WTM/PS/26/ERO/IMD/MAY/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
ORDER
Under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act,
1992
In the matter of Sunplant Business Limited
In respect of
1. Mr. Girija Shankar Kumar (PAN: AKAPK2774R/ DIN: 00355512) and
2. Mr. Awdhesh Kumar Singh (PAN: AKQPS6527G/DIN: 00301404)

Date of personal hearing: March 09, 2016

Appearance:
Mr. Girija Shankar Kumar appeared in-person.
Mr. Awdhesh Kumar Singh appeared along with Mr. B. Ghosh, Bar-at-Law.
For SEBI: Mr. T. Vinay Rajneesh, Assistant General Manager and Ms. Nikki Agarwal, Assistant
Manager
1.

Securities and Exchange Board of India (SEBI) passed an Order dated June 03, 2015 (the

Order) in the matter of Sunplant Business Limited (the Company), whereby the Company and its
directors, Mr. Basant Kumar Sasmal, Mr. Amit Kumar Chowdhury and Mr. Mahesh Chandra Prasad
were made liable for the contravention of sections 56, 60 and 73 of the Companies Act, 1956 and
the SEBI (Disclosure and Investor Protection) Guidelines, 2000 (DIP Guidelines) in respect of the
offer and issuance of Redeemable Preference Shares (RPS) during the financial years 2005-2006,
2006-2007 and 2007-2008. SEBI had directed the Company and others to refund the public funds
mobilized under such offer and issuance of securities and also passed certain other consequential
and attendant directions against them.

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2.

Thereafter, it came to the notice of SEBI that Mr. Girija Shankar Kumar and Mr. Awdhesh

Kumar Singh (collectively referred to as noticees) were the directors in the Company from April
29, 2002 to April 30, 2011. In view of the same, they were alleged that they were also engaged in
fund mobilizing activity from the public, in the capacity as directors during the relevant period, and
have violated the provisions of law mentioned the above paragraph. Accordingly, SEBI issued an
interim order cum show cause notice dated November 20, 2015, wherein the allegations were made
and the following directions were issued:
In view of the alleged violations by the abovementioned past Directors, I, in exercise of the powers conferred

upon me under Sections 11, 11(4), 11A and 11B of the SEBI Act, hereby issue the following directions
i.

The past Directors of SBL, viz. Shri Girija Shankar Kumar (PAN: AKAPK2774R; DIN:
00355512) and Shri Awdhesh Kumar Singh (PAN: AKQPS6527G; DIN: 00301404), 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;
ii. The abovementioned past Directors of SBL 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;
iii. The abovementioned past Directors of SBL shall provide a full inventory of all their assets and
properties.
The said interim order had also directed the said noticees to show cause as to why suitable
directions/prohibitions under sections 11(1), 11(4), 11A and 11B of the SEBI Act, section 73(2) of
the Companies Act, 1956 read with section 27(2) of the SEBI Act should not be passed against
them:
i.

Directing them jointly and severally to refund money collected through the Offer of
preference shares alongwith interest, if any, promised to investors therein;

ii.

Directing them not to issue 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, for an appropriate period;

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iii. Directing them to refrain from accessing the securities market and prohibiting them
from buying, selling or otherwise dealing in securities for an appropriate period.

3.

The interim order advised the noticees to file their response within a period of 21 days and

also indicate whether they wish to avail an opportunity of personal hearing. The interim order was
forwarded to the noticees vide SEBI letters dated November 23, 2015. The noticees were also
advised to read this interim order along with the Final Order dated June 03, 2015 passed in respect
of the Company and its directors.
4.

Mr. Girija Shankar Kumar, vide his letter dated December 28, 2015 requested for further

time of 45 days in order to gather relevant documents for sending a suitable reply. The noticee
mentioned that this request was made for the other noticee i.e. Mr. Awdhesh Kumar Singh also.
SEBI, on consideration of the request, advised the noticees vide letter dated January 19, 2016 that
they are granted additional time till February 05, 2016 for filing their replies.
5.

Thereafter, vide letter dated February 05, 2016, Mr. Awdhesh Kumar Singh made the

following submissions:
(a) There were other past directors too in the Company apart from them. By issuing show cause
notice to the noticees, SEBI has been selective.
(b) He was appointed as a director in the Company on April 29, 2002 and resigned from the
post on April 30, 2011.
(c) When the noticees had resigned, the board of directors/management at that point in time
have taken all the liabilities and absolved them from any sort of liability. Evidence in this
regard was enclosed.
(d) There were many assets of the Company against liabilities of preference shareholders.
(e) He requested SEBI not to involve him with respect to any compliance with respect to the
Company as there is document which has absolved him of the liabilities. He also stated that
he is complying with SEBIs instructions issued in the matter of Sunplant Agro Limited.
(f) He also contended that he was not connected with the Company after his resignation.

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The noticee had enclosed copy of an undated letter from the Company to him wherein it was stated
that the noticees resignation dated April 30, 2011 was accepted in the board meeting held on the
same day. The noticee was also informed that as on the date of his resignation, he had no liability
towards the Company. It was further mentioned that the noticee would not be held liable in the
future also and that the present directors have taken full responsibility towards the Company.
6.

Mr. Girija Shankar Kumar, vide letter dated February 05, 2016 made the following

submissions:
(a) He had consented to act as an independent director of the Company.
(b) The company is a separate legal entity having perpetual succession managed by the board of
directors. In the instant case, though he was a director, he had received an NOC from Mr.
B.K. Sasmal (managing director) at the time when he had resigned.
(c) He had always acted in accordance with the MoA, AoA of the Company. His effort was to
attain the main objects of the Company and to work for the interest of the shareholders.
(d) As per section 166 of the Companies Act, 2013, when a director has discharged his duties
with due diligence, reasonable care and skill and no knowledge of wilful default, he should
not be held responsible for any act. He is therefore not covered with the purview of officer
in default. As per the Companies Act, 2013, no director shall be held responsible if any act
has been done or any breach occurred without his knowledge and without consent.
(e) In view of his submissions, the noticee requested SEBI to absolve him in the matter.
7.

In accordance with the principles of natural justice, the noticees were afforded an

opportunity of personal hearing on March 09, 2016. In the personal hearing, Mr. Girija Shankar
Kumar appeared in-person and referred to his reply and reiterated the submissions made therein.
Mr. Awdhesh Kumar Singh appeared along with his representative. This notice also referred to his
reply and reiterated the submissions made therein.
8.

I have considered the final order dated June 03, 2015, the interim order cum show cause

notice issued to the noticees, their submissions and other material available on record.

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9.

The final order dated June 03, 2015 passed in respect of the Company and its directors had

conclusively held that the Company made a public issue of Redeemable Preference Shares (RPS)
during FY 2005-06, 2006-07 and 2007-08 without complying with the public issue norms mandated
under sections 56, 60 and 73 of the Companies Act, 1956 and also the provisions of the DIP
Guidelines. The final order had also observed that the Company made a series of allotments during
the aforesaid financial years. Further, the Company had admitted to have issued 41,74,300 RPS to
470 persons and mobilized Rs.4,17,43,000/- and had also mobilized Rs.1,58,61,000/- (pending
allotment) from 229 persons.
10.

In the present case, it is admitted position that the noticees were present as directors in the

Company during the period April 29, 2002 to April 30, 2011. It is relevant to note here that the
Company was incorporated on April 29, 2002. It can therefore be seen that the noticees became
directors when the Company was incorporated. The noticeeswere in the board of directors when
the Company made the offer and allotted RPS, without complying with the public issue norms.
11.

As regards the liability of the noticees, I note that

(a) In terms of section 291 of the Companies Act, 1956, the board of directors of a company
shall be entitled to exercise all such powers and do all such acts and things as the company is
authorized to exercise and do. Therefore, the board of directors being responsible for the
conduct of the business of a company shall therefore be liable for any non-compliance of
law and such liability is on the individual directors also.
(b) Mr. Girija Shankar Kumarhas claimed that he was an independent director in the
Company. However, he has not supported this claim with any document. From the Register of
directors, managing directors, manager and secretary etc. (obtained from RoC, Kolkata) pertaining to
the Company, it is noted that the noticee was appointed as a director on April 29, 2002
and continued in such position till April 30, 2011.
Notwithstanding the observations made herein above, I note that independent directors do
not have personal, material and pecuniary connection with the company or related to

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persons/entities/promoters. They are appointed for their expertise in a given field for
constructive role in meetings/policies of a company, report unethical and oppressive
activities, if any, noticed in the conduct of the company and also to report violation of law.
Therefore, even if it is presumed that the noticee was an independent director, he ought to
have ensured that the Company carried on its business in full compliance with the applicable
law including the Companies Act, 1956.
(c) With respect to the culpability of a director for breach of law by a company, I refer to and
rely on the following observations made by the Honble High Court of Madras in
MadhavanNambiar vs Registrar Of Companies (2002 108 Comp Cas 1 Mad):
13. It may be that the petitioner may not be a whole-time director, but that does not mean he is
exonerated of the statutory obligations which are imposed under the Act and the rules and he cannot
contend that he is an ex officio director and, therefore, he cannot be held responsible. There is
substance in the contention advanced by Mr. Sridhar, learned counsel since the petitioner a member
of the Indian Administrative Service and in the cadre of Secretary to Government when appointed as
a director on the orders of the Government to a Government company or a joint venture company, he
is expected not only to discharge his usual functions, but also take such diligent care as a director of
the company as it is expected of him not only to take care of the interest of the Government, but also
to see that the company complies with the provisions of the Companies Act and the rules framed
thereunder. Therefore, the second contention that the petitioner cannot be proceeded against at all as
he is only a nominee or appointed director by the State Government, cannot be sustained in law. A
director either full time or part time, either elected or appointed or nominated is bound to discharge
the functions of a director and should have taken all the diligent steps and taken care in the affairs
of the company.
14. 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.
15. Section 5 of the Companies Act defines the expression "officer who is in default". The
expression means either (a) the managing director or managing directors ; (b) the whole-time director
or whole-time directors ; (c) the manager ; (d) the secretary ; (e) any person in accordance with whose
directions or instructions the board of directors of the company is accustomed to act; (f) any person
charged by the board with the responsibility of complying with that provision ; (g) any director or
directors who may be specified by the board in this behalf or where no director is so specified, all the
directors.
16. Section 29 of the Companies Act provides the general power of the board and ...
Therefore it follows there cannot be a blanket direction or a blanket indemnity in favour of the

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petitioner or other directors who have been nominated by the Government either ex officio or
otherwise. Hence the second point deserves to be answered against the petitioner.
17. As regards the first contention, it is contended by Mr. Arvind P. Datar, learned senior counsel
appearing for the petitioner that the company or its board had resolved that Thiagaraj S. Chettiar
shall be the director in charge of the company of all its day-to-day affairs and, therefore, the
petitioner, an ex officio chairman and director, cannot be expected to attend to the affairs on a dayto-day basis. This contention though attractive cannot be sustained as a whole. There may be a
delegation, but ultimately it comes before the board and it is the board and the general body of the
company which are responsible.
{Emphasis supplied}
(d) The noticees cannot assume the role of a director in a company in a casual manner. The
position of a director in a public company/listed company comes along with
responsibilities and compliances under law associated with such position, which have to be
fulfilled by such director or face the consequences for any violation or default thereof. The
noticee cannot therefore wriggle out from liability by merely stating that he was not involved
in the affairs of the Company or was not aware of issuance of securities. Accordingly, a
director who is part of a companys board shall be responsible and liable for all acts carried
out by a company unless exemptions are provided. The noticees, in the present case, were
part of the Companys Board of Directors for the period April 29, 2002 to April 30, 2011.
Accordingly, they shall also be responsible and liable along with the others in the Board, for
all the deeds/acts of the Company during the period of his directorship.
(e) According to 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, contain 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'. The
Company had not complied with these provisions, as found in the Order.

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Section 56(1) and 56(3) read with section 56(4) of the Companies Act, 1956 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 noncompliance of issuing the prospectus as per the said section. The noticees are therefore also
liable for non-compliance with sections 56 and 60.
(f) By making a public issue of RPS, as discussed above, the Company had to compulsorily list
such securities in compliance with section 73(1) of the Companies Act, 1956. As per section
73(1) 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 with in the stock exchange. The Company had failed to comply with this requirement,
as observed in the final Order. Section 73(2) states that "Where the permission has not been applied
under subsection (1) or such permission having been applied for, has not been granted as aforesaid, the
company shall forthwith repay without interest all moneys received from applicants in pursuance of the
prospectus, and, if any 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
eighth day, 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". As the Company failed to make an application for listing
such securities, the Company had to forthwith repay such money collected from investors. If
such repayments are not made within 8 days after the Company becomes liable to repay, the
Company and every director is liable to repay with interest at such rate. The liability of the
Company/directors to refund the public funds collected through offer and allotment of the
impugned RPSs is continuing and such liability would continue till repayments are made.
Accordingly, the noticees shall be liable for making refunds for the monies collected during
his tenure as a director in the Company, till such liability is discharged by making refunds by
Company/other directors who are liable.
(g) In view of the above observations and findings, the submissions of the noticees do not have
merit. Further, the said NOC from Company issued to the noticees, stating that they have

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no liability, shall have no validity in view of the statutory liability under the Companies Act,
1956 and DIP Guidelines including liability to make refunds under section 73(2). The
present case involves directors in a company that has mobilized public funds from gullible
investors through its offer and issue of securities without complying with the applicable laws.
Such statutory provisions (sections 56, 60 and 73) in the Company Act, 1956 and the DIP
Guidelines are prescribed to
i. ensure that the investing public are aware about the company in which they
were investing their money and the attendant risk such investment may carry,
and also
ii. provide for marketability of such securities and in the absence of the same, to
return the funds collected from the investors, with or without interest in
accordance with section 73(2) of the Companies Act, 1956.
12.

In view of the above discussions, I hereby find themalso liable for the violation of sections

56, 60 and 73 of the Companies Act, 1956 read with the Companies Act, 2013 and the DIP
Guidelines, committed by the Company/its board of directors with respect to the offer and issue of
RPS during 2005-06, 2006-07 and 2007-08, thereby mobilizing Rs.5.76crores(=Rs.4.17crore + Rs. 1.59
crore, i.e., amount raised against issue of RPS and the amount raised pending allotment)from the public
investors. The noticees shall also be liable for making refunds as provided under section 73(2) of the
Companies Act, 1956 read with section 27 of the SEBI Act, and shall be jointly and severally
responsible along with other as directed vide the final Order. The Order had levied an interest @
15% p.a. on the amounts that are due to be repaid to the investors. The noticees shall be liable to
make refunds along with interest at 15%. The same is also in accordance 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 also.
13.

Mr. Awdhesh Kumar Singh has also submitted that there were other persons in the board of

directors during the relevant period and that SEBI has been selective in issuing the interim orders
against him and Mr. Girija Shankar Kumar.This submission has no relevance as SEBI has taken
action against the past and present directors as per the records of the MCA.

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14.

In view of the above findings and observations, 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) Thenoticee, Mr. Girija Shankar Kumar and Mr. Awdhesh Kumar Singhshall,jointly and
severally along with the Company and others as ordered vide SEBI Order dated June 03,
2015,forthwith refund the money collected by the Company through the issuance of
Redeemable Preference Shares (which have been found to be issued in contravention of the public issue
norms stipulated under the Companies Act, 1956 and DIP Guidelines), to the investors 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 (in terms of Section 73(2) of the Companies Act, 1956) to the investors till
the date of actual payment.

(b) The noticeesshall also provide a full inventory of their assets and properties and details of all
bank accounts, demat accounts and holdings of shares/securities, if held in physical form.
(c) All other directions issued vide Order dated June 03, 2015 in respect of making refunds and
reporting of the same shall apply mutatis mutandis to the above noticees.

(d) In case of failure of the noticees to refund the monies as directed in this Order or on failure
to comply with the directions, SEBI, on expiry of three months 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 noticees, including adjudication

proceedings, in accordance with law.

(iii)

would make a reference to the State Government/ Local Police to register a

civil/ criminal case against the noticee, for offences of fraud, cheating, criminal
breach of trust and misappropriation of public funds; and

(iv)

would also make a reference to the Ministry of Corporate Affairs for necessary
action.

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(e) The noticees, Mr. Girija Shankar Kumar and Mr. Awdhesh Kumar Singh arerestrained from
accessing the securities market and further prohibited from buying, selling or otherwise
dealing in the securities market, directly or indirectly in whatsoever manner, with immediate
effect. They are also restrained from issuing prospectus, offer document or advertisement
soliciting money from the public and associating himself with any listed public company and
any public company which intends to raise money from the public, or any intermediary
registered with SEBI. The above directions shall come into force with immediate effect and
shall continue to be in force from the date of this Order till the expiry of 4 yearsfrom the
date of completion of refunds to investors, as directed above.
(f) The above directions shall come into force with immediate effect.
15.

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
noticees.
16.

Copy of this Order shall be forwarded to the recognised stock exchanges and depositories

for information and necessary action.

17.

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 noticees.

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Date: May 09, 2016
Place: Mumbai

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