Order in the matter of M/s. Rahul Hi Rise Limited

WTM/MPB/EFD-1-DRA-IV/ 98 /2017 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: MADHABI PURI BUCH, WHOLE TIME MEMBER FINAL ORDER Under Sections 11, 11(4),11A and 11B of the Securities and Exchange Board of India Act, 1992 In the matter of Rahul Hi Rise Limited In respect of: 1. Rahul Hi Rise Limited (PAN: AAECA8578L) 2. Shri Abhijit Majumdar (PAN: AJCPM9999F; DIN: 03619374 ). 3. Shri Dipankar Gupta (DIN: 02408609 ). 4. Shri Mrinmoy Bose (PAN: AMOPB0512G; DIN: 03619376 ). 5. Debenture Trustees, viz. Shri Dinendra Nath Bandopadhyay (address- P-745, New Alipore, Block-P, P.S.Lake Thana, Kolkata – 700053) and Well Being Trust – address – P 745A, Kundan Lal Saigal Sarani, New Alipore, Kolkata – 700053 (Represented by its Trustees, viz. Shri Dinendra Nath Bandopadhyay - address- P- 745, New Alipore, Block-P, P.S.Lake Thana, Kolkata – 700053 and Shri Chapal Biswas – address – 111/3, Swamiji Sark, Kolkata - 70003) 1. Rahul Hi Rise Limited (hereinafter referred to as “RHRL”/ “the Company”) is a Public company incorporated on August 13, 2004 and registered with Registrar of Companies– Kolkata with CIN: U51909WB2004PLC099458. Its registered office is at 30H/1, B.B.Sengupta Sarani, Kolkata - 700034, West Bengal, India. 2. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) received reference against RHRL in respect of issue of Secured Redeemable Non-Convertible Debentures (hereinafter referred to as “NCDs”) and undertook an enquiry to ascertain whether RHRL had made any public issue of securities without complying with the provisions of the Companies Act, 1956; Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”) and the Rules and Regulations framed thereunder including the Securities and Exchange Board of India (Issue and Listing of Order in the matter of M/s Rahul Hi Rise Limited

Debt Securities), Regulations, 2008 (hereinafter referred to as “ILDS Regulations”). 3. On enquiry by SEBI, it was observed that RHRL had made an offer of NCDs in the financial years 2009-2010, and 2010-2011 (hereinafter referred to as “Offer of NCDs”) and raised at least an amount of Rs. 29.44 crores from at least 100 allottees. The number of allottees and funds mobilized has been collated from the documents submitted with the complaints received by SEBI and MCA records. Therefore, it was concluded that the actual number of allottees and amount mobilized could be more than the above indicated figures. It was also observed that RHRL created a charge for an amount of Rs. 15 crores on March 10, 2009 and appointed Shri Dinendra Nath Bandopadhyay as Debenture Trustee and created another charge for an amount of Rs. 15 crores on March 15, 2010 and appointed Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) as Debenture Trustee for the Offer of NCDs by that company. 4. As the above said Offer of NCDs was found prima facie in violation of respective provisions of the SEBI Act, 1992, the Companies Act, 1956, and the ILDS Regulations, SEBI passed an interim order dated October 01, 2015 (hereinafter referred to as “interim order”) and issued directions mentioned therein against RHRL and its Directors viz. Shri Abhijit Majumdar, Shri Dipankar Gupta, Shri Mrinmoy Bose and and its Debenture Trustees, Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) (hereinafter collectively referred to as “Noticees”). 5. Prima facie findings/allegations: In the said interim order, the following prima facie findings were recorded. RHRL had made an Offer of NCDs during the financial years 2009-2010 and 2010-2011 and raised at least an amount of Rs. 29.44 crores as shown below:

Order in the matter of M/s Rahul Hi Rise Limited

Amount raised (Rs.) Year of Issue Security Issued Number of allottees (in crores) 14.44 50 2009-2010 15.00 50 2010-2011 NCDs

Total 29.44^ 100* *^ No. of allottees and funds mobilized has been collated from the documents submitted with the complaints received by SEBI and MCA records. However, actual no. of allottees and amount mobilized could be more than the above indicated figures. 6. Further, RHRL created a charge for an amount of Rs. 15 crores on March 10, 2009 and appointed Shri Dinendra Nath Bandopadhyay as Debenture Trustee and created another charge for an amount of Rs. 15 crores on March 15, 2010 and appointed Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) as Debenture Trustee for the Offer of NCDs by that company.Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) were not registered as debenture trustee for the offer of NCDs by that company. 7. The above Offer of NCDs and pursuant allotment were deemed public issue of securities under the first proviso to section 67(3) of the Companies Act, 1956. Accordingly, the resultant requirement under section 60 read with section 2(36), section 56, sections 73(1), 73(2) and 73(3) and sections 117B and 117C of the Companies Act, 1956 read with section 27(2) of the SEBI Act and the relevant provisions of the ILDS Regulations were not complied with by RHRL in respect of the Offer of NCDs. Further, the Debenture Trustees viz. Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal

Order in the matter of M/s Rahul Hi Rise Limited

Biswas) have prima facie violated section 12(1) of the SEBI Act and regulation 7 of the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993 (hereinafter referred to as " Debenture Trustees Regulations "). 8. In view of the prima facie findings on the violations, the following directions were issued in the said interim order dated October 01, 2015 with immediate effect. i. “RHRL (PAN: AAECA8578L) shall forthwith cease to mobilize 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. RHRL and its Directors viz. Shri Abhijit Majumdar (PAN: AJCPM9999F; DIN: 03619374), Shri Dipankar Gupta (DIN: 02408609) and Shri Mrinmoy Bose (PAN: AMOPB0512G; DIN: 03619376), 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. RHRL 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. RHRL shall provide a full inventory of all its assets and properties;

v. RHRL's abovementioned Directors shall provide a full inventory of all their assets and properties;

vi. RHRL 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;

Order in the matter of M/s Rahul Hi Rise Limited vii. RHRL 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 RHRL;

viii. RHRL and its abovementioned Directors shall co-operate with SEBI and shall furnish all information/documents sought vide letters dated May 23, 2014, May 26, 2014 and June 4, 2014.

ix. The Debenture Trustees, viz. Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas), are prohibited from continuing with their assignment as debenture trustee in respect of the Offer of NCDs of RHRL 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 interim order also directed the RHRL and its Directors to show cause as to why suitable directions/prohibitions under sections 11(1), 11(4), 11A and 11B of the SEBI Act, and section 73(2) of the Companies Act, 1956 read with section 27(2) of the SEBI Act should not be passed against them: i. Directing them jointly and severally to refund money collected through the Offer of NCDs along with interest, if any, promised to investors therein; ii. Directing them not to issue prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly, for an appropriate period; iii. Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period.

Order in the matter of M/s Rahul Hi Rise Limited

10. Similarly, the Debenture Trustees, viz. Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas were advised to show cause as to why suitable directions/prohibitions under Sections 11(1), 11(4), 11A and 11B of the SEBI Act including restraining them from accessing the securities market and further restraining them from buying, selling or dealing in securities, in any manner whatsoever, for an appropriate period should not be issued. 11. Vide the said interim order, RHRL, its abovementioned Directors along with its Debenture Trustees were given the opportunity to file their replies, within 21 days from the date of receipt of the said interim order. The order further stated the concerned persons may also indicate whether they desired to avail themselves an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard. 12. Service of interim order: The copy of the said interim order was sent to the Noticees vide letter dated October 01, 2015. Subsequently, vide notification dated August 28, 2016 published in newspaper Times of India and notification dated August 28, 2016 published in newspaper Ananda Bazar Patrika, the Noticees were notified by SEBI, that interim order dated October 01, 2015 was issued against them and they were given the opportunity to submit their reply in the matter and an opportunity of hearing was also given to them on October 20, 2016. However, the hearing was adjourned subsequently. 13. Subsequently, vide notification dated October 15, 2017 published in newspaper Times of India and notification dated October 15, 2017 published in newspaper Ananda Bazar Patrika, the Noticees were notified by SEBI that they will be given the final opportunity of being heard on November 15, 2017 at the time and the venue mentioned therein. The Noticees were advised that in case they failed 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. 14. Hearing and submissions: Noticees did not avail the opportunity of hearing held on Order in the matter of M/s Rahul Hi Rise Limited

November 15, 2017. None of the Noticees have filed any replies subsequent to Interim Order as on date. 15. I have considered the allegations and materials available on record. On perusal of the same, the following issues arise for consideration. Each question is dealt with separately under different headings. (1) Whether the company came out with the Offer of NCDs as stated in the interim order. (2) If so, whether the said issues are in violation of Section 56, Section 60 read with section 2(36), Section 73 and section 117C of the Companies Act, 1956 read with the ILDS Regulations. (3) Whether appointment of Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) as the Debenture Trustees by RHRL is in violation of Section 117B of the Companies Act, 1956 and whether Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) violated Section 12(1) of SEBI Act and regulation 7 of the Debenture Trustees Regulations (4) If the findings on Issue No.2 and 3 are found in the affirmative, who are liable for the violation committed?

ISSUE No. 1- Whether the company came out with the Offer of NCDs as stated in the interim order. 16. I have perused the interim order dated October 01, 2015 for the allegation of Offer of NCDs. I note that neither the company nor the directors filed any reply disputing the same. 17. I have also perused the documents/ information obtained from the 'MCA 21 Portal' and other documents available on records. It is noted, from the investors' complaints received

Order in the matter of M/s Rahul Hi Rise Limited by SEBI in the matter and MCA records that RHRL has issued and allotted NCDs to at least 100 investors during the financial years 2009-2010 and 2010-2011 and raised at least an amount of Rs. 29.44 crores. I also note that complainants have forwarded copies of NCDs dated September 14, 2011 and December 20, 2011 showing the allotment of NCDs even after March 2011. I also note that the number of allottees and funds mobilized has been collated from the documents submitted with the complaints received by SEBI and MCA records. Therefore, it is possible that the actual number of allottees and amount mobilized could be more than 100 allottees and Rs. 29.44 crores respectively. 18. I therefore conclude that RHRL came out with an offer of NCDs as outlined above.

ISSUE No. 2- If so, whether the said issues are in violation of Section 56, Section 60 read with section 2(36), Section 73 and section 117C of the Companies Act, 1956 read with the ILDS Regulations. 19. The provisions alleged to have been violated and mentioned in Issue No. 2 are applicable to the Offer of NCDs made to the public. Therefore the primary question that arises for consideration is whether the issue of NCDs is ‘public issue’. At this juncture, reference may be made to sections 67(1) and 67(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) any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to Order in the matter of M/s Rahul Hi Rise Limited 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.

(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).” 20. The following observations of the Hon'ble Supreme Court of India in Sahara India Real Estate Corporation Limited & Ors. v. SEBI (Civil Appeal no. 9813 and 9833 of 2011) (hereinafter referred to as the “Sahara Case”), while examining the scope of Section 67 of the Companies Act, 1956, are worth consideration:- “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 Order in the matter of M/s Rahul Hi Rise Limited 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, after 13.12.2000, any offer of securities by a public company to fifty persons or more will be treated as a public issue under the Companies Act, even if it is of domestic concern or it is proved that the shares or debentures are not available for subscription or purchase by persons other than those receiving the offer or invitation.”

21. Section 67(3) of Companies Act, 1956 provides for situations when an offer is not considered as offer to public. As per the said sub section, if the offer is one which is not calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation, or, if the offer is the domestic concern of the persons making and receiving the offer, the same are not considered as public offer. Under such circumstances, they are considered as private placement of shares and debentures. It is noted that as per the first proviso to Order in the matter of M/s Rahul Hi Rise Limited

Section 67(3) Companies Act, 1956, the public offer and listing requirements contained in that Act would become automatically applicable to a company making the offer to fifty or more persons. However, the second proviso to Section 67(3) of Companies Act, 1956 exempts NBFCs and Public Financial Institutions from the applicability of the first proviso. 22. In the instant matter, I find that NCDs were issued by RHRL to at least 100 investors in the financial years 2009-2010 and 2010-2011. However, this number is not conclusive as it is based on the documents received by SEBI along with complaints and MCA records and the actual number of investors could be more than 100. I find that RHRL has mobilized at least an amount of Rs. 29.44 crores over the financial years 2009-2010 and 2010-2011 which is not a conclusive value as it is based on the complaints received by SEBI and MCA records. I also note that complainants have forwarded copies of NCDs dated September 14, 2011 and December 20, 2011 showing the allotment of NCDs even after March 2011 and at least till December 2011. Further, I find that RHRL has created a charge of Rs. 15 crores on March 10, 2009 and another charge of Rs. 15 crores on March 15, 2010. The above findings lead to a reasonable conclusion that the Offer of NCDs by RHRL was a “public issue” within the meaning of the first proviso to section 67(3) of the Companies Act, 1956. 23. RHRL vide replies dated February 6, 2012 and August 16, 2014 (prior to Interim Order)) has stated, inter-alia, that they have not issued any offer documents to the public for issue of NCDs and the said NCDs have been issued to their associates and members during 2009-2010 and 2010-2011 exclusively on private placement basis. Though RHRL claims to have made the offer of NCDs to their associates and members, RHRL has not brought out evidence to prove who these claimed associates were or what is the nature of its relationship with these members or claimed associates. I have also perused the list of allottees of NCDs submitted by RHRL with its reply dated February 6, 2012 and find that a lot of the allottees (during the year 2009-2010) share common addresses. However, it is noted that once the allotment has exceeded 49 persons, then the same

Order in the matter of M/s Rahul Hi Rise Limited comes under the first proviso of the section 67(3) of the Companies Act even if the offer were to be considered to the domestic concern. Therefore, in the instance case, in view of the allotment to more than 49 persons, it becomes the public issue. 24. Even in cases where the allotments are considered separately, reference may be made to Sahara Case, wherein it was held that under Section 67(3) of the Companies Act, 1956, the "Burden of proof is entirely on Saharas to show that the investors are/were their employees/workers or associated with them in any other capacity which they have not discharged." In respect of the issuances by RHRL, the directors have not placed any material that the allotment was in satisfaction of section 67(3)(a) or 67(3)(b) of Companies Act, 1956 i.e., it was made to the known associated persons or domestic concern even though the Company in its replies prior to Interim Order have claimed the issue to be done on private placement basis. Therefore, I find that the said issuance cannot be considered as private placement. Moreover, reference may be made to the order dated April 28, 2017 of Hon’ble Securities Appellate Tribunal in Neesa Technologies Limited vs. SEBI (Appeal No. 311 of 2016) which lays down that “In terms of Section 67(3) of the Companies Act any issue to ‘50 persons or more’ is a public issue and all public issues have to comply with the provisions of Section 56 of Companies Act and ILDS Regulations. Accordingly, in the instant matter the appellant have violated these provisions and their argument that they have issued the NCDs in multiple tranches and no tranche has exceeded 49 people has no meaning”. I note that RHRL had contended vide letters dated February 6, 2012 and August 16, 2014 (prior to Interim Order) that the NCDs had been issued on private placement basis. However, considering that RHRL has mobilized at least an amount of Rs. 29.44 crores over the financial years 2009-2010 and 2010-2011 from at least 100 investors and in view of my aforesaid findings, I do not find RHRL’s submissions tenable. 25. I find that RHRL has not claimed it to be a Non–banking financial company or public financial institution within the meaning of Section 4A of the Companies Act, 1956. In view of the aforesaid, I, therefore, find that there is no case that RHRL is covered under

Order in the matter of M/s Rahul Hi Rise Limited the second proviso to Section 67(3) of the Companies Act, 1956. 26. Therefore, in view of the material available on record, I find that the Offer of NCDs by RHRL falls within the first proviso of section 67(3) of Companies Act, 1956. Hence, the Offer of NCDs are deemed to be public issues and RHRL was mandated to comply with the 'public issue' norms as prescribed under the Companies Act, 1956. 27. Further, since the offer of NCDs is a public issue of securities, such securities shall also have to be listed on a recognized stock exchange, as mandated under section 73 of the Companies Act, 1956. As per section 73(1) and (2) of the Companies Act, 1956, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange and if permission has not been applied for or not granted, the company is required to forthwith repay with interest all moneys received from the applicants. 28. The allegations of non-compliance of the above provisions were not denied by RHRL or its directors.

I also find that no records have been submitted to indicate that it has made an application seeking listing permission from stock exchange or refunded the amounts on account of such failure. Therefore, I find that RHRL has contravened the said provisions. RHRL has not provided any records to show that the amount collected by it is kept in a separate bank account. Therefore, I find that RHRL has also not complied with the provisions of section 73(3) which mandates that the amounts received from investors shall be kept in a separate bank account. Therefore, I find, that section 73(2) of the Companies Act, 1956 has not been complied with. 29. Section 2(36) of the Companies Act read with section 60 thereof, mandates a company to register its 'prospectus' with the RoC, before making a public offer/ issuing the 'prospectus'. As per the aforesaid Section 2(36), “prospectus” means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate.

As the offer of NCDs was a deemed public issue of securities, RHRL was required to register a Order in the matter of M/s Rahul Hi Rise Limited prospectus with the RoC under Section 60 of the Companies Act, 1956. I find that RHRL has not submitted any record to indicate that it has registered a prospectus with the RoC, in respect of the offer of NCDs. I, therefore, find that RHRL has not complied with the provisions of section 60 of the Companies Act, 1956. 30. In terms of section 56(1) of the Companies Act, 1956, every prospectus issued by or on behalf of a company, shall state the matters specified in Part I and set out the reports specified in Part II of Schedule II of that Act. Further, as per section 56(3) of the Companies Act, 1956, no one shall issue any form of application for shares in a company, unless the form is accompanied by abridged prospectus, containing disclosures as specified. Neither RHRL nor its directors produced any record to show that it has issued Prospectus containing the disclosures mentioned in section 56(1) of the Companies Act, 1956, or issued application forms accompanying the abridged prospectus.

Therefore, I find that, RHRL has not complied with sections 56(1) and 56(3) of the Companies Act, 1956. 31. As regards the allegation of section 117C of the Companies Act, 1956, it may be seen that the said provision mandates the company to create a debenture redemption reserve for the redemption of such debentures, to which every year, adequate amounts should be credited out of its profits, until such debentures are redeemed. None of the Noticees denied this allegation. There is no material on record to show that such debenture reserve was created. Therefore, I hold that the company has violated section 117C of the Companies Act, 1956. 32. ILDS Regulations are applicable to the public issue and listing of debt securities. Regulation 2(e) of the ILDS Regulations defines debt securities to mean non-convertible debt securities which create or acknowledge indebtedness, and include debentures. In view of the finding that RHRL has made a public issue of debt securities, the ILDS Regulations is also applicable to the instant offer of NCDs. Therefore, I find that the Company has violated the following provisions of the aforesaid ILDS Regulations, which contain inter alia conditions for public issue and listing of debt securities, viz.

Order in the matter of M/s Rahul Hi Rise Limited 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 Trustees 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 17 – Creation of security xv. Regulation 19 – Mandatory Listing xvi. Regulation 26 – Obligations of the Issuer, etc. 33. Further, I note that the jurisdiction of SEBI over various provisions of the Companies Act, 1956 including the above mentioned, in the case of public companies, whether listed or unlisted, when they issue and transfer securities, flows from the provisions of Section 55A of the Companies Act, 1956. While examining the scope of Section 55A of the Companies Act, 1956, the Hon'ble Supreme Court of India in Sahara Case, had observed that:

"We, therefore, hold that, so far as the provisions enumerated in the opening portion of Section 55A of the Companies Act, so far as they relate to issue and transfer of securities and non-payment of dividend is concerned, SEBI has the power to administer in the case of listed public companies and in the case of those public companies which intend to get their securities listed on a recognized stock exchange in India."

Order in the matter of M/s Rahul Hi Rise Limited "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" 34. In this regard, it is pertinent to note that by virtue of Section 55A of the Companies Act, 1956, SEBI has to administer Section 67 of that Act, so far as it relates to issue and transfer of securities, in the case of companies who intend to get their securities listed. While interpreting the phrase “intend to get listed” in the context of deemed public issue the Hon’ble Supreme Court in Sahara Case observed- “…But then, there is also one simple fundamental of law, i.e. that no-one can be presumed or deemed to be intending something, which is contrary to law. Obviously therefore, “intent” has its limitations also, confining it within the confines of lawfulness…” “…Listing of securities depends not upon one’s volition, but on statutory mandate…” “…The appellant-companies must be deemed to have “intended” to get their securities listed on a recognized stock exchange, because they could only then be considered to have proceeded legally. That being the mandate of law, it cannot be presumed that the appellant companies could have “intended”, what was contrary to the mandatory requirement of law…” 35. In view of the above findings, I am of the view that RHRL was engaged in fund mobilizing activity from the public, through the offer of NCDs and has contravened the provisions of section 56(1), 56(3), 2(36) read with 60, 73(1), 73(2), 73(3), and 117C of the Companies Act, 1956, and above mentioned provisions pertaining to the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008.

ISSUE No. 3-Whether appointment of Shri Dinendra Nath Bandopadhyay and Well

Order in the matter of M/s Rahul Hi Rise Limited

Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas), as the Debenture Trustees by RHRL is in violation of Section 117B of the Companies Act, 1956 and whether Shri Dinendra Nath Bandopadhyay and Well Being Trustand Shri (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) have violated Section 12(1) of SEBI Act and regulation 7 of the Debenture Trustees Regulations? 36. I find that RHRL had created a charge for an amount of Rs. 15 crores on March 10, 2009 and appointed Shri Dinendra Nath Bandopadhyay as Debenture Trustee and created another charge for an amount of Rs. 15 crores on March 15, 2010 and appointed Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) as Debenture Trustee for the Offer of NCDs by that company.Section 12(1) of the SEBI Act states that: "No… trustee of trust deed … shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act". Regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993, states 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 alone are eligible to get a certificate of registration as Debenture Trustee. 37. Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) are not eligible to obtain a certificate of registration since it does not satisfy the eligibility criteria mentioned in Regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993. None of the Noticees claimed that Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) had received certificate of registration as per section 12(1) of the SEBI Act. In view of the above, I find that Shri Dinendra Nath Bandopadhyay and Well Being Trust

Order in the matter of M/s Rahul Hi Rise Limited and Shri Chapal Biswas have dealt in the impugned Offer of NCDs as debenture trustees, without having a certificate of registration as Debenture Trustee in violation of Section 12(1) of the SEBI Act, 1992. 38. Under section 117B of the Companies Act, 1956 no company shall issue a prospectus or a letter of offer to the public for subscription of its debentures, unless the company 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. I find that RHRL has appointed Shri Dinendra Nath Bandopadhyay and Well Being Trust (represented by its trustees, viz. Shri Dinendra Nath Bandopadhyay and Shri Chapal Biswas) who do not have a certificate of registration. Therefore, the appointment of the same is in violation of section 117B of the Companies Act, 1956. Further, since RHRL has not issued a prospectus with the relevant information and therefore, the requirement of stating the consent of the debenture trustee to be so appointed on the face of the prospectus has not been complied with.

ISSUE No. 4- If the findings on Issue No.2 and 3 are found in the affirmative, who are liable for the violation committed? 39. From the documents available on record, I find that the present Directors in RHRL are Shri Abhijit Majumdar, Shri Dipankar Gupta and Shri Mrinmoy Bose. The details of the appointment and resignation of the directors are as following: Name of the Date of directors appointment Date of cessation Shri Abhijit Majumdar August 20, 2011 Continuing Shri Dipankar Gupta February 14, 2009 Continuing Shri Mrinmoy Bose August 20, 2011 Continuing

Order in the matter of M/s Rahul Hi Rise Limited

40. Section 56(1) and 56(3) read with section 56(4) of the Companies Act, 1956 imposes the liability on the company, every director, and other persons responsible for the prospectus for the compliance of the said provisions. The liability for non-compliance of Section 60 of the Companies Act, 1956 is on the company, and every person who is a party to the non-compliance of issuing the prospectus as per the said provision. Therefore, RHRL and its directors are held liable for the violation of sections 56(1), 56(3) and 60 of the Companies Act, 1956. 41. As far as the liability for non-compliance of section 73 of Companies Act, 1956 is concerned, as stipulated in section 73(2) of the said Act, the company and every director of the company who is an officer in default shall, from the eighth day when the company becomes liable to repay, 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 if the money is not repaid forthwith.With regard to liability to pay interest, I note that as per section 73 (2) of the Companies Act, 1956, the company and every director of the company who is an officer in default is jointly and severally liable, to repay all the money with interest at prescribed rate. In this regard, I note that in terms of rule 4D of the Companies (Central Governments) General Rules and Forms, 1956, the rate of interest prescribed in this regard is 15%. 42. I find that NCDs were issued by RHRL to at least 100 investors in the financial years 2009-2010 and 2010-2011. However, this number is not conclusive as it is based on the documents received by SEBI along with complaints and MCA records and the actual number of investors could be more than 100. I also note that complainants have forwarded copies of NCDs dated September 14, 2011 and December 20, 2011 showing the allotment of NCDs even after March 2011 and at least till December 2011. 43. From the material available on record and the details of the appointment and resignation of the directors of RHRL as reproduced in paragraph 39 of this Order, it is noted that Shri Abhijit Majumdar, Shri Dipankar Gupta and Shri Mrinmoy Bose were the directors at the time of the issuance of NCDs. Since they was acting as directors during

Order in the matter of M/s Rahul Hi Rise Limited the period of issuance of NCDs, he is officer in default as per Section 5(g) of Companies Act, 1956. Further, in the present case, no material is brought on record to show that any of the officers set out in clauses (a) to (c) of Section 5 of Companies Act, 1956 or any specified director of RHRL was entrusted to discharge the obligation contained in Section 73 of the Companies Act, 1956. Therefore, as per Section 5(g) of the Companies Act, 1956 all the past and present directors of RHRL, as officers in default, are liable to make refund, jointly and severally, along with interest at the rate of 15 % per annum, under section 73(2) of the Companies Act, 1956 for the non-compliance of the above mentioned provisions. The Noticees have not disputed this legal liability by way of any written or oral submissions. Since, the liability of the company to repay under section 73(2) is continuing and such liability continues till all the repayments are made, the above said director is co-extensively responsible along with the Company for making refunds along with interest under section 73(2) of the Companies Act, 1956 read with rule 4D of the Companies (Central Government's) General Rules and Forms, 1956, and section 27(2) of the SEBI Act.

Therefore, I find that RHRL and its Directors, viz. Shri Abhijit Majumdar, Shri Dipankar Gupta and Shri Mrinmoy Bose are jointly and severally liable to refund the amounts collected from the investors with interest at the rate of 15 % per annum, for the non-compliance of the above mentioned provisions. 44. I note that during the financial years 2009-2010 and 2010-2011, RHRL through Offer of NCDs, had collected at least an amount of Rs. 29.44 crores from various allottees. I also note that complainants have forwarded copies of NCDs dated September 14, 2011 and December 20, 2011 showing the allotment of NCDs even after March 2011 and at least till December 2011. I note that Shri Dipankar Gupta has been director of RHRL since financial year 2009-2010, 2010-2011 till present date. I note that both Shri Abhijit Majumdar and Shri Mrinmoy Bose has been directors of RHRL from August 20, 2011 till present date. Therefore, in view of Hon’ble Securities Appellate Tribunal (SAT) Order dated July 14, 2017 in the matter of Manoj Agarwal vs. SEBI, I am of the view that the obligation of the director to refund the amount with interest jointly and severally

Order in the matter of M/s Rahul Hi Rise Limited with RHRL and other directors are limited to the extent of amount collected during his/her tenure as director of RHRL. 45. As far as the liability under sections 117B and 117C of the Companies Act, 1956, is concerned, the liability is on the company to comply with the said provisions. Therefore, RHRL is liable for the violation of sections 117B and 117C of the SEBI Act. In respect of the liability under section 12(1) of the SEBI Act, the liability is on the Trustee who act as the debenture trustee without the Certificate of Registration from SEBI as debenture trustee. In view of the above, I find that Shri Dinendra Nath Bandopadhyay and Well Being Trust and Shri Chapal Biswas are liable for the violation of section 12(1) of the SEBI Act read with regulation 7 of the Debenture Trustee Regulations. 46. With respect to the provisions of the respective regulations of the ILDS Regulations enumerated on paragraph 32 of this order, the liability is on the Company to comply with the requirements therein. 47. In view of the foregoing, the natural consequence of not adhering to the norms governing the issue of securities to the public and making repayments as directed under section 73(2) of the Companies Act, 1956, is to direct RHRL and its Directors, viz., Shri Abhijit Majumdar, Shri Dipankar Gupta and Shri Mrinmoy Bose to refund the monies collected, with interest to such investors.

Further, in view of the violations committed by the Company and its Directors to safeguard the interest of the investors who had subscribed to such NCDs issued by the Company, to safeguard their investments, and to further ensure orderly development of securities market, it also becomes necessary for SEBI to issue appropriate directions against the Company and the other Noticees. 48. I also note that, vide the interim order dated October 01, 2015, RHRL was directed to provide a full inventory of all the assets and properties belonging to the Company. Similarly, the Directors of RHRL were also directed to provide an inventory of assets and properties belonging to them. The above inventories were required to be filed within 21 days of the receipt of the order. However, I find that no such inventory has been Order in the matter of M/s Rahul Hi Rise Limited provided either by RHRL or the other Noticees despite the notifications of issuance of the interim order through newspaper publications as stated in paragraph 12 of this Order. 49. In view of the discussion above, appropriate action in accordance with law needs to be initiated against RHRL and its Directors and debenture trustees, viz. Shri Abhijit Majumdar, Shri Dipankar Gupta, Shri Mrinmoy Bose, Shri Dinendra Nath Bandopadhyay, Well Being Trust and Shri Chapal Biswas.

50. In view of the aforesaid observations and findings, I, in exercise of the powers conferred under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(4), 11A and 11B of the SEBI Act, hereby issue the following directions: (a) RHRL, Shri Abhijit Majumdar, Shri Dipankar Gupta and Shri Mrinmoy Bose shall forthwith refund the money collected by the Company, during their respective period of directorship through the issuance of NCDs including the application money collected from investors during their respective period of directorship, till date, pending allotment of securities, if any, with an interest of 15% per annum, from the eighth day of collection of funds, to the investors till the date of actual payment. (b) The repayments and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order both of which should be crossed as “Non- Transferable”. (c) RHRL, Shri Abhijit Majumdar, Shri Dipankar Gupta and Shri Mrinmoy Bose are directed to provide a full inventory of all the assets and properties and details of all the bank accounts and holdings of mutual funds/shares/securities, if held in physical form and demat form, of the company and their own.

(d) RHRL, Shri Abhijit Majumdar, Shri Mrinmoy Bose and Shri Dipankar Gupta are permitted to sell the assets of the Company for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalized Bank. Such proceeds shall be utilized for the sole purpose of making refund/repayment to the investors till the full refund/repayment as directed above is Order in the matter of M/s Rahul Hi Rise Limited made. (e) Shri Abhijit Majumdar, Shri Mrinmoy Bose and Shri Dipankar Gupta are prevented from selling their assets, properties and holding of mutual funds/shares/securities held by them in demat and physical form except for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalized Bank. Such proceeds shall be utilized for the sole purpose of making refund/repayment to the investors till the full refund/repayment as directed above is made. (f) RHRL and, Shri Abhijit Majumdar, Shri Mrinmoy Bose, Shri Dipankar Gupta in their personal capacity to make refund, 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 the details of contact persons such as names, addresses and contact details, within 15 days of this Order coming into effect.

(g) After completing the aforesaid repayments, RHRL, and Shri Abhijit Majumdar and Shri Mrinmoy Bose and Shri Dipankar Gupta in their personal capacity shall file a report of such completion 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") (h) In case of failure of RHRL, Shri Abhijit Majumdar, Shri Mrinmoy Bose and Shri Dipankar Gupta to comply with the aforesaid applicable directions, SEBI, on the expiry of three months period from the date of this Order, may recover such amounts, from the company and the directors liable to refund as specified in paragraph 50(a) of this Order, in accordance with section 28A of the SEBI Act including such other

Order in the matter of M/s Rahul Hi Rise Limited provisions contained in securities laws. (i) RHRL, Shri Abhijit Majumdar, Shri Mrinmoy Bose and Shri Dipankar Gupta are directed not to, directly or indirectly, access the securities 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 (four) years from the date of completion of refunds to investors as directed above. The above said directors are also restrained from 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 from the date of this Order till the expiry of 4 (four) years from the date of completion of refunds to investors. (j) Shri Dinendra Nath Bandopadhyay and Well Being Trust and Shri Chapal Biswas 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 4 (four) years from the date of this order. (k) The above directions shall come into force with immediate effect.

51. Hon’ble Calcutta High Court has passed an order dated August 12, 2016 in WP No. 17904 (W) of 2015 - Depositors and Agent Welfare Association of Rahul Group & Ors v. Union of India & Ors. in respect of Rahul group of Companies. Therefore, the effect and implementation of the aforesaid directions stated in paragraph 50 shall be subject to the directions passed by the Hon’ble High Court in its Order dated August 12, 2016.

52. Copy of this Order shall be forwarded to the recognised stock exchanges and depositories and registrar and transfer agents for information and necessary action.

Order in the matter of M/s Rahul Hi Rise Limited

53. 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.

54. A copy of this Order shall also be forwarded to the Local Police/State Government for information. -Sd-

DATE: November 27, 2017 MADHABI PURI BUCH PLACE: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in the matter of M/s Rahul Hi Rise Limited