Securities Appellate Tribunal
Mr. Shanti Lal Badera vs Sebi on 30 September, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on: 27.09.2022
Date of Decision : 30.09.2022
Misc. Application No. 786 of 2022
And
Appeal No. 608 of 2022
M/s. Texmo Pipes and Products Ltd.
98, Bahadarpur Road,
Burhanpur,
Madhya Pradesh - 450 331. ..... 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
Mrs. Poonam D. Gadkari, Advocate with Mr. Anil Shah,
Advocate i/b Juris Matrix Partners LLP for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Mihir Mody and
Mr. Mayur Jaisingh, Advocates i/b. K Ashar & Co. for the
Respondent.
WITH
Misc. Application No. 783 of 2022
And
Appeal No. 605 of 2022
Mr. Sanjay Kumar Agrawal
221/2, Shri Venkatesh Villa,
Bahadarpur Road,
Burhanpur,
Madhya Pradesh - 450 331. ..... Appellant
Versus
2
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mrs. Poonam D. Gadkari, Advocate with Mr. Anil Shah,
Advocate i/b Juris Matrix Partners LLP for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Mihir Mody and
Mr. Mayur Jaisingh, Advocates i/b. K Ashar & Co. for the
Respondent.
WITH
Misc. Application No. 785 of 2022
And
Appeal No. 607 of 2022
Mr. Vijay Prasad Pappu
Makan No. 57, Ward No. 43,
Shree Laxmi Nilayam,
Vrindavan Dham Colony, ..... Appellant
Lalbagh Road, Burhanpur,
Madhya Pradesh - 450 331.
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mrs. Poonam D. Gadkari, Advocate with Mr. Anil Shah,
Advocate i/b Juris Matrix Partners LLP for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Mihir Mody and
Mr. Mayur Jaisingh, Advocates i/b. K Ashar & Co. for the
Respondent.
3
WITH
Misc. Application No. 784 of 2022
And
Appeal No. 606 of 2022
Mr. Shanti Lal Badera
4, Surana Nagar,
Barawah,
Madhya Pradesh - 451 115. ..... 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
Mrs. Poonam D. Gadkari, Advocate with Mr. Anil Shah,
Advocate i/b Juris Matrix Partners LLP for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Mihir Mody and
Mr. Mayur Jaisingh, Advocates i/b. K Ashar & Co. for the
Respondent.
AND
Misc. Application No. 782 of 2022
And
Appeal No. 604 of 2022
Mr. Rishabh Kumar Jain
G1, Shlok Enclave,
9B, Sanchar Nagar Main, ..... Appellant
Indore, Madhya Pradesh.
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
4
Mrs. Poonam D. Gadkari, Advocate with Mr. Anil Shah,
Advocate i/b Juris Matrix Partners LLP for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Mihir Mody and
Mr. Mayur Jaisingh, Advocates i/b. K Ashar & Co. for the
Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer
Ms. Meera Swarup, Technical Member
Per : Justice Tarun Agarwala, Presiding Officer
1.Five appeals have been filed against the order dated June 28, 2022 passed by the Adjudicating Officer ('AO' for short) wherein a penalty of Rs. 10.25 crores has been imposed on noticee no.1, Texmo Pipes and Products Ltd. i.e. the Company under Section 15HA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') and Section 23E of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as 'SCRA Act'). A penalty of Rs. 20 lakh each has been imposed upon noticee no. 2, Mr. Sanjay Kumar Agrawal and upon noticee no. 3 Mr. Vijay Prasad Pappu under Section 15HA of the SEBI Act. Similarly, a penalty of Rs. 10 lakh has been imposed on noticee no. 4 Mr. Shanti Lal Badera and a penalty of Rs. 2 lakh has been imposed upon noticee no. 5, Mr. Rishabh Kumar Jain.
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2. The facts leading to the filing of the present appeal is, that the Board of Directors of the Company known as Texmo Pipes and Products Ltd. passed a resolution on October 28, 2010 for opening a bank account with European American Investment Bank AG (hereinafter referred to as 'EURAM Bank') for depositing the GDR proceeds.
3. The resolution approved by the Board of Directors resolved that a bank account would be opened with European American Investment Bank AG (hereinafter referred to as 'EURAM Bank') for the purpose of receiving the subscription money in respect of GDR issue. Further, Mr. Sanjay Agrawal, CMD, Mr. Vijay Prasad Pappu, Whole Time Director and Mr. Rishabh Kumar Jain, Company Secretary of the Company was authorised to sign and execute an agreement as may be required by the Bank and take such steps from time to time on behalf of the Company. The resolution further resolved to use the funds deposited in the aforesaid Bank account as security in connection with the loan, if any as well as to enter into any escrow account or similar arrangement if and when so required.
4. Based on the aforesaid resolution, the Company issued 6,27,500 GDRs for USD 9.99 million dated April 11, 2011. 6 The aforesaid GDR was subscribed by one entity, namely, Vintage FZE (hereinafter referred to as 'Vintage') and a corporate announcement was made by the Company that the entire issue was subscribed.
5. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') conducted an investigation pertaining to the issue of GDR by the Company. Based on the investigation, a show cause notice dated July 16, 2019 was issued to the Company, its Directors and Company Secretary to show cause as to why suitable directions under Section 11 and 11B should not be issued for violation of Section 12A(a),
(b), (c) of the SEBI Act read with Regulation 3(a), (b), (c), (d) and 4(1), 4(2)(f), (k), (r) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as 'PFUTP Regulations'), Section 21 of the Securities Contracts (Regulations) Act, 1956 (hereinafter referred to as the 'SCR Act') read with Clauses 32, 36(7) and 50 of the Listing Agreement and Section 23E of the SCR Act.
6. The show cause notice alleged that pursuant to the resolution dated October 28, 2010 not only a bank account 7 was opened with EURAM Bank but the Managing Director executed a pledge agreement dated March 1, 2011 on behalf of the Company based on which a loan agreement dated March 1, 2011 was executed between Vintage and EURAM Bank in which the proceeds of the GDR was to be kept as security with EURAM Bank. The show cause notice further alleged that the pledge agreement and the loan agreement was not disclosed to the stock exchange and, consequently, the investors and shareholders were kept in the dark. The show cause notice further alleged that based on the pledge agreement and the loan agreement EURAM Bank advanced USD 9.9 million to Vintage which amount was utilised by Vintage to subscribe to the entire issue. The GDR proceeds were pledged as security till such time the loan was repaid by Vintage. It was also alleged that the fact that Vintage was the sole subscriber was not intimated to the stock exchange and to the Indian investors. Further, Vintage did not repay the loan and defaulted, as a result, the Bank adjusted USD 34,98,579.85 million from the GDR proceeds and, accordingly, the Company and its Directors were charged with violation of Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations. 8
7. The AO after considering the evidence on record found that the entire scheme of using the GDR proceeds to fund a subscriber to the GDR issue was a fraudulent scheme and violative of Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations. The AO found that the GDR was subscribed by one entity, namely, Vintage and not by four entities as disclosed by the Company vide its letter dated June 18, 2015. The AO further found that on account of the pledge created by the Company with EURAM Bank the funds were not made available at the Company's disposal and the same became available in tranches as and when the loan amount was repaid by Vintage. Further, the loan agreement was not disclosed to the stock exchange and to the Indian investors. Further, the disclosure made by the Company to the stock exchange that the GDR issue was fully subscribed was misleading as the investors were not informed that the GDR was subscribed by only one entity and, therefore, the scheme hatched by the Company and its Directors was violative of Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations.
8. The AO found that the non-disclosure of the loan agreement and the pledge agreement was violative of Clause 9 36 of the Listing Agreement as well as Section 21 of the SCRA Act read with Clause 32 and 50 of the Listing Agreement. The AO, however, found that Vintage repaid the loan amount over a period of time in installments except the defaulted amount.
9. We have heard Mrs. Poonam D. Gadkari, the learned counsel with Shri Anil Shah, the learned counsel for the appellant and Shri Sumit Rai, the learned counsel with Shri Mihir Mody and Shri Mayur Jaisingh, the learned counsel for the respondent.
10. The appellants contended that the entire fraudulent scheme was executed by the Lead Manager, Pan Asia Advisors Ltd. and its connected entities and that the appellants are a victim of exploitation by Vintage, Pan Asia Advisors Ltd. and other entities. The appellants denied that they have committed fraud or violated any provision of law and contended that the appellants have been subjected to the fraudulent scheme purported by Pan Asia Advisors Ltd., Vintage etc. The appellants contended that they were not in any manner connected with Vintage. Further, they had no knowledge about Vintage being the sole subscriber to the GDR issue until the receipt of the show cause notice. The 10 appellants further denied that they had violated any clause of the Listing Agreement and contended that all information was duly disclosed to the stock exchange as and when a material event had occurred. The appellants further denied signing the pledge agreement and contended that it had never authorised EURAM Bank to create a pledge and only came to know when the show cause notice was issued. It was urged that the GDR proceeds were utilised in accordance with the objects of the GDR and there was no diversion of money nor has the appellant indulged in any wrong doing. Further, there was no complaint with regard any unlawful or disproportionate gain or any loss caused to the shareholders or to the investors. It was urged that the appellant, being a small Company, has not played any fraud upon the market and violation, if any, is confined to non-disclosure under the Listing agreement for which purpose the penalty awarded was wholly excessive, harsh and disproportionate.
11. It was urged that all approvals and compliances were met by the appellant Company pertaining to the GDR issue from BSE and NSE and filing with the Luxembourg Stock Exchange for listing of the GDR which eventually led to the approval and the issue of GDR. It was also urged that Pan 11 Asia Advisors Ltd., were renowned Lead Managers and registered in U.K. and were known to have conducted several GDRs and based on their reputation had appointed Pan Asia Advisors Ltd. as Lead Manager who advised the Company on how to proceed with the GDR without realising that they had played a fraud upon the Company and its Directors. It was contended that post GDR issue the GDR funds were moved from the escrow account to current account with EURAM Bank. Further, BSE and NSE approved the listing of securities and Luxembourg Stock Exchange listed the GDR for trading and filings were completed with Reserve Bank of India ('RBI' for short). It was contended that the returns as prescribed by RBI was duly filed by every quarter and within the time provided for the purpose. As per the provisions of the master circular issued by RBI dated 2nd July, 2007 it was contended that the funds raised in overseas market was required to be maintained outside India and if not utilised it should be brought back to India when to be put to use. It was contended that this circular was duly followed and returns as prescribed by RBI was duly filed.
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12. The appellant contended that as per the listing prospectus the GDR proceeds were required to be utilised in the following manner.
(i) The modernization of machinery, equipment and technology and expansion of existing product range;
(ii) The establishment of overseas subsidiaries to explore and cater to the needs of the international market;
(iii) The repayment of debts;
(iv) The investment in, amalgamation with and takeover of other entities;
(v) Trading activities of non-recurring nature;
(vi) As working capital for the existing and future expansion / Diversification projects of the Company;
(vii) Setting up of power project for electricity generation through biogas up to 3MW.
13. It was urged that the proceeds have been utilised for the purpose shown in the listing prospectus.
14. It was also urged that the appellants had engaged a professional for managing the issue and other connected 13 matters post the issue. The appellant had appointed the Bank of New York Mellon, USA which acted as a Depository Bank. It was urged that all acts, deeds and things done were in compliance with the applicable law. It was, thus, contended that due diligence was complied at all levels and there was no intent to get involved in any fraudulent scheme.
15. On the other hand, the respondent supported the impugned order and contended that the modus operandi is the same as has been dealt with by this Tribunal in a large number of matters relating to the GDR issue wherein this Tribunal has held that the nondisclosure of the loan agreement and the pledge agreement was totally fraudulent and violative of the Listing Agreement.
16. Having heard the learned counsel for the parties we find that this modus operandi in the instant appeals is the same and has been dealt with by this Tribunal in a large number of matters relating to the GDR issue wherein the Tribunal has held that non-disclosure of the loan agreement and the pledge agreement was totally fraudulent and violative of the Listing Agreement. This Tribunal also held that the Company and its MDs were aware of the execution of the pledge agreement as well as loan agreement and it was no longer open to them to 14 deny the existence of the said agreements. This Tribunal also held that the Company and its Directors misled SEBI into believing that there were more subscribers to the issue and not one subscriber.
17. We also held that Company and its MDs were aware of the pledge agreement, non-disclosure of the pledge agreement and loan agreement invited penalty. Further, the corporate announcement did not disclose the fact that the subsisting pledge agreement facilitated the subscribers to subscribe to the GDR issue. The corporate announcement was misleading and presented a distorted version to the investors and created a false version inducing the investors to deal in securities. The aforesaid findings have been given in a large number of matters decided by this Tribunal especially in Appeal no. 381 of 2019, Sibly Industries Ltd. vs SEBI and other companion appeals decided on July 14, 2022, Appeal no. 438 of 2020, Aksh Optifibre Ltd. vs SEBI and other companion appeals decided on June 27, 2022 and Appeal no. 28 of 2022, Praveen Kumar Hastimal Shah vs SEBI and other companion appeals decided on July 6, 2022.
18. Consequently, in the light of the aforesaid decisions the findings against the appellants in the instant appeals does not 15 require any interference nor we require to give elaborate reasons. The findings of the AO are upheld.
19. There is no doubt that the proceeds of the GDR issue was eventually received by the Company though belatedly less USD 34,98,579 million which was adjusted by Euram Bank against the loan default committed by Vintage. Evidence has come that the same was utilized as per Listing prospectus. Thus, there has been no diversion of funds and there is no wrongful dealings in securities other than the fact that a portion of amount was deducted by the EURAM Bank for default committed by Vintage. The AO has himself given a finding that no disproportionate gain is attributed to the appellants. No finding has been given by the AO that any loss was caused to the shareholders or investors.
20. Considering the above, we are of the opinion that the directions given by the AO is excessive and arbitrary as well as discriminatory.
21. In Excel Corp Care Limited vs Competition Commission of India & Anr, (2017) 8 SCC 47, the Supreme Court held:
"92. Even the doctrine of "proportionality" would suggest that the court should lean in favour of "relevant 16 turnover". No doubt the objective contained in the Act, viz., to discourage and stop anti-competitive practices has to be achieved and those who are perpetrators of such practices need to be indicted and suitably punished. It is for this reason that the Act contains penal provisions for penalising such offenders. At the same time, the penalty cannot be disproportionate and it should not lead to shocking results. That is the implication of the doctrine of proportionality which is based on equity and rationality. It is, in fact, a constitutionally protected right which can be traced to Article 14 as well as Article 21 of the Constitution. The doctrine of proportionality is aimed at bringing out "proportional result or proportionality stricto sensu". It is a result oriented test as it examines the result of the law in fact the proportionality achieves balancing between two competing interests: harm caused to the society by the infringer which gives justification for penalising the infringer on the one hand and the right of the infringer in not suffering the punishment which may be disproportionate to the seriousness of the Act."
22. Similar view was expressed by the Delhi High court in Rajkumar Dyeing and Printing Works Pvt. Ltd. In Rajendra Yadav, the Supreme Court held that the doctrine of equality applies to all those who are found guilty. The Supreme Court held:
"9. The doctrine of equality applies to all who are equally placed; even among persons who are found guilty. The persons who have been found guilty can also claim equality of treatment, if they can establish discrimination while imposing punishment when all of them are involved in the same incident. Parity among co-delinquents has also to be maintained when punishment is being imposed. Punishment should not be disproportionate while comparing the involvement of co-delinquents who are parties to the same transaction or incident. The disciplinary authority cannot impose punishment which is disproportionate, i.e., lesser punishment for serious offences and stringent punishment for lesser offences."17
23. Undoubtedly, the doctrine of proportionality is now well established in our jurisprudence and is a recognised facet of Article 14 of the Constitution of India. In Andhra Pradesh Dairy Development Corporation Federation vs. B. Narasimha Reddy and Others (2011) 9 SCC 286, the Supreme Court held:
"29. It is a settled legal proposition that Article 14 of the Constitution strikes at arbitrariness because an action that is arbitrary, must necessarily involve negation of equality. This doctrine of arbitrariness is not restricted only to executive actions, but also applies to legislature. Thus, a party has to satisfy that the action was reasonable, not done in unreasonable manner or capriciously or at pleasure without adequate determining principle, rational, and has been done according to reason or judgment, and certainly does not depend on the will alone. However, the action of legislature, violative of Article 14 of the Constitution, should ordinarily be manifestly arbitrary. There must be a case of substantive unreasonableness in the statute itself for declaring the act ultra vires of Article 14 of the Constitution. (Vide: Ajay Hasia etc. v. Khalid Mujib Sehravardi, Reliance Airport Developers (P) Ltd. v. Airports Authority of India, Bidhannagar (Salt Lake) Welfare Assn. v. Central Valuation Board, Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union v. Srinivasa Resorts Limited, and State of T.N. v. K. Shyam Sunder.)"
24. In matters relating to punitive measures the emphasis has shifted from the wednesbury principle of unreasonable to one of proportionality. A disproportionate punitive measure which does not commensurate with the offence would be violative of Article 14 of the Constitution of India. We are of 18 the opinion that in the rapid growth of administrative law it has become the need and necessity to control possible abuse of discriminatory power by administrative authorities. In this regard, certain principles have been evolved by Courts, namely, that if an action is taken by an authority which is contrary to law or which is improper or where the action taken is unreasonable then the Court of law is duty bound to interfere with such action and one such mode of exercising power is to exercise the doctrine of proportionality. Where the punitive measure is harsh or disproportionate to the offence which shocks the conscience it is within the discretion of the Court to exercise the doctrine of proportionality and reduce the quantum of punishment to ensure that some rationality is brought to make unequals equal.
25. A penalty has also been imposed for violation of Section 23E of the SCRA Act for non-disclosure under the Listing Agreement. The imposition of penalty under Section 23E is wholly erroneous in as much as Section 23E is not applicable.
26. In Suzlon Energy Ltd. v. SEBI, appeal no.201 of 2018 decided on 3rd May, 2021, this Tribunal held:
"17. The AO held that since Clause 36 of the Listing Agreement was violated, in addition to the penalty 19 imposed under Section 23A(a), the provisions of Section 23E of the SCRA is also invoked. In our view, the imposition of penalty under Section 23E is patently erroneous. The AO has committed a manifest error in invoking Section 23E of the SCRA.
18. Section 23E has nothing to do with the violation of the provisions of the Listing Agreement especially Clause 36. Section 23E provides that where a Company fails to comply with the listing conditions or delisting conditions or grounds or commits a breach thereof then penalty would be a minimum of Rs. 5 lakh upto maximum of Rs. 25 crore. The words "fails to comply with the listing conditions" cannot mean failure to comply with the conditions in the Listing Agreement. One of the requirements in the Listing Agreement which is required to be complied with is Clause 36 whereas Section 23E refers to the conditions which are imposed upon a Company when it is applying for its shares to be listed on the stock exchange platform. Section 23E has to be read along with Rule 19 of the Securities Contracts (Regulation) Rules, 1957 („SCRR‟ for short). Rule 19 of the SCRR provides certain requirements with respect to a listing of securities on a recognized stock exchange. Rule 19A provides that a Company has to continuously maintain listing requirements. Rule 21 provides conditions for delisting of securities. Failure to comply with the listing conditions which are stated in Rule 19 would entail a penalty as provided under Section 23E. Thus, in our view violation of Clause 36 of the Listing Agreement will attract Section 23A(a) of the SCRA and will not attract Section 23E. The AO has made an error.
19. In view of the aforesaid, the penalty of Rs. 1 crore under Section 23E is patently erroneous and cannot be imposed and the order to that extent cannot be sustained."
27. In this regard, the appellants have produced various orders passed by SEBI against various companies and its Directors wherein different penalties have been imposed for similar/identical offence. In the instant case, the AO has penalised the appellant Company of Rs.10.25 crore and the 20 Managing Director of Rs. 20 lakh. In similar matters lesser penalty has been awarded. For facility, a comparative table is given hereunder:
Penalty Orders Sr. Name of the Date of GDR Subscriber Combined Date No. GDR issuer Issue size Penalty of the company (million Order $)
1. ABL June 2008 6.68 Clifford Rs.50,00,000/- 23rd Biotechnologies Capital (Rupees Fifty April Ltd. Partners Lakhs) 2018
2. Syncom September 20.74 Vintage Rs.25,00,000/- 30th Healthcare Ltd. 2010 (Rupees Twenty August Five Lakhs) 2019
3. Visu April 9.66 Seazun Rs.1,25,00,000/- 18th International 2006 (Rupees 1 Crore March Ltd. Twenty-Five 2021 Lakhs)
4. GV Films Ltd. April 40 Whiteview Rs.25,00,000/- 29th 2007 (Rupees January Twenty-Five 2020 Lakhs)
5. Aksh Opti- Sept 2010 25 Vintage Rs.10,15,00,000/- 28th Fibre Ltd. (Rupees Rupees February Ten Crore 2020 Fifteen Lakhs)
6. Rana Sugars May, 18.00 Rs.10,00,000 29th 2006 (Rupees Ten Lakhs) February 2018
7. Sybly Industries June 9, 6.99 Vintage Rs.10,30,00,000/- March Ltd. 2008 (Rupees Rupees 2019 Ten Crore Thirty Lakhs)
8. Winsome Yarns March 29, 13.24 Vintage Rs.11,00,00,000 28th Ltd. 2011 (Rupees Eleven Crores) March 2021
28. A perusal of the aforesaid table indicates that G.V. Films Ltd. had raised 40 million USD and the Company was only awarded a penalty of Rs. 25,00,000/-. Another Company Syncom Healthcare Ltd., raised 20.74 million USD and was awarded a penalty of Rs.25 lakhs whereas in the case of the appellant Company who raised 6.99 million USD has been 21 awarded Rs.10,30,00,000/-. In Sybly Industries Ltd. v. SEBI, appeal no.381 of 219 and other connected appeals decided on 14th July, 2022 penalties ranging from Rs.10 lakhs to Rs.10.30 crores were imposed which were reduced to Rs.25 lakhs on the Company and Rs.10 lakhs on the Managing Director. Thus, in our opinion, the penalty imposed is excessive and disproportionate to the violation and is also discriminatory.
29. We find that such excessive penalty imposed upon the Company does not make any sense. In the instant case, there are public shareholders and workers. The Company is a running concern. Penalising the Company with such heavy penalty is in fact penalising the shareholders which is not justifiable especially for a running company. Further, the money raised through GDRs has been received by the Company and has not been misappropriated. The same has been utilitised for the purpose for which the GDR was issued which fact has not been disputed. Thus, it is not a case of defalcation of the funds.
30. Consequently, while affirming the order of the AO for the violations committed by the Company we reduce the penalty against the Company to Rs.25 lakhs. The penalty 22 against the Managing Director for Rs. 20 lakhs is affirmed. Insofar as the appellant the Mr. Vijay Prasad Pappu is concerned he was the Whole Time Director. Other than being a signatory to the resolution there is no finding that he was involved in the monitoring of the GDR issue. We are of the considered opinion that the imposition of Rs. 20 lakh against the appellant Mr. Vijay Prasad Pappu is excessive and we reduce the penalty from Rs. 20 lakh to Rs. 10 lakh. Insofar as appellant Mr. Shanti Lal Badera is concerned, we find that he was a non-executive independent director apart from being the signatory of the resolution. He was not involved in the day to day affairs of the running of the Company nor was he aware or monitored the issuance of the GDR issue. In a large number of cases, namely, Appeal no. 389 of 2021, Prafull Anubhai Shah vs SEBI decided on June 28, 2021, Appeal no. 433 of 2021, Rajesh Shah vs SEBI decided on July 5, 2021, Appeal no. 58 of 2021, Jaiprakash Kabra vs SEBI decided on September 2, 2021 and Appeal no. 406 of 2020, Mr. Gurmeet Singh vs SEBI decided on September 20, 2021 we have held that independent directors cannot be penalized when they are not part of day to day affairs of the Company. Consequently, the penalty imposed against Mr. Shanti Lal Badera of Rs. 10 lakh is set aside. The appellant Mr. Rishabh Kumar Jain was 23 the Company Secretary in the Company. He has been penalized a sum of Rs. 2 lakh only on the ground that he was signatory to the resolution and that he did not act diligently. In our opinion being the Company Secretary he was required to sign and verify the resolution but was not involved in the process of issuance of GDR issue nor was he involved in the process of issuance of the loan agreement or the pledge agreement. Thus, the question of him not acting diligently does not arise when he has required to sign on the dotted line as per the dictate of the management and as per the regulations of SEBI. In our opinion, it does not amount to lack of due diligence. In the instant case, we are of the opinion that no penalty could have been imposed upon the appellant Mr. Rishabh Kumar Jain. Consequently, penalty is set aside.
31. For the reasons stated aforesaid, the appeal of the Company, Texmo Pipes and Products Ltd. being Appeal no. 608 of 2022 is partly allowed. The penalty of Rs. 10.25 crore is reduced to Rs. 25 lakh. The appeal of Mr. Sanjay Kumar Agrawal being Appeal no. 605 of 2022 is dismissed. The appeal of Mr. Vijay Prasad Pappu being Appeal no. 607 of 2022 is partly allowed. The penalty of Rs. 20 lakh is reduced 24 to Rs. 10 lakh. The appeal of Mr. Shanti Lal Badera being Appeal no. 606 of 2022 and appeal of Mr. Rishabh Kumar Jain being Appeal no. 604 of 2022 are allowed. The penalty is set aside. In the circumstances of the case, parties shall bear their own costs. All the miscellaneous application are also disposed of.
32. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.
Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member RAJALA Digitally by signed KSHMI RAJALAKSHMI H 30.09.2022 NAIR Date: 2022.10.04 H NAIR 16:59:20 +05'30' msb