Order in the matter of Hooghly Agrotech Limited

WTM/PS/162/ERO/FEB/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 In the matter of Hooghly Agrotech Limited In respect of: 1. Hooghly Agrotech Limited [PAN: AABCH8362A], 2. Mr. Subhrajit Banik [PAN: ANRPB9054H], 3. Mr. Uma Shankar Shaw [PAN: BDBPS9453C], 4. Mr. Debdulal Banik Chowdhury [PAN: AHCPC4610M], 5. Mr. Avijit Chowdhury [PAN: APEPC8255N], 6. Mr. Sekhar Chandra Koley [PAN: BUOPK8353F], 7. Mr. Himadri Bag [PAN: AJXPB3796L], 8. Mr. Arjun Saha [PAN: AVIPS6571K], 9. Ms. Sumita Das [PAN: AHTPD9166G], 10. Mr. Subrata Das [PAN: AEYPD5580Q], 11. Mr. Devid Haslaf [PAN: AHUPH9113Q], 12. Mr. Miarul Sekh [PAN: CQYPS9419K], 13. Mr. Kedar Chandra Bera [PAN: AUDPB3525G]; 14. Hooghly Debenture Trust [through its trustee namely Mr. Bijay Sarkar] Date of Hearing: September 03, 2015 Appearances: For Noticees: Mr. Arjun Saha Mr. Swarna Kamal Dutta, Advocate Mr. Sumantra Sarathi Mahata, Practicing Company Secretary For SEBI: Mr. Prashanta Mahapatra, General Manager, Mr. T. Vinay Rajneesh, Assistant General Manager, Mr. N. Murugan, Assistant General Manager, Ms. Nikki Agarwal, Assistant Manager.

1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), vide an ex-parte interim Order dated February 11, 2015 (hereinafter referred to as ‘the interim order’) had observed that the company, Hooghly Agrotech Limited (hereinafter referred to as ‘Hoogly’ or ‘the Company’) is prima facie engaged in fund mobilising activity from the public, by making offer and issuing Non-Convertible Redeemable Secured Debentures (hereinafter referred to as ‘NCD’) and had allegedly violated the provisions of Sections 56, 60 [read with Section 2(36)], 73, 117B and 117C of the Companies Act, 1956 and the relevant provisions of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (hereinafter referred to as ‘the ILDS Regulations’). The interim order also alleged that Hooghly Debenture Trust (through its trustee namely Mr. Bijay Sarkar) had allegedly failed to meet the eligibility conditions specified under the SEBI (Debenture Trustees) Regulations, 1993 (hereinafter referred to as ‘DT Regulations’) and acted as an unregistered debenture trustee in violation of Section 12(1) of the SEBI Act, 1992 (hereinafter referred to as ‘SEBI Act’).

2. In order to protect the investors who have subscribed to the impugned offer and issue of NCD and to prevent the Company from further carrying on with its fund mobilizing activity under the offer of NCDs, SEBI had issued the following directions: “… … 21. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11(1), 11(4), 11A and 11B of the SEBI Act read with the Debt Securities Regulations and the Debenture Trustee Regulations, hereby issue the following directions – i. Hooghly Agrotech shall not mobilize any fresh funds from investors through the Offer of NCDs or through the issuance of equity shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly till further directions; ii. Hooghly Agrotech (PAN- AABCH8362A) and its past and present Directors viz. Shri Subhrajit Banik, (DIN-02913681, PAN- ANRPB9054H), Uma Shankar Shaw (DIN-03644930, PAN-BDBPS9453C), Shri Debdulal Banik Chowdhury (DIN- 05325110, PAN-AHCPC4610M ), Shri Avijit Chowdhury (DIN-05358817, PAN-APEPC8255N), Shri Sekhar Chandra Koley (DIN- 06454703, PAN- BUOPK8353F), Himadri Bag (DIN- 02729318, PAN-AJXPB3796L), Shri Arjun Saha (DIN- 02457813, PAN- AVIPS6571K), Smt. Sumita Das (DIN- 02645151, PAN-AHTPD9166G),Shri Subrata Das (DIN-02457681,PAN-AEYPD5580Q), Shri Devid Haslaf (DIN- 06594846, PAN-AHUPH9113Q), Shri Miarul Sekh (DIN- 05134527, PAN-CQYPS9419K), Shri Kedar Chandra Bera (DIN- 05203711, PAN- AUDPB3525G) 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. Hooghly Agrotech 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. Hooghly Agrotech shall provide a full inventory of all its assets and properties;

v. Hooghly Agrotech's abovementioned Directors shall provide a full inventory of all their assets and properties; vi. Hooghly Agrotech 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. Hooghly Agrotech 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 Hooghly Agrotech; viii. Hooghly Agrotech and its abovementioned Directors shall furnish complete and relevant information (as sought by SEBI letters dated May 05, 2014 and June 13, 2014) within 21 days from the date of receipt of this Order. ix. The Debenture Trustee, viz. Hooghly Debenture Trust (represented by its trustee viz. Mr. Bijay Sarkar), is prohibited from continuing with its present assignment as a debenture trustee in respect of the Offer of NCDs of Hooghly Agrotech 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. 22. The above directions shall take effect immediately and shall be in force until further orders. … 23. Similarly, the Debenture Trustee, viz. Hooghly Debenture Trust (represented by its trustee viz. Mr. Bijay Sarkar), may, within 21 days from the date of receipt of this Order, file its reply, if any, to this Order and may also indicate whether it desires to avail an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard. 24. This Order is without prejudice to the right of SEBI to take any other action that may be initiated against Hooghly Agrotech and its abovementioned Directors; its Debenture Trustee, viz. Hooghly Debenture Trust (represented by its trustee viz. Mr. Bijay Sarkar), in accordance with law.” 3. The interim order observed that the prima facie observations made therein were on the basis of the information obtained from the 'MCA 21 Portal'. The interim order advised the Company and its directors that they may file their replies within 21 days from the date of receipt of the order and also to seek an opportunity of personal hearing.

4. The interim order was forwarded to the Company and its directors namely Mr. Subhrajit Banik, Mr. Uma Shankar Shaw, Mr. Debdulal Banik Chowdhury, Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley, Mr. Himadri Bag, Mr. Arjun Saha, Ms. Sumita Das, Mr. Subrata Das, Mr. Devid Haslaf, Mr. Miarul Sekh, Mr. Kedar Chandra Bera and its Debenture Trustee namely Hooghly Debenture Trust [through its trustee namely Mr. Bijay Sarkar] vide letter dated February 12, 2015. The said letters were delivered to Mr. Subhrajit Banik, Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley,

Mr. Arjun Saha and Mr. Kedar Chandra Bera. The letters issued to others had returned undelivered. Thereafter, attempts were made to deliver the interim order by hand delivery/ pasting on the last known addresses of these persons. In the meantime, one Mr. Kabir Hossain, advocate while writing on behalf of Mr. Avijit Chowdhury, a director of the Company vide letter dated March 17, 2015, submitted a brief reply to the interim order. Mr. Arjun Saha vide his letter dated March 09, 2015, replied to the interim order.

5. Thereafter, the matter was proceeded further and an opportunity of personal hearing was granted to the Company, its directors and the debenture trustee on September 03, 2015. The scheduled date was communicated vide SEBI letter dated July 27, 2015. The date of hearing was also communicated vide the public notice in the newspapers namely ‘Ananda Bazar Patrika’ and ‘Times of India’ both dated September 03, 2015. The Company and its directors were advised that in case they fail to appear for the personal hearing before SEBI on the aforesaid date, then the matter would be proceeded ex-parte on the basis of material available on record. Mr. Avijit Chowdhury (vide letter dated August 31, 2015) and Mr. Arjun Saha (vide fax dated August 06, 2015) confirmed their presence for the personal hearing. Mr. Himadri Bag also vide fax dated August 25, 2015, had confirmed his presence for the personal hearing.

6. On the date fixed, one Mr. Sumantra Sarathi Mahara, Practicing Company Secretary appeared for Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley and Mr. Himadri Bag for the personal hearing and made submissions. Another director Mr. Arjun Saha also appeared for the personal hearing along with Mr. Swarna Kamal Dutta, Advocate and made oral submissions. These persons also requested for time to file the written submissions. The request was considered and one week’s time was granted for filing of the written submissions.

The Company and other directors of the Company had failed to appear for the personal hearing. Considering that reasonable opportunities to the Company and its directors had already been afforded for making submissions in the matter, I am inclined to proceed further with the matter, on the basis of material available on record.

7. Mr. Arjun Saha vide letter dated September 10, 2015, filed the written submissions which was taken on record. The submissions of Mr. Arjun Saha made vide letters dated March 09, 2015 and September 10, 2015, in brief, are as under: a. In the year 2008, when his family was facing acute financial stringency and he was searching for a job to earn then Mr. Subrata Das (who was staying in his locality) gave him a proposal to work in his Company. b. His work was to contact agents and collect documents from them and submit these in the office of the Company and supply the Company’s circulars, forms and manuals. He was not attached to any financial transactions in the Company. c. He did not collect money from the public on behalf of the Company nor did he work as agent of the Company. d. He had no knowledge about the functioning of the Company. e. In June 2009, he came to know from an office staff that he is appointed as a ‘director’ of the Company. f. He had approached Mr. Subrata Das and confronted him on his appointment without his consent. Upon not getting a suitable reply, he had submitted his resignation letter to the Company and Mr. Devid Haslaf had received the same on June 20, 2009. g. He was attached with the Company for about six to seven months. He did not attend any board meeting during his short span of work as ‘director’. He had not involved in the functioning of the Company due to lack of educational qualification. He has not submitted the Form 32 as per the requirements of the Companies Act as he was not aware of the procedures and the statutory provisions. h. The Company had worked practically with the wishes and directions of Mr. Subrata Das, Mr. Devid Haslaf and Ms. Sumita Das. These persons had taken all the decisions and had issued the directions to the agents. i. He has no connection with the Company since June 2009. He had heard that the Company is closed but he is not aware of its reasons for closing. He is not aware of the whereabouts of other directors/ persons who were connected with the Company. He runs a small shop and maintains his family with the small earnings for the said shop.

j. The debentures were issued by the Company pursuant to the resolution passed by the Board of Directors of the Company on November 10, 2009. He had resigned from the Company on June 20, 2009. Therefore, he was not present in such meeting and the resolution taken on the said meeting are not binding upon him. 8. Other directors namely Mr. Sekhar Chandra Koley, Mr. Avijit Chowdhury and Mr. Himadri Bag also filed the written submissions, all received by SEBI on September 09, 2015. The submissions made by these, in brief, are as under: a. They were employed by the Company and thereafter were appointed as directors. b. After Sahara dispute, it was clear that the fund raising is illegal, if it was not through proper channel. After Saradha incident and arrest of Mr. Sudipta Sen, the companies who are mobilizing fund from public was totally stopped. The operation of such companies also stopped due to loss of faith of public. c. For saving themselves from the investigation, the promoter/ directors who had taken the funds had resigned from the Company and had appointed new people who have no basic knowledge in acts and rules. These new persons were misguided and cheated by the promoter/ directors of the Company. d. The Company was incorporated on March 03, 2005 and had registered its debenture trust deed on December 30, 2009, signed by Mr. Bijay Sarkar. The Company had permission to raise ₹10 crore by allotting NCDs. e. The basic object of the Company was to defraud the people. On the advice of a professional, they had resigned to avoid future hazard. They did not had legal understanding of the consequences to become director of such company. They were promised remuneration from the Company, however, they have not received anything. f. Mr. Sekhar Chandra Koley and Mr. Avijit Chowdhury were the directors of the Company for 60 days and Mr. Himadri Bag was director only for 14 days. They had not signed any papers of the Company during the respective tenures. The Company had not transferred any shares to them. They had not attended any meeting of members for fund raising or motivate people to deposit the funds in the Company. No balance sheet/ profit and loss account were signed by these.

9. I have considered the interim order, the submissions of Mr. Arjun Saha, Mr. Sekhar Chandra Koley, Mr. Avijit Chowdhury and Mr. Himadri Bag and the material available on record. The interim order had observed/alleged the following: a. Hooghly was incorporated on March 03, 2005, with the ROC, Kolkata, West Bengal. b. From the copy of the ‘brochure cum application form’ it was revealed that the Company had come out with an issue of non-convertible redeemable secured debentures amounting to ₹5 crores. The issue opening date has been stated as January 01, 2010. c. The Company made a public issue under the first proviso to Section 67(3) of the Companies Act, 1956. The Company is not stated to be non-banking financial company or a public financial institution. The Company did not comply with the public issue norms mandated under Sections 56, 60 and 73 of the Companies Act, 1956. d. The interim order also observed that “Form 10 filed by the company with RoC, Kolkata that charge of Rs.10 crores was created on December 30, 2009 on immovable properties, plant & machinery, furniture & fixtures, stock in trade, book debts and any movable or immovable, present or future assets of the company. The name of debenture trustee is “Hooghly Debenture Trust” managed by trustee Mr. Bijay Sarkar and the office of the debenture trustee is situated at 160 Sarat Pally, P.O. Hooghly, West Bengal - 712103 which, incidentally, was the same as the registered office address of the company”. e. Hooghly had issued NCDs of face value of ₹100 each during the financial years 2009- 10, 2010-11 and 2011-12. The interim order had observed that the exact number of debenture holders and the amount raised through the offer of NCDs could not be ascertained as Hooghly had failed to submit the details of the debentures issued and debenture holders in its Annual Return for the year ended 2009-10, 2010-11, 2011-12 with RoC. The interim order had also observed that Hooghly and its directors have not replied to the letters sent by SEBI. 10. Having considered the above, it is now necessary to determine whether the Company had made a public issue as alleged in the interim order and if so, whether the Company had complied with the public issue norms. The liability of the directors of the Company also needs to be determined as they have also been alleged in the interim order

11. For ascertaining whether an issue of securities is a ‘public issue’ or done on ‘private placement’ basis it is necessary to make a reference to Section 67(3) of the Companies Act, 1956, which reads as under: “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).” As per Section 67(3) (as amended by the Companies (Amendment) Act, 2000, with effect from December 13, 2000), no offer or invitation shall be treated as made to the public by virtue of sub-sections (1) or (2), as the case may be, if the offer or invitation can properly be regarded, in all circumstances - (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation.

More importantly, in terms of the first proviso to the aforesaid section, the provisions of Section 67(3) shall not apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. Therefore, the number of subscribers becomes relevant to decide whether an issue of shares are made for public or done on a private placement basis, in the light of the above said provision. In view of the same, if an offer of securities are made to fifty or more persons, it would be deemed to be a public issue.

12. The Hon'ble Supreme Court of India in the matter of Sahara India Real Estate Corporation Limited & Others Vs. SEBI and another (Civil Appeal Nos. 9813 and 9833 of 2011; decided on August 31, 2012) (‘the Sahara case’) had inter alia held that – “Section 67(1) deals with the offer of shares and debentures to the public and Section 67(2) deals with invitation to the public to subscribe for shares and debentures and how those expressions are to be understood, when reference is made to the Act or in the articles of a company. The emphasis in Section 67(1) and (2) is on the “section of the public”. Section 67(3) states that no offer or invitation shall be treated as made to the public, by virtue of subsections (1) and (2), that is to any section of the public, if the offer or invitation is not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation or otherwise as being a domestic concern of the persons making and receiving the offer or invitations. Section 67(3) is, therefore, an exception to Sections 67(1) and (2).

If the circumstances mentioned in clauses (1) and (b) of Section 67(3) are satisfied, then the offer/invitation would not be treated as being made to the public. The first proviso to Section 67(3) was inserted by the Companies (Amendment) Act, 2000 w.e.f. 13.12.2000, which clearly indicates, nothing contained in Sub-section (3) of Section 67 shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. … Resultantly, if an offer of securities is made to fifty or more persons, it would be deemed to be a public issue, even if it is of domestic concern or proved that the shares or debentures are not available for subscription or purchase by persons other than those received the offer or invitation. … I may, therefore, indicate, subject to what has been stated above, in India 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. …” 13. In the present case, I note that the Company had published a brochure for its issue of NCDs amounting to ₹5 crore and the date of opening of such issue was January 01, 2010. It is observed from the copies of the brochure cum application forms and the letters of allotment to atleast 47 investors (received by SEBI along with the investor complaints before the passing of the interim order) that about ₹25,63,000 was collected by the Company from the investors.

From the same, it is noted that the Company had issued NCDs of face value of ₹100 each during the financial years 2009-10, 2010-11 and 2011-12. As per the balance sheet of the Company as on March 31, 2010, it had raised ₹38.40 lakh through its issue of debentures. However, the details regarding the number of investors is not available on record. The Company has failed to provide such details inspite of repeated reminders. After the issuance of the interim order, SEBI has received five other investor complaints pertaining to the issue of debentures of the Company. Considering these details, it is reasonable to infer that the Company had offered and allotted NCDs during the said financial years to more than 49 persons. In view of the same, it is held that the Company had made its offer and allotted NCDs to more than 49 persons, thereby making a public issue of NCD (in terms of the first proviso to Section 67(3) of the Companies Act, 1956) during the period alleged in the interim order. Further, the Company has failed to produce any evidence that the issue was a domestic concern of the members of the Company.

Thus on the face of it, the issue made by the Company cannot be considered as a private placement.

14. By making a public issue of NCDs, as discussed above, 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 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. …” 15. In view of the above observations, by virtue of Section 55A(a) and (b), the SEBI has jurisdiction and would govern the issue of NCDs as the same was made to more than 49 persons. In terms of Section 55A of the Companies Act, 1956, SEBI shall administer various provisions (as mentioned therein) of the said Act with respect to issue and transfer of securities by listed companies, companies that intend to list and also those companies that are required to list its securities while making offer and issue of securities to the public. While examining the scope of Section 55A of the Companies Act, 1956, the Hon'ble Supreme Court of India in Sahara Case, had observed that:

"We, therefore, hold that, so far as the provisions enumerated in the opening portion of Section 55A of the Companies Act, so far as they relate to issue and transfer of securities and non-payment of dividend is concerned, SEBI has the power to administer in the case of listed public companies and in the case of those public companies which intend to get their securities listed on a recognized stock exchange in India." " SEBI can exercise its jurisdiction under Sections 11(1), 11(4), 11A(1)(b) and 11B of SEBI Act and Regulation 107 of ICDR 2009 over public companies who have issued shares or debentures to fifty or more, but not complied with the provisions of Section 73(1) by not listing its securities on a recognized stock exchange".

Under Section 11A of the SEBI Act, SEBI is also empowered to regulate, by regulations/ general or special orders, the matters pertaining to issue of capital, transfer of securities and matters related thereto. Accordingly, the Company, having made a public offer and issue of securities, as observed above, is under the jurisdiction of SEBI.

16. Sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 and the provisions of the ILDS Regulations are required to be complied by a company making a public issue of securities. 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’.

17. The interim order has alleged that the Company had failed to comply with Section 73 of the Companies Act, 1956, in respect of its issuance of NCDs. By issuing NCDs to more than 49 persons, the Company had to compulsorily list such securities in compliance with Section 73(1) of the Companies Act, 1956. 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. There is no material on record to say that the Company has filed an application with a recognised stock exchange to enable the NCDs to be dealt with in such exchange. Therefore, the Company has failed to comply with this requirement.

18. Section 73(2) of the Companies Act, 1956 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 the investors. If such repayments are not made within 8 days after the Company becomes liable to repay, the Company and every director of the Company, become jointly and severally liable to repay with interest at such rate.

There is no material on record to say that the Company has complied with such provision. 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.” 19. Section 117B of the Companies Act, 1956, prescribes that no company shall issue a prospectus or a letter of offer to the public for subscription of its debentures, unless it has, before such issue, appointed one or more debenture trustees for such debentures and the company has, on the face of the prospectus or the letter of offer, stated that the ‘debenture trustee’ or trustees have given their consent to the company to be so appointed. The Company has admittedly not filed any prospectus. Therefore, the said provision has not been fully complied with. Further, appointment of ‘debenture trustee’ shall be in terms of all applicable law. Further, Section 117C of the Companies Act, 1956, stipulates that, where a company issues debentures, it shall create a debenture redemption reserve for the redemption of such debentures, to which adequate amounts shall be credited, from out of its profits every year until such debentures are redeemed.

There is no record to suggest that this provision was complied with by the Company.

20. As the NCDs are ‘debt securities’ in terms of the ILDS Regulations, the Company was also mandated to comply with the provisions of the ILDS Regulations in respect of its public issue of NCDs. However, the Company has failed to comply with the following provisions of the ILDS 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 – Debenture Redemption Reserve xv. Regulation 17 – Creation of security xvi. Regulation 19 – Mandatory Listing xvii. Regulation 26 – Obligations of the Issuer, etc.

From the foregoing, it is concluded that the Company has failed to comply with the provisions of Sections 56, 60, 2(36), 73, 117B and 117C of the Companies Act, 1956 read with Companies Act, 2013 and the aforesaid provisions of the ILDS Regulations, in respect of its offer and issuance of NCDs as discussed in this Order and liable for suitable action under the Companies Act, 1956, the SEBI Act and the ILDS Regulations.

21. The interim order has alleged that the debenture trustee namely Hooghly Debenture Trust (through its trustee namely Mr. Bijay Sarkar) had acted without registration from SEBI as required under Section 12(1) of the SEBI Act. In this regard, I note that Hooghly Debenture Trust is not registered with SEBI to perform the functions of a ‘debenture trustee’ in the capital market. Further, it does 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."

From the above, it is seen that Hooghly Debenture Trust does not satisfy the eligibility conditions stipulated under Regulation 7 of the DT Regulations. The debenture trustee has not disputed these allegations. Hooghly Debenture Trust has not submitted any reply to the interim order. In the absence of any reply, I am inclined to conclude that Hooghly Debenture Trust has violated Section 12(1) of the SEBI Act and Regulation 7 of the DT Regulations. In view of these observations, it can be said that the provisions of Section 117B of the Companies Act, 1956, have not been completely complied with.

22. At this stage, I note that SEBI has received various investor complaints against the Company and ‘ERIS Group of Companies’. One of these complaints has referred to the advertisement from the newspaper namely ‘Sangbad Pratidin’ on June 05, 2014, wherein a company, 'G.R. Agro Project Limited' had announced that it has taken over past, present and future assets and liabilities inter alia of Hoogly. I note that SEBI has already passed an order dated December 03, 2015, against the said G.R. Agro Project Limited and its directors restraining these from mobilizing any funds from the investors through issue of any securities and accessing the securities market, till further directions. Further, I am of the opinion that such advertisement does not in anyway mitigate the responsibility of the Company and its directors for violation of various provisions of the Companies Act, 1956 and the SEBI Act and Regulations made thereunder.

23. Liability of directors: I note that the interim order was issued against the directors of the Company namely Mr. Subhrajit Banik, Mr. Uma Shankar Shaw, Mr. Debdulal Banik Chowdhury, Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley, Mr. Himadri Bag, Mr. Arjun Saha, Ms. Sumita Das, Mr. Subrata Das, Mr. Devid Haslaf, Mr. Miarul Sekh and Mr. Kedar Chandra Bera.

a. The details of the appointment and resignations of the directors of the Company are as under: Name Date of Appointment Date of Cessation Mr. Subhrajit Banik 21/10/2010 15/05/2014 Mr. Uma Shankar Shaw 11/11/2011 15/05/2014 Mr. Debdulal Banik Chowdhury 23/07/2012 15/05/2014 Mr. Avijit Chowdhury 09/05/2014 17/07/2014 Mr. Sekhar Chandra Koley 09/05/2014 17/07/2014 Mr. Himadri Bag 09/05/2014 23/05/2014 Mr. Arjun Saha 09/06/2009 23/07/2012 Ms. Sumita Das 03/03/2005 21/10/2010 Mr. Subrata Das 03/03/2005 15/11/2011 Mr. Devid Haslaf 15/05/2014 Continue as director Mr. Miarul Sekh 15/05/2014 Continue as director Mr. Kedar Chandra Bera 15/05/2014 Continue as director I note that the Company had commenced the offer and issuance of NCD from 2009- 2010 and continued with its money mobilization activity till the financial year 2011-12. Section 56 of the Companies Act, 1956 imposes the liability for the compliance, on the company, every director, and persons responsible for the issuance of the prospectus. The liability of the Company to repay under Section 73(2) of the Companies Act, 1956 read with Section 27 of the SEBI Act, is continuing and the same continues till all the repayments are made to the investors/ public. Therefore, the directors who were present during the period when the Company had made the offer and allotted NCDs shall be liable for violation of Sections 56, 60 and 73 of the Companies Act, 1956 including the default in making refunds as mandated therein. As the liability to make repayments under Section 73(2) of the Companies Act read with Section 27 of the SEBI Act is continuing, the persons who joined 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 the discussed provisions of law.

b. From the table above and as per the available records, it is noted that the persons namely Mr. Subhrajit Banik, Mr. Uma Shankar Shaw, Mr. Arjun Saha, Ms. Sumita Das and Mr. Subrata Das were the directors of the Company at the time of impugned issues and allotment of NCDs and were responsible for the affairs of the Company, at the relevant point of time. Mr. Subhrajit Banik, Mr. Arjun Saha, Ms. Sumita Das and Mr. Subrata Das had resigned from the Company on May 15, 2014, May 15, 2014, July 23, 2012, October 21, 2010 and November 15, 2011 respectively. None of these except Mr. Arjun Saha have replied to the interim order.

Mr. Arjun Saha vide his submissions dated March 09, 2015 and September 10, 2015, has submitted that he was only an employee of the Company and his job was to contact agents and collect documents and submit such documents in the office of the Company and supply the Company’s circulars, forms and manuals. He has also submitted that he has not collected any money from the public. Upon becoming aware in June 2009 that he is appointed as a ‘director’ of the Company, he had approached Mr. Subrata Das and confronted him on his appointment as director without his consent. Later he submitted his resignation letter on June 20, 2009 to Mr. Devid Haslaf. It has also been submitted by him that no ‘form 32’ was submitted as he was not aware of the procedures and the statutory provisions.

From the available record, I note that Mr. Arjun Saha was appointed on the board of the Company on June 09, 2009 and had resigned on July 23, 2012, whereas he says his resignation letter was submitted on June 20, 2009. Further, Mr. Arjun Saha has claimed to have submitted his resignation letter to Mr. Devid Haslaf, who as per the available records was appointed on the board of the Company only on May 15, 2014 i.e. much after the date as claimed by Mr. Arjun Saha. In view of the same, I find no merits in the submissions of Mr. Arjun Saha. From the available records, I note that Mr. Arjun

Saha was a director during the period of allotment of NCDs. In this regard, I also place reliance on the order of Hon’ble High Court of Madras in the matter of Madhavan Nambiar Vs. Registrar of Companies [2002 108 Comp Cas 1 Mad] wherein it was observed that “In the matter of proceedings for negligence, default, breach of duty, misfeasance or breach of trust or violation of the statutory provisions of the Act and the rules, there is no difference or distinction between the whole-time or part time director or nominated or co-opted director and the liability for such acts or commission or omission is equal. So also the treatment for such violations as stipulated in the Companies Act, 1956.”.

In view of the same, it can be concluded that the noticees namely Mr. Subhrajit Banik, Mr. Uma Shankar Shaw, Mr. Arjun Saha, Ms. Sumita Das and Mr. Subrata Das are liable, jointly and severally, for making refunds along with interest to the investors as mandated under Section 73(2) of the Companies Act, 1956 read with Section 27 of the SEBI Act.

c. I note that Mr. Debdulal Banik Chowdhury, Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley, Mr. Himadri Bag, Mr. Devid Haslaf, Mr. Miarul Sekh and Mr. Kedar Chandra Bera were appointed as directors of the Company after the last available year of allotment. Mr. Devid Haslaf, Mr. Miarul Sekh and Mr. Kedar Chandra Bera are also the present directors of the Company. It is observed that these persons have not exercised necessary diligence after becoming the directors in the Company. The inaction by these against the management (for violating the public issue norms as stipulated under the Companies Act, 1956 while making the offer and issuing the NCDs), leads one to conclude on a possible collusion with the Company and its management. Further, Mr. Debdulal Banik Chowdhury, Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley, Mr. Himadri Bag, Mr. Devid Haslaf, Mr. Miarul Sekh and Mr. Kedar Chandra Bera have also not taken any steps to remedy the violations committed. Accordingly, I hold these persons to be responsible for the same.

24. I note that Hooghly Agrotech Limited, Mr. Subhrajit Banik, Mr. Uma Shankar Shaw, Mr. Debdulal Banik Chowdhury, Mr. Avijit Chowdhury, Mr. Sekhar

Chandra Koley, Mr. Himadri Bag, Mr. Arjun Saha, Ms. Sumita Das, Mr. Subrata Das, Mr. Devid Haslaf, Mr. Miarul Sekh and Mr. Kedar Chandra Bera were required to provide full inventory of the assets and properties and furnish complete and relevant information in respect of the Offer of NCDs for compliance with the direction in the interim order. However, no details have been submitted by these, till date.

25. In view of the discussion above, appropriate action in accordance with law needs to be initiated against the Company and the directors/ promoters in charge of the affairs of the Company during the relevant period.

26. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11 and 11B thereof hereby issue the following directions:

a. The Company, Hooghly Agrotech Limited [PAN: AABCH8362A], Mr. Subhrajit Banik [PAN: ANRPB9054H], Mr. Uma Shankar Shaw [PAN: BDBPS9453C], Mr. Debdulal Banik Chowdhury [PAN: AHCPC4610M], Mr. Avijit Chowdhury [PAN: APEPC8255N], Mr. Sekhar Chandra Koley [PAN: BUOPK8353F], Mr. Himadri Bag [PAN: AJXPB3796L], Mr. Arjun Saha [PAN: AVIPS6571K], Ms. Sumita Das [PAN: AHTPD9166G], Mr. Subrata Das [PAN: AEYPD5580Q], Mr. Devid Haslaf [PAN: AHUPH9113Q], Mr. Miarul Sekh [PAN: CQYPS9419K] and Mr. Kedar Chandra Bera [PAN: AUDPB3525G] jointly and severally, shall forthwith refund the money collected by the Company through the issuance of Non-Convertible Redeemable Secured Debentures (which have been found to be issued in contravention of the public issue norms stipulated under the Companies Act, 1956), to the investors including the money collected from investors, till date, pending allotment of NCD, if any, with an interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became due (in terms of Section 73(2) of the Companies Act, 1956) to the investors till the date of actual payment.

b. The repayments to investors shall be effected only in cash through Bank Demand Draft or Pay Order.

c. The Company/ its present management is 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 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 on 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 report of such completion of repayment with SEBI, within a period of three months from the date of this order, certified by 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. Hooghly Agrotech Limited, Mr. Subhrajit Banik, Mr. Uma Shankar Shaw, Mr. Debdulal Banik Chowdhury, Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley, Mr. Himadri Bag, Mr. Arjun Saha, Ms. Sumita Das, Mr. Subrata Das, Mr. Devid Haslaf, Mr. Miarul Sekh and Mr. Kedar Chandra Bera 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 Hooghly Agrotech Limited, Mr. Subhrajit Banik, Mr. Uma Shankar Shaw, Mr. Debdulal Banik Chowdhury, Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley, Mr. Himadri Bag, Mr. Arjun Saha, Ms. Sumita Das, Mr. Subrata Das, Mr. Devid Haslaf, Mr. Miarul Sekh and Mr. Kedar Chandra Bera, to comply with the aforesaid directions SEBI, on the expiry of the three months period from the date of this order,- i. shall recover such amounts in accordance with Section 28A of the SEBI Act including such other provisions contained in securities laws. ii. 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. iii. 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 iv. would also make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the Company.

h. Hooghly Agrotech 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 is 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 four (4) years from the date of completion of refunds to investors, made to the satisfaction of SEBI, as directed above. The Company is restrained from accessing the securities market for the purposes of raising funds with immediate effect.

i. The directors namely Mr. Subhrajit Banik, Mr. Uma Shankar Shaw, Mr. Debdulal Banik Chowdhury, Mr. Avijit Chowdhury, Mr. Sekhar Chandra Koley, Mr. Himadri Bag, Mr. Arjun Saha, Ms. Sumita Das, Mr. Subrata Das, Mr. Devid Haslaf, Mr. Miarul Sekh and Mr. Kedar Chandra Bera are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, with immediate effect. They are also restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, with immediate effect. This restraint shall continue to be in force for a further period of four (4) years on completion of the repayments, as directed above.

j. Hooghly Debenture Trust and Mr. Bijay Sarkar shall not offer themselves to be engaged as debenture trustees or in any capacity as an intermediary in the securities market, without obtaining a certificate of registration to undertake that assignment as required under law. Further, they are restrained from accessing the securities market and are further restrained from buying, selling or dealing in securities, in any manner whatsoever, for a period of four (4) years.

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

27. 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 and other key persons.

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

29. 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.

DATE : February 23rd, 2016 PRASHANT SARAN PLACE : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA