Order in the matter of MBK Business Development (India) Limited[SAT Appeal No.145 /2017,461 /2016]

WTM/PS/149/ERO/FEB/2016 BEFORE THE SCURITIES 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 MBK Business Development (India) Limited In respect of: 1. MBK Business Development (India) Limited 2. Shri Prafulla Kumar Kundu [PAN: ASRPK2076K], 3. Shri Saikat Roy [PAN: ASOPR6898P] and 4. Shri Anshuman Ghosh [PAN: AMMPG9367Q]; 5. Trustees of Secured Debentures Trust of MBK Business Development India Limited (through its Trustees, viz. Shri Ram Sundar Bhattacharya and Smt. Pratima Roy). Date of hearing: August 12, 2015 For Noticees: Shri Triptimoy Talukder, Advocate For SEBI: Dr. Anitha Anoop, Deputy General Manager Shri N. Murugan, Assistant General Manager Shri Laltu Pore, Assistant General Manager 1.1 MBK Business Development (India) Limited (hereinafter referred to as MBK or Company) having its Office at C – 3, Pritilata Waddedar Bithi, City Centre, Durgapur, West Bengal – 713216, India was incorporated on September 1, 2009, with the Registrar of Companies (ROC), Kolkata, with CIN No. as U52390WB2009PLC138103. 1.2 On receipt of information about collection of money by MBK and subsequent enquiry by SEBI, it was observed that MBK had issued Secured Redeemable Debentures (SRDs) during 2010-11, 2011-12 and 2012-13 to 386, 1772 and 2360 persons respectively (hereafter referred to as offer of ‘MBK’) and as admitted by the company to more than 49 persons between the period June 2010 to September 2012 with the total amount collected to the tune of Rs. 9,06,82,615. 2.1 As the above offer of MBK were found prima facie in violation of respective provisions of the SEBI Act, 1992 (‘SEBI Act’), the Companies Act, 1956, SEBI (Issue and Listing of Debt Securities), Regulations, 2008 (‘Debt Securities

Regulations’), SEBI passed an interim order dated August 7, 2014 and issued directions mentioned therein against MBK and its Promoter/ Directors, viz. Shri Prafulla Kumar Kundu, Shri Saikat Roy and Shri Anshuman Ghosh, its Debenture Trustee, Secured Debentures Trust of MBK Business Development India Limited (through its Trustees, viz. Shri Ram Sundar Bhattacharya and Smt. Pratima Roy). 2.2 Prima facie findings/allegations: In the said interim order, the following prima facie findings/ allegation were recorded. MBK has made an offer and allotment of SRDs in the respective years to various persons as shown in the following Table:- Table A No. of investors to whom Offer of SRDs was made by MBK Year Number of Investors 2010 386 2011 1,772 2012 2,360 Total 4,518 2.3 The said offer and issuance of SRDs were made in respect of the different maturity periods as shown in the following table. Table B Plan–wise No. of investors to whom Offer of SRDs was made by MBK Year of Application Plan 2010 2011 2012 3 Year 34 150 131 5 Year 105 226 162 7 Year 235 1031 1373 10 Year 12 365 694 Total 386 1772 2360

2.4 MBK admittedly issued SRDs to more than 49 persons between the period June 2010 to September 2012 and collected money to the tune of Rs. 9,06,82,615. 2.5 MBK created Charge for an amount of Rs. 15.09 Crores on March 26, 2010, in respect of the Offer of SRDs. MBK appointed Trustees of Secured Debentures Trust of MBK Business Development India Limited (represented by its Trustees, viz. Shri Ram Sundar Bhattacharya and Smt. Pratima Roy) as Debenture Trustee for the Offer of SRDs. 2.6 The above offer of SRDs of MBK and pursuant allotment were deemed public issues of securities under the first proviso to Section 67(3) of the Companies Act, 1956. Accordingly, the resultant requirement under Section 60, Section 56(1) and 56(3), Sections 73(1), (2) and (3) of the Companies Act were not complied with by MBK in respect of allotment of SRDs. MBK also failed to comply with Section 117B, 117C of the Companies Act, 1956 and relevant provisions of Debt Securities Regulations mentioned in the interim order. Shri Ram Sundar Bhattacharya and Smt. Pratima Roy having acted as Debenture Trustee without registration have violated Section 12(1) of SEBI Act.

2.7 In view of the prima facie findings on the violations, the following directions were issued in the said interim order dated August 7, 2014 with immediate effect. i. MBK shall not mobilize funds from investors through the Offer of SRDs 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. MBK and its Directors, viz. Shri Prafulla Kumar Kundu, Shri Saikat Roy and Shri Anshuman Ghosh, 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. MBK 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. MBK shall provide a full inventory of all its assets and properties; v. MBK's abovementioned Directors shall provide a full inventory of all their assets and properties; vi.

MBK 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 SRDs, without prior permission from SEBI; vii. MBK and its abovementioned Directors shall not divert any funds raised from public at large through the Offer of SRDs, which are kept in bank account(s) and/or in the custody of MBK; viii. MBK shall furnish complete and relevant information (as sought by SEBI during the examination of books of accounts, etc. made by it on March 28, 2014), within 21 days from the date of receipt of this Order. ix. Trustees of Secured Debentures Trust of MBK Business Development India Limited (represented by its Trustees, viz. Shri Ram Sundar Bhattacharya and Smt. Pratima Roy)

is prohibited from continuing with its present assignment as a debenture trustee in respect of the Offer of SRDs of MBK 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. 2.8 Vide the said interim order MBK and its abovementioned promoter/Directors and the person acting as Debenture trustees, were given the opportunity to file their reply, within 21 days from the date of receipt of the said interim Order. The order further stated that the concerned persons may also indicate whether they desired to avail an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard.

3.1 Service of interim order: The copy of the said interim order was sent to the above mentioned entities by SEBI’s letter dated August 8, 2014. These were delivered to the Company and its directors. However, the interim orders sent to the debenture trustees viz. Shri Ram Sundar Bhattacharya and Smt. Pratima Roy had returned undelivered. Thereafter, the interim order was served to Shri Ram Sundar Bhattacharya by hand delivery. The interim order could not be delivered to Smt. Pratima Roy. Hence, an e-mail dated October 31 2014 was sent to the Company advising it to serve the interim order upon her. 4.1 Opportunity of Hearing and submissions: SEBI vide letters dated July 24, 2015, intimated all the noticees would be given an opportunity of being heard on August 12, 2015 at the time and the venue mentioned therein. The hearing notices sent to the Company, its director viz. Shri Anshuman Ghosh, the debenture trust and to the two debenture trustees had returned undelivered. 4.2 Since the notices of hearing to some of the entities were not delivered, SEBI vide notification dated July 24, 2015, published in the newspaper Ananda Bazar Patrika on August 05, 2015 and notification dated July 24, 2015 published in the newspaper The Times of India on August 05, 2015, whereby the Company, its directors and debenture trustee, were notified that the noticees would be given the final opportunity of being heard on August 12, 2015. 4.3 Shri Triptimoy Talukder, Advocate appeared on behalf of MBK.

He orally submitted that SEBI can sell the property of the company and repay the investors. He sought a week’s time for filing written submissions and the same was granted. Subsequently vide letter dated August 25, 2015, Shri Triptimoy Talukder stated that the company had filed an application before the Hon’ble High Court of Calcutta which was disposed off on the ground that SEBI has extended an opportunity of hearing. 4.4 Vide the said letter, it was stated that the details of the property which is lying with the Company had been incorporated in the Writ Petition [W.P. No. 17073/2015] filed before the Hon’ble Calcutta High Court. 5.1 MBK vide letter dated August 30, 2014 stated that either the company or its directors do not have any intention to defraud its investors. In case any law was violated, the same inadvertent mistake was primarily due to the lack of collective knowledge on the part of the directors on the company and there was no intention to cause any financial loss to any retail investor 5.2 I have considered the allegations and the material available on record, documents perusal of the same, the following questions arise for consideration.

Each question is dealt with separately under a suitable heading. 1. Whether the Company came out with the offer of SRDs? 2. If so, whether the said issue of SRDs by MBK are in violation of Section 60, Section 56(1) and 56(3), Sections 73(1) (2) (3) of the Companies Act, 1956 and whether the Offer of MBK is in violation of Section 117C of Companies Act and relevant provisions of the Debt Securities Regulations mentioned in the interim order? 3. Whether MBK has appointed Shri Ram Sundar Bhattacharya and Smt. Pratima Roy who are not registered entities to act as Debenture Trustee for the offer of MBK, in violation of Section 117B of the Companies Act, 1956 and whether Shri Ram Sundar Bhattacharya and Smt. Pratima Roy have violated Section 12(1) of SEBI Act? 4. If the findings on question no. 2 and 3 are found in the affirmative, who are liable for the violations committed? 6.1 Whether the Company came out with the Offer of SRDs?: On perusal of the undated letter of MBK received by SEBI on March 4, 2014, I find that MBK had admittedly issued SRDs to more than 49 persons between the period June 2010 to September 2012 with the total amount of such debentures issued was to the tune of Rs.9,06,82,615.

6.2 I have perused the interim order dated August 7, 2014 for the allegation of offer of SRDs by MBK and other material on record. The Company vide its letter dated October 09, 2014 (i.e. after passing of the interim order) had submitted the list of debenture holders. A perusal of the same revealed that the number of SRD applicants for the financial year 2010-2011 and 2011-2012 were 2,663 and 5,853 respectively. In view of the same, it is an admitted position that the Company had offered and allotted SRDs to 8,516 persons. 7.1 If so, whether the said issue of SRDs by MBK are in violation of Section 60, Section 56(1) and 56(3), Sections 73(1) (2) (3) of the Companies Act, 1956 and whether the Offer of MBK is in violation of Section 117C of Companies Act and relevant provisions of the Debt Securities Regulations mentioned in the interim order? 7.2 The provisions alleged to have been violated and mentioned in this issue for consideration, are applicable to the offer made to the public. Therefore, the primary question that arises for consideration is whether the issuance of SRDs by MBK covered in Issue No 1 are public issues.

At this juncture, reference may be made to section 67(1) & (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 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).” 7.3 The following observations of the Hon'ble Supreme Court of India in Sahara India Real Estate Corporation Limited & Ors.Vs.

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:- "84. 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. 85. 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…..” 7.4 Section 67(3) 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 {(section 67(3)(a)}, or, if the offer is the domestic concern of the persons making and receiving the offer {(section 67(3)(b)}, 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 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. 7.5 In the instant case, as found in Issue No.1, the redeemable preference shares were issued to fifty or more persons admittedly, the same is considered as deemed public issue. 7.6 In view of the above, I hold that the impugned issues are deemed to be public issues and therefore, such issues are mandated to comply with the 'public issue' norms as prescribed under the Companies Act, 1956. 7.7 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.

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. 7.8 Neither the Company nor the directors produced any record to show that MBK had issued Prospectus containing the disclosures mentioned in section 56(1) of the Companies Act, 1956, or filed a Prospectus with ROC or issued application forms accompanying the abridged prospectus. Therefore, I find that, MBK and the persons responsible for the failure to issue prospectus, has not complied with Section 56(1), 56(3) and 60 of the Companies Act, 1956. 7.9 Further, by issuing SRDs to more than forty nine persons, as stated above, MBK had to compulsorily list such securities in compliance with section 73 of the Companies Act, 1956. As per section 73(1) and (2) of the Companies Act, 1956, every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus, is required to make an application, before such offer, 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.

7.10 The allegation of non-compliance of the above provisions were not denied by the company or directors. I find that no records have been submitted to indicate that it has made an application seeking listing permission from stock exchange nor refunded the amounts on account of such failure. Thus, MBK has contravened the said provisions. MBK or the directors have not provided any records to show that the amount collected by MBK are kept in a separate bank account. Therefore, I find that MBK has also not complied with the provisions of section 73(3) as it has not kept the amounts received from investors in a separate bank account and failed to repay the same in accordance with section 73(2) as observed above. 7.11 Further as regards the violation of Debt Securities Regulations, it may be seen that the word, 'debt securities' has been defined as 'non-convertible debt securities which create or acknowledge indebtedness, and include debenture'. In view of the finding that MBK has made a public issue of debt securities, the Debt Securities Regulations is also applicable to the instant offer of MBK.

Therefore, I find that the Company has violated the following provisions of the aforesaid Regulations, which contain inter alia conditions for public issue and listing of debt securities, viz. i. Regulation 4(2)(a) – Application for listing of debt securities ii. Regulation 4(2)(b) – In-principle approval for listing of debt securities iii. Regulation 4(2)(c) – Credit rating has been obtained iv. Regulation 4(2)(d) – Dematerialization of debt securities v. Regulation 4(4) – Appointment of Debenture Trustee vi. Regulation 5(2)(b) – Disclosure requirements in the Offer Document vii. Regulation 6 – Filing of draft Offer Document viii. Regulation 7 – Mode of disclosure of Offer Document ix. Regulation 8 – Advertisements for Public Issues x. Regulation 9 – Abridged Prospectus and application forms xi. Regulation 12 – Minimum subscription xii. Regulation 14 – Prohibition of mis-statements in the Offer Document xiii. Regulation 15 – Trust Deed xiv. Regulation 16(1) – Debenture Redemption Reserve xv. Regulation 17 – Creation of Security xvi. Regulation 19 – Mandatory Listing xvii. Regulation 26 – Obligations of the Issuer, etc. 7.12 As regards the allegation of violation 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. 7.13 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." "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" 7.14 In this regard, it is pertinent to note that by virtue of Section 55A of the Companies Act, 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. 7.15 In view of the forgoing findings, I am of the view that MBK is engaged in fund mobilizing activity from the public, through the offer and issuance of SRDs and has contravened the provisions of sections 56, 60 and 73 and 117C of the Companies Act, 1956. 8.1 Whether MBK has appointed Shri Ram Sundar Bhattacharya and Smt. Pratima Roy who are not a registered entity to act as Debenture Trustee for the offer of SRDs, in violation of Section 117B, of the Companies Act, 1956 and whether Shri Ram Sundar Bhattacharya and Smt. Pratima Roy have violated Section 12(1) of SEBI Act?

8.2 On perusal of the extract of the minutes of the board meeting of the directors held on March 30, 2010, annexed and sent by the company vide letter received by SEBI on May 26, 2014, I note that the Board decided to appoint Shri Ram Sundar Bhattacharya and Smt. Pratima Roy as debenture trustees. The draft debenture trust deed to be signed by these debentures trustees were also approved in the said board meeting. The Board also authorized Shri Prafulla Kumar Kundu, one of the director of the company was authorized to take all necessary steps for the execution of the Debenture Trust deed and creation of the charge in favour of the Debenture Trustee 8.3 On examination of the Trust Deed dated March 26, 2010, given by the company as executed by MBK with its Debenture Trustees, I find that charge is shown to be created for an amount of Rs.15.10 Crores on March 26, 2010, in respect of the Offer of SRDs, on the 'Land at Plot No. 701, Mouza- Rasiknagarpur, LR. Kh. No. 135, C.S. Kh No. 47, P.S and Dist Bankura, West Bengal' (value of consideration Rs.11,40,075) and Current Assets including bank balance, cash balance and furniture and fixtures of that company.

On perusal of the said Trust Deed, I find that the names of Shri Ram Sundar Bhattacharya and Smt. Pratima Roy appear in the title portion of the Deed. On further perusal of the Trust Deed, I note that even though signatures of both these persons purportedly appointed as debenture trustees are not found on the Trust deed, the Company in its Extra Ordinary General Meeting dated March 30, 2010 had appointed Shri Ram Sundar Bhattacharya and Smt. Pratima Roy as debenture trustees for ‘issue of various series of Secured Debentures of the Company’. At this stage, I also note that Shri Ram Sundar Bhattacharya and Smt. Pratima Roy have not replied to the interim order inspite of a public notice. In absence of any reply available on record, I am not inclined to give any benefit of doubt to these persons. 8.4 It is further observed that from the Balance Sheet for the year ended March 31, 2010 (as submitted by MBK), the value of Current Assets i.e. cash and bank balances was Rs.16,685 and value of Furniture And Fixtures was Rs. 32,600 aggregating to Rs. 49,285 only. These indicate that even the purported creation of charge by MBK to secure the offer of SRDs, was not backed by sufficient assets.

8.5 It is not the case of the Company that trustees other than Shri Ram Sundar Bhattacharya and Smt. Pratima Roy as debenture trustees were appointed. 8.6 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 trustee for such debentures and the company has, on the face of the prospectus or the letter of offer, stated that the debenture trustees have given their consent to the company to be so appointed. Therefore, I find that MBK had appointed Shri Ram Sundar Bhattacharya and Smt. Pratima Roy for its issue of SRDs, in violation of Section 117B, of the Companies Act, 1956. 8.7 By virtue of Section 12(1) of the SEBI Act "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". By virtue of Regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993, 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.

8.8 In view of the above findings, Shri Ram Sundar Bhattacharya and Smt. Pratima Roy are found to have violated Section 12(1) of the SEBI Act and Regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993. 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. 9.1 If the findings on question No.2 and 3 are found in the affirmative, who are liable for the violations committed? 9.2 Section 56(1) and 56(3) read with section 56(4) imposes the liability for the compliance of the said provisions, on the company, every director, and other persons responsible for the issuance of the prospectus. The liability for non-compliance of Section 60 of the Companies Act, 1956 is on the company, and every person who is a party to the non-compliance of issuing the prospectus as per the said section. 9.3 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 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.

9.4 SEBI, as per section 27(2) of the SEBI Act, has the powers to proceed against directors of such companies. In cases of financial fraud, the role of directors in prevention of the same is of utmost importance. They are required to take diligent measures in preventing the same. They are also required not to be neglectful in the affairs of the company which results in the violation of various laws such as deemed public issue in violation of law. In deemed public issue in violation of law, money is collected from innocent, ill-informed and gullible public, without the Company giving the statutory protection available to those investors under the law such as, full and necessary disclosures about the company, an exit opportunity by way of listing of the shares. The purpose of refund in such cases as per law, is to protect the investors who have parted their money without having any opportunity of exit and without full disclosures about the Company which deprives their informed consent. 9.5 Reference may also be made to the ratio of the Hon’ble High court of Madras in Madhavan Nambiar Vs. Registrar Of Companies (2002 108 Comp Cas 1 Mad) which observed “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”. 9.6 SEBI also has powers under section 11 and 11B of the SEBI Act to pass direction of refund along with interest. The Hon’ble Bombay High court in B.P. Plc (Formerly B.P. Amoco Plc) Vs. SEBI, (2002 (4) Bom CR 79), held that that SEBI has powers to award interest in exercise its power under section 11 and 11B of SEBI Act, as stated below:- “Applying the principles regarding award of interest as has been held by the Apex Court in Secretary, Irrigation Department vs. G.C.Roy (supra) to the effect "a person deprived of the use of money to which he is legitimately entitled to has a right to be compensated for the deprivation, call it by any name. It may be called "interest, compensation or damages," the investors are entitled to be compensated by way of interest for delayed payment. Under these circumstances we find no substance that there is no power to award such an interest.” 9.7 On perusal of reply of MBK received at SEBI on March 4, 2014, vide which a copy of the Annual Report for Financial Year 2012–13 along-with the list of outstanding debentures as on September 30, 2013, were given by MBK, it had submitted that from the total amount of Rs. 9,06,82,615 raised through the issuance of SRDs, nearly 50% have already been repaid to the retail investors and the net outstanding as on September 30, 2013, was only to the tune of Rs.5,10,57,000.

9.8 SEBI had also sought information from the Registrar of Companies, Kolkata vide letters dated February 27, 2014 and May 14, 2014, in respect of repayment of SRDs issued by MBK. On perusal of the letter dated May 21, 2014 from ROC, I find ROC stated that according to the last filed Balance Sheet of MBK as at March 31, 2013, the amount of liability towards debentures issued by the company was 5,55,25,063 as on March 31, 2013. The Charge ID created in respect of the debentures issued also remains active as on date. 9.9 On perusal of the subsequent letter dated August 6, 2014, I find that the ROC informed SEBI that: "(it) had issued a letter dated 2.11.2012 to the company calling for information. On 23.11.2012, an order under Section 234(3A) of the Companies Act, 1956, was issued to the company for furnishing information not yet submitted by the company. The company replied by letter dated 29.11.2012, wherein it was stated that the Company collected debenture monies of Rs.9.07 Crore and Rs.1.42 Crore was paid back to the investors on request, leaving a balance of ₹ 7.65 Crore. No documentary evidence regarding such repayment of debentures was attached to the letter.

9.10 On perusal of letter received by SEBI on May 26, 2014 from MBK, I find that the company stated that the money raised from the customers were mostly by cash and in some cases cheque. The refund was also done in similar fashion. It only provided the sample copy of one refund note and one advance receipt note. On examination of the same, I find that even the said refund note does not refer to any debenture certificate numbers or the value of debenture or the number of debentures. Therefore, it would be difficult to infer the repayment to the debenture holder from these sample evidences. 9.11 As regards the direction in the interim order that MBK shall furnish complete and relevant information (as sought by SEBI during the examination of books of accounts, etc. made by it on March 28, 2014), within 21 days from the date of receipt of this Order, the Company vide its letter dated October 09, 2014 submitted the details. 9.12 In view of the provisions of law and facts, I find that MBK and its Directors, Shri Prafulla Kumar Kundu (DIN: 02725120), Shri Saikat Roy (DIN: 06591224) and Shri Anshuman Ghosh (DIN: 06591238) are responsible for the non-compliance of the provisions of Sections 56, 60, 67, 73, 117B of the Companies Act, 1956 and Debt Securities Regulations.

9.13 In the above context of law, I find from the available information as per extract of “Register of directors, managing directors, manager and secretary, etc.” the details of the appointment and resignation of all the directors as given in the Table below: Directors Date of appointment Date of cessation Prafulla Kumar Kundu September 01, 2009 - Saikat Roy May 02, 2013 - Anshuman Ghosh May 02, 2013 - Saikat Brahmachari* September 01, 2009 May 02, 2013 Tanmoy Kundu* September 01, 2009 May 02, 2013 Sadhan Chandra Brahmachari* September 01, 2009 April 10, 2013 * SEBI has issued an interim order dated November 20, 2015 in respect of these persons and the proceedings are in progress.

9.14 Shri Prafulla Kumar Kundu was serving as director while the impugned issues and allotments were made. Shri Saikat Roy and Shri Anshuman Ghosh, joined as the directors subsequent to the impugned allotments. In view of the non-availability of the status of resignation of Shri Prafulla Kumar Kundu and non-production of any information on his date of resignation, I am constrained to take adverse inference that he continues to be the director of the Company. 9.15 The liability of the Company to repay under section 73(2) of the Companies Act, 1956 is continuing and such liability continues till all the repayments are made. Therefore, the directors who join subsequent to the impugned public issuance are also liable to make refunds, if the Company does not repay the money collected, as mandated in Section 73(2) of the Companies Act, 1956. Therefore, even assuming that Shri Saikat Roy and Shri Anshuman Ghosh had joined the Company subsequent to the impugned issues, they have not exercised necessary diligence after joining as directors in the Company. Neither did they make any attempts to report the wrongdoings of the Company to appropriate authorities.

The very inaction by these directors against the previous management (for violating the public issue norms as stipulated under the Companies Act, 1956 while making the offer and issuing the preference shares), even after the receipt of the interim order, leads one to conclude on a possible collusion at their end with the Company and its previous management. Further, Shri Saikat Roy and Shri Anshuman Ghosh have also not taken any steps to remedy the violations committed. 9.16 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 the MBK and its Directors, Shri Prafulla Kumar Kundu, Shri Saikat Roy, Shri Anshuman Ghosh to refund the monies collected through issuance of SRD with interest to such investors. In view of the violations committed by the Company, its directors, to safeguard the interest of the investors who had subscribed to such SRDs issued by the Company 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.

10.1 In view of the foregoing 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(1), 11(4), 11A and 11B thereof, hereby issue the following directions: a) The Company, namely, MBK Business Development (India) Limited and its promoter/ directors, Shri Prafulla Kumar Kundu, Shri Saikat Roy, Shri Anshuman Ghosh, shall forthwith refund the money collected by the Company through the issuance of SRD and MBK, including the money collected from investors, till date, pending allotment of securities, if any, with an interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became due to the investors till the date of actual payment. b) If the Company, MBK Business Development (India) Limited had repaid/ redeemed the debentures as stated in its replies to its investors as per section 73(2) of the Companies Act, along with promised returns, the above directions and the below mentioned consequential directions from 10.1 (c) to (f), shall be applicable for the amounts due to be returned to remaining investors. However, such repayments/redemption by the Company made as per requirement laid down in para (c) below, shall be certified by Chartered Accountants, as directed in sub-paragraph (f) below. c) The repayments and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order. d) MBK Business Development (India) Limited and its present management is permitted to sell the assets of the Company only for the sole purpose of making the repayments including interest, as directed above and deposit the proceeds in an Escrow Account opened with a nationalized Bank. e) The Company, namely, MBK Business Development (India) Limited and its promoter/directors, Shri Prafulla Kumar Kundu, Shri Saikat Roy, Shri Anshuman Ghosh, shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily (in Bengali) with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect. f) After completing the aforesaid repayments, the Company, namely, MBK Business Development (India) Limited and its promoter/directors, Shri Prafulla Kumar Kundu, Shri Saikat Roy, Shri Anshuman Ghosh, 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"). g) The Company, namely, MBK Business Development (India) Limited and its promoter/directors, Shri Prafulla Kumar Kundu, Shri Saikat Roy, Shri Anshuman Ghosh, are 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. h) In case of failure of The Company, namely, MBK Business Development (India) Limited and its promoter/directors, Shri Prafulla Kumar Kundu, Shri Saikat Roy, Shri Anshuman Ghosh, to comply with the aforesaid directions, SEBI, on the expiry of the three months period from the date of this order, i. shall recover such amounts in accordance with section 28A of the SEBI Act including such other provisions contained in securities laws. ii. may initiate appropriate action against the Company, its promoters/directors and the persons/officers who are in default, including adjudication proceedings against them, in accordance with law. iii. would make a reference to the State Government/ Local Police to register a civil/ criminal case against the Company, its promoters, directors and its managers/ persons in-charge of the business and its schemes, for offences of fraud, cheating, criminal breach of trust and misappropriation of public funds; and iv. would also make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the Company. i) The Company, namely, MBK Business Development (India) Limited and its promoter/directors, Shri Prafulla Kumar Kundu, Shri Saikat Roy, Shri Anshuman Ghosh, 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 four (4) 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 four (4) years from the date of completion of refunds to investors. j) Shri Ram Sundar Bhattacharya and Smt. Pratima Roy 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.

10.2 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. 10.3 Copy of this Order shall be forwarded to the recognised stock exchanges and depositories for information and necessary action. 10.4 A copy of this Order shall also be forwarded to the Ministry of Corporate Affairs/ concerned Registrar of Companies, for their information and necessary action with respect to the directions/ restraint imposed above against the Company and the individuals.

DATE : February 04, 2016 PRASHANT SARAN PLACE : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA