Order in the matter of Megasys Medi Life Limited

UNDERSECTIONS11,11(4),11A AND11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT,1992, IN THE MATTER OF MEGASYS MEDI LIFE LIMITED AND ITS DIRECTORS, VIZ. SHRI MANISH ROY (DIN: 05258308; PAN: AQQPR8167F), SHRI ANIL PANDEY (DIN: 05354626; PAN: BMPPP2155K), SHRI BARUN BISWAS (DIN: 06420748; PAN: ADRPB4364N), SHRI SANDEEP KUMAR (DIN: 01323894; PAN: AIZPK7566J), SHRI KABIR ROY (DIN: 02105383; PAN: ADWPR2654Q), SMT. SUSMITA ROY CHOUDHURY (DIN: 03092008; PAN: ADTPR0390N), SHRI PRABIR SENGUPTA (DIN: 03171427; PAN: ANNPS2028N) AND SHRI TUFAN KUMAR PRAMANIK (DIN: 06415440; PAN: AMJPP4359E) ALONG WITH ITS DEBENTURE TRUSTEE, VIZ. SHRI DINESH CHANDRA GHOSH. Date of hearing: April 22, 2015 Appearance

For Noticees Mr. Kamal Nayan Jain, K.N.Jain Company Mr. JitendraLohia, K.N.Jain Company

For SEBI Ms. Soma Majumdar, Deputy General Manager Mr. N. Murugan, Deputy General Manager Mr. T.Vinay Rajneesh, Assistant General Manager Ms. Nikki Agarwal, Assistant General Manager

1.1 MegasysMedi Life Limited (MMML) having its office at FB–32, Deshbandhu Nagar, Baguiati, Kolkata–700059, West Bengal, India, was incorporated on June 30, 2008, with the ROC, Kolkata, West Bengal with CIN No. as U85100WB2008PLC126961. 1.2 Securities and Exchange Board of India ("SEBI") received information of alleged illegal mobilization of funds by MMML. On enquiry by SEBI, it was observed that MMML had made an offer and issued Secured Redeemable Debenture ("offer of SRDs") for Rs. 52.79 lakhs from the public. 1.3 As the above said offer of SRDs was 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 January 28, 2015 and issued directions mentioned therein against MMML and its Directors, viz. Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanikalong with its Debenture Trustee, viz. Shri Dinesh Chandra Ghosh. 2.1 Prima facie findings/allegations: In the said interim order, the following prima faciefindings/allegation were recorded. MMML had made an offer and issued Secured Redeemable Debentures during the Financial Years 2010–11 to 2012–13 and allotted Redeemable Debentures to a total of 133 individuals/investors and mobilized funds amounting to Rs. 52.79 lakhs as shown below:- Table 1 Year Security Amount Raised No. of Allottees ( in Lakhs) (Approx) 2010 – 11 Secured Redeemable Debenture 2.97 11 2011 – 12 21.94 55 2012 – 13 27.88 67 Total 52.79 133

2.2 MMML created a charge for an amount of Rs.5 Crores on December 4, 2010 and appointed Shri Dinesh Chandra Ghosh who does not have a certificate of registration, as Debenture Trustee for the Offer of SRDs. 2.3 The above offer of SRDs 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 MMML in respect of offers of SRDs. MMML and its directors also failed to comply with Section 117B, 117C of the Companies Act, 1956 and relevant provisions of the Debt Securities Regulations, 2008 mentioned in the interim order. Shri Dinesh Chandra Ghosh, appointed as debenture trustee had violated Section 12(1) of SEBI Act. 2.4 In view of the prima facie findings on the violations, the following directions were issued in the said interim order dated January 28, 2015with immediate effect. i. MMML 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.

MMML and its present Directors, viz. Shri Manish Roy, Shri Anil Pandey and Shri Barun Biswas including its past Directors, viz. Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, 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. MMML and its abovementioned past and present Directors, are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions; iv. MMML shall provide a full inventory of all its assets and properties; v. MMML's abovementioned past and present Directors shall provide a full inventory of all their assets and properties; vi. MMML and its abovementioned present Directors shall not dispose of any of the properties or alienate or encumber any of the assets owned/acquired by that company through the Offer of SRDs, without prior permission from SEBI; vii.

MMML and its abovementioned present 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 MMML; viii. MMML and its abovementioned past and present Directors shall furnish complete and relevant information (as sought by SEBI letters dated February 3, 2014 and February 11, 2014), within 21 days from the date of receipt of this Order. ix. The Debenture Trustee, viz. Shri Dinesh Chandra Ghosh, is prohibited from continuing with his assignment as debenture trustee in respect of the Offer of SRDs of MMML 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.

3.1 Vide the said interim order, MMML and its abovementioned Directors and the person acting as Debenture trustee 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. 4.1 Service of interim order: The copy of the said interim order was sent to the above mentioned entities by SEBI’s letter dated January 29, 2015 through speed post acknowledgement due. The copy of the interim order sent to the company returned undelivered with postal remarks ‘Left’. The copies of the interim order sent toShri Manish Roy, Shri Kabir Roy and Smt. SusmitaRoychoudhury returned undelivered with postal remarks ‘Addressee moved’. The copies of the interim order sent to Shri Anil Pandey and Shri Barun Biswas and Shri PrabirSengupta returned undelivered with postal remarks as ‘Addressee not found’, ‘Refused’ and ‘Insufficient Address’ respectively. The copies of the interim order sent to Shri Sandeep Kumar, Shri Tufan Kumar Pramanik and the debenture trustee viz. Shri Dinesh Chandra Ghosh were delivered.In cases where interim orders returned undelivered, wherever possible, attempts of hand delivery/pasting were made. The copies of interim order were pasted at the addresses of the company, Shri Anil Pandey, Shri Barun Biswas, Shri Kabir

Roy and Smt. SusmitaRoychoudhury. 4.2 Thereafter, SEBI vide letter dated March 20, 2015 communicated the company, its above mentioned directors and the debenture trustee that an opportunity of personal hearing was scheduled on April 22, 2015. Subsequently, vide notification dated April 14, 2015, published in newspaper Ananda Bazar Patrika, and notification dated April 15, 2015 published in newspaper Times of India, MMML and the directors and debenture trustees were notified that they will be given the final opportunity of being heard on April 22, 2015 at the time and the venue mentioned therein. 5.1 Hearing and submissions: Shri Sandeep Kumar, one of the directors appeared along with his representative Mr. Kamal Nayan Jain and Mr. JitendraLohia. It was submitted on his behalf that he had already sent his reply vide letter dated March 2, 2015 to SEBI. The other noticees did not avail the opportunity of hearing held on April 22, 2015. Shri Dinesh Chandra Ghosh, vide letter dated April 20, 2015 replied to the letter of SEBI dated March 20, 2015 that he should be informed about the subject matter for which his personal attendance is sought. Shri Sandeep Kumar vide his letter dated March 2, 2015 submitted his reply stating that:- a. Neither had he participated in any fund raising by the company nor was he aware of any such fund raising by company. b. He was director of the company from June 30, 2008 to August 09, 2010. He has not participated in the decision making process of the company. c. He became a director in the company through late Kabir Roy whose family was doing medicine and export business. d. Mr. Kabir Roy suggested to form two companies one for leather garment export and other for medicine business. In view of Shri Sandeep Kumar’s being from non-commerce background, Mr. Kabir Roy suggested that he will do all necessary formalities through consultant and was asked to sign necessary papers. Subsequently, Mr. Kabir Roy formed two companies in the name of MegasysMedlife Pvt. Ltd and Premier Fab Exports Pvt. Ltd. e. He was informed of his being inducted as directors in the above said two companies, but he was not informed about the duties as directors.

f. Mr. Kabir Roy took Rs. 3 lakh for allotting 30000 shares. On perusal of annual return for the period of 2008-09, he found that only 10,000 shares have been shown to have allotted to him. Latter it is shown that he had been allotted 30,000 shares during the period of 2010-2011. However, no share certificates were received by him. It is noteworthy to mention that even his signatures were forged. g. Though he intended to do joint business with Mr. Kabir Roy in the new entities, the latter was doing most of the business in the name of his personal firms. So he requested Mr. Kabir Roy to return the money which was not returned and absolve him from the position of director. h. Then he handed over his resignation letter on August 9, 2010 to Mr. Kabir Roy which was duly accepted. However, without submitting the above said resignation letter, Mr. Kabir Roy submitted another forged resignation letter dated October 28, 2010. The signature in the financial statement of the company also bears his forged signature. i. The directions passed against him may be vacated. 6.1 I have considered the allegations, replies, documents downloaded from MCA 21 Portal', the complaints given by various complainants and replies/submissions and other material on record. On perusal of the same, the following questions arise for consideration. Each question is dealt with under a suitable heading. 1. Whether the company came out with the Offer of SRDs? 2. If so, whether the said issue is in violation of Section 60, Section 56(1) and 56(3), Sections 73(1), (2) and (3) of the Companies Act, 1956 and whether the offer of SRDs is in violation of Section 117C of Companies Act and relevant provisions of the Debt Securities Regulations, mentioned in the interim order? 3. Whether MMML has appointed Shri Dinesh Chandra Ghosh,who is an unregistered entity to act as Debenture Trustee for the offer of SRDs, in violation of Section 117B of the Companies Act, 1956 and whether the trustee has 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 violation committed?

7.1 Whether the company came out with the Offer of SRDs?:I have perused the interim order dated January 28, 2015 for the allegation of Offer of SRDs and material on record. The replying Debenture Trustee did not dispute the said issuance. The company or the directors did not file reply disputing the issuance. The replying director Shri Sandeep Kumar submitted that he is not aware of any such issuance. 7.2 It is noted that SEBI had received complaints dated May 03, 2014, June 20, 2014 and an undated complaint, which enclosed the copies of the debenture certificates issued by the Company. The said debenture certificates contain, inter alia, details of the holder, the number of debentures, redemption value and redemption date. On perusal of these, I find that the Company had made allotment of SRDs as alleged in the Tabular column No.1. 7.3 On examination of the Form 10 filed in respect of “Particulars for registration of charges for debentures”, it shows that MMML created charge, however, for an amount of Rs. 5 Crores towards the Offer of SRDs on December 4, 2010 in favour of Shri Dinesh Chandra Ghosh as debenture trustee 8.1 If so, whether the said issue is in violation of Section 60, Section 56(1) and 56(3), Sections 73(1), (2) and (3) of the Companies Act, 1956 and whether the offer of SRDs is in violation of Section 117C of Companies Act and relevant provisions of the Debt Securities Regulations, mentioned in the interim order? 8.2 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 issues of SRDs covered in Issue No 1 is a public issue. 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).” 8.3 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 publicǁ. 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…..” 8.4 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. 8.5 As found earlier, on the basis of materials available on record, allotments of SRDs have been made to 11 persons during 2010-11, 55 persons during 2011-12 and 67 persons during the period of 2012-13.

8.6 As far as the issuance to 11 persons during 2010-11, 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 issuance to 11 persons during 2010-11, the Company or the directors have not placed any material that the allotment to 11 persons 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. Therefore, I find that the said issuance cannot be considered as private placement. 8.7 As far as the other two issues during 2011-12 and 2012-13, the offer of SRDs and subsequent allotment were made to fifty or more persons. Therefore, the same falls within the first proviso to section 67(3) of the Companies Act, 1956. 8.8 Thereby, the impugned issues are deemed to be public issues and therefore, such issues are also mandated to comply with the 'public issue' norms as prescribed under the Companies Act, 1956. 8.9 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. 8.10 Neither the company nor the directors produced any record to show that MMML 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, MMML 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. 8.11 Further, in view of the impugned issues being deemed public issues, MMML 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.

8.12 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, MMML has contravened the said provisions. MMML or the directors have not provided any records to show that the amount collected by MMML are kept in a separate bank account. Therefore, I find that MMML 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. 8.13 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 MMML has made a public issue of debt securities, the Debt Securities Regulations is also applicable to the instant offer of SRDs.

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. 8.14 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. 8.15 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" 8.16 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. 8.17 In view of the forgoing findings, I am of the view that MMML 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 through the issuance of SRDs has contravened section 117C of the Companies Act, 1956. 9.1 Whether MMML has appointed Shri Dinesh Chandra Ghosh,who is an unregistered entity to act as Debenture Trustee for the offer of SRDs, in violation of Section 117B of the Companies Act, 1956 and whether the trustee has violated Section 12(1) of SEBI Act?

9.2 On examination of the Form 10 filed in respect of “Particulars for registration of charges for debentures”, it shows that MMML created charge, for an amount of Rs. 5 Crores towards the Offer of SRDs on December 4, 2010 in favour of the Shri Dinesh Chandra Ghosh as trustee. 9.3 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 trustee or trustee have given their consent to the company to be so appointed. 9.4 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 Reg. 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.

Shri Dinesh Chandra Ghosh is not eligible to obtain a certificate of registration, since it does not satisfy the eligibility criteria mentioned in Reg. 7 of the SEBI (Debenture Trustees) Regulations, 1993. Neither did this noticee claim that they had received certificate of registration issued by SEBI nor did the other noticees. Instead Shri Dinesh Chandra Ghosh filed an evasive reply vide letter dated April 20, 2015 in response to the letter of SEBI dated March 20, 2015 communicating the personal hearing, that he should be informed about the subject matter for which his personal attendance is sought. It is clear that the said letter of SEBI clearly mentions the personal hearing in response to the order dated January 28, 2015(WTM/SR/ERO/10/01/2015) passed by SEBI. 9.5 In view of above, I find that Shri Dinesh Chandra Ghoshhad dealt in the impugned SRDs as debenture trustee, without having a certificate of registration as Debenture Trustee in violation of Section 12(1) of the SEBI Act, 1992. Since the company has appointed the said entity who does not have a certificate of registration, the appointment of the same is in violation of section 117B of the Companies Act, 1956. 10.1 If the findings on question No.2 and 3 are found in the affirmative, who are liable for the violation committed?

10.2 Section 56(1) and 56(3) read with section 56(4) 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 party to the non-compliance of issuing the prospectus as per the said section. 10.3 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 who is an officer in default shall, from the eighth day becomes 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. 10.4 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.

10.5 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. 10.6 Reference may also be made to the ratio of the Hon’ble High court of Madras in MadhavanNambiar 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”. 10.7 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.” 10.8 In view of the provisions of law, MMML and its Directors, viz. Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik along with its Debenture Trustee, viz. Shri Dinesh Chandra Ghosh are responsible for the non-compliance of the above mentioned provisions.

10.9 I find from the “Register of directors, managing directors, manager and secretary,etc” sent by the RoC, West Bengal vide its letter dated December 5, 2014 to SEBI, the details of the appointment and resignation of the directors which is reproduced below:

Name Date of appointment Date of Cessation Shri Manish Roy 02/04/2013 - Shri Anil Pandey 01/10/2013 - Shri Barun Biswas 02/04/2013 - Shri Sandeep Kumar 30/06/2008 29/10/2010 Shri Kabir Roy 30/06/2008 02/04/2013 Smt. SusmitaRoychoudhury 12/05/2010 02/04/2013 Shri PrabirSengupta 29/10/2010 02/04/2013 Shri Tufan Kumar Pramanik 02/04/2013 02/10/2013

10.10 Therefore, I hold that the Company, Shri Kabir Roy, Smt. SusmitaRoychoudhury and Shri PrabirSengupta acting as directors are responsible for the issue of SRDs in violation of law and regulations and hence co-extensively responsible along with the Company for making refunds along with interest. 10.11 The liability of the company to repay under section 73(2) read with sections 11, 11B and 27(2) of the SEBI Act, is continuing and such liability continues till all the repayments are made. Therefore, the directors who joined subsequent to the impugned public issuance are also responsible for making the refund, if the company does not repay the money collected, as mandated in section 73(2) of the Companies Act, 1956 read with sections 11, 11B and 27(2) of the SEBI Act. 10.12 Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas and Shri Tufan Kumar Pramanik who joined as directors subsequent to the impugned issue, have not exercised necessary diligence while taking charge of directorship in the Company. The very inaction by them against the previous management (for violating the public issue norms as stipulated under the Companies Act, 1956), even after passing of the interim order, leads one to conclude on collusion at their end with the Company and its previous management.

Further, these directors have also not taken any step to remedy the violations committed. Therefore, I hold that Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas and Shri Tufan Kumar Pramanik are co-extensively responsible along with the Company for making refunds along with interest. 10.13 As regards Shri Sandeep Kumar, he submitted that he was director of the company from June 30, 2008 to August 09, 2010. He also stated that he handed over his resignation letter on August 9, 2010 to Mr. Kabir Roy which was duly accepted. However, without submitting the above said resignation letter, Mr. Kabir Roy submitted another forged resignation letter dated October 28, 2010.However, he has not produced any proof of any complaint given by him to appropriate authorities about the forgery. Therefore, the allegation of forgery is not substantiated by production of any records. Moreover, On perusal of “Register of directors, managing directors, manager and secretary,etc”, I find that Shri Sandeep Kumar had joined as director on June 30, 2008 and ceased to be director only on October 28, 2010. He was a director at the time of deemed public issue during 2010-11.

The submission that he has not participated in the decision making process of the company does not divest his liability. In fact, as pointed out in para 10.5, Shri Sandeep Kumar was required to take diligent measures in preventing violation of various provisions of law relating to the deemed public issue. He was also required not to be neglectful in the affairs of the company which resulted in the violation of various laws relating deemed public issue. Therefore, Shri Sandeep Kumar is also co-extensively responsible along with the Company for making refunds along with interest. 10.14 Regarding Shri Kabir Roy, Shri Sandeep Kumar vide his letter dated March 2, 2015 had made reference to Shri Kabir Roy as late director. However, the primary evidence of death certificate of Shri Kabir Roy is not available in the records. Therefore, in view of the non-availability of any primary evidence on the demise of Shri Kabir Roy, I am constrained to hold that Shri Kabir Roy, is alsoco-extensively responsible along with the Company for making refunds along with interest. 11.1 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 MMML and its Directors, Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanikto refund the monies collected through issuance of SRDs, with interest to such investors.

In view of the violations committed by the Company, its directors, and the unregistered debenture trustee, 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. 11.2 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, MegasysMedi Life Limitedand its Directors, Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik shall forthwith refund the money collected by the Company through the issuance of SRDs, 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) The repayments and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order. c) MegasysMedi Life 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. d) MegasysMedi Life Limited and its Directors, viz., Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily (in Bengali) with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect. e) After completing the aforesaid repayments, MegasysMedi Life Limitedand its Directors, viz. Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, shall file a report of such completion of repayment with SEBI, within three months from the date of this Order, certified by two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution.

For the purpose of this Order, a peer reviewed Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by the Institute of Chartered Accountants of India ("ICAI"). f) MegasysMedi Life Limitedand its Directors, viz. Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, 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. g) In case of failure ofMegasysMedi Life Limitedand its Directors, viz. Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, to comply with the aforesaid directions, SEBI, on the expiry of the three months period from the date of this order,- a. shall recover such amounts in accordance with section 28A of the SEBI Act including such other provisions contained in securities laws. b. may initiate appropriate action against the Company, its promoters/directors and the persons/officers who are in default, including adjudication proceedings against them, in accordance with law. c. would make a reference to the State Government/ Local Police to register a civil/ criminal case against the Company, its promoters, directors and its managers/ persons in-charge of the business and its schemes, for offences of fraud, cheating, criminal breach of trust and misappropriation of public funds; and d. would also make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the Company. h) MegasysMedi Life Limited and its Directors, viz., Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, 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. i) Shri Dinesh Chandra Ghosh is restrained from, acting as any intermediary, accessing the securities market and further restrained from buying, selling or dealing in securities, in any manner whatsoever, directly or indirectly, for a period offour (4)years. j) The above directions shall come into force with immediate effect. 12.1 Copy of this Order shall be forwarded to the recognized stock exchanges and depositories for information and necessary action. 12.2 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. 12.3 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 :Oct 19th, 2015 PRASHANT SARAN Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA