WTM/SR/SEBI/ERO/01/01/2017. Case: In Re: Saradha Realty India Ltd. and Ors. Vs. Securities and Exchange Board of India

Case NumberWTM/SR/SEBI/ERO/01/01/2017
Party NameIn Re: Saradha Realty India Ltd. and Ors. Vs
JudgesS. Raman, Whole Time Member
IssueSecurities And Exchange Board Of India Act, 1992 - Sections 12 (1B), 12(1B), 15 -I(3), 15-I (3), 15-I(3), 15D, 15D (a), 15D(a), 15HB, 19, 24, 27 (1), 27(1)
Judgement DateJanuary 11, 2017
CourtSecurities and Exchange Board of India

Order:

S. Raman, Whole Time Member

1.1 Securities and Exchange Board of India (hereinafter referred to as "SEBI"), vide Order dated April 23, 2013 directed Saradha Realty India Ltd. (hereinafter referred to as the "Company"/"Saradha Realty") and its Managing Director, viz. Mr. Sudipta Sen (Sudipta Sen):

"* to wind up its existing collective investment schemes and refund the money collected by it under the schemes with returns which are due to the investors as per terms of offer within a period of three months from the date of the Order, and

* to submit a winding up report and repayment report to SEBI in accordance with the SEBI Collective Investment Schemes) Regulations, 1999."

1.2 The aforesaid directions were issued against Saradha Realty and its Managing Director, Sudipta Sen for launching "collective investment schemes" without obtaining certificate of registration from SEBI, thereby contravening the provisions of Section 12(1B) of the SEBI Act, 1992 ("SEBI Act") and Regulation 3 of the SEBI Collective Investment Schemes) Regulations, 1999 ("CIS Regulations"). Vide the aforesaid Order, it was also directed that in case the company/Saradha Realty fails to comply with the aforesaid directions, SEBI would initiate prosecution under Section 24 of the SEBI Act and adjudication proceedings under Chapter VI of the SEBI Act against Saradha Realty and its Directors.

1.3 Thereafter, SEBI initiated Prosecution and Adjudication proceedings against Saradha Realty, its Managing Director, viz., Sudipta Sen, its Directors, viz., Mr. Monoj Kumar Nagel (Monoj Nagel), Mr. Hemanta Pradhan (Hemanta Pradhan), Mr. Subhojit Sen (Subhojit Sen), Mrs. Debika Dasgupta (Debika Dasgupta), Mrs. Mitali Banerjee (Mitali Banerjee), Mrs. Poulami Mukherjee (Poulami Mukherjee), Mrs. Debjani Mukherjee (Debjani Mukherjee) and Mr. Gobinda Prasad Giri (Gobinda Giri) and the Secretary of Saradha Realty, viz., Mr. Arvind Kumar Mishra (Arvind Mishra).

1.4 Adjudicating Officer was appointed to inquire and adjudicate on:-

"i. Whether the aforesaid entities are liable for penalty under Section 15D of the SEBI Act for launching "collective investment schemes" without obtaining certificate of registration from SEBI, in contravention to the provisions of Section 12(1B) of the SEBI Act and Regulation 3 of the CIS Regulations, and

ii. Whether the entities are liable under Section 15HB of the SEBI Act for non-compliance of SEBI directions issued vide Order dated April 23, 2013"

1.5 Section 15D of the SEBI Act provides: "If any person, who is- (a) required under this Act or any rules or regulations made thereunder to obtain a certificate of registration from the Board for sponsoring or carrying on any collective investment scheme, including mutual funds, sponsors or carries on any collective investment scheme, including mutual funds, without obtaining such certificate of registration, he shall be liable to [a penalty of one lakh rupees for each day during which he sponsors or carries on any such collective investment scheme including mutual funds, or one crore rupees, whichever is less".

Section 15HB of the SEBI Act provides: "Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees."

1.6 "The Adjudicating Officer (A.O.), after conducting the inquiries into the alleged violations by the aforementioned entities, vide order dated October 14, 2016 observed as under:

"21. During the course of scrutiny, it was perceived that the action has been initiated/approved against all the 10 persons who were shown in the said list of MCA. However, the said list showed that there were only 3 persons namely- Mr. Sudipta Sen, Mr. Hemanta Pradhan and Mr. Monoj Kumar Nagel who were shown as existing directors of the Noticee No. 1/Saradha Realty India Ltd. at the relevant point of time (viz. April 23, 2013 onwards) while other 6 persons/Noticee namely Mr. Subhojit Sen, Mrs. Debika Dasgupta, Mrs. Mitali Banerjee, Mrs. Poulami Mukherjee, Mrs. Debjani Mukherjee and Mr. Gobinda Prasad Giri, were shown to have ceased as directors well before the date of said SEBI Order. Also, Noticee No. 3 (Mr. Arvind Kumar Mishra) was shown as secretary of the Noticee No. 1 and not as director.

...............

26. As it is established above that only 3 Noticee(s) were shown as the directors of the Saradha realty India Ltd./Noticee No. 1 during the relevant time and other 7 Noticees were not the directors during that time, therefore, as per settled legal position, only those directors of Saradha Realty India Ltd./Noticee No. 1 can be held liable for non -compliance of directions, who on the date of said order or thereafter, were/are the directors of Noticee No. 1. Needless to say that a person who is or was not on the Board of a Company as a Director, then, he has no authority to comply with the directions on behalf of the Company as he is not involved in the affairs of the company.

..................

28. In view of the above, I am of the opinion that the Noticees No. 6 -11 namely- Mr. Subhojit Sen, Mrs. Debika Dasgupta, Mrs. Mitali Banerjee, Mrs. Poulami Mukherjee, Mrs. Debjani Mukherjee and Mr. Gobinda Prasad Giri, were not the directors of Noticee No. 1 at the relevant time (viz. April 23, 2013 onwards) as they have ceased as directors well before the date of said SEBI Order. Also, Noticee No. 3 (Mr. Arvind Kumar Mishra) was shown only as secretary of the Noticee No. 1 and not as the director. Therefore, they cannot be made liable for the non - compliance of directions issued under said SEBI order.

29. Here, it is not out of place to mention that other actions against the erstwhile directors relating to the violation of securities laws if any, that had occurred prior to their cession of as directors, can be initiated/proceeded which are independent of the present allegation.

30. Keeping in view the aforesaid observations, facts/circumstance of the case, undisputed role of Noticee No. 1 and its directors towards their involvements in the affairs of Noticee No. 1, I am of...

To continue reading

Request your trial