wtm/ps/ 73 /ero/oct/2015 before the securities and … · 2018-08-16 · coram: prashant...

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WTM/PS/ 73 /ERO/OCT/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN,WHOLE TIME MEMBER

ORDER

UNDERSECTIONS11,11(4),11A AND11B OF THE SECURITIES AND EXCHANGE

BOARD OF INDIA ACT,1992, IN THE MATTER OF MEGASYS MEDI LIFE

LIMITED AND ITS DIRECTORS, VIZ. SHRI MANISH ROY (DIN: 05258308; PAN:

AQQPR8167F), SHRI ANIL PANDEY (DIN: 05354626; PAN: BMPPP2155K), SHRI

BARUN BISWAS (DIN: 06420748; PAN: ADRPB4364N), SHRI SANDEEP KUMAR

(DIN: 01323894; PAN: AIZPK7566J), SHRI KABIR ROY (DIN: 02105383; PAN:

ADWPR2654Q), SMT. SUSMITA ROY CHOUDHURY (DIN: 03092008; PAN:

ADTPR0390N), SHRI PRABIR SENGUPTA (DIN: 03171427; PAN: ANNPS2028N)

AND SHRI TUFAN KUMAR PRAMANIK (DIN: 06415440; PAN: AMJPP4359E)

ALONG WITH ITS DEBENTURE TRUSTEE, VIZ. SHRI DINESH CHANDRA

GHOSH.

.---------------------------------------------------------------------------------------------------------------- Date of hearing: April 22, 2015

Appearance

For Noticees Mr. Kamal Nayan Jain, K.N.Jain Company

Mr. JitendraLohia, K.N.Jain Company

For SEBI Ms. Soma Majumdar, Deputy General Manager

Mr. N. Murugan, Deputy General Manager

Mr. T.Vinay Rajneesh, Assistant General

Manager

Ms. Nikki Agarwal, Assistant General Manager

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1.1 MegasysMedi Life Limited (MMML) having its office at FB–32, Deshbandhu Nagar,

Baguiati, Kolkata–700059, West Bengal, India, was incorporated on June 30, 2008,

with the ROC, Kolkata, West Bengal with CIN No. as U85100WB2008PLC126961.

1.2 Securities and Exchange Board of India ("SEBI") received information of alleged

illegal mobilization of funds by MMML. On enquiry by SEBI, it was observed that

MMML had made an offer and issued Secured Redeemable Debenture ("offer of

SRDs") for Rs. 52.79 lakhs from the public.

1.3 As the above said offer of SRDs was found prima facie in violation of respective

provisions of the SEBI Act, 1992 ("SEBI Act"), the Companies Act, 1956, SEBI

(Issue and Listing of Debt Securities), Regulations, 2008 ("Debt Securities

Regulations"), SEBI passed an interim order dated January 28, 2015 and issued

directions mentioned therein against MMML and its Directors, viz. Shri Manish Roy,

Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt.

SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanikalong

with its Debenture Trustee, viz. Shri Dinesh Chandra Ghosh.

2.1 Prima facie findings/allegations: In the said interim order, the following prima

faciefindings/allegation were recorded. MMML had made an offer and issued

Secured Redeemable Debentures during the Financial Years 2010–11 to 2012–13 and

allotted Redeemable Debentures to a total of 133 individuals/investors and mobilized

funds amounting to Rs. 52.79 lakhs as shown below:-

Table 1

Year Security Amount Raised No. of Allottees (� in Lakhs) (Approx)

2010 – 11 Secured Redeemable Debenture 2.97 112011 – 12 21.94 552012 – 13 27.88 67

Total 52.79 133

2.2 MMML created a charge for an amount of Rs.5 Crores on December 4, 2010 and

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appointed Shri Dinesh Chandra Ghosh who does not have a certificate of registration,

as Debenture Trustee for the Offer of SRDs.

2.3 The above offer of SRDs and pursuant allotment were deemed public issues of

securities under the first proviso to Section 67(3) of the Companies Act, 1956.

Accordingly, the resultant requirement under Section 60, Section 56(1) and 56(3),

Sections 73(1), (2) and (3) of the Companies Act were not complied with by MMML

in respect of offers of SRDs. MMML and its directors also failed to comply with

Section 117B, 117C of the Companies Act, 1956 and relevant provisions of the Debt

Securities Regulations, 2008 mentioned in the interim order. Shri Dinesh Chandra

Ghosh, appointed as debenture trustee had violated Section 12(1) of SEBI Act.

2.4 In view of the prima facie findings on the violations, the following directions were

issued in the said interim order dated January 28, 2015with immediate effect.

i. MMML shall not mobilize funds from investors through the Offer of SRDs 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. MMML and its present Directors, viz. Shri Manish Roy, Shri Anil Pandey and Shri Barun Biswas including its past Directors, viz. Shri Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, 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. MMML 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. MMML shall provide a full inventory of all its assets and properties;

v. MMML's abovementioned past and present Directors shall provide a full inventory of all their assets and properties;

vi. MMML and its abovementioned present Directors shall not dispose of any of the properties or alienate or encumber any of the assets owned/acquired by

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that company through the Offer of SRDs, without prior permission from SEBI;

vii. MMML and its abovementioned present Directors shall not divert any funds raised from public at large through the Offer of SRDs, which are kept in bank account(s) and/or in the custody of MMML;

viii. MMML and its abovementioned past and present Directors shall furnish complete and relevant information (as sought by SEBI letters dated February 3, 2014 and February 11, 2014), within 21 days from the date of receipt of this Order.

ix. The Debenture Trustee, viz. Shri Dinesh Chandra Ghosh, is prohibited from continuing with his assignment as debenture trustee in respect of the Offer of SRDs of MMML and also from taking up any new assignment or involvement in any new issue of debentures, etc. in a similar capacity, from the date of this order till further directions.

3.1 Vide the said interim order, MMML and its abovementioned Directors and the person

acting as Debenture trustee were given the opportunity to file their reply, within 21

days from the date of receipt of the said interim Order. The order further stated that

the concerned persons may also indicate whether they desired to avail an opportunity

of personal hearing on a date and time to be fixed on a specific request made in that

regard.

4.1 Service of interim order: The copy of the said interim order was sent to the above

mentioned entities by SEBI’s letter dated January 29, 2015 through speed post

acknowledgement due. The copy of the interim order sent to the company returned

undelivered with postal remarks ‘Left’. The copies of the interim order sent toShri

Manish Roy, Shri Kabir Roy and Smt. SusmitaRoychoudhury returned undelivered

with postal remarks ‘Addressee moved’. The copies of the interim order sent to Shri

Anil Pandey and Shri Barun Biswas and Shri PrabirSengupta returned undelivered

with postal remarks as ‘Addressee not found’, ‘Refused’ and ‘Insufficient Address’

respectively. The copies of the interim order sent to Shri Sandeep Kumar, Shri Tufan

Kumar Pramanik and the debenture trustee viz. Shri Dinesh Chandra Ghosh were

delivered.In cases where interim orders returned undelivered, wherever possible,

attempts of hand delivery/pasting were made. The copies of interim order were pasted

at the addresses of the company, Shri Anil Pandey, Shri Barun Biswas, Shri Kabir

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Roy and Smt. SusmitaRoychoudhury.

4.2 Thereafter, SEBI vide letter dated March 20, 2015 communicated the company, its

above mentioned directors and the debenture trustee that an opportunity of personal

hearing was scheduled on April 22, 2015. Subsequently, vide notification dated April

14, 2015, published in newspaper Ananda Bazar Patrika, and notification dated April

15, 2015 published in newspaper Times of India, MMML and the directors and

debenture trustees were notified that they will be given the final opportunity of being

heard on April 22, 2015 at the time and the venue mentioned therein.

5.1 Hearing and submissions: Shri Sandeep Kumar, one of the directors appeared along

with his representative Mr. Kamal Nayan Jain and Mr. JitendraLohia. It was

submitted on his behalf that he had already sent his reply vide letter dated March 2,

2015 to SEBI. The other noticees did not avail the opportunity of hearing held on

April 22, 2015. Shri Dinesh Chandra Ghosh, vide letter dated April 20, 2015 replied

to the letter of SEBI dated March 20, 2015 that he should be informed about the

subject matter for which his personal attendance is sought. Shri Sandeep Kumar vide

his letter dated March 2, 2015 submitted his reply stating that:-

a. Neither had he participated in any fund raising by the company nor was he

aware of any such fund raising by company.

b. He was director of the company from June 30, 2008 to August 09, 2010. He

has not participated in the decision making process of the company.

c. He became a director in the company through late Kabir Roy whose family

was doing medicine and export business.

d. Mr. Kabir Roy suggested to form two companies one for leather garment

export and other for medicine business. In view of Shri Sandeep Kumar’s

being from non-commerce background, Mr. Kabir Roy suggested that he will

do all necessary formalities through consultant and was asked to sign

necessary papers. Subsequently, Mr. Kabir Roy formed two companies in the

name of MegasysMedlife Pvt. Ltd and Premier Fab Exports Pvt. Ltd.

e. He was informed of his being inducted as directors in the above said two

companies, but he was not informed about the duties as directors.

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f. Mr. Kabir Roy took Rs. 3 lakh for allotting 30000 shares. On perusal of annual

return for the period of 2008-09, he found that only 10,000 shares have been

shown to have allotted to him. Latter it is shown that he had been allotted

30,000 shares during the period of 2010-2011. However, no share certificates

were received by him. It is noteworthy to mention that even his signatures

were forged.

g. Though he intended to do joint business with Mr. Kabir Roy in the new

entities, the latter was doing most of the business in the name of his personal

firms. So he requested Mr. Kabir Roy to return the money which was not

returned and absolve him from the position of director.

h. Then he handed over his resignation letter on August 9, 2010 to Mr. Kabir

Roy which was duly accepted. However, without submitting the above said

resignation letter, Mr. Kabir Roy submitted another forged resignation letter

dated October 28, 2010. The signature in the financial statement of the

company also bears his forged signature.

i. The directions passed against him may be vacated.

6.1 I have considered the allegations, replies, documents downloaded from MCA 21

Portal', the complaints given by various complainants and replies/submissions and

other material on record. On perusal of the same, the following questions arise for

consideration. Each question is dealt with under a suitable heading.

1. Whether the company came out with the Offer of SRDs?

2. If so, whether the said issue is in violation of Section 60, Section 56(1) and

56(3), Sections 73(1), (2) and (3) of the Companies Act, 1956 and whether the

offer of SRDs is in violation of Section 117C of Companies Act and relevant

provisions of the Debt Securities Regulations, mentioned in the interim order?

3. Whether MMML has appointed Shri Dinesh Chandra Ghosh,who is an

unregistered entity to act as Debenture Trustee for the offer of SRDs, in

violation of Section 117B of the Companies Act, 1956 and whether the trustee

has violated Section 12(1) of SEBI Act?

4. If the findings on question No.2 and 3 are found in the affirmative, who are

liable for the violation committed?

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7.1 Whether the company came out with the Offer of SRDs?:I have perused the interim

order dated January 28, 2015 for the allegation of Offer of SRDs and material on

record. The replying Debenture Trustee did not dispute the said issuance. The

company or the directors did not file reply disputing the issuance. The replying

director Shri Sandeep Kumar submitted that he is not aware of any such issuance.

7.2 It is noted that SEBI had received complaints dated May 03, 2014, June 20, 2014 and

an undated complaint, which enclosed the copies of the debenture certificates issued

by the Company. The said debenture certificates contain, inter alia, details of the

holder, the number of debentures, redemption value and redemption date. On perusal

of these, I find that the Company had made allotment of SRDs as alleged in the

Tabular column No.1.

7.3 On examination of the Form 10 filed in respect of “Particulars for registration of

charges for debentures”, it shows that MMML created charge, however, for an

amount of Rs. 5 Crores towards the Offer of SRDs on December 4, 2010 in favour of

Shri Dinesh Chandra Ghosh as debenture trustee

8.1 If so, whether the said issue is in violation of Section 60, Section 56(1) and 56(3),

Sections 73(1), (2) and (3) of the Companies Act, 1956 and whether the offer of SRDs

is in violation of Section 117C of Companies Act and relevant provisions of the Debt

Securities Regulations, mentioned in the interim order?

8.2 The provisions alleged to have been violated and mentioned in this issue for

consideration, are applicable to the offer made to the public. Therefore, the primary

question that arises for consideration is whether the issues of SRDs covered in Issue

No 1 is a public issue. At this juncture, reference may be made to section 67(1) & (3)

of the Companies Act, 1956:

"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.

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(2)any reference in this Act or in the articles of a company to

invitations to the public to subscribe for shares or debentures shall, subject as

aforesaid, be construed as including a reference to invitations to subscribe for

them extended 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.

(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).”

8.3 The following observations of the Hon'ble Supreme Court of India in Sahara India

Real Estate Corporation Limited &Ors.Vs. SEBI (Civil Appeal no. 9813 and 9833 of

2011)(hereinafter referred to as the 'Sahara Case'), while examining the scope of

Section 67 of the Companies Act, 1956, are worth consideration:-

"84. 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 publicǁ. Section 67(3) states

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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.

85. 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, after 13.12.2000, any offer of securities by a public

company to fifty persons or more will be treated as a public issue under the

Companies Act, even if it is of domestic concern or it is proved that the shares

or debentures are not available for subscription or purchase by persons other

than those receiving the offer or invitation…..”

8.4 Section 67(3) provides for situations when an offer is not considered as offer to

public. As per the said sub section, if the offer is one which is not 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 {(section

67(3)(a)}, or, if the offer is the domestic concern of the persons making and receiving

the offer {(section 67(3)(b)}, the same are not considered as public offer. Under such

circumstances, they are considered as private placement of shares and debentures. It is

noted that as per the first proviso to Section 67(3) Companies Act, 1956, the public

offer and listing requirements contained in that Act would become automatically

applicable to a company making the offer to fifty or more persons.

8.5 As found earlier, on the basis of materials available on record, allotments of SRDs

have been made to 11 persons during 2010-11, 55 persons during 2011-12 and 67

persons during the period of 2012-13.

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8.6 As far as the issuance to 11 persons during 2010-11, reference may be made to Sahara

Case, wherein it was held that under Section 67(3) of the Companies Act, 1956, the

"Burden of proof is entirely on Saharas to show that the investors are/were their

employees/workers or associated with them in any other capacity which they have not

discharged." In respect of issuance to 11 persons during 2010-11, the Company or the

directors have not placed any material that the allotment to 11 persons was in

satisfaction of section 67(3)(a) or 67(3)(b) of Companies Act, 1956 i.e., it was made

to the known associated persons or domestic concern. Therefore, I find that the said

issuance cannot be considered as private placement.

8.7 As far as the other two issues during 2011-12 and 2012-13, the offer of SRDs and

subsequent allotment were made to fifty or more persons. Therefore, the same falls

within the first proviso to section 67(3) of the Companies Act, 1956.

8.8 Thereby, the impugned issues are deemed to be public issues and therefore, such

issues are also mandated to comply with the 'public issue' norms as prescribed under

the Companies Act, 1956.

8.9 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, containing

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'. As per the aforesaid Section 2(36),

“prospectus” means any document described or issued as a prospectus and includes

any notice, circular, advertisement or other document inviting deposits from the

public or inviting offers from the public for the subscription or purchase of any shares

in, or debentures of, a body corporate.

8.10 Neither the company nor the directors produced any record to show that MMML had

issued Prospectus containing the disclosures mentioned in section 56(1) of the

Companies Act, 1956, or filed a Prospectus with ROC or issued application forms

accompanying the abridged prospectus. Therefore, I find that, MMML and the

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persons responsible for the failure to issue prospectus, has not complied with Section

56(1), 56(3) and 60 of the Companies Act, 1956.

8.11 Further, in view of the impugned issues being deemed public issues, MMML had to

compulsorily list such securities in compliance with section 73 of the Companies Act,

1956. As per section 73(1) and (2) of the Companies Act, 1956, every company

intending to offer shares or debentures to the public for subscription by the issue of a

prospectus, is required to make an application, before such offer, 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 and if permission has not been applied for or

not granted, the company is required to forthwith repay with interest all moneys

received from the applicants.

8.12 The allegation of non-compliance of the above provisions were not denied by the

company or directors. I find that no records have been submitted to indicate that it has

made an application seeking listing permission from stock exchange nor refunded the

amounts on account of such failure. Thus, MMML has contravened the said

provisions. MMML or the directors have not provided any records to show that the

amount collected by MMML are kept in a separate bank account. Therefore, I find

that MMML has also not complied with the provisions of section 73(3) as it has not

kept the amounts received from investors in a separate bank account and failed to

repay the same in accordance with section 73(2) as observed above.

8.13 Further as regards the violation of Debt Securities Regulations, it may be seen that the

word, 'debt securities' has been defined as 'non-convertible debt securities which

create or acknowledge indebtedness, and include debenture'. In view of the finding

that MMML has made a public issue of debt securities, the Debt Securities

Regulations is also applicable to the instant offer of SRDs. Therefore, I find that the

Company has violated the following provisions of the aforesaid Regulations, which

contain inter alia conditions for public issue and listing of debt securities, viz.

i. Regulation 4(2)(a) – Application for listing of debt securities

ii. Regulation 4(2)(b) – In-principle approval for listing of debt securities

iii. Regulation 4(2)(c) – Credit rating has been obtained

iv. Regulation 4(2)(d) – Dematerialization of debt securities

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v. Regulation 4(4) – Appointment of Debenture Trustee

vi. Regulation 5(2)(b) – Disclosure requirements in the Offer Document

vii. Regulation 6 – Filing of draft Offer Document

viii. Regulation 7 – Mode of disclosure of Offer Document

ix. Regulation 8 – Advertisements for Public Issues

x. Regulation 9 – Abridged Prospectus and application forms

xi. Regulation 12 – Minimum subscription

xii. Regulation 14 – Prohibition of mis-statements in the Offer Document

xiii. Regulation 15 – Trust Deed

xiv. Regulation 16(1) – Debenture Redemption Reserve

xv. Regulation 17 – Creation of Security

xvi. Regulation 19 – Mandatory Listing

xvii. Regulation 26 – Obligations of the Issuer, etc.

8.14 As regards the allegation of section 117C of the Companies Act, 1956, it may be seen

that the said provision mandates the company to create a debenture redemption

reserve for the redemption of such debentures, to which every year, adequate amounts

should be credited out of its profits, until such debentures are redeemed. None of the

noticees denied this allegation. There is no material on record to show that such

debenture reserve was created. Therefore, I hold that the company has violated section

117C of the Companies Act, 1956.

8.15 I note that the jurisdiction of SEBI over various provisions of the Companies Act,

1956 including the above mentioned, in the case of public companies, whether listed

or unlisted, when they issue and transfer securities, flows from the provisions of

Section 55A of the Companies Act, 1956. While examining the scope of Section 55A

of the Companies Act, 1956, the Hon'ble Supreme Court of India in Sahara Case, had

observed that:

"We, therefore, hold that, so far as the provisions enumerated in the opening

portion of Section 55A of the Companies Act, so far as they relate to issue and

transfer of securities and non-payment of dividend is concerned, SEBI has the

power to administer in the case of listed public companies and in the case of

those public companies which intend to get their securities listed on a

recognized stock exchange in India."

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" SEBI can exercise its jurisdiction under Sections 11(1), 11(4), 11A(1)(b) and

11B of SEBI Act and Regulation 107 of ICDR 2009 over public companies

who have issued shares or debentures to fifty or more, but not complied with

the provisions of Section 73(1) by not listing its securities on a recognized

stock exchange"

8.16 In this regard, it is pertinent to note that by virtue of Section 55A of the Companies

Act, SEBI has to administer Section 67 of that Act, so far as it relates to issue and

transfer of securities, in the case of companies who intend to get their securities listed.

8.17 In view of the forgoing findings, I am of the view that MMML is engaged in fund

mobilizing activity from the public, through the offer and issuance of SRDs and has

contravened the provisions of sections 56, 60 and 73 and through the issuance of

SRDs has contravened section 117C of the Companies Act, 1956.

9.1 Whether MMML has appointed Shri Dinesh Chandra Ghosh,who is an unregistered

entity to act as Debenture Trustee for the offer of SRDs, in violation of Section 117B

of the Companies Act, 1956 and whether the trustee has violated Section 12(1) of

SEBI Act?

9.2 On examination of the Form 10 filed in respect of “Particulars for registration of

charges for debentures”, it shows that MMML created charge, for an amount of Rs. 5

Crores towards the Offer of SRDs on December 4, 2010 in favour of the Shri Dinesh

Chandra Ghosh as trustee.

9.3 Under section 117B of the Companies Act, 1956 no company shall issue a

prospectus or a letter of offer to the public for subscription of its debentures, unless

the company has, before such issue, appointed one or more debenture trustee for

such debentures and the company has, on the face of the prospectus or the letter of

offer, stated that the debenture trustee or trustee have given their consent to the

company to be so appointed.

9.4 By virtue of Section 12(1) of the SEBI Act " No trustee of trust deed … shall buy,

sell or deal in securities except under, and in accordance with, the conditions of a

certificate of registration obtained from the Board in accordance with the regulations

made under this Act". By virtue of Reg. 7 of the SEBI (Debenture Trustees)

Regulations, 1993, only a scheduled bank carrying on commercial activity or, a

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public financial institution within the meaning of section 4A of the Companies Act,

1956 or, an insurance company or, a body corporate alone are eligible to get a

certificate of registration as Debenture Trustee. Shri Dinesh Chandra Ghosh is not

eligible to obtain a certificate of registration, since it does not satisfy the eligibility

criteria mentioned in Reg. 7 of the SEBI (Debenture Trustees) Regulations, 1993.

Neither did this noticee claim that they had received certificate of registration issued

by SEBI nor did the other noticees. Instead Shri Dinesh Chandra Ghosh filed an

evasive reply vide letter dated April 20, 2015 in response to the letter of SEBI dated

March 20, 2015 communicating the personal hearing, that he should be informed

about the subject matter for which his personal attendance is sought. It is clear that

the said letter of SEBI clearly mentions the personal hearing in response to the order

dated January 28, 2015(WTM/SR/ERO/10/01/2015) passed by SEBI.

9.5 In view of above, I find that Shri Dinesh Chandra Ghoshhad dealt in the impugned

SRDs as debenture trustee, without having a certificate of registration as Debenture

Trustee in violation of Section 12(1) of the SEBI Act, 1992. Since the company has

appointed the said entity who does not have a certificate of registration, the

appointment of the same is in violation of section 117B of the Companies Act, 1956.

10.1 If the findings on question No.2 and 3 are found in the affirmative, who are liable for

the violation committed?

10.2 Section 56(1) and 56(3) read with section 56(4) imposes the liability on the

company, every director, and other persons responsible for the prospectus for the

compliance of the said provisions. The liability for non-compliance of Section 60 of

the Companies Act, 1956 is on the company, and every person who is party to the

non-compliance of issuing the prospectus as per the said section.

10.3 As far as the liability for non-compliance of section 73 of Companies Act, 1956 is

concerned, as stipulated in section 73(2) of the said Act, the company and every

director of the company who is an officer in default shall, from the eighth day

becomes 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.

10.4 As far as the liability for non-compliance of section 73 of Companies Act, 1956 is

concerned, as stipulated in section 73(2) of the said Act, the company and every

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director of the company who is an officer in default shall, from the eighth day when

the company becomes liable to repay, 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 if the money is not repaid forthwith.

10.5 SEBI, as per section 27(2) of the SEBI Act, has the powers to proceed against

directors of such companies. In cases of financial fraud, the role of directors in

prevention of the same is of utmost importance. They are required to take diligent

measures in preventing the same. They are also required not to be neglectful in the

affairs of the company which results in the violation of various laws such as deemed

public issue in violation of law. In deemed public issue in violation of law, money is

collected from innocent, ill-informed and gullible public, without the Company

giving the statutory protection available to those investors under the law such as, full

and necessary disclosures about the company, an exit opportunity by way of listing

of the shares. The purpose of refund in such cases as per law, is to protect the

investors who have parted their money without having any opportunity of exit and

without full disclosures about the Company which deprives their informed consent.

10.6 Reference may also be made to the ratio of the Hon’ble High court of Madras in

MadhavanNambiar vs Registrar Of Companies (2002 108 Comp Cas 1 Mad) which

observed “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”.

10.7 SEBI also has powers under section 11 and 11B of the SEBI Act to pass direction of

refund along with interest. The Hon’ble Bombay High court in B.P.Plc (Formerly

B.P.Amoco Plc) vs SEBI, (2002 (4) Bom CR 79), held that that SEBI has powers to

award interest in exercise its power under section 11 and 11B of SEBI Act, as stated

below:-

“Applying the principles regarding award of interest as has been held by the

Apex Court in Secretary, Irrigation Department vs. G.C.Roy (supra) to the

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effect a person deprived of the use of money to which he is legitimately

entitled to has a right to be compensated for the deprivation, call it by any

name. It may be called "interest, compensation or damages," the investors are

entitled to be compensated by way of interest for delayed payment.

Under these circumstances we find no substance that there is no power to

award such an interest.”

10.8 In view of the provisions of law, MMML and its Directors, viz. Shri Manish Roy,

Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt.

SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik along

with its Debenture Trustee, viz. Shri Dinesh Chandra Ghosh are responsible for the

non-compliance of the above mentioned provisions.

10.9 I find from the “Register of directors, managing directors, manager and

secretary,etc” sent by the RoC, West Bengal vide its letter dated December 5, 2014

to SEBI, the details of the appointment and resignation of the directors which is

reproduced below:

Name Date of appointment Date of Cessation Shri Manish Roy 02/04/2013 - Shri Anil Pandey 01/10/2013 - Shri Barun Biswas 02/04/2013 - Shri Sandeep Kumar 30/06/2008 29/10/2010 Shri Kabir Roy 30/06/2008 02/04/2013 Smt. SusmitaRoychoudhury 12/05/2010 02/04/2013 Shri PrabirSengupta 29/10/2010 02/04/2013 Shri Tufan Kumar Pramanik 02/04/2013 02/10/2013

10.10 Therefore, I hold that the Company, Shri Kabir Roy, Smt. SusmitaRoychoudhury

and Shri PrabirSengupta acting as directors are responsible for the issue of SRDs in

violation of law and regulations and hence co-extensively responsible along with the

Company for making refunds along with interest.

10.11 The liability of the company to repay under section 73(2) read with sections 11, 11B

and 27(2) of the SEBI Act, is continuing and such liability continues till all the

repayments are made. Therefore, the directors who joined subsequent to the

impugned public issuance are also responsible for making the refund, if the company

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does not repay the money collected, as mandated in section 73(2) of the Companies

Act, 1956 read with sections 11, 11B and 27(2) of the SEBI Act.

10.12 Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas and Shri Tufan Kumar

Pramanik who joined as directors subsequent to the impugned issue, have not

exercised necessary diligence while taking charge of directorship in the Company.

The very inaction by them against the previous management (for violating the public

issue norms as stipulated under the Companies Act, 1956), even after passing of the

interim order, leads one to conclude on collusion at their end with the Company and

its previous management. Further, these directors have also not taken any step to

remedy the violations committed. Therefore, I hold that Shri Manish Roy, Shri Anil

Pandey, Shri Barun Biswas and Shri Tufan Kumar Pramanik are co-extensively

responsible along with the Company for making refunds along with interest.

10.13 As regards Shri Sandeep Kumar, he submitted that he was director of the company

from June 30, 2008 to August 09, 2010. He also stated that he handed over his

resignation letter on August 9, 2010 to Mr. Kabir Roy which was duly accepted.

However, without submitting the above said resignation letter, Mr. Kabir Roy

submitted another forged resignation letter dated October 28, 2010.However, he has

not produced any proof of any complaint given by him to appropriate authorities

about the forgery. Therefore, the allegation of forgery is not substantiated by

production of any records. Moreover, On perusal of “Register of directors, managing

directors, manager and secretary,etc”, I find that Shri Sandeep Kumar had joined as

director on June 30, 2008 and ceased to be director only on October 28, 2010. He

was a director at the time of deemed public issue during 2010-11. The submission

that he has not participated in the decision making process of the company does not

divest his liability. In fact, as pointed out in para 10.5, Shri Sandeep Kumar was

required to take diligent measures in preventing violation of various provisions of

law relating to the deemed public issue. He was also required not to be neglectful in

the affairs of the company which resulted in the violation of various laws relating

deemed public issue. Therefore, Shri Sandeep Kumar is also co-extensively

responsible along with the Company for making refunds along with interest.

10.14 Regarding Shri Kabir Roy, Shri Sandeep Kumar vide his letter dated March 2, 2015

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had made reference to Shri Kabir Roy as late director. However, the primary evidence

of death certificate of Shri Kabir Roy is not available in the records. Therefore, in

view of the non-availability of any primary evidence on the demise of Shri Kabir Roy,

I am constrained to hold that Shri Kabir Roy, is alsoco-extensively responsible along

with the Company for making refunds along with interest.

11.1 In view of the foregoing, the natural consequence of not adhering to the norms

governing the issue of securities to the public and making repayments as directed

under section 73(2) of the Companies Act, 1956, is to direct the MMML and its

Directors, Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep

Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri

Tufan Kumar Pramanikto refund the monies collected through issuance of SRDs, with

interest to such investors. In view of the violations committed by the Company, its

directors, and the unregistered debenture trustee, to safeguard the interest of the

investors who had subscribed to such SRDs issued by the Company and to further

ensure orderly development of securities market, it also becomes necessary for SEBI

to issue appropriate directions against the Company and the other noticees.

11.2 In view of the foregoing observations and findings, I in exercise of the powers

conferred under section 19 of the Securities and Exchange Board of India Act, 1992

read with sections 11(1), 11(4), 11A and 11B thereof, hereby issue the following

directions:

a) The Company, namely, MegasysMedi Life Limitedand its Directors, Shri Manish

Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy,

Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar

Pramanik shall forthwith refund the money collected by the Company through the

issuance of SRDs, including the money collected from investors, till date, pending

allotment of securities, if any, with an interest of 15% per annum compounded at

half yearly intervals, from the date when the repayments became due to the

investors till the date of actual payment.

b) The repayments and interest payments to investors shall be effected only through

Bank Demand Draft or Pay Order.

c) MegasysMedi Life Limited and its present management is permitted to sell the

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assets of the Company only for the sole purpose of making the repayments

including interest, as directed above and deposit the proceeds in an Escrow

Account opened with a nationalized Bank.

d) MegasysMedi Life Limited and its Directors, viz., Shri Manish Roy, Shri Anil

Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy, Smt.

SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik,

shall issue public notice, in all editions of two National Dailies (one English and

one Hindi) and in one local daily (in Bengali) with wide circulation, detailing the

modalities for refund, including details of contact persons including names,

addresses and contact details, within fifteen days of this Order coming into effect.

e) After completing the aforesaid repayments, MegasysMedi Life Limitedand its

Directors, viz. Shri Manish Roy, Shri Anil Pandey, Shri Barun Biswas, Shri

Sandeep Kumar, Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri

PrabirSengupta and Shri Tufan Kumar Pramanik, shall file a report of such

completion of repayment with SEBI, within three months from the date of this

Order, certified by 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) MegasysMedi Life Limitedand its Directors, viz. Shri Manish Roy, Shri Anil


SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, are

directed to provide a full inventory of all their assets and properties and details of

all their bank accounts, demat accounts and holdings of shares/securities, if held in

physical form.

g) In case of failure ofMegasysMedi Life Limitedand its Directors, viz. Shri Manish

Roy, Shri Anil Pandey, Shri Barun Biswas, Shri Sandeep Kumar, Shri Kabir Roy,

Shri Kabir Roy, Smt. SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan

Kumar Pramanik, to comply with the aforesaid directions, SEBI, on the expiry of

the three months period from the date of this order,-

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a. shall recover such amounts in accordance with section 28A of the SEBI

Act including such other provisions contained in securities laws.

b. 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.

c. 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

d. would also make a reference to the Ministry of Corporate Affairs, to

initiate the process of winding up of the Company.

h) MegasysMedi Life Limited and its Directors, viz., Shri Manish Roy, Shri Anil


SusmitaRoychoudhury, Shri PrabirSengupta and Shri Tufan Kumar Pramanik, are

directed not to, directly or indirectly, access the securities market, by issuing

prospectus, offer document or advertisement soliciting money from the public and

are 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 (4) years from the date of completion of refunds

to investors as directed above. The above said directors are also restrained from

associating themselves with any listed public company and any public company

which intends to raise money from the public, or any intermediary registered with

SEBI from the date of this Order till the expiry of four (4)years from the date of

completion of refunds to investors.

i) Shri Dinesh Chandra Ghosh is restrained from, acting as any intermediary,

accessing the securities market and further restrained from buying, selling or

dealing in securities, in any manner whatsoever, directly or indirectly, for a period

offour (4)years.

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

12.1 Copy of this Order shall be forwarded to the recognized stock exchanges and

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depositories for information and necessary action.

12.2 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.

12.3 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 :Oct 19th , 2015

Place: Mumbai

PRASHANT SARAN

WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

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