the issue to more than 49 persons attract the obligations of the public issue since they are deemed as public issue. Therefore, I find that, MCCL and its directors and promoters responsible for the failure to issue prospectus,thus having failed to coply with Section 56(1), 56(3) and 60 of the Companies Act, 1956. 8.10 Further, by issuing RPS to more than 49 persons, MCCL 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, a company is required to make an application to one or more recognized stock exchanges for permission for the shares or debentures to be offered to be dealt within 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. 8.11 The allegation of non-compliance of the above provisions was not denied by the company or directors or promoters. I find that no records have been submitted to indicate that it had made an application seeking listing permission from stock exchange nor did it refund the amounts consequent upon such failure. Thus, MCCL has contravened the said provisions. MCCL has not provided any records to show that the amount collected by MCCL are kept in a separate bank account. Therefore, I find that MCCL 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. 8.12 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." " 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" 8.13 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. 8.14 In view of the forgoing findings, I am of the view that MCCL is engaged in fund mobilizing activity from the public, through the offer and issuance of RPS and has contravened the provisions of sections 56, 60 and 73 of the Companies Act, 1956. 9.1 If the findings on question No.2 are found in the affirmative, who are liable for the violation committed: 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 a party to the non-compliance of issuing the prospectus as per the said section. 9.2 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. 9.3 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. 9.4 Reference may also be made to the ratio of the Honble High court of Madras in Madhavan Nambiar 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. 9.5 SEBI also has powers under section 11 and 11b of the sebi act to pass direction of refund along with interest. The Honble 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 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. 9.6 The Company also stated in the written submissions that it has resolved vide board resolution dated March 28, 2014 that it would redeem the preference shares irrespective of the date of maturity and the repayment has started. It stated that only Rs. 20,26,800/- is only remaining to be redeemed. It stated the said balance amount was transferred to the separate account opened by the company in ICICI and payments on this account has been made from this bank account. At para 15 of the written submissions, the Company stated that it has redeemed Rs. 2,41,40,600 and only a sum of Rs. 10,53,500 remains to be paid. This was also stated in the reply dated March 3, 2015 of the company. The company stated that it has vide its letter dated May 21, 2015 addressed to SEBI has intimated SEBI that the outstanding amount for redemption is only Rs. 9,85,500 which according to the Company has come down to Rs. 9,00,000 as on the date of written submissions. It is noted that no proof of payments was produced before the SEBI. Further, as submitted by the Company, it has deposited only Rs. 20,26,800 in the ICICI Bank which according to the Company was the then outstanding amount. The Company submitted that though it is willing to make the refund, no investor is willing to receive the payment. However, no copy of the said letter and proof of service was given by the company. 9.7 The Company and the directors contended that they were not given opportunity of being heard before the interim order was passed. It is an established position of law that SEBI has powers to interim orders before an opportunity of being heard is given in appropriate cases. In the present case an interim order has been passed in view of the urgent situation of preventing the Company and its directors from further violating the law and preventing them from dissipating the assets so that in case of an order of refund is passed after hearing, the same would not become infructuous. 9.8 The Companys submission that MCA Portal 21 documents were relied upon also does not stand since they are public documents and the Company and directors themselves have admitted that they have made allotments. 9.9 The Company also raised a defense that it is not dealing in securities. The same does not stand in view of the fact that they issued redeemable preference shares which fall within the definition of securities under the Securities Contract (Regulation) Act, 1956. 9.10 It is noted that there is no allegation in the interim order cum show cause notice that there is a violation of CIS regulations or the Company is running collective investment schemes. However, the Company submitted that it is in the business of construction of residential and commercial flats and selling the flats to the purchasers through execution of sale agreement. It is noted that the Company advanced arguments on that basis in its letter dated March 3, 2015 also. The submissions on this basis that it is not running the CIS made in the written submissions of the Company, therefore, are irrelevant to the present proceedings. 9.11 From the available information as per the Register of directors, managing directors, manager, secretary, etc dated December 4, 2014, obtained from RoC, Kolkata before passing of the interim order, the details of the appointment and resignation of all the directors are given in the Table 2 below: Table 4 Name of the Directors Date of Appointment Date of Resignation Shri Samarjit Mondal, July 01, 2004 - Shri Swapan Kumaar Mondal July 01, 2004 - Shri Sachi Dulal Mondal September 03, 2012 - Shri Sanjiv Jain July 03, 2006 July 23, 2010 Shri Indranil Chattopadhyay July 23, 2010 September 07, 2012 9.12 As per the latest Signatory Details obtained from MCA website on December 28, 2015, it is observed that Shri Sachi Dulal Mondal has resigned from the directorship of the company and Shri Indranil Chattopadhyay joined the company as director on December 23, 2014 (i.e. after passing of interim order). 9.13 Shri Samarjit Mondal, Shri Swapan Kumaar Mondal were serving as directors while the impugned issues and allotments were made. Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay (has been inducted as director again on 23.12.2014 after resigning on 07.09.2012) were acting as directors at some stages of the raising of money by way of issuance of RPS. Therefore, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay who acted as directors at the time of impugned issues, are responsible for the refund along with the Company. 9.14 Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay resigned on December 23, 2014, July 23, 2010 and September 07, 2012 respectively. The liability of the company to repay under section 73(2) of the Companies Act, 1956 is continuing and such liability continues till all the repayments are made. Reference may be made to the judgment rendered in Honble High court Delhi in Anita Chadha vs Registrar Of Companies {74 (1998) DLT 537}. The ratio of this judgment would show that the directors who have resigned still can be proceeded against for the violations committed by them. Therefore, the subsequent resignation of Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay will not discharge them of their liability as persons responsible for the issuance of RPS in violation of law. 9.15 The liability of the company to repay under section 73(2) of the Companies Act, 1956 is continuing and such liability continues till all the repayments are made. Therefore, the directors who join subsequent to the some instances of the impugned public issuances are also liable if the company does not repay the money collected, as mandated in section 73(2) of the Companies Act, 1956. Therefore, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay also become responsible on this ground also for making refunds along with interest on the basis of their continuing liability. Shri Indranil Chattopadhyay has joined the company again. These directors also have not exercised necessary diligence after joining as directors in the Company. Neither did they make any attempts to report the wrongdoings of the company to appropriate authorities at the time of their joining. 9.16 In view of the provisions of law, MCCL and its directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, are responsible for the issue of RPS in violation of law and regulations and hence co-extensively responsible along with the Company for making refunds along with interest. The amounts mobilized through the issue of securities have not been refunded within the time period as mandated under law. It would therefore be appropriate to levy an interest @ 15% p.a. as provided for under the above section read with rule 4D (which prescribes that the rates of interest, for the purposes of sub-sections (2) and (2A) of section 73, shall be 15 per cent per annum) of the Companies (Central Governments) General Rules and Forms, 1956 on the amounts mobilized by the Company through its offer and issue of securities from the date when the same was liable to be repaid till date of actual payment to the investors. 9.17 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 MCCL and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, to refund the monies collected, with interest to such investors. In view of the violations committed by the Company and its directors and promoters, to safeguard the interest of the investors who had subscribed to such preference shares 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. 11.1 In view of the foregoing, I, in exercise of the powers conferred upon me 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, Mondal Construction Company Limited and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, shall forthwith refund the money collected by the Company through the issuance of RPS, including the money collected from investors, till date, pending allotment, if any, with an interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became due (in terms of section 73(2) of the Companies Act, 1956) to the investors till the date of actual payment.
b) The Company has claimed to have redeemed the securities and made payments to its investors. If the Company has actually made any repayments to its investors of the amounts collected from them along with interest, the above directions shall be applicable for the amounts due to be returned to remaining investors. However, such repayments as claimed to have been already made by the Company, shall be certified by Chartered Accountants, as directed in sub-paragraph (f) below.
c) The repayments and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order.
d) Mondal Construction Company Limited and its present management is permitted to sell the 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.
e) The Company, namely, Mondal Construction Company Limited and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, 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.
f) After completing the aforesaid repayments, Mondal Construction Company Limited and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, shall file a report of such completion of repayment with SEBI, within a period of 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").
g) If the Company, Mondal Construction Company Limited had repaid any investors as claimed by it in its written submissions dated July 29, 2015, the Company may include such repayment in the report to be submitted under para 11.1 (e), provided the Company had met with the criteria laid down under para 11.1(b) and provided further that the Company pays interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became due (in terms of section 73(2) of the Companies Act, 1956) to the investors till the date of actual payment.
h) Mondal Construction Company Limited and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, 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.
i) In case of failure of Mondal Construction Company Limited and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, to comply with the aforesaid directions, SEBI, on the expiry of the three months period from the date of this order,-
i. shall recover such amounts in accordance with section 28a of the sebi act including such other provisions contained in securities laws.
ii. 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.
iii. 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;
iv. would also make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the Company.
j) Mondal Construction Company Limited and its Directors, Shri Samarjit Mondal, Shri Swapan Kumaar Mondal, Shri Sachi Dulal Mondal, Shri Sanjiv Jain and Shri Indranil Chattopadhyay, 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 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 4 years from the date of completion of refunds to investors.
k) The above directions shall come into force with immediate effect. 12.1 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. 12.2 Copy of this Order shall be forwarded to the recognized stock exchanges and depositories for information and necessary action. 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 : January 15, 2016 Place: Mumbai PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA