Order in the matter of Seashore Securities Ltd.[SAT Appeal No.:328/2015

WTM/PS/84/ERO/BLO/MAR/2015 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI CORAM : PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Sections 11(1), 11(4), 11A(1)(b) and 11B of the Securities and Exchange Board of India Act, 1992 In the matter of SEASHORE SECURITIES LIMITED In respect of Seashore Securities Limited, Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu

1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') had vide an ex-parte interim Order dated July 23, 2014 (hereinafter referred to as 'the interim Order'), prima facie observed that the company, Seashore Securities Limited (hereinafter referred to as 'the Company' or 'Seashore') was engaged in the mobilization of funds from the public, through the issue of 'cumulative redeemable preference shares' during the years of 2008, 2009, 2010, 2011 and 2012, in contravention of the provisions of Sections 56, 60 read with 2(36), 67 and 73 of the Companies Act, 1956, the SEBI (Disclosure and Investor Protection) Guidelines, 2000 (hereinafter referred to as 'DIP Guidelines') and the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (hereinafter referred to as 'ICDR Regulations'). The interim Order had also observed that the promoters/ directors of Seashore are Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu. In order to ensure that the Company and its promoters/ directors do not continue to collect public funds in contravention of law and to ensure that public funds are not diverted, it became necessary for SEBI to intervene and issue suitable directions vide the interim Order. Accordingly, SEBI issued the following directions vide the interim Order. "23. For the aforesaid reasons, I, in exercise of the powers conferred under Sections 11(1), 11(4), 11A(1)(b) and 11B read with Section 19 of the Securities and Exchange Board of India Act, 1992, Clause 17 of the SEBI (Disclosure and Investor Protection) Guidelines, 2000 read with Regulation 107 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, hereby, pending investigation and passing of further directions, issue the following directions: a. The company namely Seashore Securities Limited and its promoters and directors including Mr. Prashanta Kumar Dash [PAN: AENPD6409F], Mr. Pravat Kumar Dash [PAN:

AEKPD7710E], Ms. Jyotirani Sarangi [DIN: 01321926], Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena [DIN: 03419332] and Mr. Gopal Chandra Sahu [DIN: 05240823] are restrained from mobilizing funds through the issue of redeemable preference shares 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. b. Seashore Securities Limited and its promoters and directors including Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu 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. c. Seashore Securities Limited and its promoters and directors including Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu shall not dispose any of the properties of the said company or alienate the assets acquired/created through the funds raised from public by issuance of the impugned redeemable preference shares. d. Seashore Securities Limited and its promoters and directors including Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu shall not divert any funds raised from public at large through the issuance of the impugned cumulative redeemable preference shares, kept in its bank accounts and/or in the custody of the company without prior permission of SEBI until further orders. e. Seashore Securities Limited and its promoters and directors including Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities and being associated with the securities market in any manner whatsoever, directly or indirectly through any person/ entity till further direction. f. The company namely Seashore Securities Limited and its promoters and directors shall co-operate with SEBI in the investigation and shall furnish documents, that are in their possession, which may be required by SEBI in the course of its investigation. ... ..."

2. The interim Order also mentioned that the observations made therein are on the basis of the material available on record and preliminary examination by SEBI. The Company and its promoters/ directors were advised that they may file their objections, if any, within a period of 21 days from the date of receipt of the Order and 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.

3. Vide separate letters, the directors of the Company submitted their replies. The content of the same are summarised below:

a. Ms. Sapna Jena vide her letter received by SEBI on August 19, 2014, replied to the interim order and submitted that: −−−− Seashore had raised capital through issue of redeemable preference shares in terms of Section 86 of the Companies Act, 1956 and Article 9 of the Articles of Association so as to meet its capital expenditure for different projects undertaken by it and also for investment in group companies for implementing different projects either individually or jointly with Government of Odisha in Public Private Partnership mode. The issue of redeemable preference shares was made on private placement basis to friends and associates of the Company and the same cannot be construed as public issue in terms of the SEBI Regulations and the Companies Act, 1956. Seashore had never induced any public to invest in the preference shares at any point of time nor issued any prospectors to attract public to invest in such shares. −−−− The application form issued by the Company had clearly mentioned about the issuance of 'redeemable cumulative preference shares', in furtherance of which the Company would give dividend as a token of return on investment. Therefore, the interest of depositors was shown in the accounts of the Company as dividend in terms of the provisions of the Companies Act, 1956 and paid to the depositors. −−−− Redeemable preference shares is a share as defined under Section 85 of the Companies Act, 1956 and the same does not carry any voting rights. Such shares have preference in respect of dividend and redemption and the same have to be redeemed within a maximum period of 20 years under Section 80(5A) of the Companies Act, 1956. −−−− Seashore had issued 6,50,000 equity shares @

10 each and 50,26,28,060 preference shares @

10 each. Until the raid by the Crime branch and seizure of its assets, Seashore was regular in paying dividend and redemption of preference shares whenever asked for. −−−− The office premises of Seashore was found locked by SEBI as much before the visit of SEBI officials, the Crime branch of Odisha police had searched the office and factory premises of Seashore, evicted all the staffs and also sealed it. −−−− The Company has never carried on any activity which can be called as NBFC business. −−−− Ms. Shantiprava Dash was neither a director nor holds any official position in the Company. She was a mere shareholder of the Company and subscribed to the Memorandum of Association and Articles of Association of the Company to the tune of 10 shares amounting to 100 only in order to accomplish the mandatory requirement of incorporation under the Companies Act, 1956 and her liability was limited only to the extent of her subscribed shares in the Company. The interim order has implicated her for the alleged action for which she was not responsible for. −−−− Mr. Pravat Kumar Dash was appointed as a director of Seashore for a short duration and resigned since long.

Allegations regarding the applicable sections of the SEBI Act were not during his tenure, hence, implicating him on the subject is not fair. −−−− The induction of Mr. Gopal Chandra Sahu into the Company as a Director of 'S-TV Samachar', a subsidiary of Seashore was made with his due consent, the proof of which was there in the relevant form 32. −−−− As regards, the 6,00,000 preference shares allotted to Mr. Prashanta Kumar Dash, Managing Director, it has been said that the amount has been collected by the Company to some extent as application money and the rest amount was treated as call in arrear due for collection. −−−− The major outflows of Seashore's fund towards its group companies are as per the applicable mandatory provisions of the Companies Act, 1956, with a hope of getting adequate return in future. −−−− As regards, the issuance of cumulative preference shares to more than 50 persons, the same was inadvertently done as the issue was entirely made with the intention of making private placement. For the violation of all the applicable provisions, Seashore is ready for the compounding and in order to abide by the terms of Section 73(2) of the Companies Act, the Company is also ready to refund the amount with interest that was collected from the investors provided the Crime Branch of Odisha Police releases the cessation and make the Company free, allow it to do the business, so that out of the earned money, it can repay the genuine investors. −−−− Due to the seizure of operations of Seashore, the Company cannot act and hence there is no question of violation of any of the orders passed by SEBI.

b. Mr. Pravat Kumar Dash vide his letter received by SEBI on August 19, 2014, replied to the interim order and submitted that he was appointed as a director of Seashore for a short duration and he had resigned since long. It was also submitted by him that the violations as alleged in the interim order were not of during his tenure.

c. Ms. Shantiprava Dash, Mr. Manoj Kumar Nath and Ms. Prativa Dash, vide their respective letters received by SEBI on August 19, 2014, submitted common reply to the interim order i.e. they were neither directors nor held any official position in Seashore, affecting any decision in this regard. They were the shareholders of Seashore right from the beginning and had subscribed to the Memorandum of Association and Articles of Association of the Company to the tune of 10 shares each, amounting to 100 each only in order to accomplish the mandatory requirement of incorporation under the Companies Act, 1956 and their liability was limited only to the extent of the subscribed shares in the Company. The interim order had implicated these for the alleged action for which they are not responsible for.

d. Mr. Gopal Chandra Sahu replied to the interim order vide his letter dated August 12, 2014 and submitted as under: −−−− Seashore was incorporated in the year 2008 by its chief promoter Prashant Kumar Das, his wife Ms. Jyotirani Sarangi and his younger brother Pravat Kumar Dash. Seashore had several business activities including an electronic media unit known as 'S-TV Samachar'. He was contacted by the officials/ directors of Seashore to work for the media unit i.e. 'S-TV Samachar' on salary. Thereafter, he joined 'S-TV Samachar', w.e.f. from October 09, 2010 as 'Advertisement Sales Executive'. He continued as a paid employee till the month of March 2013. The Company is yet to pay his arrear salary for the last six months. He and his family are dependent on his monthly salary/ wages and at present he is in distressed financial condition. −−−− While working with 'S-TV Samachar', he was designated as the 'Executive Director'. In March 2012, he came to know that he had been inducted as a Director in the Board of Directors of the Company w.e.f. from March 05, 2012 and 'Form 32' in this regard had been filed before the RoC, Cuttack, Odisha, without his consent and forging his signature. On this, he had approached the Chairman of Seashore, Mr. Prashant Kumar Das for deletion of his name from the Board of Directors of the Company, but all his requests went in vain. Thereafter, vide his letter dated August 01, 2012, he tendered his resignation retrospectively from the date of induction. However, Chairman and the other directors of Seashore had not taken any action on it. Thereafter, he filed a civil suit in the Court of Civil Judge, Junior Division, which was pending for disposal. He had not lodged the FIR with police as his plea would not have believable till the said civil suit is pending. Further, he could not have managed and tackled the consequences of filing a FIR, before the police. −−−− He was never associated with the management or the decision making process of Seashore. It was also said by him that the relevant records of Seashore were in the possession of Mr. Prashant Kumar Das, Chairman and his family members. −−−− He would co-operate with the process of inquiry by SEBI as and when his presence would be required.

e. Mr. Surath Das replied to the interim order vide his letter dated August 16, 2014 and submitted as under: −−−− He had joined Seashore Consultancy Pvt. Limited (a group company of Seashore) as an employee/ record officer on September 01, 2007, in fixed salary. The managing director of Seashore had transferred him within the other group companies. He was transferred from Seashore Consultancy Pvt. Limited to Seashore Funds Management Limited on November 01, 2007. He was again transferred to Seashore Securities Limited on May 01, 2009. −−−− No money of Seashore was diverted to his account except the salary. He had never signed any document either as a promoter or as a director of Seashore. If any documents were signed in his name, the same are forged and fabricated.

f. Mr. Sudhansu Shekhar Pati vide his letter received by SEBI on September 03, 2014, replied to the interim order and submitted that: −−−− He was an employee of one M/s NAD Pvt. Limited at its Raipur Head Office since 2007. Mr. Prashanta Kumar Dash, Managing Director of Seashore was known to him while he was working at Cuttack, Odisha. Prashanta Kumar Dash had approached him for becoming a director of Seashore. There were only 3 directors (statutory minimum) at the time of incorporation of Seashore and he was taken as a director for the limited purpose and had not participated in any of the business of the board of directors any time as he had consented to be a director for a temporary period and only for the purpose of statutory compliance. −−−− Later, he forgot to remind Prashanta Kumar Dash about his resignation. He reminded him for the same on February 03, 2012 and his resignation was duly approved in the Extra-ordinary General Meeting on March 05, 2012 and was filed at RoC, Cuttack on April 02, 2012.

−−−− He was not a person in charge of the business of the Company. The allegation against the Company have occurred without his knowledge and he was not in any way accessible or responsible for any of the business of Seashore. In this regard, he relied on the orders of Hon'ble Supreme Court. −−−− It was said that he had shares of a few listed companies in his demat account which are his life time saving for future necessities and he requested for release of restriction from his demat account.

4. As the letter forwarding the interim order in respect of Seashore and Mr. Prashanta Kumar Dash had returned undelivered, SEBI forwarded the same to the Superintendent of Police, Economic Offence Wing, vide letter dated September 17, 2014, requesting for the delivery thereof. The same was duly served on Seashore and Mr. Prashantha Kumar Dash on October 09, 2014, in the District Jail, Koraput.

5. Before proceeding further in the matter, an opportunity of personal hearing was granted to Seashore and its promoters/ directors on October 29, 2014. On the date fixed Mr. Surath Das and Mr. Gopal Chandra Sahu appeared for the personal hearing and made submissions. On behalf of other noticees, Ms. Sapna Jena vide email dated October 28, 2014, requested for rescheduling of the personal hearing. This request was duly considered and the hearing was rescheduled to December 02, 2014. Again, Ms. Sapna Jena vide her letter dated November 29, 2014, wrote on her behalf and also for Seashore and 6 other noticees namely Prashanta Kumar Dash, Ms. Jyotirani Sarangi, Manoj Nath, Ms. Prativa Dash, Pravat Kumar Dash and Ms. Shantiprava Dash again requested for extension of two months. Vide this letter, it was also submitted by her that all the documents of the Company and computer peripheries were seized by the Crime Branch, Odisha Police. It was also said that the main promoter director well versed with the facts of the case namely Prashanta Kumar Dash was in CBI custody and without him, it would be very difficult to prepare any reply in the matter. The plea made by Ms. Sapna Jena vide her letter appeared to be a delaying tactic as Seashore or any of its directors had till date not provided any documents relevant to the present proceedings to SEBI. However, in the interest of natural justice, one last opportunity of hearing was granted on December 19, 2014.

6. Vide email dated December 18, 2014, SEBI received a letter dated December 18, 2014, from Ms. Sapna Jena, writing on behalf of herself, Seashore and 6 other noticees namely Prashanta Kumar Dash, Ms. Jyotirani Sarangi, Manoj Nath, Ms. Prativa Dash, Pravat Kumar Dash and Ms. Shantiprava Dash requested for an adjournment citing similar problems as communicated vide the letter dated November 29, 2014. It was also said that steps were initiated to prepare and finalize the reply on the information and documents available and requested for 15 days further time, to file the reply. I note that the noticees were citing same reasons for seeking adjournment. The same as discussed above appears to be delay tactics by the Company and its directors. There are other persons who are members of the board of directors of Seashore, other than Mr. Prashanta Kumar Dash. In view of the same, I am of the considered view that granting further opportunities of personal hearing in the matter, may not serve any purpose.

7. Considering the fact that reasonable opportunities to the Company, its promoters and directors have already been afforded for making their submissions in the matter, I note that the principles of natural justice have been duly complied with in the present proceedings. In view of the same, the matter is being proceeded, based on the material available on record.

8. Thereafter, SEBI received written submissions dated December 22, 2014 and December 23, 2014 signed by Ms. Sapna Jena on behalf of herself, Seashore and 6 other noticees namely Prashanta Kumar Dash, Ms. Jyotirani Sarangi, Manoj Kumar Nath, Ms. Prativa Dash, Pravat Kumar Dash and Ms. Shantiprava Dash. Ms. Shantiprava Dash, Surath Dash and Manoj Kumar Nath also submitted that those submissions were additional replies in response to the interim order. The submissions in brief are as under: a. Mr. Prashanta Kumar Dash, Ms. Jyotirani Sarangi and Mr. Pravat Kumar Dash were the first directors of Seashore from the date of incorporation and accordingly 'form 32' was filed with the RoC on April 21, 2008. Therefore, although the noticees namely Ms. Shantiprava Dash, Ms. Prativa Dash, Surath Dash and Manoj Kumar Nath were subscribers/ signatories to the Memorandum of Association, they were never involved in the management of the Company. It was requested that the direction issued against these may be lifted/ removed immediately. The 'officer who is in default' as defined under Section 5 of the Companies Act, 1956, was only held responsible for the violation of most of the provisions of the Companies Act.

b. The main promoter director of Seashore namely Mr. Prashanta Kumar Dash, who was well versed with the facts of the case is in CBI custody and it was very difficult to prepare any reply in the matter without his active contribution. All the documents of Seashore were seized by Odisha Police and therefore preparation of reply without such documents was not possible. c. Seashore has issued 50,32,28,060 'redeemable preference shares' on private placement basis in compliance with the relevant provisions of the Companies Act, 1956. They complied with all the relevant provisions of the Companies Act pertaining to the issue of 'redeemable preference shares'. In compliance with the provisions of Section 75(1) of the Companies Act, Seashore had filed return of allotment with RoC, in prescribed 'Form 2' giving the details about the number of allottees, nominal amount of shares comprised in the allotment, names, addresses and occupation of the allottees, etc. The non-compliance of the provisions relating to the deemed public issue had occurred merely due to ignorance of the provisions. Such technical default had to be viewed leniently.

The Company was committed to redeeming the 'redeemable preference shares' on their due dates as also paying the total redemption amount to the investors. d. Seashore had issued 'redeemable preference shares', the relevant board resolutions, shareholders' resolution and the 'share certificate' unambiguously stated that the preference shares were redeemable in nature and the same did not provide any option of conversion into equity shares. The clause for conversion of shares into equity in the application form was an inadvertent error and the same could not change the basic character of 'non-convertible preference shares'. Further, the terms and conditions of the issue of redeemable preference shares could not be altered without following the due process of law (i.e. Section 106 of the Companies Act, 1956). e. Sections 56, 67 and 73 of the Companies Act, 1956 were not applicable in the case of Seashore as it had never intended to make public issue or to list the preference shares on stock exchanges. 'Redeemable Preference shares' are neither regulated by ICDR Regulations or DIP Guidelines.

DIP Guidelines only govern IPO, FPO and issue of equity shares and convertible/ non-convertible debt instruments. The IPO related provisions for unlisted companies and listed companies as provided under clause 2.2 and 2.3 respectively, of the DIP Guidelines were applicable for equity shares and convertible securities. Clause 10 of the DIP Guidelines discussed about the guidelines for issue of debt instruments. SEBI has framed SEBI (Issue and Listing of Debt Securities) Regulations, 2008 for the purpose of governing non-convertible debt securities. It was also said that preference shares were part of the share capital and cannot be treated as debt instrument.

f. ICDR Regulations was also not made applicable to the issue of 'non-convertible redeemable preference shares'. ICDR Regulations define 'specified securities' as equity shares and convertible securities and the same did not cover 'non-convertible redeemable preference shares'. g. SEBI framed SEBI (Issue and Listing of Non-convertible Redeemable Preference Shares) Regulations, 2013, in June 12, 2013, for regulating the issue and listing of 'Non-convertible Redeemable Preference shares'. h. Seashore had issued 6,00,000 equity shares and not preference shares to Mr. Prashanta Kumar Dash. i. They did not have details/ information in respect of inter-corporate loans and terms and conditions of the same as all the documents of the Company are seized by Odisha Police. j. While relying on Section 24 of the Companies Act, 2013, it was submitted that SEBI has no power whatsoever to govern the redemption of preference shares. k. The Company did not float any 'ponzi' schemes and raised the funds from the public. l. SEBI may remove/ lift all the directions given vide the order dated July 23, 2014, if the said directions were not removed/ lifted/ modified, Seashore would not be able to redeem the 'redeemable preference shares'/ refund the amount to the investors.

9. I have considered the allegations leveled in the interim Order, the material relied upon therein and the submissions and documents provided by the promoters/ directors of Seashore. The interim Order, based on certain documents, observed that the 'cumulative redeemable preference shares' issued by Seashore with an option to convert such shares into equity in the Company are 'specified securities' within the ambit of Regulation 2(1)(zj) of the ICDR Regulations. The interim order has also alleged that Seashore has not complied with the provisions regulating to the public issue of securities of the Companies Act, 1956, including Sections 60B(2), 60B(9) read with Sections 2(36), 56(1), 56(3) and 73 of the Companies Act, 1956. Considering the above, the limited issue to be considered and decided in this proceeding is whether, based on the material available on record and after considering the submissions made, the directions issued by SEBI vide the interim Order needs to be continued, revoked or modified in any manner.

10. SEBI while passing the interim Order relied upon various documents including sample application form for preference shares, sample agreement, documents received from RoC, Cuttack, etc. Seashore and its promoters/ directors did not dispute the issuance of 50,32,28,060 redeemable preference shares during 2008-2009, 2009-2010, 2010-2011, 2011-2012, 2012-2013 except the argument that option of conversion to equity was not there. I note that a total of 503,22,80,600 was mobilised from 76,758 investors during the relevant period through the subscription received against the issuance of redeemable preference shares.

11. The Company and its promoters/ directors have submitted that: a. it is not a listed entity and was only making a private placement of cumulative redeemable preference shares, b. such cumulative redeemable preference shares had no option of conversion into equity, and c. non-compliance of certain provisions of the Companies Act, 1956 was unintentional and the same occurred on account of incorrect understanding of the relevant provisions.

12. As alleged in the interim order, Seashore had issued cumulative redeemable preference shares to 76,758 investors. The Company has contended that it had made a private placement of securities and that it is not listed in a stock exchange. To determine, whether an issue of securities is done on private placement or made to the public, reference has to be made to Section 67 of the Companies Act, 1956, which, reads as under: "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) ... (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).” In terms of the Section 67(3)(a) and (b) a private placement is one in which (i) the shares/ debentures which are available for subscription/ purchase is not received by a person, either directly or indirectly, who has not received the offer or invitation to subscribe, (ii) domestic concern of the persons making and receiving the offer or invitation.

In this case, as the Company has contended that it made a private placement, it has the onus to prove that the securities were subscribed to only by the persons to whom the offer was made or that it was a domestic concern of the persons making and receiving the offer or invitation. The Company has failed to substantiate the above, with proof.

As per the first proviso to Section 67(3) of the Companies Act, 1956, if the offer or invitation is made to more than 50 persons, the provisions of Section 67(3)(a) and (b) do not apply. Accordingly, any offer made to more than 50 persons is a public issue. As alleged in the interim order, the Company had made an offer and issued the securities to 76,758 persons. Accordingly, as per the first proviso to Section 67(3), the Company had made a public offer of cumulative redeemable preference shares.

Also a perusal of the copy of the 'application form' reveals that the same does not contain the name of the person to whom it was issued, which indicates that the issue was surely not a private placement. Under normal circumstances, the application forms are serially numbered and addressed to the recipients in a private placement, which means it is circulated only among a known set of persons. However, in the present case these features are missing.

13. Another argument of Seashore is that the cumulative redeemable preference shares issued by it had no option of conversion into equity and therefore neither DIP Guidelines nor the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 were applicable to the preference shares. In support of this argument, the promoters/ directors of Seashore relied upon the relevant board resolutions, shareholders' resolution and the 'share certificate'. It was also said that these documents unambiguously stated that the preference shares issued by Seashore are redeemable in nature and that the same do not provide any option of conversion into equity shares. It was also said that the terms and conditions of the issue of 'redeemable preference shares' cannot be altered without following the due process of law (i.e. Section 106 of the Companies Act, 1956) and inadvertent inclusion of a clause for conversion of shares into equity in the application form cannot change the basic character of 'non-convertible preference shares'.

I note that the promoters/ directors of Seashore have provided a copy of the 'share certificate' along with the letter dated December 23, 2014, which only states "24% cumulative redeemable preference shares of Rs.10/- each, fully paid-up". It is seen that although the promoters/ directors of Seashore relied upon the board resolution and the shareholders' resolution, they have failed to submit copy of either the board resolution or the shareholders' resolution to show that no option of conversion into equity was given by Seashore to the respective allottees. In the absence of such documents, the 'application form' as relied on the interim order becomes all the more relevant for deciding the contention raised by the promoters/ directors of Seashore. The 'terms and conditions' as set out in the 'application form' (elaborately discussed in para 5 of the interim order) clearly states "...The preference shares are redeemable after 6 years from the date of issue/ allotment. However, the holder of preference shares may opt for conversion for such shares to equity in the company ...".

In view of the above discussions, the argument of Seashore that DIP Guidelines and ICDR Regulations have no applicability with respect to the issuance of redeemable preference shares by it have no merit. Further, Seashore cannot escape its liability from complying with the relevant provisions of the Companies Act, 1956 relating to the public issue and the SEBI Act and the regulations framed thereunder.

14. As regards, the submission that non-compliance of certain provisions of the Companies Act, 1956 was unintentional and that the same occurred on account of incorrect understanding of the relevant provisions, I note that ignorance of law is not a valid explanation for non-compliance of the relevant provisions.

15. I note that the interim Order had observed the manner in which Seashore had mobilized public funds through the issue of cumulative redeemable preference shares during 2008-2009, 2009- 2010, 2010-2011, 2011-2012, 2012-2013, in breach of the public issue norms as stipulated under the SEBI Act, Companies Act, 1956, the DIP Guidelines (since repealed) and ICDR Regulations.

16. I also note the following observations made in the interim Order: "9. As Seashore has issued and allotted the cumulative redeemable preference shares to more than 50 persons, I observe that the Company had prima facie made public issue of such shares during the years of 2008, 2009, 2010, 2011 and 2012. Therefore, Seashore ought to have complied with the applicable provisions of the Companies Act, 1956, the SEBI Act, the rules, regulations, guidelines framed thereunder. 10. Having observed that the cumulative redeemable preference shares issued by Seashore are prima facie in the nature of public issue, now, the securities so issued require to be listed on a recognized stock exchange, as mandated under Section 73 of the Companies Act, 1956. ... ... ... ... As Seashore had issued the cumulative redeemable preference shares to fifty persons or more and has failed to ensure listing of these with a recognised stock exchange, therefore, the same is prima facie in violation of the Section 73(1) of the Companies Act, 1956. Further, as per Section 73(2) of the Companies Act, 1956, Seashore has the mandatory obligation to refund the amount with interest that was collected from the investors under the cumulative redeemable preference shares is mandatory on Seashore.

11. I note that in terms of the Section 2(36) read with Section 60 of the Companies Act, 1956, a company needs to register its 'prospectus' with the RoC, before making a public offer/ issuing the 'prospectus'. Seashore was required to register a prospectus with the RoC under Section 60 of the Companies Act, 1956, if it has made a public offer. Further, in terms of Section 56(1) of the Companies Act, 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, contain disclosures as specified. Having considered the above, I find that Seashore has not prima facie complied with the provisions of Section 56(1) and 56(3) of the Companies Act, 1956. 17. Seashore has argued that it had never intended to make public issue to list the preference shares on stock exchanges. In this regard, I note that the Company has allotted 'cumulative redeemable preference shares' to more than 49 persons and it had to compulsorily list such securities in compliance with Section 73 of the Companies Act, 1956. The other relevant provisions i.e. Sections 56, 60 and 67 were also be complied with.

18. I note that Seashore and its promoters/ directors have not submitted any details of loans to the group companies/ associates for the reasons that all the documents of the Company have been seized by Odisha Police. Further, I also note that Seashore in its Directors' Report dated September 03, 2010, had expressed their plans to list the shares of the Company on the stock exchanges. From the same, it can be said that Seashore with false information in the Directors' report was luring the public to invest in the securities issued by Seashore, as it had taken no steps towards the listing of its securities.

19. I have perused the 'extract of meeting of board of directors' held on various dates between June 02, 2008 to April 27, 2012 as extracted from the 'MCA 21' Portal and note that such meetings were attended by Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Sudhansu Shekhar Pati, Ms. Sapna Jena, Mr. Gopal Chandra Sahu during their relevant terms. - I note that the submissions made by Mr. Gopal Chandra Sahu in reply to the interim Order are similar to his submission dated March 06, 2014 and have been duly considered in the interim Order. Upon consideration of such submissions the interim Order has observed the following: "... Mr. Gopal Chandra Sahu became director of Seashore on March 05, 2012 and the civil suit has been filed by him in the year 2013. Further, he has not approached the police as the fraud and forged practice as alleged are offences of criminal nature. It appears that even the civil suit filed by him is still pending. In the absence of such documents, it would not be appropriate to give credence to such submission of Mr. Gopal Chandra Sahu, at this stage. ..."

As regards Gopal Chandra Sahu, the noticee namely Ms. Sapna Jena in her submissions dated August 19, 2014, has submitted that the induction of Gopal Chandra Sahu, as a director of S- TV Samachar' was made with his due consent. I note that the submissions made by Gopal Chandra Sahu and Sapna Jena require to be examined and confirmed independently. - Mr. Surath Das in his submissions to SEBI has pleaded that he was only an employee of Seashore and used to get a fixed salary and he had never signed any document either as a promoter or as a director of Seashore. It has also been said by him that if any documents are signed in his name, the same are forged and fabricated. I note that the allegations made by Surath Das are very serious and needs to be examined in detail before reaching any conclusion, in this regard. - Ms. Shantiprava Dash, Mr. Manoj Kumar Nath and Ms. Prativa Dash, vide their respective letters have submitted that they were the shareholders of Seashore right from the beginning and had subscribed to the Memorandum of Association and Articles of Association of the Company to the tune of 10 shares each, amounting to 100 each only in order to accomplish the mandatory requirement of incorporation under the Companies Act, 1956. It has also been said that they neither were the directors nor held any official position in Seashore, affecting any decision in this regard.

At this stage, I note that Seashore had started issuing 'cumulative redeemable preference shares' immediately after incorporation. This gives all the more reasons to conclude that these persons being the promoters of Seashore had played important role in collection of money from investors. In view of the same the role of these persons needs to be examined in details before reaching to any conclusion. - Mr. Sudhansu Shekhar Pati in his submissions has said that he was taken as a director of Seashore for the limited purpose and had not participated in any of the business of the board of directors any time. It has also been argued by him that he was not a person in charge of the business of Seashore. The submissions made by Sudhansu Shekhar Pati are incorrect as the available record shows that he was present as director during all the meetings of board of directors from November 03, 2008 to January 11, 2012. In view of the same, the submissions made by Sudhansu Shekhar Pati cannot be considered.

Considering the above discussions, I am of the opinion that it would not be appropriate to give any conclusive findings with respect to any fact or submissions made by Ms. Shantiprava Dash, Mr. Manoj Kumar Nath and Ms. Prativa Dash, Gopal Chandra Sahu, Surath Das and Mr. Sudhansu Shekhar Pati. The objections/ submissions made by the promoters/ directors of Seashore would be considered in detail by the investigation/ examination before coming to any conclusion in respect of them, in the matter. Therefore, at the present stage, as the investigation in the matter is in progress, I do not find it fit to modify/ revoke the interim Order, till the completion of investigation in the matter. I am convinced that the directions in the interim Order in respect of the Company and its promoters/ directors needs to be continued, till further directions. Needless to say, the same would be reviewed after the conclusion of investigation.

20. Considering the above alleged violations committed by the Company and its promoters/ directors of the provisions of the SEBI Act, Companies Act, 1956, DIP Guidelines and ICDR Regulations in respect of its issuance of 'cumulative redeemable preference shares' during the relevant period as detailed in the interim Order, the objections filed by Seashore and its promoters/ directors, there appears no need to modify or vacate the directions issued vide the interim Order. All the directions issued vide the interim Order, therefore, need to be confirmed with respect to the company, Seashore Securities Limited and its promoters/ directors including Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu.

21. Accordingly, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 and sections 11(1), 11(4), 11A and 11B thereof read with clause 17 of the SEBI (Disclosure and Investor Protection) Guidelines, 2000 and regulations 107 and 111 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, hereby confirm all the directions issued against Seashore Securities Limited [PAN: AALCS9420L] and its promoters/ directors including Mr. Prashanta Kumar Dash [PAN: AENPD6409F], Mr. Pravat Kumar Dash [PAN: AEKPD7710E], Ms. Jyotirani Sarangi [PAN: ATYPS3889C; DIN: 01321926], Mr. Surath Das [PAN: ALVPD8457D], Ms. Shantiprava Dash, Mr. Manoj Kumar Nath [PAN: ADEPN2533N], Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati [PAN:

AONPP6949L], Ms. Sapna Jena [PAN: AJBPJ8557H; DIN: 03419332] and Mr. Gopal Chandra Sahu [PAN: AXCPS5392Q; DIN: 05240823] vide SEBI order dated July 23, 2014.

22. Seashore Securities Limited and its promoters/ directors including Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu shall 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 within a period of 15 days from the date of this Order.

23. SEBI shall conclude its examination in the matter at the earliest and initiate appropriate action in accordance with law against Seashore Securities Limited and its promoters/ directors including Mr. Prashanta Kumar Dash, Mr. Pravat Kumar Dash, Ms. Jyotirani Sarangi, Mr. Surath Das, Ms. Shantiprava Dash, Mr. Manoj Kumar Nath, Ms. Prativa Dash, Mr. Sudhanshu Shekhar Pati, Ms. Sapna Jena and Mr. Gopal Chandra Sahu.

Place: Mumbai PRASHANT SARAN Date: March 18th, 2015 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA