Ritman Infra Ltd. & Ors. vs Sebi

Date of Decision : 06.03.2020

Appeal No. 84 of 2020

1.

Ritman Infra Ltd.

2. Mr. Parag Majmudar

3. Mrs. Falguni Majmudar

4. Mr. Dinesh Majmudar

5. Mrs. Pushpa Majmudar

6. Mrs. Lipika Ray

7. Mr. Saibal Battacharjee

8. Mr. Dibyendu Sarkar

Ritman House, 14, Ayer Amir Ali Avenue, Kolkata 700 017. ..... Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. .... Respondent

Ms. Sheetal Parkash, Advocate with Mr. Vishal Mehta, Advocate i/b M/s. MV Law Partners for the Appellants. Mr. Abhiraj Arora, Advocate with Mr. Vivek Shah, Advocate i/b ELP for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C. K. G. Nair, Member Justice M. T. Joshi, Judicial Member

Per : Dr. C. K. G. Nair, Member (Oral) 2

1. This appeal has been filed to challenge the order of the

Adjudicating Officer (hereinafter referred to as 'AO') of Securities

and Exchange Board of India (hereinafter referred to as 'SEBI')

dated December 24, 2019 whereby a total penalty of Rs. 5 lacs has

been imposed on six of the appellants who are directors of Ritman

Infra Ltd., appellant No. 1 company. Out of this, Rs. 3 lacs has been

imposed jointly and severally on two of the directors, namely, Mr.

Parag Majmudar and Mrs. Falguni Majmudar for violation of

Regulation 4(2)(f)(i)(1) of the Securities and Exchange Board of

India (Listing Obligations and Disclosure Requirements), 2015

(hereinafter referred to as 'LODR Regulations') and Rs. 2 lacs jointly

and severally on Mrs. Falguni Majmudar, Mr. Dinesh Majmudar,

Mrs. Pushpa Majmudar, Mrs. Lipika Ray, Mr. Dibyendu Sarkar for

violation of Regulation 4(2)(f)(ii)(6) of the LODR Regulations under

Section 15HB of the Securities and Exchange Board of India Act,

1992 (hereinafter referred to as 'SEBI Act').

2. We find from the impugned order and the other papers

produced before us that SEBI had directed the Metropolitan Stock

Exchange of India Ltd. ('Stock Exchange', for short) to appoint an

independent forensic auditor to carry out a forensic audit of the

appellant company, pursuant to SEBI's interim and confirmatory

orders dated October 13, 2017 and April 25, 2018 respectively. 3

Based on certain observations in the said forensic audit report

multiple charges were levelled against the appellants under Securities

and Exchange Board of India (Prohibition of Fraudulent and Unfair

Trade Practices relating to Securities Market) Regulations, 2003 and

LODR Regulations. Thereafter, an AO was appointed and a show

cause notice was issued on March 8, 2019 to the appellant company

and its directors alleging various violations. The alleged violations

include misrepresentation of the financial statements, misuse of

books of accounts / funds, non-appointment of Company Secretary,

improper composition of audit committee, nomination and

remuneration committees, non submission of information, etc.

However, after analyzing the submissions made by the noticees and

other records produced by them the only charge upheld against some

of the noticees is that of violations of the stated LODR Regulations.

3. Learned counsel Ms. Sheetal Parkash appearing on behalf of

the appellants submitted that the only charge against the appellants is

in terms of taking an advance of Rs. 17 lacs from a related party and

guided us to paragraph 48 of the impugned order which reads as

follows :-

"48. Preceding paragraphs have brought out that related party transactions involving advance of Rs. 0.17 cr taken from Matra Panagarh Developers Pvt. Ltd. where Mr. Parag Majumdar, Noticee 2, and Falguni Majumdar, Noticee 3 (Directors of RIL) are the 4

directors was not disclosed. The Board of Directors was required under Regulation 4 (2) (f) (i) to disclose to the board of directors whether they, directly, indirectly, or on behalf of third parties, had a material interest in any transaction or matter directly affecting the listed entity. Further, Regulation 4 (2) (f) (ii) (6) of the LODR Regulations pertains to monitoring and managing potential conflicts of interest of management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions. In failing to ensure reporting of the related party transaction, I find that the Board of Directors, i.e. Noticee Nos. 2 to 6 and 8 failed to perform their duty to monitor and manage potential conflict of interest."

4. Learned counsel for the respondent SEBI in addition to

emphasizing that six of the appellants have violated the stated

provisions of the LODR Regulations and therefore, a penalty of Rs. 5

lacs imposed is only a nominal penalty. He also stated that the

impugned order is not passed against appellant No. 1, the company

and appellant No. 7, Mr. Saibal Battacharjee and hence they are not

aggrieved parties.

5. We note from the impugned order at Paragraph 59 that "...the

default brought out is of a single instance of non-reporting of related

party transaction, amounting to Rs. 0.17 crores". We also note that

though multiple charges had been made in the SCN, including

alleged violation of PFUTP Regulations, none of those charges, 5

except this single instance of non-reporting, has been upheld in the

impugned order.

6. The violation upheld is a single instance of a financial

transaction with a related party to the tune of just Rs. 17 lacs taken as

an advance. Admittedly, there is a violation; however, the gravity of

the violation is not serious enough to impose a monetary penalty and

that too a penalty of Rs. 5 lacs. The imposition of penalty is

accordingly set aside.

7. Accordingly, in the facts of this case, we dispose of the appeal

with a warning to the appellants which, in our opinion, is just and

sufficient to meet the ends of justice. No order as to costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 06.03.2020 Prepared & Compared by PTM