Sheikh Abdul Rabial vs Sebi

Order Reserved : 7.6.2019 Date of Decision: 2.7.2019

Appeal No.198 of 2018

Sheikh Abdul Rabial Pranabananda Pally West Kenduadihi Post Office Kenduadihi, District Bankura, West Bengal - 722102. ..... Appellant

Versus

Securities and Exchange Board of India SEBI Bhawan, Plot No.C4-A, 'G' Block, Bandra Kurla Complex, Bandra (E), Mumbai, Maharashtra 400051. ... Respondent

Mr. Saurabh Bachhawat, Advocate with Mr. Pranav Shah, Advocate i/b. Mr. Abhishek Adke, Advocate for the Appellant.

Mr. J.P. Sen, Senior Advocate with Mr. Nishant Upadhyay, Advocate i/b. Desai & Diwanji for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member

Per : Justice M.T. Joshi

1.

Aggrieved by the order of the Whole Time Member

referred to hereinafter as 'WTM') dated 31st October, 2017

holding the appellant (Original notice no.7) liable for

violating the provisions of The Companies Act, 1956 2

(referred to hereinafter as 'The Companies Act), Securities

and Exchange Board of India Act, 1992 (referred to

hereinafter as 'SEBI Act') for issuance of Secured

Redeemable Non-Convertible Debentures (hereinafter

referred to as NCDs) during the financial year 2011-2012 and

2012-13 by appointing an unregistered debenture trustee i.e.

one Ms. Rojina Begam and raising at least an amount of

Rs.34,51,500/- and thereby violated various provisions as

detailed in page 31 of the impugned order. The proceedings

were started against the present appellant, the Company

Angel Rural Development Limited (hereinafter referred to as

the Company), the debenture trustee and other directors.

2. Out of them only the present appellant noticee no.7 and

one Vasudev Ghosh responded by letters cum representation.

3. The appellant's case was that initially he was an

investor with the Company thereafter he became the agent for

a period of more than 2 years. Ultimately appreciating his

performance he was appointed as a director in the Company

on 16.8.2014. However, thereafter he found that there used

to be no board meeting and as such he raised the issue with

the Chairman-cum-Managing Director and offered his

resignation in December, 2012. His resignation was accepted 3

by the end of March, 2013. Registrar of Companies has duly

notified acceptance of his resignation on 1st April, 2013.

Since 1st April, 2013 he had no connection with the Company

and any of the promoter and as such he wanted to be

absolved from the proceedings.

4. The WTM found that as per the submission of the

appellant and as per the record of the Registrar of Companies

the present appellant was director for a period between

16.8.2012 to 1.4.2013. At page no.27 of the impugned order

WTM gave the details of the investors, the date of plan and

date of acceptance of installment which would show that

during the above period many investors had invested in the

said NCDs. In the circumstances, the WTM found that there

is no plea or material to show that any Managing Director

was holding the field or any other person was specially

appointed held all the director including the present director

jointly and severally liable for the various violations.

Consequently, vide para no.51 directed repayment of the

money calculated with interest of 15% directing to provide

full inventory of their assets. Consequential directions and

lastly prohibition order against the appellant and others from 4

buying, selling or otherwise dealing in securities market for a

period of 4 years was passed.

5. The learned counsel for the appellant placed before us

the print of form no.32 obtained from the website of

Registrar of Companies which would show that appellant

was professional director with effect from 16.8.2012. The

learned counsel submitted that the appellant in fact was a non

executive director. He was not in any way involved in the

administration of the Company or in the day to day affairs of

the same. He was appointed being a professional and that too

taking into consideration his performance as an agent of the

Company. The NCDs were issued prior to his appointment

and therefore the appellant could not have been roped into

the activities.

Learned counsel for the respondent opposed the plea.

He submitted that admittedly the appellant was director for a

period between 16.8.2012 till 1.4.2013. During this period as

detailed in the table in the impugned order at page no.11

many NCDs were issued and the amount was collected

during this period. There is no plea that any Managing

Director was holding the field during the period or any other

officer was appointed specifically for this purpose. He 5

therefore submitted that without complying any rules or

provisions, in violation of the Companies Act and SEBI Act

the Company and its directors had collected huge amount of

Rs.34,51,500/- from the investors by offering NCDs.

Respondent SEBI came to know only when various

complaints were received by it. After due investigation the

facts were collected and in the circumstance he submitted

that the appellant cannot be absolved.

6. We find that the Companies Act does not differentiate

between a professional director or a director simpliciter. The

reasoning of the WTM holding present appellant jointly and

severally liable with other directors therefore cannot be

faulted with.

7. The appeal is therefore dismissed with no order as to

costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Justice M.T. Joshi Judicial Member

2.7.2019 Prepared and compared by RHN