Order in the matter of Infocare Infra Limited295/2016]263/2016]

WTM/PS/172/ERO/MAR/2016 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 the matter of Infocare Infra Limited In respect of: 1. Infocare Infra Limited [PAN: AACCI5072P], 2. Mr. Kousik Patra [PAN: AGRPP5715A], 3. Mr. Suresh Reddy [PAN: AKDPR6812L], 4. Mr. Abhijit Chakraborty [PAN: AGCPC9762B], 5. Mr. Arup Kumar Roy [PAN: ANJPR9146G], 6. Mr. Aloke Singh [PAN: APYPS3977H] and 7. Mr. Pawan Kumar Agarwal [PAN: ADHPA8420C]. Date of Hearing: September 04, 2015 Appearances: For Noticees: Mr. Sandip Dey, Chartered Accountant 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 March 19, 2015 (hereinafter referred to as ‘the interim order’) had observed that the company, Infocare Infra Limited (hereinafter referred to as ‘Infocare’ or ‘the Company’) is prima facie engaged in fund mobilising activity from the public, through the Offer of Redeemable Preference Shares (hereinafter referred to as ‘RPS’) and Non-Convertible Debentures (‘NCD’) had allegedly violated the provisions of Sections 56, 60 (read with Section 2(36)), 67, 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 the debenture trustee, Mr. Pawan Kumar Agarwal had acted as unregistered debenture trustee in violation of the provisions of Section 12(1) of the SEBI Act, 1992 (hereinafter referred to as ‘SEBI Act’) and the SEBI (Debenture Trustees) Regulations, 1993 (hereinafter referred to as ‘DT Regulations’).

2. In order to protect the interest of investors and to ensure that only legitimate fund raising activities are carried on by the Company and its directors, 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, hereby issue the following directions – i. IIL (PAN: AACCI5072P) shall forthwith cease to mobilize funds from investors through the Offer of Redeemable Preference Shares and 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. IIL and its present Directors, viz. Shri Kousik Patra (PAN: AGRPP5715A; DIN: 02271604), Shri Suresh Reddy (PAN: AKDPR6812L; DIN: 03382494) and Shri Abhijit Chakraborty (PAN: AGCPC9762B; DIN: 05283740), 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. The past Directors of IIL, viz. Shri Arup Kumar Roy (PAN: ANJPR9146G; DIN: 02703502) and Shri Aloke Singh (PAN: APYPS3977H; DIN: 02299175), 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; iv. IIL and its abovementioned past and present 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; v. IIL shall provide a full inventory of all its assets and properties; vi. IIL's abovementioned past and present Directors shall provide a full inventory of all their assets and properties; vii. IIL and its abovementioned present 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 Redeemable Preference Shares and Offer of NCDs, without prior permission from SEBI;

viii. IIL and its abovementioned present Directors shall not divert any funds raised from public at large through the Offer of Redeemable Preference Shares and Offer of NCDs, which are kept in bank account(s) and/or in the custody of IIL; ix. IIL and its abovementioned present Directors shall furnish complete and relevant information (as sought by SEBI letter dated August 4, 2014), within 21 days from the date of receipt of this Order. x. The Debenture Trustee, viz. Shri Pawan Kumar Agarwal (PAN: ADHPA8420C), is prohibited from continuing with its assignment as debenture trustee in respect of the Offer of NCDs of IIL 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. 10. … 11. This Order is without prejudice to the right of SEBI to take any other action that may be initiated against IIL and its abovementioned Directors; its Debenture Trustee, viz. Shri Pawan Kumar Agarwal, in accordance with law.” 3. The interim order observed that the prima facie observations made therein were on the basis of the correspondences exchanged between SEBI and the Company alongwith the documents contained therein, complaint received by SEBI and the information/ documents obtained from the ‘MCA-21’ portal. The interim order was also treated as a show cause notice which advised the Company, its directors and the debenture trustee to file their replies within 21 days from the date of its receipt and also seek an opportunity of personal hearing.

4. The interim order was forwarded to the Company and its directors namely Mr. Kousik Patra, Mr. Suresh Reddy, Mr. Abhijit Chakraborty, Mr. Arup Kumar Roy and Mr. Aloke Singh and the debenture trustee namely Mr. Pawan Kumar Agarwal vide letters dated March 20, 2015. The Company vide its letter dated April 02, 2015, requested for extension of time for replying to the interim order on behalf of itself, its directors and debenture trustee. SEBI vide its letter dated April 17, 2015 extended the time for replying to the interim order till April 30, 2015. Vide another letter dated May 11, 2015, SEBI again extended the time for replying till May 15, 2015.

5. In the meantime, Mr. Pawan Kumar Agarwal vide his letter dated April 06, 2015, replied to the interim order and requested for an opportunity of personal hearing. The Company vide its letter dated April 28, 2015, filed certain documents and submitted the reply to the interim order. The Company vide this letter also requested for a time of 6-8 months for repaying the funds to the investors.

Mr. Arup Kumar Roy also vide his letter dated May 12, 2015, replied to the interim order and requested for an opportunity of personal hearing.

6. Thereafter, SEBI proceeded further and granted an opportunity of personal hearing to the Company and its directors on September 04, 2015. The scheduled date was communicated vide SEBI letter dated July 28, 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 the material available on record.

7. On the date fixed for personal hearing i.e. September 04, 2015, on Mr. Sandip Dey, Chartered Accountant appeared for the Company and requested liberty for filing written submissions, which was duly granted. The written submissions were filed by the Company on September 07, 2015, which were taken on record.

The directors of the Company and the debenture trustee remained absent. Considering the reasonable opportunities already afforded for making submissions in the matter, I am inclined to proceed further with the matter.

8. The submissions in brief are as under: a. The Company vide its letter dated April 28, 2015 and September 07, 2015, submitted as under: - It has stopped taking any money from the public by way of the issue of RPS and NCDs even before the issue of SEBI order.

- Infocare has taken full resort to refund the money raised by them from the public and the process of the same has already been initiated. - Many depositors have received the redemption of their RPSs and NCDs after March 31, 2014. - The operations of the Company have come to a halt and there is no operational or non-operational revenue in the books of Company. - The Company has taken full resort to protect the money raised from the RPS and NCD holders through generation of assets which can be liquidated in due course, if needed. A ‘debenture trustee’ is also entrusted to protect the pari passu interest of NCD holders through creation of charges of equitable amount. - The Company has not parted with any of the assets owned by it in discharge of its public liabilities. - The Company requested to grant time till December 31, 2015 for refunding the money raised from public through issue of RPS and NCD along with dividend/ interest accumulated thereon.

b. Mr. Arup Kumar Roy vide his letter dated May 12, 2015, submitted as under: - He is an engineering graduate from West Bengal University of Technology and was working as a freelancer for IT and Telecom related projects. - He was approached by Mr. Koushik Patra and Mr. Aloke Singh to become the director of the Company for undertaking projects of his expertise and development of modern infrastructure and related IT enable services. - He was allocated 300 shares of the Infocare and was inducted as non-executive director on January 18, 2011. - He was not regular in the Company and nobody had ever contacted him or took consent or opinion for the business of Infocare. - In all other sister companies of Infocare, he had minimum negligible shares and have resigned from those companies within a month or so of their formation. The activity of fund mobilization was without taking his consent. He had not attended any meetings of the Company.

- He had not received any notice for attending board meeting from Infocare and had no access to the bank accounts or any financial instrument of the Company. - He attended only one meeting of the Company i.e. regarding relieving on resignation which was accepted on February 11, 2012. No salary or any honorarium was paid to him during his tenure as director. - He is currently in technology services like software, telecom and IT. Vide this letter Mr. Arup Kumar Roy also submitted his asset details.

c. The submissions of Mr. Pawan Kumar Agarwal made vide his letter dated April 06, 2015, are as under: - He is a practicing Chartered Accountant having practice in Kolkata. He was approached by Mr. Aloke Singh, Director in October 2011 to act as debenture trustee for the private placement to the tune of 10 crore from known friends and relatives of directors of Infocare. - The Debenture Trust Deed and Agreement was signed on January 09, 2012. In terms of the same, he was appointed as ‘debenture trustee’. There is neither any bar on any person from becoming ‘debenture trustee’ for securing issue of debentures on private placement basis by a ‘private limited’ company nor are there any regulations which regulates or provides the manner in which such trustees are to be appointed. - The Debenture Trust Deed along with appropriate forms were filed with the Registrar of Companies, Kolkata on January 12, 2012 for registration of charge and on completion of all the formalities, the charge was created. The RoC did not object to any document or for the creation of charge. - Upon assuming the responsibility of Trustee, he had called for the information from the Company and wrote several letters to the Company. Despite several reminders, the Company did not provide any information or details about any issue of ‘debentures’. In view of the same, he had submitted his resignation to the Company on February 10, 2012. A copy of the same was also forwarded to the RoC on February 20, 2012.

- He was a ‘debenture trustee only for a brief period of one month. During such time, no debentures were issued nor any details or information were provided despite various reminders.

d. I have considered the interim order and the material available on record. The following are the observations from the interim order: “… i. IIL was incorporated on January 18, 2011, with the ROC, Kolkata with CIN No. as U45400WB2011PLC157549. Its Registered Office is at Kamdhenu Park, 75C Park Street, 11th Floor, Room No. 4, Kolkata – 700016, West Bengal, India. ii. The present Directors in IIL are Shri Kousik Patra, Shri Suresh Reddy and Shri Abhijit Chakraborty. iii. Shri Arup Kumar Roy and Shri Aloke Singh, who were earlier Directors of IIL, have since resigned. iv. Form 2 (Form for Return of Allotment – filed by IIL with the ROC in accordance with the provisions of the Companies Act, 1956) for the Financial Year 2011–12, reveals that IIL issued "Redeemable Preference Shares" ("Offer of Redeemable Preference Shares") to investors, details of which are provided below – Type of Security Year Total Amount No. of persons to whom (₹ in Lakhs) preference shares were allotted Redeemable Preference 2011–12 9.41 95 Shares v. From the Annual Return (filed by IIL with the ROC in accordance with the provisions of the Companies Act, 1956) for the Financial Year 2011–12 (covering the period till May 22, 2012), it is observed that IIL also issued Non – Convertible Debentures ("Offer of NCDs"), details of which are provided below – Year Type of Security Amount Raised Number of Allottees (₹ in Lakhs) 2011 – 12 Non – Convertible 55.36 Financial Year–wise 2012 – 13 Debentures 42.99 details not available TOTAL 98.35 90 …” 12. 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.

13. In order to ascertain whether an issue of securities is a ‘public issue’ or done on ‘private placement’, 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).” 14. In terms of 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.

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 conclude whether an issue of shares are for public or on a private placement basis. 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.

15. I now place my reliance on the order of 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. …” 16. In the present case, I note that the Company had offered and allotted RPSs to 95 persons on June 11, 2011 and had raised ₹9.41 lakh.

From the interim order, it is also noted that the Company had issued NCDs during the financial year 2011-12 and 2012-13 and had raised ₹98.35 lakh from 90 investors. The Company along with its reply dated April 28, 2015, has submitted a copy of the application form for its issue of ‘Non-Convertible Redeemable Secured Debentures’

(‘NCD’). The same makes it clear that the Company had came out with an issue of NCDs. From the balance sheets as submitted by the Company along with its reply, it is noted that liability under the head ‘Other Long Term Liabilities’ (for 12.5% Debentures repayable in financial year 2016-17) has increased from ₹55,36,000 as on March 31, 2012 to ₹2,79,39,000 as on March 31, 2013. The balance sheet as on March 31, 2014, also shows the amount of ₹2,79,39,000 as ‘Other Long Term Liabilities’. From the same, it can be inferred that the amounts collected under the head NCDs has increased from the amount as mentioned in the interim order. I note that the Company has not submitted the details of the NCD holders with the Annual Returns filed for the financial years 2012-13 and 2013-14.

From the same, it can be said that the Company had clearly allotted RPSs and NCDs to more than 49 persons, thereby making a public issue of RPSs and NCDs (in terms of the first proviso to Section 67(3) of the Companies Act, 1956) during the period alleged in the interim order.

17. By making a public issue of RPSs and 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. …” 18. In view of the above observations, by virtue of Section 55A(a) and (b), SEBI has jurisdiction and would govern the issue of RPS and NCD as the same was clearly 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. 19. As alleged in the interim order, the Company was mandated to comply with the provisions of Sections 56, 60, 73, 117B and 117C of the Companies Act, 1956 and the provisions of the ILDS Regulations is required to be complied by the Company in respect of its offer and issue of RPSs and NCDs. 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’.

20. The interim order further alleged that the Company had failed to comply with Section 73 of the Companies Act, 1956, in respect of its issuance of RPSs and NCDs. By issuing RPSs and 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) of the Companies Act, 1956, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange. There is no material on record to say that the Company has filed an application with a recognised stock exchange to enable the RPSs and NCDs to be dealt with in such exchange. Therefore, the Company has failed to comply with this requirement.

21. 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 RPSs and 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 of the Company, who is an officer in default, is 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 the provisions of Section 73(3).

22. 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.

23. 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.

24. 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 RPSs and NCDs as discussed in this Order and is liable for suitable action under the Companies Act, 1956, the SEBI Act and the ILDS Regulations.

25. The interim order has noted that Infocare had created a charge of ₹10 Crores on December 19, 2011 and appointed Mr. Pawan Kumar Agarwal as Debenture Trustee for its offer of NCDs. I note that Mr. Pawan Kumar Agarwal had acted without registration from SEBI as required under Section 12(1) of the SEBI Act. In this regard, I note that the said trust is not registered with SEBI to perform the functions of a ‘debenture trustee’ in the capital market. Further, the following conditions under Regulation 7 of the DT Regulations are also not satisfied by the said trust: "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 Mr. Pawan Kumar Agarwal do not satisfy the eligibility conditions stipulated under Regulation 7 of the DT Regulations. The debenture trustee has not disputed the allegations. However, it has been said by him that upon assuming the responsibility of Trustee, he had called for the information from the Company and had wrote several letters to it.

Further, as the Company had failed to provide any information, he had submitted his resignation to the Company on February 10, 2012. I note that a person who accepts a position which carries certain responsibilities, compliances and eligibility criteria under law, then the same ought to have been satisfied under full compliance of applicable law. In the present case, Mr. Pawan Kumar Agarwal is not registered as ‘debenture trustees’ with SEBI as required under Section 12(1) of the SEBI Act. Further, he does not satisfy the conditions under Regulation 7 of the DT Regulations. This regulation prescribes that only a scheduled bank carrying on commercial activity or a public financial institution within the meaning of Section 4A of the Companies Act, 1956 or an insurance company or a body corporate should act as a debenture trustee. In view of the same, I find him guilty of violating the provisions of 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.

26. Liability of Directors: The interim order was issued against the directors of the Company namely Mr. Kousik Patra, Mr. Suresh Reddy, Mr. Abhijit Chakraborty, Mr. Arup Kumar Roy and Mr. Aloke Singh. a. The details of their appointment and resignations are as under: Name Date of Appointment Date of Cession Mr. Kousik Patra 18/01/2011 Continuing as director Mr. Suresh Reddy 01/02/2012 Continuing as director Mr. Abhijit Chakraborty 04/06/2013 Continuing as director Mr. Arup Kumar Roy 18/01/2011 11/02/2012 Mr. Aloke Singh 18/01/2011 10/06/2013 b. I note that the Company had offered and issued RPSs on June 11, 2011. Further, it had also offered and issued NCDs during the financial years 2011-12 and 2012-13. 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 RPS and NCD 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 a continuing liability, the persons who joined the Company’s Board pursuant to the offer and allotment of RPS and NCD shall also be liable if the Company and the concerned directors have failed to make refunds, as mandated under the discussed provisions of law.

c. From the table above, it is noted that Mr. Kousik Patra, Mr. Suresh Reddy, Mr. Arup Kumar Roy and Mr. Aloke Singh were the directors of the Company at the time of impugned issues and allotment of RPSs and NCDs and were responsible for the affairs of the Company at the relevant point of time. Mr. Kousik Patra and Mr. Suresh Reddy continue to be the directors of the Company. Mr. Arup Kumar Roy and Mr. Aloke Singh had resigned from the Company on February 11, 2012 and June 10, 2013 respectively.

Mr. Arup Kumar Roy vide his letter dated May 12, 2015, has submitted that he was allotted 300 shares of the Company and was inducted as non-executive director on January 18, 2011. It has also been submitted by him that he had neither received any notice for attending board meeting from the Company nor any salary/ honorarium during his tenure of directorship. He further submitted that presently he is working in technology services company at Hyderabad.

I note that the position of a ‘director’ in a public company/ listed company comes along with responsibilities and compliances under law associated with such position, which have to be fulfilled by such director or face the consequences for any violation or default thereof. 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 Mr. Kousik Patra, Mr. Suresh Reddy, Mr. Arup Kumar Roy and Mr. Aloke Singh are responsible for the violations committed by the Company and 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.

d. Mr. Abhijit Chakraborty was appointed as director of the Company on June 04, 2013 i.e. after the last date/ year of allotment of RPSs and NCDs. I note that Mr. Abhijit Chakraborty is also one of the present directors of the Company. It is observed that he has not exercised necessary diligence after becoming the director in the Company. The inaction by him against the management (for violating the public issue norms as stipulated under the Companies Act, 1956 while making the offer and issuing the RPSs and NCDs), leads one to conclude on a possible collusion with the Company and its management. Further, Mr. Abhijit Chakraborty Bose have also not taken any steps to remedy the violations committed. Accordingly, I hold Mr. Abhijit Chakraborty to be responsible for the same.

27. At this stage, I note from the audited financial statement for the financial year 2012- 13, the remark of the Independent Auditors report dated May 29, 2013, i.e. ‘the Company is not maintaining proper records showing full particulars including quantitative details and situations of fixed assets’. I also note that the Company and its directors namely Mr. Kousik Patra, Mr. Suresh Reddy, Mr. Abhijit Chakraborty, Mr. Arup Kumar Roy and Mr. Aloke Singh were required to provide full inventory of the assets and properties within 21 days from the date of receipt of the interim order. However, no such details have been filed till date except by Mr. Arup Kumar Roy.

28. 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.

29. Therefore, 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, Infocare Infra Limited [PAN: AACCI5072P], Mr. Kousik Patra [PAN: AGRPP5715A], Mr. Suresh Reddy [PAN: AKDPR6812L], Mr. Abhijit Chakraborty [PAN: AGCPC9762B], Mr. Arup Kumar Roy [PAN:

ANJPR9146G] and Mr. Aloke Singh [PAN: APYPS3977H] jointly and severally, shall forthwith refund the money collected by the Company through the issuance of Redeemable Preference Shares and Non-Convertible Debentures (which have been found to be issued in contravention of the public issue norms stipulated under the Companies Act, 1956 and ), to the investors including the money collected from investors, till date, pending allotment of RPS and 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 and/or its present management are permitted to sell the assets of the Company only for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalised Bank.

d. The Company and its present management shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily 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 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. Infocare Infra Limited, Mr. Kousik Patra, Mr. Suresh Reddy, Mr. Abhijit Chakraborty and Mr. Aloke Singh 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, Infocare Infra Limited, its directors including Mr. Kousik Patra, Mr. Suresh Reddy, Mr. Abhijit Chakraborty, Mr. Arup Kumar Roy and Mr. Aloke Singh in complying with the aforesaid directions, SEBI, on expiry of three months 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. The Company namely Infocare Infra 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.

i. The directors of the Company namely Mr. Kousik Patra, Mr. Suresh Reddy, Mr. Abhijit Chakraborty, Mr. Arup Kumar Roy and Mr. Aloke Singh 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. Mr. Pawan Kumar Agarwal 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.

30. 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.

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

32. 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 : March 01st, 2016 PRASHANT SARAN PLACE : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA