Delhi District Court
Securities And Exchange Board Of India vs Kalyani Finance Ltd on 3 July, 2010
1
IN THE COURT OF SH. DIG VINAY SINGH, ADDITIONAL CHIEF METROPOLITAN
MAGISTRATE (SPL. ACTS): CENTRAL: TIS HAZARI COURTS, DELHI
CASE NO.18/5
UNIQUE ID NO. 02401R0034562000
In re:
SECURITIES AND EXCHANGE BOARD OF INDIA
HAVING ITS REGIONAL OFFICE AT
32, RAJENDRA BHAWAN,
RAJENDRA PLACE,
NEW DELHI110008 .....COMPLAINANT
VS.
1. KALYANI FINANCE LTD.
AT 5574A, IST FLOOR,
KANSHI RAM MARKET,
KOLHAPUR ROAD,
KAMLA NAGAR,
DELHI110007
ALSO AT
203, DHAKA CHAMBERS
2069/39, NAIWALA, KAROL BAGH,
NEW DELHI110005.
CASE NO. 18/5
Page
1 of
9 /k
2
2. ASEEM GUPTA
S/O. SH. D.D. GUPTA
R/O. 1366/21, IIIRD FLOOR,
NAIWALA, KAROL BAGH,
NEW DELHI110005
3. TARUN GOYAL
203, DHAKA CHAMBERS
2069/39, NAIWALA, KAROL BAGH,
NEW DELHI110005 ........ACCUSED
U/S. 63 & 68 OF THE COMPANIES ACT, 1956 & 200 Cr.PC
DATE OF INSTITUTION OF CASE: 24.3.2000
DATE OF RESERVATION OF ORDERE: 03.7.2010
DATE OF PRONOUNCEMENT OF ORDER: 03.7.2010
ORDER
03.7.2010 Present A2 Aseem Gupta and A3 Tarun Goyal are present on bail with their respective counsels Mr. Anil Goyal and Mr. A.K. Dass, Advocates. Accused no.1 is a company.
And none has appeared for the complainant today to give clarification regarding the A1 Company, in terms of last order dated 23.2.2010. It is not clear whether the accused company is served in this matter or not. None has appeared for the complainant upto 2.30 PM today. CASE NO. 18/5
Page 2 of 9 /k 3 Arguments on discharge application of A2 and A3 heard.
1. The present complaint has been filed by SEBI against the abovementioned three accused for the offences u/s.63 & 68 of the Companies Act, 1956. It is claimed that the accused company, Kalyani Finance Ltd., came out with a prospectus dated 19.2.1996 for public issue for equity shares of Rs.10/ each for a total amount of Rs.240 lacs, and which public issue opened on 02.4.1996 and closed on 13.4.1996. The complainant alleges that there were various misstatements made in the prospectus, which were made by the accused knowingly that they were false and they were made in order to induce public persons to subscribe to the public issue. The details of those misstatements are mentioned as follows.
2. It is claimed that A2 was the Director of accused company, as per prospectus and he authorised issuance of that prospectus through his attorney Mr. Ravish Kumar Gupta. As per the prospectus, the Lead Managers to the issue was GEEFCEE Finance Ltd. A3 was the Director and Head Merchant of this Lead Manager. The registered office's address mentioned in the prospectus was 5574A, Ist floor, Kanshi Ram Market, Kolhapur Road, Kamla Nagar, Delhi 110007, but it was found that no such company existed at the given address at the relevant time. This was one of the misstatements. In the prospectus, besides the name of A2 as one of the Directors, name of Ravish Kumar Gupta as Managing Director and Ashok Kumar Jain as another Director was mentioned. It was found by the complainant that no such person existed at the given CASE NO. 18/5 Page 3 of 9 /k 4 addresses. Even the address was found to be not existing. This was another misstatement of fact mentioned in the prospectus.
3. The complainant SEBI started inquiring about the address of the company from the Registrar of Companies and it was found that the company filed form no.18 on 20.2.1998, which was dated 10.4.1997 regarding change of its registered office from the abovementioned address to 203, Dhaka Chambers, 2068/38, Naiwala, Karol Bagh, New Delhi. It was also learnt by the complainant that the company reported appointment of one Mr. Lalit Jha, as Director, who was again found to be nonexistent and even the address was not existing.
4. Officer of the complainant visited the new office of the company at Karol Bagh and found that neither any board of company was there nor any such company was existing there. Rather, that premises belonged to the A3 and, this address of A3 as the address of the company reveals that A3 was the person behind all these misstatements in the prospectus and alongwith A2. This address of the accused company is the same as that of the Lead Managers, of which the A3 was the Director and Incharge of and responsible. A3 owns this premises which was used by the accused company as its address and which he also used as the address of the Lead Managers i.e. GEEFCEE.
5. When communication was sent to the A2, he replied vide his letter dated 24.4.1999 that it was the A3, who used his name as a Director of the company and he never introduced Mr. Ravish Kumar Gupta and Ashok Kumar Jain. CASE NO. 18/5
Page 4 of 9 /k 5
6. Inquiries were also made from Chartered Accountant and Auditors, as named in the company as named in the prospectus. It was learnt by the complainant that the said RSA & Co. were engaged as Auditors by the A3 himself and it was the A3, who produced the records and accounts of the company before the Auditors. The Auditor also informed that it was A3, who allowed verification of documents at his own address of Karol Bagh and no one else interacted with the concerned Chartered Accountant. He also stated that it was the A3, who persuaded them for provisional assignment of auditorship. Besides this, various documents examined by the complainant reveals that it was the A3, who was behind this Kalyani Finance Ltd.
7. When the company was converted from private to public limited company, the fresh certificate of incorporation was received by the A3. The form no.23 regarding this conversion bears the signatures of A3. The A3 even countersigned the corrections at various pages of the statement in lieu of prospectus filed on 27.11.1995.
8. The complainant also learnt that one account of the company was opened on 03.11.1998 at Karol Bagh in the Bank of Rajasthan and the account was introduced by one Harpal Rathee, who had already expired before the date of opening of account and it was also done by the A3. In the prospectus, there are other misstatements as to the promoters and their backgrounds, as to the Board of Directors, Managerial competence, changes in the Directors and there was deliberate omission of material facts regarding the involvement of A3 in the CASE NO. 18/5 Page 5 of 9 /k 6 affairs of company.
9. It is the case of the complainant that A3 Tarun Goyal used to run such fictitious/bogus companies in the name of nonexistent persons, so that in case of problem, he could wriggle out of legal complications.
10. A2 Aseem Gupta claims that he resigned as a Director in November, 1996. It is claimed by him that he did not sign the prospectus.
11. Perusal of prospectus reveals that it was claimed in the declaration that this accused signed through attorney Ravish Kumar Gupta. The said Ravish Kumar Gupta is not existing. It is not denied by the A2 that he was a Director of the company on the date of issuance of prospectus. Therefore, his liability arises on the date of making misstatements of facts. Merely by subsequent resignation as a Director would not absolve him. It is not a case where Ravish Kumar Gupta is an existent person and who is not having any attorney in his favour, rather it is a case where Ravish Kumar Gupta is a nonexistent person and it cannot be believed that A2 being a Director was not aware that no such person by the name of Ravish Kumar Gupta or Ashok Kumar Jain existed. It may well be a case where this A2 is actively involved with A3 in issuance of prospectus and in a very well planned manner, the prospectus was issued through attorney by impersonating someone as Ravish Kumar Gupta.
12. Even otherwise, section 63 of Companies Act, 1956, provides, that where there is misstatement of facts in a prospectus, the person authorising the issue of prospectus shall be liable for punishment, unless such person proves either CASE NO. 18/5 Page 6 of 9 /k 7 that the statement was immaterial or that he had reasonable grounds to believe and did upto the time of prospectus believed that the statement was true.
13. Onus is on the A2 to disprove the allegations, which can be done at the stage of evidence. There is grave suspicion against A2 that he was actively involved in issuance of prospectus containing the misstatements, as the other two Directors namely Ravish Kumar Gupta and Ashok Kumar Jain are non existent. It may be mentioned here that it is not the case of A2 and A3 till date that those two persons were existing. No such particulars are supplied to the complainant or the Court till date. Such people cannot be allowed to go scot free by taking shelter that they did not sign the prospectus, especially when it has come to light that the prospectus was signed by nonexistent persons.
14. It is claimed by the A2 that he was not an active Director. This is a disputed question of fact, which can be gone into during evidence only and cannot be prejudged without taking complete evidence. It is next claimed that the complainant has not filed supportive documents to show misstatements. The complainant has filed copies of supportive documents, which can be proved only during evidence and the right of the complainant cannot be foreclosed by discharging the accused. The A2 also claimed that he did not authorise any Ravish Kumar Gupta to sign on his behalf. I have already mentioned above that Ravish Kumar Gupta and another Directors were nonexistent persons and there is primafacie sufficient material to show that A2 and A3 in conspiracy did all these manipulation in order to wriggle out all legal complications. A2 also CASE NO. 18/5 Page 7 of 9 /k 8 claimed that he ceased to be a Director w.e.f. 01.7.1996 and his appointment was not regularised in the annual general meeting. This nonregularisation of directorship is a subsequent fact and, therefore, is immaterial. Reliance is placed by the A2 on the case of M.V. Joshi, AIR 1961 SC 1494 and the Bhajan Lal's case, 1992, Supplementary(1)SCC 335, which are not applicable to the facts of the present case. Accordingly, the application of A2 is liable to dismissed.
15. Turning to the application of A3. He claims that he was not an Officer of the company nor a Director of the accused company and not even a signatory of the prospectus and, therefore, he ought to be discharged.
16. U/s.63 of the Companies Act, 1956, it is not necessary that only an Officer of the company can be prosecuted, nor is it so necessary u/s.68 of Companies Act, 1956. Under both these sections, any person, who authorises issuance of such prospectus containing misstatement and containing statement, which are false, deceptive or misleading can be tried. The abovementioned facts clearly reveals that there are sufficient material, primafacie, that it was the A3, who was behind issuance of this prospectus of accused company. Although, in the application of A3, it is claimed that ROC had also filed similar complaint, but during arguments, counsel for the A3 conceded that the said complaint of ROC was withdrawn and, therefore, there is no bar in prosecuting the present complaint. From the above discussion of facts, even the application of A3 is liable to be dismissed.
CASE NO. 18/5
Page 8 of 9 /k 9
17. Today, none has appeared for the complainant. One opportunity is given to the complainant to take necessary steps regarding the accused company and it is made clear that it shall be last opportunity no further opportunity would be granted.
18. Put up on 16.11.2010 for the said purpose.
ANNOUNCED IN OPEN COURT ON 03rd July, 2010 (DIGVINAY SINGH) ADDITIONAL CHIEF METROPOLITAN MAGISTRATE SPECIAL ACTS, CENTRAL, TIS HAZARI COURTS, DELHI CASE NO. 18/5 Page 9 of 9 /k