order dated August 7, 2014 in Paragraph 4.1 at page no. 4 of the aforesaid order dated August 7, 2014, it is stated that the noticee, company has made an offer to the public, thus basic premise of the said order is erroneous therefore naturally the conclusion drawn would also be drawn erroneous. 32. With reference to paragraph (v) at page 6 f the said order “for ascertaining if the public issue or on private placement in addition what is stated in paragraph v(a) at page 6 of the order, it is submitted that the admitted documents speak of a private placement and this is without giving an opportunity to the noticee company. The said order quotes at sub paragraph (c) at page no. 7 that it is a public offer by relying on the judgment of Hon’;ble Supreme Court in Sahara Case. 33. It is submitted that each case decided by Supreme Court is decided in the facts and circumstance of that case. Notwithstanding the facts that the law declared by Hon’ble Supreme Court is binding on the High Courts and Tribunals in India in order to be a binding precedent on the noticee company, the facts will have to be gone into without that nothing can be decided.

The conclusion on factual reading of the case is that it is an outcome by wrongly recording facts and thereby arriving at a wrong conclusion. If only the noticee company had given an opportunity of being heard, then the noticee would have clarified the matter and such clarification would have assisted the Hon’ble Whole Time Member of SEBI to pass a reasoned order”. C. Scope of Hearing: “34. It is submitted that the records reveal that the Eastern Regional Office of SEBI sought information. The information so provided by the noticee company brought forth a dispute with regard to whether issue of offer by it was a public or private offer. The consequence of adopting the deeming provision under section 67 of the Companies Act was also required to be examined. 35. It is submitted that records that the issues as to whether the noticee company raising investment in the manner as set out supra would amount to public offer or not as stipulated in section 67 of the Companies Act, was never an issue for consideration nor was the noticee company put to notice of the same. The Hon’ble SEBI has formulated such a question for the first time in order dated August 7, 2014, without Noticee Company having prior notice and without being given an opportunity of being heard or an opportunity for defense to be put forth.

Thus, the noticee company was presented with a opportunity to defense to be put forth. Thus noticee company was presented with a fait accompli by the order dated August 7, 2014. 36. It is submitted that in all fairness, the noticee company should have been given a show cause notice calling upon it to answer to specific charges as to the nature of its business and whether the funds raised by it amounted to public offer or not. If such a show cause notice had been issued by the Hon’ble SEBI to the noticee company, there it would have had its say to defend itself and explain its business and whether raising debt indeed amounted to public offer or not. The Hon’ble Supreme Court in Mohinder Singh Gill & Another vs. Chief Election Commissioner AIR 1978 SC 851 held that even where the decision has to be reached by a body acting judicially, there must be a balance between the need for expeditious and the need to give full opportunity to the defendant to see material against him. 37. It is submitted it was imperative that the noticee company be put to notice before an action is contemplated. It is submitted that it is important to state now as to what is a notice: “When a notice can be said to be valid in law?

The term ‘notice’ originated from the latin word ‘Notitia’ which means ‘being known’. It is equivalent to information, intelligence or knowledge. Notice is the starting pint of any hearing. The right to fair hearing covers every stage through which an administrative adjudication passes starting from notice to final determination. Notice embodies rule or fairness and must precede an adverse order. It should clearly state the reason as to why a party is required to appear and/or his reply is required. The party concerned should be apprised of the evidence on which the case against him is based and be given on opportunity to rebut the said evidence. A notice to be valid in law, should be clear and precise so as to give the party concerned adequate information of the case he has to meet. The adequacy of notice will be whether it gives sufficient information so as to enable the person concerned to out up on effective defense. If a notice is vague or it contains unspecified or unintelligible allegations, it would imply a denial of proper opportunity of being heard. Natural justice is not only a requirement of proper legal procedure but also a vital element of good administration”.

(Emphasis added).” D. Bonafide Conduct: “38. It is submitted that the facts narrated supra would go to show that Noticee Company is conducting its affairs in a bonafide manner. The fact of the matter is that Noticee Company conceived its business plans in order to achieve construction and development of the projects. There has been no false statement made to the investors and they have been adequately secured. With hind sight and having engaged itself in the instant proceedings, the noticee company is now been better informed and realizes that it would have been better to take certain additional steps to ensure that SEBI’s permission was sought to raise funds to avoid even a shadow of doubt that to receive money from friends and family would or may amount to a public offer. 39. It is submitted that there is no doubt that ignorance of law is not an excuse. However bonafide conduct is also a valuable material to be considered in a matter like this. On the one hand when we look at the purpose and proceedings under section 11, we would that the objective of the said provisions is to protect the investors and their money.

It cannot be denied that all that investors who have invested with the noticee company, be it family or organization have been more than adequately secured. The progress of the objects ie. Construction also substantiates the fact that all the projects are developed as per the development plan proposed by the noticee company. 40. It is submitted that it clear from the above that the noticee company has not breached / contravened / violated the rules and regulations of SEBI, however even it is assumed that not admitted that permissions were to be taken from SEBI for private placement of debentures to friends and relatives, then, the noticee company can utmost be held liable for not complying with a formality as the noticee company has in any other event secured its investors. 41. It is submitted that the noticee company has never breached the rules of SEBI intentionally. However, noticee company operating from small town was not better informed through its counsel and others and therefore sought to assume that its private offer that it would be compliant for it would register with the Registrar of Companies.

A very important aspect which would be relevant to this case would be that in the first instance there should have been a conclusion by the Registrar of Companies to say to the noticee company that this is a case which would amount to public offer and therefore noticee company was not permitted to register the charge under form 10. Even otherwise it is submitted that at no point in time that the Assistant Manager of Eastern Regional Office having full knowledge and full notice of all information provided by the noticee company has never concluded to say that the noticee company had made a public issue of debentures. 42. It is submitted that the long correspondence between the noticee company and Assistant Manger, Eastern Regional Office of SEBI would go to show that the noticee company was never once told that it had made a public offer of debentures. 43. It is submitted that as a matter of record and as per the oral submissions made by the noticee company, it is evident that the noticee company is not interested in evading or avoiding compliance of the law. In fact, the noticee company has repaid Rs. 12,24,13,460 to the investors.

The noticee company is not interested in having these investors subject to any long drawn litigation. 44. It is submitted that in order to substantiate such a statement the noticee company has hired the services of Chandran & Raman a reputed Chartered Accountant Firm, who has certified the amount repayable by the noticee company. A copy of the certificate issued by the said Chartered Accountant firm is annexed hereto and marked as Annexure D. 45. It is submitted that in view of the foregoing facts and circumstance it is hoped that the Hon’ble SEBI will conclude that the notice company did not make a public issue of debentures as mentioned in the said order. 46. Therefore it is most respectfully prayed the Hon’ble SEBI be pleased to: (a) Give suitable permission to the noticee company to repay its investors. (b) It is prayed that the noticee company/ promoters be permitted to access the public make in compliance of the orders of Hon’ble SEBI. (c) Further, the noticee company may be permitted to alienate the assets of its projects under the supervision and control of the said Chartered Accountant who shall report to the Hon’ble SEBI with regarding to the receipt and disbursal of the fund and in this manner the interests of investors will be further secured and the (d) Noticee Company and its promoters will be able to ensure that it is completely in compliance with the Hon’ble SEBI.”

7. I have considered the interim order cum show cause notice, the reply and written submissions filed by the Company, the oral submissions made in the personal hearing, documents submitted by the Company and the other material available on record. Before proceeding to deal with the allegations, I wish to deal with certain contentions raised by the Company in its written submissions dated July 03, 2015.

(a) The Company has contended that under section 11(4) of the SEBI Act, opportunity of hearing was mandated and there was no express provision for passing of an ex-parte order. It is further contended that SEBI has to exercise its powers within the four walls of the SEBI Act. The Company, through its counsel, has argued that SEBI cannot ignore the requirements of natural justice and cannot exceed jurisdiction in the matter by passing an ex-parte order and that there was no notice setting out the charges prior to the interim order and therefore the interim order was ultra vires the SEBI Act and cannot be sustained. The Company also contended that it should have been given a show cause notice calling upon it to answer to specific charges as to the nature of its business and whether the funds raised by it amounted to public offer or not. The Company further contended that if such a show cause notice had been issued by SEBI, the Company would have had its say to defend itself and explain its business and whether raising debt indeed amounted to public offer or not.

I have considered such submissions. The interim order was issued in exercise of powers under sections 11, 11(4) and 11B of the SEBI Act. SEBI, in the interest of investors and the securities market, is empowered to issue suitable directions under sections 11(4) and 11B. Proviso to section 11(4), provides that SEBI shall, either before or after passing such orders, give an opportunity of hearing to such persons concerned. Therefore, it cannot be said that SEBI does not have powers to issue ex-parte orders. As mentioned above, the interim order afforded opportunity to file submissions and personal hearing in the matter to the noticees. The noticees have availed such opportunity and have filed replies/written submissions and appeared in personal hearings. These submissions are therefore without merit. In this regard, I note that the interim order made the following observation to explain the need for an ex-parte order in the matter:

7. “Protecting the interests of investors is the foremost mandate for SEBI and therefore, steps have to be taken in the instant matter to ensure only legitimate fund raising activities are carried on by GTPL and no investors are defrauded. In light of the same, I find there is no other alternative but to take recourse through an interim action against GTPL and its Directors alongwith its Debenture Trustee, viz. GreenTouch Projects Debenture Trust (represented by its Trustee, viz. Swagata Kumar Maiti), for preventing that company from further carrying on with its fund mobilising activity under the Offer of NCDs.”

The Company had mobilized public funds through its issue of NCDs and had mobilized around Rs.56 crore without complying with the public issue norms. Accordingly, it was felt appropriate to issue ex-parte directions for stopping further collection and for any possible fraud on the investors.

(b) The Company also contended that the issue whether it made a public offer or not was never put to its notice prior to the interim order. The Company submitted that it should have been given a show cause notice to answer specific charges. As already observed above, SEBI could issue ex-parte orders in the interest of investors and give a post decisional hearing. In the present case, the interim order also serves as the show cause notice. The balance of convenience is definitely in favour of the investors whose interests are sought to be protected by issuing the interim order with preventive and remedial directions. The Company has already been afforded opportunities to make submissions and personal hearings.

8. I now proceed to determine the allegations levelled in the interim order against the Company and its directors. The interim order has alleged that the Company had invited subscription from the public for its NCDs in accordance with the following schemes and terms and conditions, in breach of the norms for issuing securities in a public offer mandated under the Companies Act and the SEBI Regulations:

SCHEME: SECURED NON–CONVERTIBLE REDEEMABLE DEBENTURES (SERIES II) PLAN- 1 (CUMULATIVE SCHEME) A B C D E F Redemption Period 1.5 Yrs 3 Yrs 5 Yrs 10 Yrs 14 Yrs 7.5 Yrs Minimum Application Amount 1000 1000 1000 1000 1000 1000 Redemption Amount 1180 1450 2000 5000 10000 3000 Annualized Yield on Investment (Compound) 11.67% 13.19% 14.87% 17.46% 17.88% 15.78%

SCHEME: SECURED NON–CONVERTIBLE REDEEMABLE DEBENTURES (SERIES II) PLAN- 2 (NON–CUMULATIVE SCHEME) G H I J Redemption Period 1.5 Yrs 3 Yrs 5 Yrs 6 Yrs Application can be made in multiple of 1000 subject to minimum of ₹ 25000 25000 25000 25000 Rate of Interest/Yield (P.A.) 10.80% 12.00% 14.88% 18% Bonus on Principal Amount at the time of Maturity (%) NIL 1.00 3.00 5.00 **For Plan G, H, I & J amount of deposit will be multiple of ₹5000 after minimum deposited amount.

Terms of the Offer of NCDs:

 Payment of Interest: The interest will be calculated from the date of realization of cheque/DD. Monthly interest payment will be due on the last day of the month. Interest for broken period of month will be calculated from the date of realization of cheque/DD to the last of the month/quarter, based on number of days in that month as the case may be.

 Payment of Principal: Interest and principal amount will be paid after redemption by cheque/draft/bank transfer. You are requested to confirm for your acceptance to the terms and conditions outlined herein by sending the application noted that above offer is made specifically to you and is not to be circulated. This information herein is to be treated as strictly confidential.

 Statutory Obligation: As the issue is for NCDs on private placement basis, no prior approval/rating is required from Government/SEBI and other statutory authorities.

 Allotment: Allotment of debenture will be made within 90 days from the application.

The interim order has also alleged that the Company issued NCDs since incorporation in the year 2010 to the general public as per details below: Sr. No. of Allottees Total Amount Year Type of Security No. (Approximate) (` in Crores) 2010–11 Secured Non – Convertible Redeemable Debentures 134 0.38 1. 2011–12 Secured Non – Convertible Redeemable Debentures 3230 11.36 2. 2012–13 Secured Non – Convertible Redeemable Debentures 17185 44.21 3. Total 20549 55.95

It is noted that the Company had issued NCDs to a total of 20,549 persons and mobilized Rs.55.95 crore under its offer and issue of NCDs. The Company has admitted the same. The Company also submitted that that its promoters have now learnt that the issuance of NCDs was not a simple affair and required compliances at various levels with regulatory authorities. The Company also submitted in its reply that it issued NCD certificates to secure the money collected by it from the family and relatives of its promoters and contended that it did not make any offer to the public. The Company further contended that the invitation to subscribe did not at the same time exceed 50 or more persons simultaneously.

With the above factual background and contentions, it is necessary to test whether the Company made a public issue of NCDs as alleged in the interim order. Section 67 of the Companies Act, 1956, lays down the criteria to test whether the offer of securities is made on a ‘private’ basis or made to the ‘public’ at large. Accordingly, it would be important to refer to the provisions of section 67(1) and (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).”

From the reading of section 67 of the Companies Act, 1956, especially the sub-section 3 and the two provisos thereafter, the following can be noted:

a) an offer or invitation shall not be treated as made to the public if such offer or invitation can be regarded in all circumstances as not being calculated to result, directly or indirectly, in the securities becoming available for subscription or purchase by persons other than those receiving the offer or invitation; b) an offer or invitation shall not be treated as made to the public if such offer or invitation can be regarded in all circumstances if the same is a domestic concern of the persons making and receiving the offer or invitation; and c) an offer or invitation made to more than 49 persons is a public issue notwithstanding anything contained in sub-section (3) of section 67; d) Even if an offer is made to 49 persons or less, the company, to state that it made a private placement, has to prove that its case falls either under clause (a) or (b) of section 67(3). e) 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.

The Company, vide its letter dated January 30, 2014 had informed that – (a) During the financial year 2010-11, it had allotted securities to 134 investors against a total of Rs.38,57,000/- mobilized from them. (b) During the financial year 2011-12, the Company had allotted securities to 3230 persons against a total of Rs.11,36,40,000/- mobilized from such persons. (c) During the financial year 2012-13, the Company had allotted securities to 17,185 persons against total mobilization of Rs.44,21,32,000/-.

The Company also enclosed the three statements pertaining to the above said three financial years (i.e. 2010-11, 2011-12 and 2012-13). I have perused the said statements and note that the Company has given the names of the allottees, the date of mobilization through issue of NCDs and the amount mobilized from such allottees. The lists have more than 20,000 entries and is therefore not reproduced in this Order. My observations in respect of such documents are as below:

(a) For FY 2010-2011, the Company has mobilized funds to the tune of Rs.3857000/- from 134 persons. The allotments were made mostly on a continuous basis with only a day or few days between the allotments. In this FY, the allotments/mobilization commenced on August 20, 2010 and concluded on March 31, 2011. As an illustration, the Company allotted securities to 6 persons on August 20, 2010; 2 persons on August 23, 2010; one person on August 24, 2011; two persons on August 26, 2010 and so on. The manner in which the allotments were done in quick succession can be inferred to be for circumventing the provision under the first proviso to section 67(3) of the Companies Act.

(b) Similarly, during FY 2011-12, the Company has mobilized funds to the tune of Rs.11,36,40,000/- from 3230 persons that commenced on April 01, 2011 and concluded on March 31, 2012. Here too the Company has made allotments mostly on a continuous basis.

(c) With respect to FY 2012-13, the Company has allotted/mobilized funds to the tune of Rs.44 crore from 17,185 persons. The list has not been arranged chronologically, with dates being jumbled. However, a perusal of this statement too proves that the allotments were continuously over a period for circumventing the requirements of the provisions under the first proviso to section 67(3) of the Companies Act.

(d) Considering the number of persons from whom monies were mobilised by the Company, which is definitely more than 49 persons, it can be concluded that the Company had made a public issue of NCDs in terms of the first proviso to section 67(3) of the Companies Act, 1956 and the manner of making such offer and issuance of NCDs adopted by the Company (i.e., series of allotments made within a short duration between each allotment) can be definitely held to be a ploy employed by the Company to circumvent the provisions of the first proviso to section 67(3) of the Companies Act, 1956.

(e) The Hon'ble Courts have always disregarded persons/entities who employ a colourable scheme to evade the provisions of law. In this regard, I refer to the following observations made by the Hon'ble Courts:

i. The Hon'ble Supreme Court of India in the matter of Hindustan Lever & Anr vs State Of Maharashtra & Anr decided on November 18, 2003 had observed "In Hindustan Lever Employees Union case (supra) it has been held by this Court that Section 394 casts an obligation on the Court to be satisfied that the scheme of amalgamation or merger was not contrary to the public interest; the basic principle of such satisfaction is none other than the broad and general principle inherent in any compromise or settlement entered between the parties that it should not be unfair or contrary to public policy or unconscionable or that the scheme should not be a device to evade the law."

ii. The Hon'ble Gujarat High Court in Patel Ratilal Maganbhai [2003 (1) GLR 562] had observed that "... Equity is always known to defend the law from crafty evasions and new subtleties invented to evade law...".

iii. Hon'ble Courts/Tribunal have considered whether a 'scheme' was a colourable device to evade the payment of tax by an assessee and have held that tax could be avoided within the four corners of law but colourable device shall not be allowed for evading tax.

I also note that as per the application form for subscribing to the NCDs, the Company has offered and solicited subscriptions to the tune of Rs.50 crore for 5 lakh debentures (NCDs-Series II) of face value of Rs.1000/-The Company has also produced copies of Resolutions dated October 13, 2010 and August 11, 2011 of the EGM of the shareholders of the Company authorizing the mobilization of Rs.20 crore and Rs.50 crore through NCDS respectively.

The Company has contended that the words “can properly be regarded” in section 67(3) of the Companies Act, 1956 contemplates that certain amount of evidence is required to be adduced to conclude as to whether the offer of Company would fail the test contained in sub-section 3 and therefore be subject to the first proviso of sub-section 3 and be treated as a public offer. In this regard, it is to be noted under the first proviso to section 67(3), nothing in the sub-section [i.e. 67(3)] shall apply in a case where the offer or invitation to subscribe for shares is made to fifty persons or more. It is already concluded above as to how the first proviso is attracted in this case for the issue to be termed a ‘public issue’. Therefore, there would be no relevance to refer to sub-section 3(a) and (b) of section

67. Moreover, the Company has not proved as to how its issue satisfied clauses (a) and (b) of section 67(3). A mere statement that the issue was through ‘private placement, cannot be accepted. Accordingly, even when – (1) the investors, who have subscribed to the NCDs issued by the Company, have filed affidavits stating that they are related to the promoters and that the issue was done through private placement, or (2) the subscription application expressly provided that “NOT FOR GENERAL CIRCULATION”, “for private offer for secured non-redeemable debenture” and “for private and confidential placement”, or (3) the application states “for private and confidential placement”, the same would not change the colour of the issue of securities as the provisions of section 67(3) are very clear as to how to treat an “issue” as ‘private’ or made to ‘public’.

9. In view of the above observations, it can be concluded that the Company in its effort to mobilize money from the public through its issue of NCDs had devised a means to make multiple allotments in order to stay away from the regulatory purview and evade the liability of complying with the public issue norms as alleged in the interim order. In view of the above observations, I agree with the prima facie view taken by SEBI in the interim order that the offer and issuance of NCDs made by the Company during the aforesaid financial years is a 'public issue' of such securities. In view of the same, the contention made by the Company that it was a ‘private offer and placement’, made to ‘known persons’, are without merit and therefore dismissed.

10. 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. …".

Therefore, by virtue of section 55A(a) and (b) of the Companies Act, 1956 and section 11A of the SEBI Act, SEBI has jurisdiction on the public issue of NCDs made by the Company.

11. As alleged in the SEBI Order, the Company was mandated to comply with the provisions of sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 read with the Companies Act, 2013, and the provisions of the ILDS Regulations, in respect of its offer and issue of NCDs. In this regard, I note that - (a) 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'.

(b) By making a public issue of NCDs, as discussed above, 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 chose 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. The Company has not disputed that this allegation is incorrect. 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 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 such NCDs, 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. Considering that the mobilization was done during FY 2010 till 2013, it would be appropriate to levy an interest @ 15% p.a. as provided for under the above section. Further, the liability of the Company to refund the public funds collected through offer and allotment of the impugned NCDs is continuing and such liability would continue till repayments are made.

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."

(c) 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 not admittedly 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. The interim order has alleged that as the Balance Sheet of the Company for the Financial Year ended March 31, 2013, it was observed that Company has not created any debenture redemption reserve.

The following observations made in the interim order are relevant to be noted here: i. Form 10 (filed by GTPL with the ROC in accordance with the provisions of the Companies Act, 1956), reveals that GTPL created Charge for a total amount of ` 168 Crores on October 13, 2010; August 11, 2011 and February 29, 2012, respectively for the Offer of NCDs. However, from the Balance Sheet for the year ended March 31, 2012 (as submitted by GTPL), it is seen that the value of Tangible Assets including Capital WIP was only ` 6.77 Crores. The aforesaid fact prima-facie indicate that Charge created by GTPL to secure the Offer of NCDs, may not have been backed by sufficient assets. ii. From the Balance Sheet for the year ended March 31, 2013, it is observed that there was a significantly high Debt–Equity ratio i.e. approximately 862 times. Such a high Debt–Equity ratio is prejudicial to the interests of the debenture holders and may significantly hamper the ability of the company to fulfill its obligation of redeeming the debentures on maturity.

The Company has not made any submissions with respect to the above. The debenture trustee, appointed in terms of the Companies Act read with the SEBI Act and DT Regulations, has a duty to protect the interest of debenture holders, to redress their grievances and take necessary action in terms of section 117B (2)-(4) of the Companies Act, 1956.

(d) As NCDs are debt securities in terms of the ILDS Regulations, a public issue of NCDs should therefore comply with the following provisions of the said Regulations: i. Regulation 4(2)(a) – Application for listing of debt securities ii. Regulation 4(2)(b) – In-principle approval for listing of debt securities iii. Regulation 4(2)(c) – Credit rating has been obtained iv. Regulation 4(2)(d) – Dematerialization of debt securities v. Regulation 4(4) – Appointment of Debenture Trustee vi. Regulation 5(2)(b) – Disclosure requirements in the Offer Document vii. Regulation 6 – Filing of draft Offer Document viii. Regulation 7 – Mode of disclosure of Offer Document ix. Regulation 8 – Advertisements for Public Issues x. Regulation 9 – Abridged Prospectus and application forms xi. Regulation 12 – Minimum subscription xii. Regulation 14 – Prohibition of mis-statements in the Offer Document xiii. Regulation 15 – Trust Deed xiv. Regulation 16(1) – Debenture Redemption Reserve xv. Regulation 17 – Creation of Security xvi. Regulation 19 – Mandatory Listing xvii. Regulation 26 – Obligations of the Issuer, etc.

(e) The Company had admittedly not complied with the aforesaid provisions of the Companies Act, 1956 and the ILDS Regulations. Accordingly, it is concluded that the Company failed to comply with the provisions of 56, 60, 73, 117B and 117C of the Companies Act, 1956 read with the 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.

12. The Company has also submitted that it is conducting its business in a bonafide manner and did not make any false statements to the investors and they have been adequately secured. The Company submitted that it can at most be held liable for not complying with a formality as it has in any event secured its investors. The Company further submitted that it did not intentionally breach the rules of SEBI and is not interested in evading or avoiding compliance of law. However, these submissions would not absolve the Company and its directors/promoters of their non-compliances. I further note that the Company has requested SEBI to grant permission to repay its investors and also for alienating assets under supervision and control of their Chartered Accountant. The Company has also stated that it has repaid Rs.12.24 crore to its investors and that the same were certified by its Chartered Accountant. As per the Chartered Accountant’s Certificate dated June 29, 2015, it has been certified that the payment of amount of Rs.12,24,13,460/- for the period April 01, 2013 to June 01, 2015 was towards redemption of secured debentures. As per documents, it appears that the Company has made cash payments also in addition to cheque and NEFT payment modes. However, this too does not absolve the Company/directors of their non-compliances.

13. The interim order has issued directions against the directors - Shyam Sundar Dey, Snehasish Sarkar, Sujoy Sinha and Sumon Sarkar. The Company has submitted that these persons were its directors. From the MCA portal (accessed on 03.11.2015), Sumon Sarkar, Snehasish Sarkar and Shyam Sundar Dey are the present directors of the Company. In this regard, I note the following – (a) Snehasish Sarkar and Shyam Sundar Dey were appointed as directors on August 08, 2010 (i.e. from the date of incorporation of the Company). Shyam Sundar Dey is the Managing Director. Sumon Sarkar was appointed on January 10, 2014.

(b) Sujoy Sinha was appointed a director on July 02, 2012 and resigned on January 15, 2014.

(c) The allotment of NCDs were made during FY 2010-11, 2011-12 and 2012-13. 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.

(d) 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.

(e) 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.

(f) Accordingly, I hereby find Shyam Sundar Dey, Snehasish Sarkar and Sujoy Sinha liable for the violation of section 56, 60, 73, 117B and 117C of the Companies Act, 1956 and the provisions of the ILDS Regulations.

(g) Mr. Sumon Sarkar is one of the present directors of the Company having been appointed during January 2014. It appears that he has neither exercised necessary diligence after joining as a director nor made any attempts to report the wrongdoings of the Company to the appropriate authorities. The very inaction by this director against the previous/existing management (for violating the public issue norms while making the offer and issuing the securities), even after the receipt of the interim order dated August 7, 2014, leads one to conclude on a possible collusion by him with the Company and its management. As discussed earlier, the liability to refund is a continuous liability and would be discharged only when the repayments are done. This director did not take any steps to remedy the violations committed. Therefore, I hold Mr. Sumon Sarkar liable for the same.

14. The interim order has alleged that the debenture trustee has acted as such 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. The debenture trustee is GreenTouch Projects Debenture Trust (represented by its Trustee, viz. Swagata Kumar Maiti). The Trust or Swagata Kumar Maiti are not registered with SEBI to perform the functions of a ‘debenture trustee’ in the capital market. Further, they 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 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.

15. 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, Greentouch Projects Limited and its directors/promoters including Shyam Sundar Dey, Snehasish Sarkar, Sujoy Sinha and Sumon Sarkar, 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.

The Company has claimed to have already repaid a sum of `12,24,13,460/- to its investors. However, such claimed repayments by the Company shall be certified by Chartered Accountants, as directed in sub-paragraph (e) below.

(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, its directors and other persons 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.

(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) Greentouch Projects Limited and its directors/promoters including Shyam Sundar Dey, Snehasish Sarkar, Sujoy Sinha and Sumon Sarkar 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, Greentouch Projects Limited and its directors/promoters including Shyam Sundar Dey, Snehasish Sarkar, Sujoy Sinha and Sumon Sarkar, 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 the process of winding up of the Company.

(h) Greentouch Projects 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) Shyam Sundar Dey, Snehasish Sarkar, Sujoy Sinha and Sumon Sarkar 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 GreenTouch Projects Debenture Trust (represented by its Trustee, viz. Swagata Kumar Maiti), 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.

16. 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.

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

18. 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: December 01, 2015 Place: Mumbai