Order with regard to Shri N. Venkataraman in the matter of Pyramid Saimira Theatre Ltd

WTM/MSS/ID2/99/2011 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI CORAM: M. S. SAHOO, WHOLE TIME MEMBER Show Cause Notice No.SEBI/PSTL/AK/190939/2010 dated January 13, 2010 issued to Mr. N. Venkataraman in the matter of Pyramid Saimira Theatre Ltd. Date of Hearing: May 06, 2011 Appearances: For Noticee: 1) Mr. N. Venkataraman, Former Director, Pyramid Saimira Theatre Ltd. 2) Mr. R. Sathyanarayan, Chartered Accountant, and 3) Mr. G. Ramachandran, Company Secretary. For SEBI: 1) Mr. Ansuman Dev Pradhan, Assistant General Manager, and 2) Mr. Amitesh Kumar, Assistant Legal Adviser. ORDER Under Sections 11, 11B and 11(4) of the Securities and Exchange Board of India Act, 1992 read with Regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 1. Vide a common show cause notice dated January 13, 2010 (SCN) issued to Mr. N. Venkataraman (‘noticee’), among others, it is alleged that Pyramid Saimira Theatre Ltd. (‘PSTL’) inflated its revenues and profits by fictitious entries in its accounts, disclosed the same in quarterly and annual accounts for the financial year 2007-08 and thereby misled the public in their investment decisions. It is also alleged that PSTL made false disclosures to stock exchanges on January 30, 2009 that it had entered into agreements with 802 theatres as on June 30, 2008. It is further alleged that PSTL did not cooperate with investigation by failing to produce various documents and records required by investigation despite summons and did not maintain certain books of accounts. The noticee was allegedly an independent director of PSTL at the relevant time. The SCN accordingly alleges that the noticee has violated Section 12A of SEBI Act, 1992 and regulation 3(b), 3(c), 3(d), 4(1), 4(2)(a), 4(2)(e), 4(2)(f), 4(2)(k), and 4(2)(r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations). The SCN called upon the noticee to show cause as to why appropriate directions under Sections 11, 11B and 11(4) of the SEBI Act, 1992 read with Regulation 11 of the PFUTP Regulations be not issued against him.

2. There was no reply to the SCN. Several opportunities of personal hearing were offered to the noticee. After failing to avail the personal hearing on August 23, 2010, September 08, 2010 and April 29, 2011, he appeared on May 6, 2011 at Chennai through video conferencing and made oral submissions. He also filed a written submission dated May 11, 2011. He has essentially made the following submissions: a. He was not a director during the financial year 2007-08. He was a non-executive independent director of PSTL from June 30, 2008 to February 24, 2009. As an independent director, he was not involved in day to day administration and operations as also in maintenance of accounts which were wholly looked after by the Managing Director. b. The financial statements presented to the Board were prepared by finance professionals headed by a CFO, audited by a firm of Chartered Accountants, and vetted and approved by the CMD. He, as a director, only reviewed these statements applying due diligence and raised questions as required, which were clarified by the CFO, auditor, Chairman or the MD at the meetings.

He was not a member of the audit committee of PSTL at any time. c. The number of agreements entered into by PSTL with theatres relate to the period prior to his joining as director of the company. Further, this information is available in the Annual Report for the year 2007-08 and is covered by the CEO and CFO certification for the year in addition to verification by internal and external auditors and audit committee. As an independent director of the company, he was not expected to physically verify these agreements to confirm their existence and to find out if the number of agreements so verified tallied with the number indicated to the Board in the board papers submitted, in the absence of any specific information or suspicion as to its inaccuracy reported to him or noticed by him. 3. I have carefully considered the SCN, the written and oral submissions, and other material available on record. I note that the SCN alleges that PSTL: a. manipulated accounts by fictitious entries, b. made false disclosures to the stock exchange, c. did not co-operate with the investigations, and d. did not maintain certain books of accounts.

However, the SCN has not charged PSTL for violation of any law in respect of the allegations at (c) and (d) above. Hence I am not considering these allegations. 4. I note that SEBI has not disputed the submissions made by the noticee at the hearing. I, therefore, note that the noticee was an independent director of the company from June 30, 2008. Thus, he was not a director during the relevant financial year, i.e., 2007-08. The alleged manipulation in the accounts occurred prior to the noticee becoming a director of PSTL. Further, he was not a member of the audit committee of the company at any time. In view of these facts, it would be, in my view, not appropriate to charge the noticee of the allegation at 3(a) above. 5. With respect to allegation at 3(b) above, I find from the SCN that PSTL disclosed to stock exchange on January 30, 2009 that it had entered into agreements with 802 theatres as on June 30, 2008, the day on which the noticee joined PSTL as an independent director. PSTL had earlier disclosed that it had entered into agreements with 765 theatres as on March 31, 2008. According to the noticee, the increase in the number of theatres from 765 as on March 31, 2008 to 802 as on 30th June, 2008 could not be considered unusual to warrant a detailed due diligence to verify its veracity.

Hence he did not labour much on this increase. I agree with the noticee. The allegation at 3(b) does not stand with respect of the noticee. 6. Therefore, in exercise of the powers conferred upon me under Section 19 read with Sections 11, 11B and 11(4) of the SEBI Act, 1992 and Regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, I, dispose of the SCN issued to Mr. N. Venkataraman (Permanent Account Number: AADPV2640J) without any direction. 7. This Order shall come into force with immediate effect.

DATE: May 31, 2011 M. S. SAHOO PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA