BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI

Order Reserved on : 05.12.2013
Date of Decision : 12.12.2013

                      Appeal No. 106 of 2013   

Rose Valley Real Estates And Construction Ltd.
RGM-25/3010, Raghunathpur,
V.I.P. Road, Kolkata 700 059.

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  

Mr. Sudipto Sarkar, Senior Advocate with Ms. Moushami Bhattacharya,

Mr. K. e, RavelaD’souzMs. a Advocates for

the Appellant.

Mr. Shiraz Rustomjee, Senior Advocate with Mr. Pratham V. Masurekar,

Advocate for the Respondent.

CORAM : Justice J. P. Devadhar, Presiding Officer
Jog Singh, Member

Per : Jog Singh

The present appeal is preferred by the appellant against impugned order

dated March 26, 2013 passed by the respondent under the provisions of the

SEBI Act, 1992 (for short the SEBI Act) read with Rule 4(1) of SEBI

(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating

Officer) Rules, 1995 (for short Adjudication Rules) seeking to impose a

penalty of ` 1 crore under Section 15A(a) of the SEBI Act for not submitting

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the complete information/records pursuant to letters dated July 14, 2011 and

November 17, 2011 and submitting the remainder after service of notice dated

February 6, 2013 thereby violating provisions of Sections 11C(2) and 11C(3)

of the said Act. The appellant is a public limited company registered under the

Companies Act, 1956 in the year 1999. It is mainly into the business of real

estate development and construction of hotels, resorts, amusement parks,

shopping malls, apartments and buildings etc.

2. The respondent is stated to have received a reference from the Registrar

of Companies, West Bengal stating that the appellant had issued debentures

between the years 2001-2008 to more than 49 persons in each financial year

without filing the necessary documents either with the Registrar of Companies

or the SEBI. Accordingly, summons dated July 14, 2011 was issued to the

appellant under Section 11C(3) of the SEBI Act by the Investigating Authority

(IA) requiring the appellant to submit certain information as mentioned in the

annexure to the said summons. The appellant sent a reply dated July 29, 2011

giving certain details such as certified copies of the Memorandum and Articles

of Association, Audited Balance Sheets of 2008-2009 and 2009-2010, names

and addresses of various directors etc. The appellant stated that it had filed

statement in lieu of prospectus for issuance of the secured debentures in

question with the Registrar of Companies. Regarding mobilization of funds

through such debentures, it was stated that the same was duly reflected in the

Audited Balance Sheets pertaining to the years 2009-2010. However, accounts

of 2010-2011 were under finalization and it was stated that they could be

provided only on being duly audited and certified by the auditors. The

appellant further stated that the company had already repaid the debentures to

the tune of 3 crore out of the total amount of 9,97,92,000/-. It was also

mentioned in the said reply dated July 29, 2011 in the following words that

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you want any further information / clarification, we shall be glad to provide the

sa

3. The respondent by letter dated November 17, 2011 again wrote to the

appellant, interalia, asking for the following :-

1. Certified copies of the Memorandum of Association and Articles of
   Association of Rose Valley Real Estates & Constructions Ltd.
2. Audited Balance Sheet and Profit & Loss account for the last three
   financial years (2008-09, 2009-10, 2010-11) of Rose Valley Real
   Estates & Constructions Ltd.
3. Name, addresses and occupation of all the promoters and directors of
   Rose Valley Real Estates & Constructions Ltd.
4. A statement of mobilization of funds (since 2001-02 onwards)
   through issue of debentures duly certified by the Statutory Auditors.
5. Names and details of the Key Managerial Personnel of Rose Valley
   Real Estates & Constructions Ltd.
6. Information in respect of each and every series of debentures issued
   (since 2001-02 onwards) as given below:

(a) Details regarding the filing of Prospectus/Red Herring
Prospectus with RoC for issuance of debentures.
(b) Date of opening and closing of the subscription list for the said
debentures.
(c) List of agents along with their addresses who have been
appointed by the company.
(d) Details regarding the number of application forms circulated
inviting subscription for debentures.
(e) Details regarding the number of applications received.
(f) Details regarding the number of allottees for each debenture
issue.
(g) List of such allottees alongwith their addresses and contact nos.
(h) Number of debentures allotted and value of such allotment
against each allottees name
(i) Details regarding subscription amount raised.
(j) Date of allotment of the debenture.
(k) Copies of the minutes of Board/committee meeting in which the
resolution has been passed for allotment of debentures.
(l) Date of dispatch of debenture certificates.
(m) Copies of application forms, RHP, pamphlets, advertisements
and other promotional material circulated for issuance of
debentures.
(n) Terms and conditions of the issue of debentures.

4. Pursuant to the abovesaid letter dated November 17, 2011, the appellant

provided the following documents vide its letter dated November 30, 2011 :-

“5. Certifcopo MemoranduaArtic les of the

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^Balasheet -2009 and 2009-2010 are
The Accounts of 2010-2011 is yet to
be approved by the Shareholders in the Annual General Meeting
and the Company had taken the requisite permission for the
Extension of the Annual General Meeting from the Registrar of
the Companies, West Bengal, When the Accounts will be
approved by the AGM of the Company the same will provided to
you.

7.. List of Name & Address of the promoters & Directions are
enclosed as Annex u“C”

8.. Mobilization of funds through secured debenture are already
reflected in the Audited Balance sheet and please refer the
Annexure C of the Audited Balance Sheet of 2009-2010 for the
same. The figures in the Balance sheet and duly certified by the
Auditors.

9.. The Directors are themselves are the Key Managerial Person

10.a) Since the Company had issued the debenture on the Private
placement basis, not to public at large and has filed the Statement
in lieu of prospectus along with form 62 vide SRN – B 17146192
and 17147083 respectively with the ROC West Bengal, copy of
form 62 is enclosed as annexure D.

b) As stated earlier, Debentures were issued to employees and
their relatives / associates on Private Placement basis only
therefore there was no such opening / closing dates for the said
debentures.

c) As stated earlier that Debentures were issued to employees
and their relatives/associates on Private Placement basis only,
there were no such agents appointed by the Company.

d) As we stated earlier that Debentures were issued to employees
and their relatives / associates on Private Placement basis only,
there were no such circulation of the application.

e) The Company has totally allotted the debentures form whom
the request was received, since it was only on the Private
Placement through the employees and their relatives / associates.

i) The total amount was Rs.99792000/- only

j) As per the Form 10 attached annexure E

k) Copy of the Board minutes is enclosed as annexure F

l) Since the Debenture were issued on private placement basis to
employees and their relatives /associates, the certificate were

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issued on individual basis within the prescribed time limit of
Companies Act, 1956.

m) Since the Debenture were issued on private placement basis
to employees and their relatives / associates there were no
advertisement, promotional material, circular etc issued by the
Company.

n) Terms & Conditions were mentioned in the debenture trust
deed, which is annexed as annexure G. ”

5. On February 6, 2013 the respondent, however, issued notice to the

appellant under Rule 4(1) of the Adjudication Rules alleging that the appellant

had not submitted any specific details regarding issues of secured redeemable

non-convertible debentures during the year 2001-2006 and also provided

incomplete information for the debentures issued in 2007-2008. It is also

alleged in the said notice that details of other series of debentures issued by the

appellant since 2001-2002 including the number of applications received,

number of allottees for each issue of debentures, list of allottees alongwith

their addresses, contact nos. etc. were not furnished. This was treated to be a

violation of the provisions of Sections 11C(2), 11C(3) and 11C(6) of the SEBI

Act.

6. Abovesaid Sections are relevant and reproduced hereinbelow for the

sake of convenience :-

“11C(2): Without udice the sections and
241 of the Companies Act, 1956 (1 of 1956), it shall be the duty of
every manager, managing director, officer and other employee of
the company and every intermediary referred to in section 12 or
every person associated with the securities market to preserve and
to produce to the Investigating Authority or any person authorised
by it in this behalf, all the books, registers, other documents and
record of, or relating to, the company or, as the case may be, of or
relating to, the intermediary or such person, which are in their
custodpower.”

“11C(3): ThInvAy y ay
intermediary or any person associated with securities market in any
manner to furnish such information to, or produce such books, or
registers, or other documents, or record before him or any person

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authorised by it in this behalf as it may consider necessary if the
furnishing of such information or the production of such books, or
registers, or other documents, or record is relevant or necessary for
the purposes of its i nve

“11C(6): Ify per fnabluses –

(a) to produce to the Investigating Authority or nay person
authorised by it in this behalf any book, register, other
document and record which is his duty under sub-section (2) or
sub-section (3) to produce; or
(b) to furnish any information which is his duty under sub-section
(3) to furnish; or
(c) to appear before the Investigating Authority personally when
required to do so under sub-section (5) or to answer any
question which is put to him by the Investigating Authority in
pursuance of that sub-section; or
(d) to sign the notes of any examination referred to in sub-section
(7),
he shall be punishable with imprisonment for a term which may
extend to one year, or with fine, which may extend to one crore
rupees, or with both, and also with a further fine which may extend
to five Lakh rupees for every day after the first during which the
failure or refusal continues .”

7. On March 11 , 2013, the appellant submitted a reply to the abovesaid

notice and stated that it had already submitted most of the information /

documents by its earlier letters to the respondent and further stated that it had

refunded all the monies collected by way of the debentures in question.

Without prejudice to the aforesaid, the appellant also furnished other remaining

information and documents as mentioned in the notice dated February 6, 2013.

On March 12, 2013, a representative of the appellant appeared before the

adjudicating officer and explained the whole situation stating that the appellant

was willing to produce any further documents required by the adjudicating

officer.

8. After considering the various letters and the submissions made by the

representative of the appellant during the personal hearing, the learned

adjudicating officer held the appellant guilty of not furnishing

information/records as required by the letters dated July 14, 2011 and

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November 17, 2011 thereby imposing a monetary penalty of ` 1 crore on the

appellant.

9. After a minute perusal of the pleadings and documents annexed

therewith and also hearing the learned senior counsel Shri Sudipto Sarkar for

the appellant and Shri Shiraz Rustomjee, learned senior counsel for the

respondent, we note that the only issue which requires consideration by this

Tribunal is whether or not in the facts and circumstances of the present case

there was a total defiance by the appellant with respect to production of

documents warranting a monetary penalty of ` 1 crore.

10. At the outset, we note that the appellant has provided the requisite

information / documents as required by the respondent in three stages. Firstly;

in response to the summons dated July 14, 2011, the appellant submitted

various information / documents by its letter dated July 19, 2011 as discussed

hereinabove. Sy; response thresletdated mber

17, 2011, the appellant submitted substantial information / documents

alongwith its letter dated November 30, 2011. However, some of the

documents which were also considered necessary for investigation of the case

were furnished by the appellant after the notice dated February 6, 2013 was

issued by the respondent under Rule 4(1) of the Adjudication Rules. It is, thus,

evident that all the information/record had already been submitted by the

appellant before the impugned order was actually passed on March 26, 2013.

11. The law does indeed impose a duty on the designated authority of

minutely going through all the information available before it presumes to pass

any judgment. It is important to note that the appellant while providing

various information / documents on July 19, 2011 itself made a categorical

statement in the covering letter to the effect that it was prepared to cooperate

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with the respondent by submitting any other / further documents or information

as and when may be required in future for the purpose of the investigation.

Moreover, from the records we note that the debenture scheme in question has

been wound up and all the monies collected under the same have been repaid.

12. In its initial reply appellant furnished certain particulars and in the

subsequent reply, appellant once again reiterated that the debentures were

issued on private placement basis and not from the public through public issue

of debentures. In support of above contention appellant furnished certain

documents. Thus, it is evident that when the appellant has issued debentures

on private placement basis without following the procedure prescribed for

issuing debentures through public, the question of furnishing documents which

are applicable to issuance of debentures through public does not arise at all. In

such a case, the appellant could not be held guilty of not furnishing documents.

13. The underlying idea behind Sections 11C(2), 11C(3) and 11C(6) is that

all relevant information and documents be made available for the purposes of a

holistic investigation before any conclusion can be drawn. As noted earlier, all

the information was in fact provided before the impugned order was passed.

In these circumstances, looking to the fact that the appellant has been willing

to furnish documents relating to issuance of debenture through private

placement from time to time and has in fact fully furnished particulars though

belatedly in the adjudication proceedings which were also initiated belatedly,

in our opinion, it would be just and proper to restrict the penalty to ` 10 lac.

14. Therefore, keeping in view the overall conduct of the appellant, we are

inclined to modify the impugned order dated March 26, 2013 and to reduce the

monetary penalty to ` 10 lac to be paid by the appellant within two months

from the date of passing of this order while upholding the rest of the impugned

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order failing which the respondent shall be at liberty to recover the same as per

law.

The appeal, thus, stands party allowed.

  Sd/-  
                         Justice J. P. Devadhar  
                 Presiding Officer  




 Sd/-    
                     Jog Singh    
                      Member   

12.12.2013
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