BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision : 28.06.2019
Appeal No. 283 of 2018
Dr. Jugal Kishore Satapathy
Plot No. A/7, Phase II,
Krishna Garden Complex, Barabari,
Bhuvaneshwar – 751 030.

….. Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai – 400 051.

…. Respondent
Ms. Kainaz Irani, Advocate with Mr. Balram Mohanty,
Advocate i/b Mohanty & Associates.
Mr. Kevic Setalvad, Senior Advocate with Mr. Kunal Shah,
Advocate i/b MDP & Partners for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer
Dr. C.K.G. Nair, Member
Justice M.T. Joshi, Judicial Member
Per : Justice Tarun Agarwala, Presiding Officer (Oral)
1.

The Whole Time Member (‘WTM’ for short) of the
Securities and Exchange Board of India (‘SEBI’ for short) by
the impugned order dated June 5, 2018 found that the
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Company, namely, Micro Finance Limited (‘MFL’ for short)
had come out with an offer of Cumulative Convertible
Preference Shares (‘CCPS’ for short) in violation of Sections
56, 60 and 73 of the Companies Act, 1956 read with the
relevant provisions of SEBI (Disclosure and Investor
Protection) Guidelines, 2000 (‘DIP Regulations’ for short)
and SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009 (‘ICDR Regulations’ for short). The WTM
found that the appellant being a Director of the Company was
an officer in default as per Section 5(g) of the Companies Act,
1956 was therefore responsible along with Company for
making refunds along with interest under Section 73(2) of the
Companies Act, 1956. The WTM accordingly directed that
the appellant and other directors are jointly and severally
liable with the Company to refund the money collected by the
Company along with interest and other directions were also
issued against the appellant.

2.

We have heard Ms. Kainaz Irani, the learned counsel for
the appellant and Shri Kevic Setalvad, the learned senior
counsel for the respondent.

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3.

It was urged that the appellant was appointed as an
honorary director after the issuance of the CCPS. It was urged
that the appellant had never signed any resolution of the board
of directors and that the main persons who were responsible
in the issuance of CCPS were Mr. Ashok Kumar Patnaik and
Mr. Durga Prasad Misra who have accepted their liability to
repay the amount on behalf of the Company and other
directors as held by the Chief Judicial Magistrate in its order
dated June 29, 2017 and July 18, 2017. It was, thus, urged that
the appellant should not be made responsible for refund of the
money towards the CCPS which was collected by the
Company and other directors.
4.

Upon perusal of the record, we find that Mr. Durga
Prasad Misra was a managing director of the Company and
was also found to be responsible for the issuance of CCPS of
the Company by the Chief Judicial Magistrate.
5.

In the light of the aforesaid fact which is not disputed by
the learned senior counsel for the respondent. We find that
Section 5(g) of the Companies Act makes it apparently clear
that if there is a Managing Director appointed in a company,
he would be an officer in default. Further in the absence of a
Managing Director all the Directors by a deeming fiction
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would be an officer in default. Since in the instant case, there
is a Managing Director, the appellant cannot be deemed to be
a Managing Director.
6.

Consequently, the impugned order cannot be sustained
and is quashed. The appeal is allowed. In the circumstances,
there shall be no order on costs.

Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C.K.G. Nair
Member
Sd/Justice M.T. Joshi
Judicial Member
28.06.2019
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