WTM/RKA/ERO/139/ 2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER
UNDER SECTIONS 11, 11A AND 11B OF THE SECURITIES AND EXCHANGE
BOARD OF INDIA ACT, 1992 READ WITH REGULATION 107 OF THE SECURITIES
AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE
REQUIREMENTS) REGULATIONS, 2009 AGAINST NVD SOLAR LIMITED, MR.
SAIBAL KUMAR HAZRA, MR. SUBRATA KUMAR MANDAL MR. ARUN KUMAR
CHAKRABORTY AND MR. DIPSEKHAR MUKHERJEE
IN THE MATTER OF NVD SOLAR LIMITED
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1. NVD Solar Limited (hereinafter referred to as "NVD") is a company which was registered with
Registrar of Companies, Kolkata, West Bengal on February 17, 2003 with CIN No. as
U52599WB2003PLC095790. NVD has its Registered Office at 21/1, Karnani Estate, 1st Floor,
209, A.J.C. Bose Road, Kolkata700017, West Bengal, India.
2. Securities and Exchange Board of India ('SEBI') conducted an examination with respect to several
complaints complaint/references whereby SEBI was informed that during the financial year
2012-13, NVD had raised an amount of 595 crore through issuance of fresh equity shares to
1,09,480 entities without complying with the regulatory provisions applicable to a public issue.
3. In this regard, SEBI, vide letter dated October 30, 2013, asked NVD to provide certain details
such as copy of shareholders approval and other statutory clearances for the said issue of shares,
copy of statutory form 2, copies of audited annual accounts of the company for the last three years.
As NVD had not provided the information sought from it by SEBI, reminders were sent to it
whereupon NVD, vide its letter dated December 13, 2013, stated that it had not issued any shares
in contravention of any provisions of law and that all due formalities regarding issuance of shares
required by the Department of Corporate Affairs had been fulfilled. It also stated that the
enhancement of authorized share capital and subsequent raising of paid up capital equivalent to the
authorized share capital had been done after fulfilling all norms as required and upon payment of
prescribed fees. Further, in response to SEBI's letter dated November 20, 2013, NVD, vide letter
dated December 13, 2013, made a contradictory statement that that they had not issued any shares
and/or convertible securities during the last five years until the time hereinafter mentioned.

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4. The examination conducted by SEBI revealed, inter alia, the following: i.

In the year 201112, NVD had accepted share application money for an amount of 20
lakh. The notes to accounts of NVD referred to receipt of the share application money
pursuant to an invitation to offer shares.

ii. On November 30, 2012, shares for an amount of 3 Crore were allotted to three persons
i.e. the directors of the Company.
iii. On March 30, 2013, equity shares for an amount of 595 Crore were allotted by NVD to 1,
09,480 entities. No prospectus/ Red Herring Prospectus/ Statement in lieu of Prospectus/
Information Memorandum was filed by NVD for the issuance of the said equity shares.
iv. As on March 31, 2013, NVD had increased its share capital from 2 crore to 600 crore.
As per the balance sheet of NVD for the year ending March 31, 2013, the money received
from the issue of the equity shares was shown to be invested almost entirely in NVD's
associate companies such as NVD Infotech Private Limited, NVD Entertainments Limited
and NVD Tea & Plants Limited etc. under the head "Non-Current Investments"
5. In view of the above, SEBI issued a show cause notice dated June 05, 214 to NVD and its directors
namely, Mr. Saibal Kumar Hazra, Mr. Subrata Kumar Mandal, Mr. Arun Kumar Chakraborty
and Mr. Dipsekhar Mukherjee calling upon them to show cause as to why appropriate directions
under sections 11, 11A and 11B of the Securities and Exchange Board of India Act, 1992 ("SEBI
Act") read with regulation 107 of the SEBI (Issuance of Capital and Disclosure Requirements)
Regulations, 2009 ("ICDR Regulations") should not be issued against them including but not
limited to directions to refund the money mobilized through equity shares along with interest as
well as directions to prohibit NVD and its directors from accessing the capital market.
6. It is alleged in the SCN that the issuance of equity shares on March 30, 2013 by NVD to more than
fifty entities (i.e. 1,09,480 entities) was a public offer in terms of section 67(3) of the Companies Act,
1956 ("Companies Act"). It is further alleged that NVD while making the said public offer of equity
shares failed to comply with the provisions of sections 56(1), 56(3), 60(1),73(1), 73(2) and 73(3) of
the Companies Act and regulations 4(2)(d), 5(1), 6(1), 7(a), 25, 26, 36, 37, 46, 47 and 57 of the ICDR
Regulations.
7. The SCN was served on NVD and its directors (except Mr. Arun Kumar Chakraborty) but no
reply to the SCN was filed by any of them. NVD, Mr. Saibal Kumar Hazra, Mr. Subrata Kumar
Mandal and Mr. Dipsekhar Mukherjee shall hereinafter collectively be referred to as "the
Noticees". The Noticees were afforded an opportunity of personal hearing in the matter on
August 26, 2014. The Noticees responded to the hearing notice vide letter dated August 25, 2014
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(received by SEBI on August 25, 2014 at 07:04 pm), stating their in ability to attend the hearing on
August 26, 2014 on the ground that they had received the hearing notice from SEBI on August 23,
2014. The said statement was however incorrect as the hearing notice had been delivered to one of
the directors, Mr. Dipsekhar Mukherjee on August 18, 2014 and to the other directors on August 19,
2014. The hearing notice sent to NVD (via hand delivery) could not be delivered as NVD was closed
(both registered office as well as corporate office). It was seen from the MCA website that there was
no change in the address of the registered office of NVD. Therefore, the said hearing notice was
pasted at the registered office address of NVD on August 19, 2014. However, in the interest of
natural justice, one more opportunity of hearing was provided to the Noticees on September 16,
2014 but on the said date, no one appeared on behalf of the Noticees nor any communication was
sent by any of them to SEBI.
8. I have carefully considered the SCN and the material available on record. I note from the
material on record that Mr. Arun Kumar Chakraborty. expired on January 1, 2014. and therefore,
the proceedings against him have abated and the SCN dated June 05, 2014 as against him is
disposed off accordingly. As regards the Noticees, I note that sufficient opportunity of filing
replies to the SCN and appear for personal hearing have been provided to them but no
reply/submissions have been made by them. I am, therefore, of the view that the principles of
natural justice have been duly complied in the present case. I now proceed to deal with the
allegations levelled against the Noticees in the SCN.
9. It is alleged in the SCN that the issuance of 59.5 crore equity shares to 1,09,480 entities on March
30, 2013 by NVD was a public offer in terms of section 67(3) of the Companies Act. I note that
section 67 of the Companies Act provides for the rule of construction for treating an issue of
shares or debentures as public issue. In order to deal with the allegations levelled against the
Noticees, I deem it necessary to refer to the provisions of section 67 of the Companies Act as it
applied at the relevant time and provided as under:Construction of references to offering shares or debentures to the public, etc.
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 subsection (3) and (4), be construed as including a reference to offering them to any section of the public, whether
selected as members of debenture holders of the company concerned or as clients of the person issuing the
prospectus or in any other manner.
(2) Any reference in this Act or in the articles of a company to invitations to the public 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.
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(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 in made to fifty persons or more:
.."
10. From the language of section 67, it is very clear that construction of public issue under subsections (1) and (2) thereof is subject to provisions of section 67(3). Section 67(3) exempts an
offer or invitation from the purview of the construction laid down in section 67(1) and 67(2), if
such offer or invitation can properly be regarded, in all the circumstances i. 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
ii. otherwise as being a domestic concern of the persons making and receiving the offer or
invitation.
11. I note that the first proviso to section 67(3) states that nothing contained in this sub-section
shall apply in a case where the offer or invitation to subscribe for shares or debentures in made
to fifty persons or more. Thus, in terms of the first proviso to section 67(3), any offer or
invitation to fifty or more persons to subscribe for shares or debentures is a public issue even if
a case satisfies the conditions under section 67(3) (a) or (b). In other words, an offer or
invitation to 50 or more persons is a public issue even if it is shown that the shares or
debentures are not available for subscription or purchase by persons other than those receiving
the offer or invitation or that it is of a domestic concern of those making and receiving the
offer or invitation. In this regard it is also to be kept in mind that the first proviso was inserted
in section 67(3) vide the Companies (Amendment) Act, 2000, with effect from December 13,
2000, in order to curb the companies from offering shares and debentures to a wider group of
people by disguising it as domestic concern. In my view, the intention of the Legislature, as
envisaged in the said Amendment Act is that any mobilization of funds from a group of
investors, fifty or more in number, should be classified as a "public issue".
12. I note that the Hon'ble Supreme Court of India in its judgement and order dated August 31,
2012 in matter of Sahara India Real Estate Corporations Limited & Ors. Vs SEBI & Anr. [(2013) 1

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SCC 1] (hereinafter referred to as the "Sahara Order") has settled all the doubts relating to
interpretation of section 67 of the Companies Act and has held as under ". after the amendment to the Companies Act, 1956 on 13.12.2000, every private placement
made to fifty or more persons becomes an offer intended for the public and attracts the
listing requirements under Section 73(1). Even those issues which satisfy Sections 67(3)(a) and (b) would be
treated as an issue to the public if it is issued to fifty or more persons, as per the proviso to Section 67(3) and as
per Section 73(1), an application for listing becomes mandatory and a legal requirement. Reading of the proviso
to Section 67(3) and Section 73(1) conjointly indicates that any public company which intends to issue shares or
debentures to fifty persons or more is legally obliged to make an application for listing its securities on a
recognized stock exchange.
13. In view of the provisions of section 67(3) and aforesaid observations of the Hon'ble Supreme
Court, I find that once the number of allottees exceeds 49, the issuance of securities (equity
shares in the present case) would be deemed to be a "public issue". I, therefore, find that the
issuance of 59.5 crore equity shares by NVD to 1,09,480 entities on March 30, 2013 was a
"public issue".
14. I note that since the issuance of shares by NVD was a public issue, it was required to ensure
compliance with all the requirements relating to a public issue under the Companies Act and
ICDR Regulations including filing a draft offer document with SEBI under regulation 6 of the
ICDR Regulations and registering the prospectus [meeting the requirements of section 56(1)]
with the Registrar of Companies under section 60(1).
15. In terms of section 56(1) of the Companies Act, every prospectus should state the
matters/reports specified in Schedule II of the Companies Act and set out reports as specified
in Part II of the Schedule. In the present case, NVD did not issue any prospectus for the
issuance of equity shares made by it on March 30, 2013 and therefore, it violated section 56(1) of
the Companies Act. In terms of section 56(3) of the Companies Act, it is mandatory for the
company to issue the application forms for shares or debentures accompanied by a
memorandum containing the salient features of the prospectus which complies with the
Companies Act and the forms prescribed under the Companies (Central Governments) General
Rules and Forms, 1956. In this case, no such application forms were issued by NVD and thus
NVD violated the provisions of section 56(3) of the Companies Act.
16. I note that in terms of section 60(1) read with section 2(36) of the Companies Act, a company
before issuing a prospectus in respect of a public issue, is required to register with the Registrar
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of Companies, a copy of the prospectus signed by every person who has been named therein as
a director or proposed director of the company or by his authorized agent. In the present case,
NVD has not registered any prospectus with the Registrar of Companies and has therefore
violated the provisions of section 60(1) of the Companies Act.
17. I further note that in terms of provisions of section 73 of the Companies Act, listing of
securities issued pursuant to a public issue is mandatory and not optional at the intention of the
issuer. Thus, when shares are issued by any company including an unlisted company to 50 or
more persons, it is under a legal obligation to make an application on a recognized stock
exchange for listing thereof. In this regard, I note that in the above mentioned Sahara Order,
Hon'ble Supreme Court has held as under:
"Section 73(1) of the Act casts an obligation on every company intending to offer shares or debentures to the
public to apply on a stock exchange for listing of its securities. Such companies have no option or

choice but to list their securities on a recognized stock exchange, once they invite
subscription from over forty nine investors from the public. If an unlisted company
expresses its intention, by conduct or otherwise, to offer its securities to the public by
the issue of a prospectus, the legal obligation to make an application on a recognized
stock exchange for listing starts. Sub-section (1A) of Section 73 gives indication of what are the
particulars to be stated in such a prospectus. The consequences of not applying for the permission under subsection (1) of Section 73 or not granting of permission is clearly stipulated in sub-section (3) of Section 73.
Obligation to refund the amount collected from the public with interest is also mandatory as per Section 73(2)
of the Act.

Listing is, therefore, a legal responsibility of the company which offers securities to
the public, provided offers are made to more than 50 persons. In view of the clear statutory
mandate, the contention raised, based on Rule 19 of the SCR Rules framed under the SCR Act, has no
basis. Legal obligation flows the moment the company issues the prospectus expressing the intention to offer
shares or debentures to the public, that is to make an application to the recognized stock exchange, so that it
can deal with the securities. A company cannot be heard to contend that it has no such intention or idea to
make an application to the stock exchange. Company's option, choice, election, interest or
design does not matter, it is the conduct and action that matters and that is what the law demands."
18. Thus, in terms of saction 73(1) of the Companies Act it is obligatory for every company
intending to offer shares to the public to apply on a stock exchange for listing of the same. I,
therefore, find that in the present case, NVD has contravened the provisions of section 73(1) of
the Companies Act as it did not apply for listing of its shares on any recognized stock exchange.
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19. I note that Mr. Saibal Kumar Hazra, Mr. Subrata Kumar Mandal and Mr. Dipsekhar Mukherjee
were part of the board of directors of NVD which authorised the issuance of shares on March
30, 2013. As found hereinabove, the issuance of shares dated March 30, 2013 was a "public
issue" and in respect thereof, the applicable provisions of the Companies Act and ICDR
Regulations were not complied by NVD. The board of directors of NVD at the time of the
above mentioned issuance of shares, being in control of the affairs of NVD, was under an
obligation to ensure that the issuance was in compliance with all the applicable provisions of the
Companies Act and ICDR Regulations. In my view, the above named directors of NVD as on
the date of the above mentioned issuance of shares are also "officers in default" as defined under
section 5 of the Companies Act. I, therefore, find that Mr. Saibal Kumar Hazra, Mr. Subrata
Kumar Mandal and Mr. Dipsekhar Mukherjee are also responsible for the acts and omissions of
NVD.
20. It is pertinent to note that SEBI Act is a special legislation to deal with matters relating, inter alia,
to the protection of interests of investors in securities and the ICDR Regulations framed for the
purposes of section 11(1) and section 11A lay down various disclosure and other related
requirements for public issues in furtherance of the objective and duties of SEBI enshrined
under the SEBI Act. It is also to be kept in mind that these statutory requirements and
obligations are intended to protect the interests of the investors in securities and to ensure
transparency and integrity in the securities market. Accordingly, a company making a public
issue of securities is obligated to comply with these requirements in addition to the requirements
prescribed under the Companies Act. In this case, the company has not complied with any
provision of ICDR Regulations. I, therefore, find that apart from non-compliance of provisions
of section 56(1), 56(3), 60(1), 73(1), 73(2) and 73(3) of the Companies Act, NVD failed to
comply with requirements relating to public issue and listing of securities contained in
regulations 4(2)(d), 5(1), 6(1), 7(a), 25, 26, 36, 37, 46, 47 and 57 of the ICDR Regulations as
alleged in the SCN. The requirements of the relevant provisions are described in the following
Table:Sr.
No.
1.
2.

Relevant provisions of
the ICDR Regulations.
Regulation 4 (2) (d)

Requirements

Regulation 5 (1)

Appointment of merchant banker and other

intermediaries.

Application for listing of specified securities on one or

more recognized stock exchange.

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3.

Regulation 6 (1)

Filing of draft offer document with SEBI and the

designated stock exchange and Registrar of Companies

4.

Regulation 7 (a)

Obtaining in-principle approval from the recognized

stock exchanges in which the specified securities are to
be listed

5.
6.

Regulation 25 and 26
Regulation 36

Satisfy the conditions of initial public offer

To ensure lock-in of minimum promoters' contribution

7.
8.
9.

Regulation 37
Regulation 46
Regulation 47

To ensure lock-in of pre-issue capital

Keeping the public issue open for the specified period
Pre issue advertisement for public issue

10.

Regulation 57

Manner of disclosures in the offer documents

21. I note that in terms of section 73(2) read with section 73(3) of the Companies Act, where the
permission (to deal shares or debentures on a stock exchange) has not been applied under
section 73(1), the company shall forthwith repay without interest all moneys received from
applicants in pursuance of the prospectus, and, if such money is not repaid within eight days
after the company becomes liable to repay it, the company and every director of the company
who is an officer in default shall, on and from the expiry of the eight days, 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, as may be prescribed, having regard to the length of the period of
delay in making the repayment of such money. Since, NVD failed to make application for listing
of its shares on any recognized stock exchange, NVD and its directors at the time of issuances
of shares mentioned above are liable to refund the amounts collected from subscribers of its
shares issued to them along with interest at the rate of 15% per annum.
22. It is pertinent to note that though Companies Act, 1956 has been repealed by the Companies
Act, 2013, anything done or any action taken or purported to have been done or taken under the
Companies Act, 1956 is deemed to have been done or taken under the corresponding provisions
of the Companies Act, 2013 by virtue of section 465(2) of the Companies Act, 2013, and is
therefore saved regardless of the repeal of the Companies Act, 1956. Section 465(2)(a) of the
Companies Act, 2013, reads as under:
"(2)Notwithstanding the repeal under sub-section (1) of the repealed enactments, (a) anything done or any action taken or purported to have been done or taken, including any rule,
notification, inspection, order or notice made or issued or any appointment or declaration made or any
operation undertaken or any direction given or any proceeding taken or any penalty, punishment, forfeiture
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or fine imposed under the repealed enactments shall, insofar as it is not inconsistent with the provisions of
this Act, be deemed to have been done or taken under the corresponding provisions of this Act;"
23. In view of the foregoing, I, in exercise of the powers conferred upon me under sections 11, 11A
and 11B read with section 19 of the SEBI Act and regulation 107 of the ICDR Regulations,
hereby issue the following directions:
i.

NVD Solar Limited and its directors namely Mr. Saibal Kumar Hazra, Mr. Subrata Kumar
Mondal and Mr. Dipsekhar Mukherjee, shall within three months from the date of this
order, jointly and severally refund the entire amount of 595 crore collected in the public
issue dated March 30, 2013 as found in this order, to the subscribers of equity shares with
interest at the rate of 15% per annum from the date of receipt of money till the date of such
refund.

ii. Such refund shall be made only in cash through a Demand Draft or Pay Order.
iii. NVD Solar Limited shall issue a public notice, in all editions of two National Dailies (one
English and one Hindi) 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.
iv. Within seven days of completion of refund as directed hereinabove, NVD Solar Limited
shall file a certificate of such completion with SEBI from 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).
v. NVD Solar Limited and its directors namely, Mr. Saibal Kumar Hazra, Mr. Subrata Kumar
Mondal and Mr. Dipsekhar Mukherjee, are directed not to, directly or indirectly, access the
capital market by issuing prospectus, any 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 till the expiry of
three years from the date of completion of refund as directed hereinabove.
vi. Mr. Saibal Kumar Hazra, Mr. Subrata Kumar Mondal and Mr. Dipsekhar Mukherjee are
further restrained from associating themselves, with any listed public company and any
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public company which intends to raise money from the public, till the expiry of three years
from the date of completion of refund as directed hereinabove.
24. The above directions are without prejudice to the right of SEBI to take any other appropriate
action for the violations found in this case or to initiate any action including launching of
prosecution, in case of failure of the Noticees to comply with the above directions, in
accordance with the provisions of applicable laws.
25. The order shall come into force with immediate effect.
26. A copy of the order shall be served upon the Noticees to ensure compliance with the above
directions.

Sd/-

DATE: NOVEMBER 27th, 2014

PLACE: MUMBAI

RAJEEV KUMAR AGARWAL

WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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