Order in the matter of Mount Vision Industries India Limited

WTM/RKA/EFD/134/2016 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under Sections 11 (1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 and Regulation 28 of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, in respect of: 1. Mount Vision Industries India Limited, 2. Mr. Mohammad Mumtaz Alam, 3. Mr. Shambhu Nath Sah, 4. Mr. Anil Kumar Dwivedi, 5. Mr. Ran Vijay Kumar, 6. Mr. Sanjay Kumar, 7. Mr. Irshad Ali and 8. Mount Vision Debenture Trust (represented by trustee Mr. Manoj Kumar). In the matter of issuance of Non-convertible Redeemable Debentures by Mount Vision Industries India Limited

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted a preliminary examination into the issuance of Non-Convertible Redeemable Debentures (hereinafter referred to as “NCDs”) by Mount Vision Industries India Limited (hereinafter referred to as “the company” or “MVIL”) with a view to ascertain the possible violations of the public issue norms stipulated under the Companies Act, 1956 and other applicable laws pertaining to SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (hereinafter referred to as “the ILDS Regulations”). 2. Pursuant to the examination, SEBI passed an interim order dated April 22, 2015 (hereinafter referred to as “interim order”) against MVIL, its directors namely Mr. Mohammad Mumtaz Alam, Mr. Shambhu Nath Sah, Mr. Anil Kumar Dwivedi, Mr. Ran Vijay Kumar, Mr. Sanjay Kumar, Mr. Irshad Ali and the persons/ entity acting as the Debenture Trustee namely Mount Vision Debenture Trust (represented by trustee Mr. Manoj Kumar) (hereinafter collectively referred to as ‘the noticees’ and individually by their respective names), in view of the following reasons: “13… iii. … a. … MVIL issued NCDs to at least 70 allottees and mobilized Rs.97,72,250/- during FY 2012-13 and 2013-14. In FY 2013-14 alone, NCDs were issued to at least 56 allottees. NCDs have thus been issued and subscribed by more than forty nine persons. …

Order in respect of Mount Vision Industries India Limited

20. MVIL is prima facie engaged in fund mobilising activity from the public, through the Offer of NCDs and as a result of the aforesaid activity has violated the aforementioned provisions of the Companies Act, 1956 (Section 56, Section 60 read with Section 2(36), Section 73, Sections 117B–117C) read with the Debt Securities Regulations. … 17. …. Mount Vision Debenture Trust (represented by trustee Mr. Manoj Kumar) has prima facie, failed to meet the eligibility criteria specified under the provisions of the Debenture Trustees Regulations and therefore, has acted as unregistered Debenture Trustees, which amounts to violation of the abovementioned provisions of the SEBI Act read with the Debenture Trustee Regulations.” 3. In view of the alleged contraventions and the reasons stated in the interim order, the following directions were issued: “i. MVIL shall forthwith cease to mobilize 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.

MVIL and its present/ past Directors, viz. Mr. Mohammad Mumtaz Alam (DIN:05164422), Mr. Shambhu Nath Sah (DIN:06451742), Mr. Anil Kumar Dwivedi (DIN:06768421), Mr. Ran Vijay Kumar (DIN:06768409), Mr. Sanjay Kumar (DIN:05162956) and Mr. Irshad Ali (DIN:05231933), 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. MVIL 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. MVIL shall provide a full inventory of all its assets and properties; v. MVIL’s abovementioned Directors shall provide a full inventory of all their assets and properties; vi. MVIL and its abovementioned Directors shall not dispose of any of the properties or alienate or encumber any of the assets owned/acquired by that company through the Offer of NCDs, without prior permission from SEBI; vii.

MVIL 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 MVIL; viii. MVIL shall furnish complete and relevant information within 21 days from the date of receipt of this Order; ix. The Debenture Trustee, viz. Mount Vision Debenture Trust (represented by trustee Mr. Manoj Kumar) is prohibited from continuing with his present assignment as a debenture trustee in respect of the Offer of NCDs of MVIL 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.”

4. The interim order advised the company and the aforesaid directors to show cause as to why suitable directions/ prohibitions under sections 11(1), 11(4), 11A and 11B of the SEBI Act including the following, should not be taken/ imposed 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 to not 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.” 5. The noticees were advised to file their response within 21 days of receipt of the interim order and indicate whether they wish to avail a personal hearing. The interim order was forwarded to the noticees vide SEBI’s letter dated April 22, 2015. Mr. Shambhu Nath Sah and Mr. Anil Kumar Dwivedi, vide their respective letters dated May 10, 2015, while requesting for an opportunity of personal hearing, replied as under: a. They were made directors of the company through a fraudulent act and were not informed about their directorship in the company.

They were only acting as agents of the company and not aware about the collection of money through NCDs. They were not aware of the Debenture Trustee namely Mount Vision Debenture Trust (represented by Mr. Manoj Kumar). b. They were not involved in the management of collected funds. They had not received any monetary rewards or incentive from the company. Further, they are not in possession of any fund/ property relating to MVIL. c. One of the director namely Mr. Ran Vijay Kumar had betrayed Mr. Anil Kumar Dwivedi by making his digital signature. Mr. Ran Vijay Kumar had then used such signature for removing his name from the directorship of the company and for filing the required Form to RoC, Indore. d. Mr. Mohammad Mumtaz Alam is absconding from his native place and they are in search for him. e. They have also lodged complaints against the company in the CJM Court in Bokaro, Jharkhand. 6. SEBI proceeded further and granted an opportunity of personal hearing to the noticees on August 30, 2016. The noticees were informed of the date of hearing vide SEBI’s letter dated August 02, 2016. As the interim order could not be delivered on certain noticees at their last known address, SEBI made a public notice in the newspapers (in Times of India, Anand

Bazaar Patrika, Dainik Bhaskar, Pioneer and Hindustan) intimating the noticees about the interim order and the personal hearing fixed on August 30, 2016. The noticees were also advised to file their replies before the date of personal hearing. On the date fixed for personal hearing, Mr. Shambhu Nath Sah and Mr. Anil Kumar Dwivedi appeared and made submissions. These noticees also filed certain documents which were taken on record. They were also granted liberty to file written submissions, if any, in the matter. However, no written submissions are received by SEBI. Other noticees neither filed replies nor appeared in the personal hearing. 7. I have considered the interim order, submissions of Mr. Shambhu Nath Sah and Mr. Anil Kumar Dwivedi and material available on record. The prima facie findings made in the interim order in respect of offer and issue of NCDs are undisputed as the company and its directors have not filed their response. Therefore, I do not deem it necessary to burden this order again with all the elaborate facts and observations made in the interim order. The company is alleged to have made a public offer and issued NCDs without complying with the public issue norms mandated under the Companies Act, 1956 and the ILDS Regulations.

As per the interim order, the company had issued NCDs during Financial Years 2012-13 and 2013- 14 to atleast 70 allottees and had mobilized funds to the tune of `97,72,250 crore. The interim order has categorically stated that the number of allottees and the amount mobilized as noted therein were from the complaints received. In view of the same such number and the amount mobilized would be much more than the indicated figures. 8. The interim order had specifically directed the company to furnish complete and relevant information. However, the concerned noticees have failed to provide the relevant information till date. Considering the said conduct of the company and their non-participation in the proceedings despite a public notice, leads to the conclusion that they deliberately concealed information regarding their money mobilizing activities through offer and issue of NCDs to the public. 9. From the available facts and the conduct of the company and its directors in not providing the information regarding the NCDs, I find no reason to differ with the observation made in the interim order that the company made a ‘public issue’ of NCDs in terms of first proviso to section 67(3) of the Companies Act, 1956. As the issuance of NCDs by the company was a ‘public issue’, it ought to have complied with the applicable provisions of the Companies Act, 1956 and the ILDS Regulations as alleged in the interim order.

In the present case, there is no dispute to the fact that the company failed to comply with sections 60 read with section 2(36), 56(1), 56(3), 73, 117B and 117C of the Companies Act, 1956 and regulations 4(2)(a), (b), (c), (d), 4(4), 5(2)(b), 6, 7, 8, 9, 12, 14, 15, 17, 19 and 26 of the ILDS Regulations. Accordingly, I find the company guilty of violating the aforesaid provisions of law. 10. The interim order was issued against the directors of the company, namely, Mr. Mohammad Mumtaz Alam, Mr. Shambhu Nath Sah, Mr. Anil Kumar Dwivedi, Mr. Ran Vijay Kumar, Mr. Sanjay Kumar and Mr. Irshad Ali. The details of the appointment and resignation of the said directors are as under: Table A Name Date of Appointment Date of Cessation Mr. Mohammad Mumtaz Alam 08/02/2012 Continuing as director Mr. Shambhu Nath Sah 18/12/2013 Continuing as director Mr. Anil Kumar Dwivedi 18/12/2013 Continuing as director Mr. Ran Vijay Kumar 18/12/2013 Continuing as director Mr. Sanjay Kumar 08/02/2012 18/12/2013 Mr. Irshad Ali 19/03/2012 18/12/2013 11. It has been concluded above that the company made a public issue of NCDs during the Financial Years 2012-13 and 2013-14.

Therefore, the aforesaid directors were part of the Board of Directors of the company during the period when the company mobilized public funds without complying with the public issue norms. In terms of section 291 of the Companies Act, 1956, the Board of Directors of a company shall be entitled to exercise all such powers and do all such acts and things as the company is authorized to exercise and do. Therefore, the Board of Directors being responsible for the conduct of the business of a company will be liable for any non-compliance of law and such liability shall be upon the individual directors also. Section 56(1) and 56(3) read with section 56(4) imposes the liability for the non-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 is on the Company, and every person who is a party to the non-compliance of issuing the prospectus as per the said section. Further, the directors of a company shall be liable for action in case of contravention of the ILDS Regulations.

12. The liability of the company and directors to repay under section 73(2) of the Companies Act, 1956 would remain until the whole of the subscription amount along with interest is refunded to the allottees/investors. Therefore, the directors (irrespective of whether they continue or resign) who were present during the period when the company made the offer and allotted NCDs shall be liable for violation of sections 56, 60 and 73 of the Companies Act, 1956 and the ILDS Regulations. In this regard, I refer to and rely on the following observations made by the Hon’ble High Court of Madras in Madhavan Nambiar vs Registrar of Companies (2002 108 Comp Cas 1 Mad): “13. …. A director either full time or part time, either elected or appointed or nominated is bound to discharge the functions of a director and should have taken all the diligent steps and taken care in the affairs of the company. 14. 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.” 13. Mr. Shambhu Nath Sah and Mr. Anil Kumar Dwivedi in their respective replies have submitted that they were acting as agents of the company and were not informed about the directorship of the company. They were not aware that the company has appointed them as its director. It has also been submitted that they were not aware of the collection of money through NCDs by the company and they have not received any monetary reward or incentive from the company. During the course of personal hearing, these noticees submitted the copy of the order sheet of the Court of JM, Ist class, Bokaro, in the matter of Ran Vijay Kumar Vs. Mohammad Mumtaz Alam bearing case number 412/14. I have perused the same and note that the said complaint has been filed by the noticee namely Mr. Ran Vijay Kumar against Mr. Mohammad Mumtaz Alam. Further, the noticees namely Mr. Shambhu Nath Sah and Mr. Anil Kumar Dwivedi have been named as witnesses in the said complaint. In the said complaint, Mr. Ran Vijay Kumar has narrated that he was acting as an agent of the company along with Mr. Shambhu Nath Sah and Mr. Anil Kumar Dwivedi and they had raised funds from 25-30 investors for the company.

It has been alleged that Mr. Mohammad Mumtaz Alam had given good profits to the investors for initial 10-11 months, however, later neither the principle nor returns were given to the investors. It has also been alleged that Mr. Mohammad Mumtaz Alam has stopped contacting him and the investors. 14. Mr. Anil Kumar Dwivedi has also submitted that he came to know about his directorship in MVIL through the letter of SEBI. It has been submitted that his consent for acting as director was not taken and Mr. Mohammad Mumtaz Alam had fraudulently taken his PAN and address details and included his name in the Board of directors of the company. He had not signed on any document for DIN allotment and has filed a complaint before the Court in Bokaro, Jharkhand. It has also been said that Mr. Mohammad Mumtaz Alam is absconding from March 2014.

15. I have considered the submissions of Mr. Shambhu Nath Sah and Mr. Anil Kumar Dwivedi and note that they have failed to submit the copies of their respective complaints. Further, they have also failed to submit any final decision of the respective Courts on the complaints said to be filed by them. Considering the same, it is difficult to grant any relief to these two noticees. However, they are at liberty to take recourse to the remedies available under law. 16. Mr. Mohammad Mumtaz Alam, Mr. Shambhu Nath Sah, Mr. Anil Kumar Dwivedi, Mr. Ran Vijay Kumar, Mr. Sanjay Kumar, Mr. Irshad Ali being ‘officers in default’ in terms of section 5 of the Companies Act, 1956, are held responsible for the violations committed by the company as found above in this order. Therefore, the company and the aforesaid persons are liable for the consequences including refund of the subscription money to the allottees along with interest at 15% p.a. as mandated under section 73(2) of the Companies Act, 1956 read with rule 3(c) of the Companies (Prospectus and Allotment of Securities) Rules, 2014. 17. The interim order has observed that the company on April 13, 2014, had created a charge of `10 crore on its movable and immovable properties, stocks in trade, plants and machinery and floating assets to secure the issuance of debentures and also appointed Mount Vision Debenture Trust (represented by trustee Mr. Manoj Kumar) as its Debenture Trustee in violation of section 12(1) of the SEBI Act and regulation 7 of the SEBI (Debenture Trustees) Regulations, 1993 (hereinafter referred to as ‘Debenture Trustees Regulations’).

It is an undisputed fact that Mount Vision Debenture Trust (represented by trustee Mr. Manoj Kumar) was never registered with SEBI as a ‘debenture trustee’. In terms of regulation 7 of the Debenture Trustee Regulations, a person can act as a debenture trustee only if it is either a scheduled bank or a public financial institution or an insurance company or a body corporate. Mount Vision Debenture Trust (represented by trustee Mr. Manoj Kumar), is therefore not qualified to be appointed. Accordingly, I find it guilty of contravening section 12(1) of the SEBI Act, 1992 and regulation 7 of the Debenture Trustee Regulations. 18. In view of the foregoing, I, in exercise of the powers conferred under sections 11(1), 11(4), 11A and 11B read with section 19 of the Securities and Exchange Board of India Act, 1992 and regulation 28 of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, hereby issue the following directions: (i) Mount Vision Industries India Limited and its directors namely Mr. Mohammad Mumtaz Alam [DIN: 05164422], Mr. Shambhu Nath Sah [PAN: BYHPS7846G], Mr. Anil Kumar

Dwivedi [PAN: AIIPD6966A], Mr. Ran Vijay Kumar [DIN: 06768409], Mr. Sanjay Kumar [DIN: 05162956] and Mr. Irshad Ali [DIN: 05231933], shall within a period of three months from the date of this order, jointly and severally refund the money collected through the issue of non-convertible debentures to the allottees with interest at the rate of 15% per annum from the date of receipt of money till the date of such refund. (ii) Such refund shall be made only in cash through a Demand Draft or Pay Order. (iii) Mount Vision Industries India Limited and its directors shall within fifteen days from the date of this Order submit to SEBI complete details of their assets (along with proofs thereof) certified by a peer reviewed Chartered Accountant. (iv) Mount Vision Industries India Limited and its directors are permitted to sell assets of the company and deposit the sale 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 allottees of non-convertible debentures till the full refund/ repayment as directed above is made.

(v) Mount Vision Industries India Limited and its directors shall issue a public notice, in all editions of one English national daily and one vernacular daily 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. (vi) Within seven days of completion of refund/ repayment as directed hereinabove, Mount Vision Industries India Limited and its directors shall file a certificate of such completion with SEBI from two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. Such certificate shall be issued by the Chartered Accountants after verifying the relevant documents including bank accounts of the noticees and satisfying themselves that the refund has actually been made. (vii) 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. (viii) Mount Vision Industries India Limited, Mr. Mohammad Mumtaz Alam, Mr. Shambhu Nath Sah, Mr. Anil Kumar Dwivedi, Mr. Ran Vijay Kumar, Mr. Sanjay Kumar, Mr. Irshad Ali are restrained from, directly or indirectly, accessing the capital market by issuing prospectus, any offer document or advertisement soliciting money from the public and are further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, in whatsoever manner for a period of four years or till the date of refund of money to the allottees, whichever is later.

(ix) Mr. Mohammad Mumtaz Alam, Mr. Shambhu Nath Sah, Mr. Anil Kumar Dwivedi, Mr. Ran Vijay Kumar, Mr. Sanjay Kumar, Mr. Irshad Ali are also restrained from associating themselves, with any listed public company and any public company which intends to raise money from the public, for a period of four years or till the date of refund of money to the allottees, whichever is later. (x) Mount Vision Debenture Trust (represented by trustee Mr. Manoj Kumar) is prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly, in whatsoever manner for a period of four years. (xi) For the purposes of sub-paragraphs (viii) and (ix) above, the period of restraint shall be counted from the date of the interim order. 19. The interim order cum show cause notice dated April 22, 2015 is disposed off accordingly. The above directions are without prejudice to the right of SEBI to take any other appropriate action for the violations found in this case or to initiate any action in case of failure to comply with the above directions, in accordance with the provisions of applicable laws including the proceedings under the provisions of section 28A of the SEBI Act.

20. The order shall come into force with immediate effect. A copy of the order shall be served on the noticees to ensure compliance with the above directions. A copy of this Order shall also be forwarded to the recognized stock exchanges and depositories for information and necessary action. 21. 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.

Date : October 3rd, 2016 RAJEEV KUMAR AGARWAL Place : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA