Order in the matter of Rising Agrotech Limited

Under sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992, in the matter of Rising Agrotech Limited (PAN: AAECR8598R) and its Directors, viz., Shri Siddhartha Kayal (DIN: 02699764; PAN: AFCPK5677G), Shri Dipan Kumar Sen (DIN: 02921533; PAN: BUIPS8288K), Shri Sushovan Roy (DIN: 06821704; PAN: AMAPR4988C) and Shri Bikash Bhandary (DIN: 06613052; PAN: ANFPB7121D).

1.1 Rising Agrotech Limited ("RAL "), having its Registered Office at 35/1, Kali Temple Road, 3rd Floor, Kolkata-700026, with CIN No. as U01403WB2010PLC151266, was incorporated on July 13, 2010. 1.2 Securities and Exchange Board of India ("SEBI") received a complaint dated May 3, 2013, from an investor alleging issue of shares by “RAL". 1.3 On enquiry by SEBI, it was observed that RAL had offered and issued Preference Shares to 564 persons in the year 2011-12 and 432 persons in the year 2012-13 ("hereafter referred to as Offer of Preference Shares"), and collected an amount of Rs. 135.20 lakhs in total. 1.4 As the above said Offer of Preference Shares was found prima facie in violation of respective provisions of the SEBI Act, 1992 ("SEBI Act"), the Companies Act, 1956, SEBI passed an interim order dated September 9, 2014 and issued directions mentioned therein against RAL and its Directors, Shri Siddhartha Kayal, Shri Dipan Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary. 2.1 Prima facie findings/allegations: In the said interim order the following prima facie findings/allegation were recorded. RAL made an Offer of Preference Shares to, 564 persons and raised Rs. 94.27 lakhs in the year 2011-12 and 432 persons in the year 2012-

13 and raised Rs. 40.93 lakhs. The said Offer of Preference Shares and pursuant allotment was a deemed public issue of securities under the first proviso to Section 67(3) of the Companies Act, 1956, Accordingly, the resultant requirement under Sections 60, 56(1), 56(3), 73(1) (2) (3) of the Companies Act,1956 were not complied with by RAL. 2.2 In view of the prima facie findings on the violations, the following directions were issued in the said interim order dated September 9, 2014 with immediate effect. i. RAL shall not mobilize funds from investors through the Offer of Preference Shares or through any other securities, to the public and/or invite subscription, in any manner whatsoever, either directly or indirectly, till further orders; ii. RAL and its present Directors, viz. Shri Siddhartha Kayal, Shri Sushovan Roy and Shri Bikash Bhandary, along with its past Director, Shri Dipan Kumar Sen 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. RAL 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. RAL shall provide a full inventory of all its assets and properties; v. RAL 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 Preference Shares, without prior permission from SEBI; vi. RAL and its abovementioned present Directors shall not divert any funds raised from public at large through the Offer of Preference Shares, which are kept in bank account(s) and/or in the custody of RAL; vii. RAL and its abovementioned present Directors shall, within 21 days from the date of receipt of this Order, provide SEBI with all relevant and necessary information, as sought vide SEBI letters dated July 29, 2013, September 23, 2013, January 30, 2014 and July 25, 2014.

3.1 Vide the said interim order RAL and its abovementioned Directors 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 desire to avail themselves 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 letter dated September 11, 2014. The copy of the interim order sent to the Company returned undelivered and therefore pasting was done in the office premises. The copies of the interim order sent to Shri Siddhartha Kayal and Shri Bikash Bhandary were delivered. The interim order sent to Shri Sushovan Roy returned undelivered with postal remarks “Not Known”. The interim order sent to Shri Dipan Kumar Sen did not return undelivered. 4.2 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, RAL and the directors 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.

4.3 Hearing and submissions: Neither RAL nor the directors of RAL availed the opportunity of hearing held on April 22, 2015. They did not file any submissions controverting the allegations leveled against them. 5.1 I have considered the allegations, and materials on record including documents consideration. Each question is dealt with separately under different headings. 1. Whether the company came out with the Offer Of Preference Shares? 2. If so, whether the said issues are in violation of Section 60, Section 56(1) and 56(3), Sections 73(1) (2) (3) of the Companies Act,1956? 3. If the findings on question No.2 are found in the affirmative, who are liable for the violation committed? 6.1 Whether the company came out with the Offer Of Preference Shares?: I have perused the interim order dated September 9, 2014 for the allegations of Offer of Preference Shares and other materials on record. The company and the directors have not disputed the said issuance by any oral or written representations. 6.2 I have also perused the documents/ information obtained from the 'MCA 21 Portal', other documents filed before the Registrar of Companies.

The perusal of Form 2 filed pursuant to the allotment dated September 23, 2011, December 05, 2011, January 05, 2012, March 16, 2012 and March 31, 2012, show that RAL made an Offer of Preference Shares to 564 persons and raised Rs. 94.27 lakhs in the year 2011-12 and the perusal of Form 2 filed pursuant to the allotment dated May 31, 2012 and July 17, 2012 shows that RAL made an Offer of Preference Shares to 432 persons and raised Rs. 40.93 lakhs in 2012-13. Thus, a total of Rs. 135.20 lakhs has been collected as on 2012-2013. 7.1 If so, whether the said issues are in violation of Section 60, Section 56(1) and 56(3), Sections 73(1) (2) (3) of the Companies Act,1956?: The provisions alleged to have been violated and mentioned in Issue No.2 are applicable to the offer made to the public. Therefore, the primary question that arises for consideration is whether the issuances of preference shares covered in Issue No 1 are 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).” 7.2 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.(Emphasis supplied) 7.3 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. However, the second proviso to Section 67(3) exempts NBFCs and Public Financial Institutions from the applicability of the first proviso. 7.4 In the instant case, as the Offer of Preference Shares and allotment was made by RAL to 564 persons and Rs. 94.27 lakhs was raised in the year 2011-12 and to 432 persons and Rs. 40.93 lakhs was raised in 2012-13, the Offer of Preference Shares falls within the first proviso of section 67(3) of Companies Act, thereby, such issues are deemed to be public issues and was mandated to comply with the 'public issue' norms as prescribed under the Companies Act, 1956. 7.5 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. 7.6 The allegation of non-compliance of the above provisions was not denied by the company or directors. Neither the company nor the directors produced any record to show that RAL has 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, RAL and the persons responsible for the failure to issue prospectus, have not complied with Sections 56(1), 56(3) and 60 of the Companies Act, 1956. 7.7 Further, by issuing preference shares as found above, RAL 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, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt with in the stock exchange and if permission has not been applied for or not granted, the company is required to forthwith repay with interest all moneys received from the applicants. 7.8 The allegation of non-compliance of the above provisions was 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, RAL has contravened the said provisions also. RAL has not provided any records to show that the amount collected by RAL are kept in a separate bank account.

Therefore, I find that RAL 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. 7.9 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" 7.10 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. 7.11 In view of the forgoing findings, I am of the view that RAL is engaged in fund mobilizing activity from the public, through the offer and issuance of preference shares and has contravened the provisions of sections 56, 60 and 73 of the Companies Act, 1956. 8.1 If the findings on question No.2 are found in the affirmative, who are liable for the violation committed?. 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 a party to the issue of the prospectus as per the said section. 8.2 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 eight 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. 8.3 On perusal of the copy of the extract of "Register of directors, managing directors, manager and secretary" sent by Registrar of Companies, West Bengal vide its letter dated December 05, 2014 to SEBI, I find that Shri Dipan Kumar Sen was director from July 13, 2010 to February 21, 2014. Further, Shri Siddhartha Kayal appointed on July 13, 2010, Shri Sushovan Roy appointed on February 20, 2014 and Shri Bikash Bhandary appointed on June 24, 2013 are the present directors of the company.

8.4 In view of the provisions of law, Shri Siddhartha Kayal, Shri Dipan Kumar Sen are officers in default as they were acting as directors responsible for the fund mobilistion The liability of the company to repay under section 73(2) 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 officers in default in not making the refund, if the company does not repay the money collected, as mandated in section 73(2) of the Companies Act, 1956. 8.5 Shri Bikash Bhandary appointed on June 24, 2013 and Shri Sushovan Roy appointed on February 20, 2014, being the directors who have joined subsequent to the impugned allotment, have failed to report the wrong doings of the Company. The very inaction by them 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 Bikash Bhandary and Shri Sushovan Roy have also not taken any steps to remedy the violations committed. Therefore, I hold Shri Bikash Bhandary and Shri Sushovan Roy also to be 'officers in default' and hence liable for the contraventions found against the Company and also for the consequences of such violations. 8.6 Therefore, Shri Siddhartha Kayal, Shri Dipan Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary being the directors are responsible for the noncompliance of the above provisions. 8.7 From the details received from ROC, subsequent to the passing of interim order, it is noted that one Ms. Lina Kayal was the director of the company during the period of fund mobilization. In view of this, SEBI may, on further verification of the facts, proceed in respect of this director, in accordance with law. 9.1 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 Company, its directors Shri Siddhartha Kayal, Shri Dipan Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary, to refund the monies collected, with interest to such investors.

Orderly development of the securities market depends on the participation of law abiding entities in securities market. In view of the violations committed by the Company and its directors, to safeguard the interest of the investors who had subscribed to such preference shares 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. 9.2 In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11(1), 11(4), 11A and 11B thereof hereby issue the following directions:

a) The Company, namely, Rising Agrotech Limited and its directors Shri Siddhartha Kayal, Shri Dipan Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary, shall forthwith refund the money collected by the Company through the issuance of preference shares with returns that were promised by the Company to its investors. In case of delay in making the repayments, the Company and present directors, shall jointly and severally, return the money collected from its investors with an interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became due (in terms of Section 73(2) of the Companies Act, 1956) to the investors till the date of actual payment.

b) The repayments and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order.

c) Rising Agrotech 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) Rising Agrotech Limited and its directors, namely, Shri Siddhartha Kayal, Shri Dipan Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary, 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, Rising Agrotech Limited and its directors, namely, Shri Siddhartha Kayal, Shri Dipan Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary, 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) Rising Agrotech Limited and its directors Shri Siddhartha Kayal, Shri Dipan

Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary 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 of Rising Agrotech Limited and its directors, namely, Shri Siddhartha Kayal, Shri Dipan Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary, 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.

h) Rising Agrotech Limited and its directors, namely, Shri Siddhartha Kayal, Shri Dipan Kumar Sen, Shri Sushovan Roy and Shri Bikash Bhandary, 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 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 years from the date of completion of refunds to investors.

i) The above directions shall come into force with immediate effect. 10.1 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 Rising Agrotech Limited, its promoters, directors and other key persons. 10.2 Copy of this Order shall be forwarded to the recognised stock exchanges and depositories for information and necessary action. 10.3 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 : 03 August, 2015 PRASHANT SARAN Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA