Sadhan Chandra Brahmachari vs Sebi

Date of Hearing : 07.11.2019 Date of Decision : 14.11.2019

Appeal No. 441 of 2018

Saikat Brahmachari Mauja-Barjora (Part), Barjora, Bankura, West Bengal - 722202. ..... Appellant

Versus

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

With Appeal No. 77 of 2019

Sadhan Chandra Brahmachari Mauja-Barjora (Part), Barjora, Bankura, West Bengal - 722202. ..... Appellant

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. Prachi Pandya, Advocate i/b Corporate Attorneys for the Appellants. 2

Mr. Kevic Setalvad, Senior Advocate with Mr. Vivek Shah, Mr. Abhiraj Arora, Ms. Misbah Dada, Advocates 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 : Justice Tarun Agarwala, Presiding Officer

1.

Two appeals have been filed against a common order and

consequently both the appeals are being decided together.

2. The appellants are aggrieved by the order of the Whole Time

Member (hereinafter referred to as, 'WTM') of Securities and

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

under Section 11 and 11B of the Securities and Exchange Board of

India Act, 1992 (hereinafter referred to as, 'SEBI Act') directing the

appellants to refund the money collected by the Company during

their respective period of directorship through issuance of Non-

Convertible Debentures (hereinafter referred to as, 'NCDs')

including the application money collected from investors alongwith

interest at the rate of 15% p.a. The WTM also issued other directions

which are indicated in the impugned order.

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3. The appellant Saikat Brahmachari in Appeal No. 441 of 2018

was appointed as a director in MBK Business Development (India)

Ltd. on September 1, 2009 and continued till May 2, 2013. The

appellant Sadhan Chandra Brahmachari in Appeal No. 77 of 2019

was appointed as a director on September 1, 2009 and continued till

April 10, 2013. During the financial years 2010-11, 2011-12, 2012-

13, the Company made an offer of NCDs and raised an amount of

Rs. 9.06 crores from 4,518 allottees. Since there was violation of

SEBI Act, Companies Act, 1956 (hereinafter referred to as,

'Companies Act') and Securities and Exchange Board of India (Issue

and Listing of Debt Securities) Regulations, 2008 (hereinafter

referred to as, 'ILDS Regulations), SEBI passed an order dated

February 4, 2016 issuing certain directions including debarment and

refund to investors against the Company and its directors /

promoters.

4. Subsequently, after the passing of the aforesaid order, it came

to the notice that the present appellants were also directors of the

company and during their period the offer of NCDs was issued.

Accordingly, an interim order dated November 20, 2015 was passed

against the appellants and a show cause notice was issued to show

cause as to why suitable direction under Section 11 and 11B read 4

with Section 73(2) of the Companies Act should not be passed

against them. After giving an opportunity of hearing, the WTM

found the appellants were involved in the issuance of the offer of

NCDs during the time when they were directors which was in

violation of the Companies Act and ILDS Regulations. Accordingly,

the WTM issued directions for refund of the money alongwith

interest etc.

5. We have heard Ms. Prachi Pandya, the learned counsel for the

appellants and Mr. Kevic Setalvad, the learned senior counsel

assisted with Mr. Vivek Shah, Mr. Abhiraj Arora, Ms. Misbah Dada,

the learned counsel for the respondent.

6. The issuance of the NCDs and violation has not been disputed

by the learned counsel for the appellants. What the learned counsel

for the appellants contend is that the order directing the appellants to

refund the amount alongwith interest under Section 73(2) of the

Companies Act is erroneous in as much as there is no finding that the

appellants were "officers in default" and consequently, the mandate

provided under Section 73(2) of the Companies Act cannot be

invoked. In support of her submission, the learned counsel for the

appellants has placed reliance upon a decision of this Tribunal in 5

Pritha Bag in Appeal No. 291 of 2017 decided on February 14,

2019.

7. In our view, the decision of this Tribunal in Pritha Bag is not

applicable to the facts and circumstances of the present case. We

find that the WTM has considered and has given a finding that the

appellants were "officers in default" as defined under Section 5(g) of

the Companies Act. No evidence was filed to show that any of the

officers set out in clauses (a) to (c) of Section 5 of the Companies

Act was entrusted to discharge the obligation contained in Section 73

of the Companies Act. In Pritha Bag case (supra), there was no

finding that the said appellant in that appeal was an "officer in

default" and, therefore, the Tribunal had held that the mandate

provided under Section 73(2) of the Companies Act could not be

invoked. The said decision was also distinguishable on the ground

that there was a managing director in that company who was

responsible for the affairs of the company.

8. Further, we find from a perusal of paragraph 36 of the impugned

order that the appellants have admitted before the WTM that they

were aware of the collection of the money from the investors by the

company and further submitted that the appellants were willing to

make refund to the investors.

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9. In the light of the aforesaid admission, the appellants cannot

escape the liability of refund of the amount alongwith interest as

directed by the WTM. Consequently, we do not find any error in the

impugned order passed by the WTM. Both the appeal fails and are

accordingly dismissed.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member

14.11.2019 Prepared & Compared by PTM