2024 TaxPub(CL) 179 (SAT- Mum)

SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

Section 15T

Appeal to Securities Appellate Tribunal - Issuance of Optionally Convertible Debentures in violation of SEBI Act and Companies Act - Appellant never held directorship in company - Whether order of restraining appellant from accessing securities is rightly passed by SEBI

SEBI found that company received funds through Optionally Convertible debentures (OCDs) without complying with provisions of SEBI Act, Companies Act and DIP Guidelines. The SEBI directed the company to refund money of investors and also restrained the company and its officials from accessing securities markets including appellant. The appellant filed an appeal against the order on the ground that he was never a director in the company. Held: The appellant had filed balance sheet obtained from MCA portal from year 2006 onwards till 2012, which did not show appellant as director in the company. Further, the appellant had also filed police complaint against managing director of the company in respect of misuse of digital signatures prior to initiation of investigation by the SEBI. In view of the evidence which had been filed by the appellant, entries made in the MCA portal showing the appellant as a Director could not be taken as the gospel truth when such entries were disputed. The appellant had taken a specific stand from the inception that he was never a director in the company, therefore, it was obligation of the SEBI to get additional evidence to prove that the appellant was a director in the company. In absence of additional evidence, the order against the appellant could not be sustained. Thus, the order in relation to the appellant was quashed.

REFERRED :

FAVOUR : In favour of appellant

A.Y. :

IN THE SECURITIES APPELLATE TRIBUNAL, MUMBAI BENCH

TARUN AGARWALA, PRESIDING OFFICER & MEERA SWARUP, TECHNICAL MEMBER

Sanjeet Kumar Sharma v. SEBI

Appeal No. 596 of 2022

9 October, 2023

Appellant by: Saurabh Bachhawat, Advocate, Yahya Batatawala, Meghna Rao and Uma Chatterjee, Advocates

Respondent by: Vyom Shah, Advocate, Akash Jain and Daksha Kasekar, Advocates

Tarun Agarwala, Presiding Officer

The present appeal has been filed against the order of the Whole Time Member ('WTM' for convenience) of the Securities and Exchange Board of India ('SEBI' for convenience) dated 6-3-2018 wherein a slew of directions has been issued against the Company and its Directors directing refund of the money collected through Optionally Convertible Debentures ('OCDs' for convenience) along with interest and further debarring the Directors for specified period. In so far as the appellant is concerned he has been debarred for a period of 4 years from the date of completion of refund to the investors.

2. The facts leading to the filing of the present appeal is, that SEBI undertook an enquiry to ascertain whether Helios Corporation Limited and Helios Chemicals Limited had made any public issue of securities without complying with the provisions of the Companies Act, 1956, SEBI Act, 1992 and SEBI (Disclosure and Investor Protection) Guidelines, 2003 ('DIP Guidelines' for convenience).

3. During enquiry it was observed that the Reserve Bank of India ('RBI') had issued a press release prohibiting Helios Corporation Limited from accepting deposits from any persons including existing depositors. SEBI also observed that the RBI had filed a Company Petition before the Patna High Court. On enquiry it was found that Helios Corporation had made an offer of OCDs during 2003-04 to 2008-09 and raised an amount of Rs. 11,95,34,587 from more than 4,062 allottees. It was found that the offer of OCDs was violative of the SEBI Act, 1992, the Companies Act, 1956 and the DIP Guidelines.

4. SEBI accordingly passed an Interim Order, dated 20-11-2015 issuing a slew of directions. After hearing the matter and after considering the objections a final Order, dated 6-3-2018 was passed directing the Company to refund the money collected through OCDs and further restrained the Directors from accessing the securities market for a period of 4 years.

5. We have heard Shri Saurabh Bachhawat, the learned counsel for the appellant and Shri Vyom Shah, the learned counsel for the respondent.

6. The only contention raised by the appellant who has been arrayed as noticee no. 7 is, that he was never a Director in the Company and that he has been falsely implicated. It was urged, that the Managing Director had played a fraud and had unauthorizedly used his digital signatures and wrongly placed a resignation latter when in fact the appellant was never appointed as a Director at any point of time. In this regard, the appellant had filed a complaint on 15-11-2013 against the Managing Director, Sanjay Kumar Singh.

7. In this regard, we find that the WTM has proceeded on the basis that as per MCA-21 portal maintained by Ministry of Corporate Affairs the appellant was shown to have been appointed as a Director on 30-5-2007 and continued till 3-12-2012. On this basis, the WTM has proceeded and presumed that the appellant was a Director in the Company and has disbelieved the contention that the appellant was not a Director.

8. In this regard, we find that the appellant was given a DIN No. 03549592. This DIN is provided to all those persons who are appointed as a Director. This DIN No. is reflected in the impugned order as well. In this regard, the appellant raised an enquiry under the Right To Information Act, 2005 from the Ministry of Corporate Affairs and, in reply, the Ministry has informed that the said DIN No. 03549592 was allocated in the name of the appellant on 10-6-2011. On this basis, the appellant contends that if DIN No. was allocated in his name on 10-6-2011 in which case the finding that on the basis on MCA-21 portal the appellant was appointed as a Director on 30-5-2007 is erroneous in as much as without a DIN number the appellant cannot be appointed as a Director in 2007.

9. The appellant has also filed the balance sheet obtained from the MCA portal from the year 2006 onwards till 2012 which does not show the appellant as a Director in the Company. The appellant when he came to know about the digital signatures being used for his resignation purpose, had filed a police complaint on 15-11-2013 against the Managing Director of the Company, Sanjay Kumar Singh. This complaint was filed prior to the investigation initiated by SEBI and prior to the passing of the interim order on 20-11-2015.

10. In view of the aforesaid evidence which has been filed by the appellant, we are of the opinion, that entries made in the MCA portal showing the appellant as a Director cannot be taken as the gospel truth when such entries are disputed and, therefore, SEBI is required to consider other additional evidence to support their case that the appellant was a Director. Additional evidence could be in the form of Board Resolutions showing his presence, appointment letter, acceptance letter and such other documentary evidence which can be obtained from the Company itself.

11. In the light of the aforesaid, we are of the opinion, that when a specific stand has been taken by the appellant from the inception that he was never a Director in which case it was the obligation of the respondent to get additional evidence to prove that the appellant was a Director in the Company. In the absence of additional evidence, we are of the opinion, that the impugned order against the appellant cannot be sustained.

12. Considering the aforesaid, the impugned order in so far as it relates to the appellant is quashed. The appeal is allowed. The matter is remitted to the WTM to decide the matter a fresh after considering the evidence that has been filed by the appellant before this Tribunal and such other evidence that the WTM may obtain from further enquiry regarding the directorship of the appellant. In the circumstances of the case, parties shall bear their own costs.