Order in the matter of Swarnabhumi Developers Limited

WTM/PS/189/ERO/MAR/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 In the matter of Swarnabhumi Developers Limited In respect of: 1. Swarnabhumi Developers Limited [PAN: AANCS2816A], 2. Mr. Biswanath Bhattacharya [PAN: AHTPB8323P], 3. Mr. Sanjoy Kumar Layek [PAN: ABWPL7019B], 4. Mr. Ranjit Kumar Sarkar [PAN: ASWPS3499R], 5. Mr. Himangshu Kumar Guha [PAN: ACZPG4691E], 6. Mr. Prakash Mandal [PAN: AUTPM0257E] and 7. Mr. Sudip Kr. Barua [PAN: AEGPB5442M]. Date of Hearing: September 03, 2015 Appearances: Mr. Soubhik Chakraborty, Advocate and Mr. Jagat Charan Ghosh, Advocate appeared for the Company; Ms. Arati Guha and Mr. Dehojyoti Sen appeared for Mr. Himangshu Kumar Guha; Mr. Sudip Kr. Barua appeared in person For SEBI: Mr. Prashanta Mahapatra, General Manager; Mr. N. Murugan, Assistant General Manager; Mr. T. Vinay Rajneesh, Assistant General Manager and Ms. Nikki Agarwal, Assistant Manager. Date of Hearing: October 01, 2015 Appearances: Mr. Rantu Kumar Das, Practicing Company Secretary appeared for the Company and Mr. Biswanath Bhattacharya For SEBI: Dr. Anitha Anoop, General Manager; Mr. T. Vinay Rajneesh, Assistant General Manager and Ms. Nikki Agarwal, Assistant Manager.

1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’), vide an ex-parte interim Order dated December 02, 2014 (hereinafter referred to as ‘the interim order’) had observed that the company, Swarnabhumi Developers Limited (hereinafter referred to as ‘Swarnabhumi’ or ‘the Company’) is prima facie engaged in fund mobilising activity from the public, through the Offer of Preference Shares (hereinafter referred to as ‘preference shares’) and had allegedly violated the provisions of Sections 56, 60 (read with Section 2(36)), 67, 73 of the Companies Act, 1956 read with Section 465 of the Companies Act, 2013. In order to protect the interest of investors and to ensure that only legitimate fund raising activities are carried on by the Company and its directors, SEBI had issued the following directions: “… … 7. In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11, 11(4), 11A and 11B of the SEBI Act, hereby issue the following directions – i. SDL (PAN: AANCS2816A) shall not mobilize funds from investors through the Offer of 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; ii.

SDL and its present Directors, viz. Shri Biswanath Bhattacharya (PAN: AHTPB8323P; DIN: 00596375), Shri Sanjoy Kumar Layek (PAN: ABWPL7019B; DIN: 02261065) and Shri Ranjit Kumar Sarkar (PAN: ASWPS3499R; DIN: 05294563) alongwith it past Directors, viz. Shri Himangshu Kumar Guha (PAN: ACZPG4691E; DIN: 02818570), Shri Prakash Mandal (PAN:AUTPM0257E; DIN: 02261096) and Shri Sudip Kr Barua (PAN: AEGPB5442M; DIN: 02838550), 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. SDL and its abovementioned past and present Directors, are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions; iv. SDL shall provide a full inventory of all its assets and properties; v. The abovementioned past and present Directors of SDL shall provide a full inventory of all their assets and properties; vi.

SDL 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; vii. SDL 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 SDL; viii. SDL and its abovementioned present Directors shall furnish complete and relevant information in respect of the Offer of preference shares (as sought by SEBI letter dated October 1, 2013), within 21 days from the date of receipt of this Order. 8. The above directions shall take effect immediately and shall be in force until further orders. … 10. This Order is without prejudice to the right of SEBI to take any other action that may be initiated against SDL and its abovementioned past and present Directors in accordance with law.” 2. The interim order observed that the prima facie observations made therein were based on the correspondences exchanged between SEBI and the Company alongwith the documents contained therein, a reference dated December 26, 2012 and the information/ documents obtained from the ‘MCA-21’ portal.

The interim order advised the Company and its directors to file their replies within 21 days from the date of its receipt and also seek an opportunity of personal hearing.

3. The interim order was forwarded to the Company and its directors namely Mr. Biswanath Bhattacharya, Mr. Sanjoy Kumar Layek, Mr. Ranjit Kumar Sarkar, Mr. Himangshu Kumar Guha, Mr. Prakash Mandal and Mr. Sudip Kr. Barua vide letters dated December 05, 2014. The letters sent to the Company and Mr. Prakash Mandal had returned undelivered. In the meantime, one Mr. Sandip Kumar Datta, Advocate vide his letter dated December 23, 2014, requested for three months’ time for complying with the directions contained in the interim order. Mr. Sandip Kumar Datta in his letter had not mentioned the name of the entity/ person on whose behalf he was writing to SEBI.

Mr. Sudip Kr. Barua through his advocate namely Ms. Supriya Ranjan Saha vide letter dated December 15, 2014, replied to the interim order. On behalf of Mr. Himangshu Guha, his wife Ms. Arati Guha vide her letter received by SEBI on January 22, 2015, replied to the interim order and submitted that her husband was suffering from lung carcinoma and had expired on October 19, 2014. She also forwarded the death certificate of Mr. Himangshu Kumar Guha along with her letter.

Thereafter, on behalf of the Company one Mr. Sanjay Majumder had collected the copy of the interim order on February 24, 2015. The Company vide its letter dated March 07, 2015, requested for an extension of time by 30 days for replying to the interim order. In the meantime, SEBI forwarded the letters of Mr. Sanjoy Kumar Layek and Mr. Prakash Mandal to the Company for onward delivery to the concerned persons. The Company vide its letter dated March 25, 2015, replied to the interim order and requested for an opportunity of personal hearing.

4. Subsequently, SEBI proceeded further and granted an opportunity of personal hearing to the Company and its directors on September 03, 2015. The scheduled date was communicated vide SEBI’s letter dated July 27, 2015. The date of hearing was also communicated vide the public notice in the newspapers namely ‘Ananda Bazar Patrika’ and ‘Times of India’ both dated September 03, 2015. The Company and its directors were advised that in case they fail to appear for the personal hearing before SEBI on the aforesaid date, then the matter would be proceeded ex-parte on the basis of the material available on record.

On the date fixed Mr. Soubhik Chakraborty, Advocate and Mr. Jagat Charan Ghosh, Advocate appeared as authorized representatives of the Company and requested for an adjournment. The request was considered and the matter was adjourned to October 01, 2015.

Other persons who had entered appearance and made submissions on September 03, 2015 were Ms. Arati Guha and Mr. Dehojyoti Sen for Mr. Himangshu Kumar Guha and Mr. Sudip Kr. Barua (in-person).

5. On October 01, 2015, one Mr. Rantu Kumar Das, a practicing Company Secretary appeared for the Company and Mr. Biswanath Bhattacharya and filed written submissions dated September 30, 2015. He also made oral submissions on the lines of the written submissions. During the course of personal hearing, the representative sought for the copies of the reference/ complaint as was referred in the interim order. Upon this, SEBI was advised to forward the copies of the same to the Company and Mr. Biswanath Bhattacharya and these were granted 15 days’ time to submit the written submissions, if any.

Thereafter, the copy of the reference/ complaint as referred in the interim order was forwarded to Mr. Biswanath Bhattacharya, the director of the Company.

6. The submissions of the Company made vide letters dated March 25, 2015 and September 30, 2015, in brief, are as under: - The reference dated December 26, 2012 as referred in the interim order has not been provided to it. - The Company had not mobilized funds from the public and therefore the SEBI Act, Companies Act, 1956 do apply to it.

- The Company could not forward the complete documents as the employee who were carrying the accounting functions had left the organization. The lapse was caused inadvertently. - The preference shares were allotted to the holders on their voluntary investment in the Company for the proposed project. Further, the same were never offered to the public. - No allotment was made in excess of 49 persons by the Company. The Board/ Committee had allotted the preference shares in several meetings and the number of allottees who had offered to subscribe to the shares had never exceeded 49. Therefore, the issue was a private placement and not a public issue and the provisions of Section 56, 60, 67(3), 73 of the Companies Act, 1956 were not violated. - The funds were received by the Company during the financial years 2010-11 and 2011- 12 so the examination of the amount received could not be considered under the provisions of the Companies Act, 2013 which came in force w.e.f. August 29, 2013. - If there was any violation, the RoC, West Bengal under whose jurisdiction the Company comes, would have taken action as per the provisions of the Companies Act, 1956.

7. Mr. Sudip Kr. Barua vide letter dated December 15, 2014, submitted that he was the erstwhile part-time director of the Company and had resigned on March 04, 2010.

8. Ms. Arati Guha on behalf of Mr. Himangshu Guha vide her letter received by SEBI on January 22, 2015, submitted as under: - Her husband passed away on October 19, 2014, due to lung carcinoma. - Her deceased husband had never participated in any administrative job with Swarnabhumi since his joining as a director. Because of the same he had expressed his intention to resign from the Company, which was accepted and ‘Form-32’ was submitted before the RoC. - Her deceased husband had paid ₹2,00,000 by cheque and only 5000 equity shares (@₹10 per share) were issued to him instead of 20,000 shares.

- She had spent lot of money for the treatment of her deceased husband and is facing acute paucity of funds. Her husband had requested several times to Mr. Biswanath Bhattacharya, MD to refund the remaining amount of ₹1,50,000.

9. I have considered the interim order and the material available on record. The following are the observations from the interim order: “… i. SDL was incorporated on July 9, 2009, with the ROC, Kolkata with CIN No. as U74140WB2009PLC136665. SDL's Registered Office is at 8B, Ballygunge Terrace, Kolkata – 700029, West Bengal, India. ii. The present Directors in SDL are Shri Biswanath Bhattacharya, Shri Sanjoy Kumar Layek and Shri Ranjit Kumar Sarkar. iii. I note that Shri Himangshu Kumar Guha, Shri Prakash Mandal and Shri Sudip Kr Barua, who were earlier Directors in SDL, have since resigned. iv. Form 2 (Form for Return of Allotment – filed by SDL with the ROC in accordance with the provisions of the Companies Act, 1956), reveals that SDL issued "Preference Shares" ("Offer of Preference Shares") to investors during the Financial Years 2010–11 and 2011–12, details of which are provided below - Type of Year No. of persons to whom Total Amount Security preference shares were allotted (₹ in lakhs) Preference 2010 – 11 206 29.28 Shares 2011 – 12 134 16.72 Total 340 46.00 …” 10. Having considered the above, now I proceed further to determine whether the Company had made a public issue as alleged in the interim order and if so, whether the Company had complied with the public issue norms. The liability of the directors of the Company also needs to be determined as they have also been alleged in the interim order.

11. In order to ascertain whether an issue of securities is a ‘public issue’ or done on ‘private placement’, it is necessary to make a reference to Section 67(3) 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 Section 67(3), as amended by the Companies (Amendment) Act, 2000, with effect from December 13, 2000, no offer or invitation shall be treated as made to the public by virtue of sub-sections (1) or (2), as the case may be, if the offer or invitation can properly be regarded, in all 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. In terms of the first proviso to the aforesaid section, the provisions of Section 67(3) shall not apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. Therefore, the number of subscribers becomes relevant to conclude whether an issue of shares are for public or on a private placement basis. In view of the same, if an offer of securities are made to fifty or more persons, it would be deemed to be a public issue.

12. I now place my reliance on the order of Hon'ble Supreme Court of India in the matter of Sahara India Real Estate Corporation Limited & Others Vs. SEBI and another (Civil Appeal nos. 9813 and 9833 of 2011; decided on August 31, 2012) (‘the Sahara case’) had inter alia held that - “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. 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, if an offer of securities is made to fifty or more persons, it would be deemed to be a public issue, even if it is of domestic concern or proved that the shares or debentures are not available for subscription or purchase by persons other than those received the offer or invitation. … I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. …” 13. In the present case, I note from the interim order that the Company had offered and allotted preference shares to a total of 340 allottees (i.e.

206 allottees in the Financial Year 2010-11 and 134 allottees in the Financial Year 2011-12) and had raised ₹46 lakh. The Company along with its submissions dated September 30, 2015, has provided the details of allotment of preference shares along with the ‘Form 2’ and the ‘minutes of the meeting’ of the allotment committee. From these documents and reply submitted by the Company, it is noted that the Company has used the term ‘preference shares and Redeemable Preference Shares (hereinafter referred to as ‘RPS’) interchangeably. The ‘minutes of meeting’ finds mention of the RPS allotted on various dates and in all these meetings Mr. Biswanath Bhattacharya and Mr. Prakash Mandal were present. The list attached to the ‘Form 2’ (i.e. return of allotment) mentions the securities issued by the Company as ‘preference shares’/ RPS. The details of allotment as provided by the Company mentions the securities as ‘preference shares’. The details of allotment of ‘preference shares’/ RPS as provided by the Company have been reproduced below:

Date of No. of application No. of Value of allotment recd. shares shares (₹) 2010-2011 21/05/2010 8 770 77,000 17/06/2010 4 130 13,000 15/07/2010 22 3,190 3,19,000 18/08/2010 25 2,795 2,79,500

04/10/2010 22 1,755 1,75,500 05/10/2010 9 460 4,6,000 25/03/2011 12 1,250 1,25,000 26/03/2011 13 1,440 1,44,000 28/03/2011 13 1,420 1,42,000 29/03/2011 35 5,595 5,59,500 30/03/2011 38 4,410 4,41,000 31/03/2011 30 6,060 6,06,000 2011-2012 28/04/2011 5 330 33,000 01/06/2011 16 2,735 2,73,500 01/07/2011 43 4,430 4,43,000 04/07/2011 11 1,950 1,95,000 01/08/2011 41 4,810 4,81,000 03/08/2011 18 2,460 2,46,000 Total 365 45,990 45,99,000

From the table above, it is observed that the Company had allotted preference shares/ RPS to a total of 365 allottees on various dates. It is noted that the Company had made continuous allotment of preference shares/ RPS on March 25, 2011, March 26, 2011, March 28, 2011, March 29, 2011, March 30, 2011 and March 31, 2011. Such continuous allotment of preference shares/ RPSs in a series of transactions which were in close proximity of each other indicates that such allotments along with other allotments (as detailed in the table above) were part of the same offer. At this stage, it is important to note that the Company has not submitted the resolution for its offer of preference shares/ RPS.

Considering the number of persons from whom the monies were mobilised by the Company by offering and allotting preference shares/ RPSs, it can be concluded that the Company had made a public issue of preference shares/ RPS in terms of the first proviso to Section 67(3) of the Companies Act, 1956 where the ‘offer’ or ‘invitation to subscribe for shares or debentures’ is made to fifty persons or more, then it has to be construed as a public offer. In view of the same, I find no merit in the submission of the Company that the preference shares were never offered to the public.

14. By making a public issue of preference shares/ RPS, as discussed above, the Company was mandated to comply with all the legal provisions that govern and regulate public issue of such securities, including the Companies Act, 1956 and the SEBI Act and regulations. In this context, I refer and rely on the below mentioned observation made by the Hon'ble Supreme Court of India in the matter of Sahara case: “... ... that any share or debenture issue beyond forty nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. …” 15. In view of the above observations, by virtue of Section 55A(a) and (b), SEBI has jurisdiction and would govern the issue of preference shares/ RPS as the same was clearly made to more than 49 persons. As alleged in the interim order, the Company was mandated to comply with the provisions of Sections 56, 60, 67 and 73 of the Companies Act, 1956, in respect of its offer and issue of preference shares/ RPS. 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, contain 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’.

16. The interim order further alleged that the Company had failed to comply with Section 73 of the Companies Act, 1956, in respect of its issuance of preference shares/RPS. By issuing preference shares/ RPSs to more than 49 persons, the Company had to compulsorily list such securities in compliance with Section 73(1) of the Companies Act, 1956. As per Section 73(1) 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. There is no material on record to say that the Company has filed an application with a recognised stock exchange to enable the RPS to be dealt with in such exchange. Therefore, the Company has failed to comply with this requirement.

17. Section 73(2) of the Companies Act, 1956 states that "Where the permission has not been applied under subsection (1) or such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, 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, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money". As the Company failed to make an application for listing such RPSs, the Company had to forthwith repay such money collected from investors. If such repayments are not made within 8 days after the Company becomes liable to repay, the Company and every director of the Company, who is an officer in default, is jointly and severally liable to repay with interest at such rate. There is no material on record to say that the Company has complied with the provisions of Section 73(3).

18. From the foregoing, I conclude that the Company had failed to comply with the provisions of Sections 56, 60, 73 of the Companies Act, 1956 read with the Companies Act, 2013 in respect of its offer and issuance of RPSs, as discussed in this Order. The Company shall therefore be liable to make refunds as per the mandate under Section 73(2) of the Companies Act, 1956 and also for regulatory action for committing the above violations. In the light of above findings, the argument of the Company that its case cannot be linked to Sahara case as it had taken only a few crores from the investors and already refunded majority of the amounts to its investors, finds no merits.

19. Liability of Directors: The interim order was issued against the directors of the Company namely Mr. Biswanath Bhattacharya, Mr. Sanjoy Kumar Layek, Mr. Ranjit Kumar Sarkar, Mr. Himangshu Kumar Guha, Mr. Prakash Mandal and Mr. Sudip Kr. Barua. a. The details of their appointment and resignations are as under: Name Date of Appointment Date of Cessation Mr. Biswanath Bhattacharya 09/07/2009 Continuing as director Mr. Sanjoy Kumar Layek 09/07/2009 Continuing as director Mr. Ranjit Kumar Sarkar 12/06/2012 Continuing as director Mr. Himangshu Kumar Guha 03/03/2011 26/03/2012 Mr. Prakash Mandal 09/07/2009 08/04/2013 Mr. Sudip Kr. Barua 12/11/2009 08/11/2011 b. I note that the Company had offered and issued RPS in the financial years 2010-11 and 2011-12 (the date of first allotment being May 21, 2010 and the last date being August 03, 2011). Section 56 of the Companies Act, 1956 imposes the liability for the compliance, on the company, every director, and persons responsible for the issuance of the prospectus. The liability of the Company to repay under Section 73(2) of the Companies Act, 1956 read with Section 27 of the SEBI Act, is continuing and the same continues till all the repayments are made to the investors/ public. Therefore, the directors who were present during the period when the Company had made the offer and allotted RPS shall be liable for violation of Sections 56, 60 and 73 of the Companies Act, 1956 including the default in making refunds as mandated therein. As the liability to make repayments under Section 73(2) of the Companies Act read with Section 27 of the SEBI Act is a continuing liability, the persons who joined the Company’s Board pursuant to the offer and allotment of RPS shall also be liable if the Company and the concerned directors have failed to make refunds, as mandated under the discussed provisions of law.

c. From the table above, it is noted that Mr. Biswanath Bhattacharya, Mr. Sanjoy Kumar Layek, Mr. Himangshu Kumar Guha, Mr. Prakash Mandal and Mr. Sudip Kr. Barua were the directors of the Company during the time of impugned issue and allotments of preference shares/ RPSs and were responsible for the affairs of the Company, at the relevant point of time. Mr. Biswanath Bhattacharya and Mr. Sanjoy Kumar Layek continue to be the directors of the Company. Mr. Prakash Mandal and Mr. Sudip Kr. Barua had resigned from the Company on April 08, 2013 and November 08, 2011 respectively.

Mr. Sudip Kr. Barua vide his letter dated December 15, 2014, has submitted that he was a part-time director of the Company and had resigned on March 04, 2010. As per the details available on record and also stated earlier he had resigned only on November 08, 2011. As regards his argument of part-time director, I note that the position of a ‘director’ in a public company comes along with responsibilities and compliances under law associated with such position, which have to be fulfilled by such director or face the consequences for any violation or default thereof. While considering the same, I also place reliance on the order of Hon’ble High Court of Madras in the matter of Madhavan Nambiar Vs. Registrar of Companies [2002 108 Comp Cas 1 Mad] wherein it was observed that “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.”.

In view of the same, it can be concluded that Mr. Biswanath Bhattacharya, Mr. Sanjoy Kumar Layek, Mr. Prakash Mandal and Mr. Sudip Kr. Barua are responsible for the violations committed by the Company and liable, jointly and severally, for making refunds along with interest to the investors as mandated under Section 73(2) of the Companies Act, 1956 read with Section 27 of the SEBI Act.

At this stage, I note the submission of the wife of Mr. Himangshu Kumar Guha that he had passed away on October 19, 2014. I have seen the copy of the ‘death certificate’ dated November 07, 2014, in this regard. As regards the other submissions of her, I note that she is at liberty to seek appropriate remedy available under the law.

d. I note that Mr. Ranjit Kumar Sarkar was appointed as director of the Company after the last available date of allotment of preference shares/ RPSs. He is also one of the present directors of the Company. It is observed that he has not exercised necessary diligence after becoming the director in the Company. The inaction by him against the management (for violating the public issue norms as stipulated under the Companies Act, 1956 while making the offer and issuing the preference shares/ RPSs), leads one to conclude on a possible collusion with the Company and its management. Further, Mr. Ranjit Kumar Sarkar have also not taken any steps to remedy the violations committed. Accordingly, I hold him responsible for the same.

20. I note that the Company and its directors namely Mr. Biswanath Bhattacharya, Mr. Sanjoy Kumar Layek, Mr. Ranjit Kumar Sarkar, Mr. Prakash Mandal and Mr. Sudip Kr. Barua were required to provide full inventory of the assets and properties. However, no details have been submitted by these, till date.

21. In view of the discussion above, appropriate action in accordance with law needs to be initiated against the Company and the directors/ promoters in charge of the affairs of the Company, during the relevant period.

22. Therefore, 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 and 11B thereof hereby issue the following directions:

a. The Company, Swarnabhumi Developers Limited [PAN: AANCS2816A] its directors namely Mr. Biswanath Bhattacharya [PAN: AHTPB8323P], Mr. Sanjoy Kumar Layek [PAN: ABWPL7019B], Mr. Ranjit Kumar Sarkar [PAN: ASWPS3499R], Mr. Prakash Mandal [PAN: AUTPM0257E] and Mr. Sudip Kr. Barua [PAN: AEGPB5442M] jointly and severally, shall forthwith refund the money collected by the Company through the issuance of Preference Shares/ Redeemable Preference Shares (which have been found to be issued in contravention of the public issue norms stipulated under the Companies Act, 1956), to the investors including the money collected from investors, till date, pending allotment of preference sares/ RPS, if any, 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 to investors shall be effected only in cash through Bank Demand Draft or Pay Order.

c. The Company and/ or its present management are permitted to sell the assets of the Company only for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalised Bank.

d. The Company and its present management shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily with wide circulation, detailing the modalities for refund, including details on contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect.

e. After completing the aforesaid repayments, the Company shall file a certificate of such completion with SEBI, within a period of three months from the date of this Order, from 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. In case of failure of the Company, Swarnabhumi Developers Limited and its directors including Mr. Biswanath Bhattacharya, Mr. Sanjoy Kumar Layek, Mr. Ranjit Kumar Sarkar, Mr. Prakash Mandal and Mr. Sudip Kr. Barua in complying with the aforesaid directions, SEBI, on expiry of three months 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 appropriate action as deemed fit. v. would also make a reference to the Ministry of Corporate Affairs to flag the names of notice directors in its database so that information may be perused by RoC or any other regulatory authority.

g. The Company namely Swarnabhumi Developers Limited is directed not to, directly or indirectly, access the capital market by issuing prospectus, offer document or advertisement soliciting money from the public and is 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, made to the satisfaction of SEBI, as directed above.

h. The directors of the Company namely Mr. Biswanath Bhattacharya, Mr. Sanjoy Kumar Layek, Mr. Ranjit Kumar Sarkar, Mr. Prakash Mandal and Mr. Sudip Kr. Barua are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, with immediate effect. They are also restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, with immediate effect. This restraint shall continue to be in force for a further period of four years on completion of the repayments, as directed above.

i. As regards, Mr. Himangshu Kumar Guha [PAN: ACZPG4691E], the proceedings against him stands abated in view of the death certificate mentioned at para 19(c) above.

j. The above directions shall come into force with immediate effect.

23. This Order is without prejudice to any action, including adjudication and prosecution proceedings, that might be taken by SEBI in respect of the above violations committed by the Company, its promoters, directors and other key persons.

24. Copy of this Order shall be forwarded to the recognised stock exchanges and depositories for information and necessary action.

25. 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 : March 16th, 2016 PRASHANT SARAN PLACE : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA