Delhi District Court
Sebi vs M/S Versatile Plantation Ltd And Ors on 22 November, 2024
IN THE COURT OF MS. VANDANA JAIN:
ADDL. SESSIONS JUDGE-03/SPECIAL JUDGE
(COMPANIES ACT), DWARKA COURTS, NEW DELHI.
(More than 22 years old)
(Targeted case in terms of letter No.7968/CFM/DHC/2024 dated
15.04.2024 by Hon'ble High Court of Delhi on the subject
"Action Plan for Arrears Reduction in District Judiciary").
CNR No. DLSW01-006829-2023
CC No. 663/2023
SEBI Vs. M/s. Versatile Plantations Ltd. & Ors.
Security and Exchange Board of India,
a statutory body established under the provisions
of Securities and Exchange Board of India Act, 1992,
having its head office at 221, Nariman Point,
Mittal Court, "B" Wing, Nariman Point,
Mumbai - 400072 and represented by its
Assistant Legal Advisor (Prosecutions)
Sh. A. Chandra Sekhar Rao.
.....Complainant
Versus
1. M/s. Versatile Plantations Ltd.
a company incorporated under the provisions of
Companies Act, 1956 and having its
registered office at 101, Jai Plaza,
Sona Market Naya Bans, Sector 15,
Noida, UP.
2. Sh. Kamaljit Singh,
Occupation : Director of the accused No. 1,
R/o B-27, Sindhu Nagar,
Lucknow.
3. Sh. Rakesh Kumar Singh,
Occupation : Director of the accused No. 1,
R/o 5/145, Vikas Nagar,
Lucknow.
CC No. 663/2023 Page No. 1 of 35
SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
4. Sh. Diptesh Kumar Sarkar
Occupation : Director of the accused No. 1,
R/o C-238, Nirala Nagar,
Lucknow. .....Accused Persons
Date of Institution of complaint : 04.07.2002
Date of Arguments : 11.11.2024
Date of pronouncement : 22.11.2024
JUDGMENT
Facts
1. Succinctly stated, the accused No.1 company namely M/s. Versatile Plantation Ltd. was running a Collective Investment Scheme (hereinafter referred to as 'CIS') and raised an aggregate amount of nearly Rs. 50 lacs from the general public.
2. The private entrepreneurs had undertaken plantation activities on a commercial scale, however, it was noticed that the promoters themselves invested a minimum amount in such ventures and raised the majority of funds from ordinary investors in the absence of any regulatory mechanism. The companies promised high returns coupled with the fiscal incentives which helped these companies to mobilize large amounts over a period of time.
3. The Government of India, after detailed consultations with the regulatory bodies, decided that an appropriate regulatory framework for regulating entities, which issue instruments like Agro Bonds, Plantation Bonds etc., has to be put in place. A CC No. 663/2023 Page No. 2 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. press release was issued by the Government on 18.11.1997, conveying that such schemes should be treated as Collective Investment Schemes coming under Security and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act'). In order to regulate such collective investment schemes, both from the point of view of investor protection as well as promotion of legitimate investment activity, Security and Exchange Board of India (hereinafter referred to as 'SEBI') was asked to formulate the regulations for them.
4. SEBI in the year 1999 notified regulations for the regulation of the activities of CIS, titled as SEBI (CIS) Regulations, 1999 (hereinafter referred to as 'CIS Regulations').
5. Pursuant to the press release dated 26.11.1997 and public notice dated 18.12.1997, accused no.1 company filed information/details with SEBI regarding its CIS.
6. In terms of Chapter IX of the CIS regulations, any person who had been operating a collective investment schemes at the time of commencement of the said regulations shall be deemed to be an existing collective investment schemes and shall comply with the provisions of the said Chapter IX. Further, in terms of the said Chapter IX any person who immediately prior to the commencement of the said regulations was operating an collective investment schemes shall make an application to SEBI for grant of registration within a period of two months from the date of notification of the said regulations.
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7. SEBI having regard to the interest of investors and request received from various persons operating CIS extended the last date of submitting the application by existing entities upto March 31, 2000 and the same was declared by SEBI vide a press release and a public notice.
8. The accused No.1 failed to make any application with SEBI for registration of the collective investment schemes being operated by it as per the said regulations. It is further submitted that in terms of Reg. 73(1) of the said regulations, an existing collective investment scheme which failed to make an application for registration with SEBI, shall wind up the existing collective investment schemes and repay the amounts collected from the investors. Further, in terms of Reg. 74 of the said regulations, an existing collective investment scheme which is not desirous of obtaining provisional registration from SEBI shall formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in Reg. 73 but accused company failed to comply with the said provisions of the regulations.
9. It is further submitted that vide letter dated 15.12.1999 and public notice dated 10.12.1999, SEBI gave intimation in terms of Reg. 73(2) to accused No. 1 company and casted an obligation on accused No.1 company to send an information memorandum to all the investors detailing the state of affairs of the schemes, the amount repayable to each investor and the manner in which such amount is determined and accused No.1 was required to send information memorandum to the investors CC No. 663/2023 Page No. 4 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. latest by 28.02.2000. SEBI vide another public notice published in newspapers on 22.02.2000 informed to the accused company that all the companies carrying out collective investment schemes who had not made any application for grant of registration or were not desirous of obtaining provisional registration were required to compulsorily wind up their existing schemes as per the provisions of Reg. 73(1) of the said regulations.
10. It is further submitted that accused No.1 company neither applied for registration under the said regulations nor took any steps for winding up of the schemes and repayment to the investors. SEBI issued a public notice in the newspapers inviting the attention of the accused No.1 company to the aforesaid position. Further, a notice dated 12.05.2000 was also issued to accused No.1 company to show cause as to why the action stated therein be not initiated against it but accused No. 1 company did not respond to the said notice and subsequently accused No.1 company was given show cause notice dated 12.05.2000 and a letter dated 31.07.2000 was also issued to wind up the schemes and repay the amounts to the investors. Accused No.1 was intentionally and with dishonest intentions evading the repayment of the amounts collected by it from the investors.
11. SEBI by exercising its powers conferred upon it under Section 11B of SEBI Act, 1992 on 07.12.2000 directing accused No.1 company to refund the money collected under the aforesaid collective investment schemes within a period of one month from the date of said directions. It is further submitted that accused No.1 company raised a total amount of Rs. 50 lakhs and its CC No. 663/2023 Page No. 5 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. failure to repay the amounts to the general public, who invested their hard earned money in the schemes operated by accused No.1 company, caused huge pecuniary damage to them. It is further submitted that accused No.1 company had violated the provisions of Sec.11B, 12 (1B) of Securities and Exchange Board of India Act, 1992 read with Reg. 5(1) r/w Reg. 68(1), 68(2), 73 and 74 of the said regulations and accused No. 2 to 4 are the directors and/or persons in charge of and responsible to accused No.1 company for the conduct of its business and are liable for the violations of accused No.1 company, in terms of section 27 of Securities and Exchange Board of India Act, 1992.
Summoning All the accused persons i.e. accused no.1 to 4 including .12 accused no.1 company were summoned for the said offences vide order dated 04.07.2002. Accused No. 2 Kamaljit Singh, accused No. 3 Rakesh Kumar Singh and accused No. 4 Diptesh Kumar Sarkar appeared in the court pursuant to issuance of process against them respectively. Accused No. 1 company was represented by accused No.3. The present judgment is passed qua .all accused persons Notice
13. Notice for violation of Section 11B, 12(1B) of SEBI Act and Regulation 5(1) r/w Regulation 68(1), 68(2), 73 and 74 of the CIS Regulations, punishable under Section 24(1) r/w 27 of SEBI Act was framed on 27.05.2005 against accused no.1 through accused No. 3 and accused No. 2 to 4 to which they pleaded not guilty to the said notice and claimed trial.
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14. Matter was listed for complainant evidence. During complainant's evidence, Ms. Jyoti Jindgar, Deputy General Manager, SEBI stepped into the witness box and examined herself as CW-1. The examination-in-chief of CW-1 Ms. Jyoti Jindgar, Deputy General Manager was recorded but the cross examination was deferred at the request of learned counsel for accused persons which could never took place as the matter was stayed by Hon'ble Delhi High Court in Criminal M.C. No.5184- 87/2005 and the said Criminal MC case was adjourned sine die on the basis of statement of counsel for complainant.
15. Matter was again revived. CW-1 Ms. Jyoti Jindgar was substituted by Sh. Vivek Yadav, Manager, SEBI by a speaking order.
16. Evidence of CW-1 Sh. Vivek Yadav, Manager, SEBI was recorded as under :
"I am working as above and I am competent and duly authorized to continue the prosecution of the present case for and on behalf of SEBI vide letter of authority dated 28.04.2017, which is now Ex.CW1/1. Relevant extracts of certified copy of delegation of powers order dated 09.01.2015 is now Ex.CW1/2.
The present complaint was filed by Sh. A. Chandra Sekhar Rao, the then Assistant Legal Advisor of SEBI. Sh. A. Chandra Sekhar Rao was competent to file the present complaint for and on behalf of SEBI. I can identify the signature of Sh. A. Chandra Sekhar Rao as I have seen and received various documents signed by Sh. A. Chandra Sekhar Rao. His signature is at point A on the complaint which is now Ex.CW1/3. Government of India dated Press Release dated 18.11.1997 notified that an appropriate regulatory framework for regulating entities which issue CC No. 663/2023 Page No. 7 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
instruments such as agro bonds, plantation bonds, etc. has to be put in place. Further, it was notified that schemes through which instruments such as agro bonds, plantation bonds, etc. are issued shall be treated as collective investment schemes under provisions of SEBI Act. The Press Release dated 18.11.1997 of Government of India is now Mark- A. SEBI vide its Press Release dated 26.11.1997 inter alia notified that provisions of Section 12 (1B) of SEBI Act prohibits collective investment schemes including mutual funds from sponsoring any new scheme till regulations are notified in this regard. Further, entities operating collective investment scheme (hereinafter referred as 'CIS') were directed to provide details of their schemes, other information as mentioned there in the Press Release. The certified copy of the press release of the SEBI dated 26.11.1997 is now Ex.CW1/4 (original seen and returned).
SEBI had also issued public notice to this effect and certified copy of the said public notice dated 18.12.1997 is now Ex.CW1/5 (original seen and returned). In response thereof, the accused No. 1 company sent a letter which was received by SEBI on 15.01.1998 whereby accused No. 1 company sent Memorandum of Information of their Agro Plantation project. The letter alongwith its annexures appended therein consisting of going to 57 pages is collectively exhibited as Ex. CW1/6. As per the said information, accused no. 2 to 4 were the Directors and Person In-Charge of the affairs of the accused no. 1 company. Further, the annexures of the said letter contained information about the schemes launched, sponsored and carried on by the accused no. 1 company, terms and condition of the said schemes run by the company accused. In the said information, the accused no. 1 company also stated that the cost of the project is Rs. 5 hundred crore and the same was to be financed by way of schemes of Agro Units run by the company. The said letter was signed by Director of the company accused on the letter head of the accused no. 1 company.
SEBI vide a letter dated 31.03.1998, directed the accused no. 1 company to provide interalia certified copy of memorandum and article of association, latest audited balance sheet, names, addresses and occupation of all the Directors of the company, statement of deployment of funds mobilized by the company under CC No. 663/2023 Page No. 8 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
its various schemes. The office copy of the letter is Ex.CW1/7 (Objected to the mode of proof). In response thereto the accused no. 1 vide a letter dated 30.04.1998 provided certified copy of memorandum and article of association, latest audited balance sheet, names, addresses and occupation of all the Directors of the company and a compliance certificate and also sought time to furnish statement of deployment of funds. The said letter was signed by Director of the company and was forwarded on the letter head of the company accused. The letter alongwith annexure appended therein consisting of 43 pages is collectively Ex.CW1/8. SEBI vide a letter dated 13.05.1998 advised the accused no. 1 company to send interalia latest audited balance sheet and statement of deployment of funds. The office copy of the same is Ex. CW1/9 (Objected to the mode of proof). Further, SEBI vide a letter dated 21.05.1998 intimated the accused no. 1 company that it has not sent copies of offer documents of its schemes, funds raised through such schemes and advised the accused no. 1 company to send the same urgently, office copy of the said letter is Ex. CW1/10 (Objected to the mode of proof). Further, SEBI advised the accused no. 1 company to send the information sought by SEBI vide a letter dated 21.03.1998 and 13.05.1998 and reminded the accused no. 1 company to send the sought information / documents. Office copy of the letter is Ex.
CW1/11 (Objected to). Further, SEBI vide its letter dated 27.08.1998, office copy is exhibited Ex. CW1/12 (Objected to), directed the accused no. 1 company to provide interalia amount due for redemption till December, 1998, number of investors, scheme brochures / offer document.
In the meantime, CWP NO. 3352/98-SD Bhattacharya v. SEBI & Ors was filed before Hon'ble High Court of Delhi. Vide a letter dated 11.09.1998, office copy of the said letter is Ex. CW1/13 (objected to) SEBI intimated the accused no. 1 company to provide information interalia breakup of the amount received form the public / investors in its schemes, number of investors, year wise break up of future liabilities / obligations in terms of promises made to the investors of the scheme, etc. as the same was required to be submitted to Hon'ble High Court. Vide a letter dated 11.11.1998, office copy of the same is Ex. CW1/14 (objected to) SEBI intimated to the accused no. 1 company, the directions issued by Hon'ble CC No. 663/2023 Page No. 9 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
High Court of Delhi vide a order dated 07.10.1998 and 13.10.1998 and 21.10.1998. In response thereto, the accused no.1 company vide a undated letter, received by SEBI on 07.12.1998, the said letter is Ex. CW1/15 (OSR) informed that the accused no. 1 company was promoted by Sh. Kamal Jeet Singh and Sh. R. K. Singh and their associates. In meantime, SEBI received a complaint dated 08.12.1998 from one Sh. Ramesh Chandra Joshi interalia forwarding brochure of the schemes of the accused no. 1 company, receipts of payment dated 30.04.1998, 30.05.1998, 31.03.1998, 14.02.1998, 31.01.1998, 29.11.1997 etc. issued by the accused no. 1 company against investment made by investors in its schemes. The said complaint further read that the accused no. 1 company is not repaying the investments made by the investors. The complaint dated 08.12.1998 alongwith its annexures, running into 12 pages, is collectively Ex. CW1/16 (objected to). SEBI vide a letter dated 24.12.1998 forwarded the said complaint dated 08.12.1998 to the accused no. 1 company and directed it to show-cause as to why appropriated proceedings should not be initiated against it and its Directors. The said show-cause notice dated 24.12.1998 was also forwarded to the accused no. 2 to
4. The office copy of the said show-cause notice dated 24.12.1998 is Ex. CW1/17 (Objected to). In response thereto, the accused no. 1 company vide a letter dated 18.01.1999 stated that it has deputed its officials to inquire the matter and also submitted that pursuant to direction of SEBI dated 24.02.1998, they have instructed their branches to immediately discontinue all collections. The said letter dated 18.01.1999 is Ex. CW1/18. SEBI vide a letter dated 05.02.1999, directed the accused no. 1 company to inform findings of its Inspecting Officials in respect of its claims that funds were mobilized after 24.02.1998 only at Pithoragarh Branch. The said letter dated 05.02.1999 is Ex. CW1/19 (Objected to).
In the meantime, SEBI received a complaint dated 04.12.1998 against the accused no. 1 company forwarded by Department of Company Affairs (DCA), bearing the referral of the Prime Minister. DCA had forwarded the said complaint to SEBI with its letter dated 02.07.1999 alongwith the said complaint. The various complaints received by SEBI were forwarded to accused no. 1 company vide letter dated 31.05.1999.
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The same is collectively Ex. CW1/20 (Objected to). The letter dated 02.07.1999 alongwith original complaint dated 04.12.1998 consisting 9 pages is now collectively Ex.CW1/21 (objected to).
Vide a letter dated 17.08.1999 SEBI again forwarded to accused No. 1 Company the investor complaints against the accused No.1 company for redressal. SEBI CIS regulations were notified on 15.10.1999. SEBI vide a letter dated 21.10.1999 intimated to the accused No. 1 company about notification of SEBI CIS regulations. Letter dated 21.10.1999 is now Ex. CW1/22. SEBI had also issued press release dated 20.10.1999, inter alia. intimating notification of SEBI CIS regulations and the same is now Ex. CW1/23. A copy of the press release was also forwarded to the accused No. 1 company alongwith the letter already exhibited as Ex. CW-1/22. SEBI vide a letter dated 10.12.1999 advised the accused No. 1 company to comply the provisions of SEBI Act and CIS regulations and report compliance thereof to SEBI, the letter dated 10.12.1999 is now exhibited as Ex. CW-1/24. SEBI also issued a general public notice dated 10.12.1999 notifying the obligations of existing CIS entities under CIS regulations. Public notice dated 10.12.1999 is Ex. CW-1/25. SEBI also sent a reminder letter dated 29.12.1999 to the accused No. 1 company, letter dated 29.12.1999 is Ex. CW-1/26.
The accused no. 1 vide a letter dated 31.03.2000 filed an application under CIS regulations with SEBI, letter dated 31.3.2000 is Ex. CW-1/27. (Objected to by counsel for the accused to the mode of proof). SEBI vide a letter dated 04.04.2000 intimated to the accused No. 1 that its application sent vide a letter dated 31.03.2000 is not an application for seeking registration under CIS regulations and further it is not in the format specified in Form A. Accordingly, SEBI vide letter dated 04.04.2000 returned the Semand draft and MoA, sent by the accused No. 1 company vide a letter Ex. CW-1/27 to SEBI, to the accused No. 1 company. The office copy of the letter dated 04.04.2000 is Ex. CW-1/28. (Objected to by counsel for the accused to the mode of proof). Since, the company accused did not comply with the provisions of SEBI Act and CIS regulations, SEBI issued show cause notice dated 12.05.2000 to the accused No. 1 and the same is now Ex. CW-1/29 (OSR). SEBI vide a letter dated 31.07.2000 sent format of "winding up and repayment CC No. 663/2023 Page No. 11 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
report" (WRR) to the accused No. 1, letter dated 31.07.2000 is now marked as Mark B. The said format of WRR was also available on the website of SEBI and the same was also communicated to the accused No. 1 vide letter Mark B. The accused no. 1 company did not file application for grant of registration of its CIS and also failed to file winding up and repayment report with SEBI. SEBI vide a order dated 07.12.2000 passed directions under section 11-B of the SEBI Act to the accused No. 1 company to refund the money collected under its scheme with returns to the investors as per terms of the offer with period of one month from the date of said order. The said order dated 07.12.2000 under section 11- B of the SEBI Act is now exhibited as Ex. CW-1/30. Further, the said directions order dated 07.12.2000 of SEBI were communicated to the accused No. 1 company vide a letter dated 18.12.2000. The said letter dated 18.12.2000 is now exhibited as Ex. CW-1/31. As the accused No. I company failed to comply with the said directions, SEBI vide an order dated 02.07.2001 debarred the promotors/directors/managers persons incharge of business of schemes of accused no. 1 from operating in the capital market. The order dated 02.07.2001 was communicated to the accused no.1 vide a letter dated 10.07.2001. Letter dated 10.07.2001 slongwith order dated 02.07.2001 is Ex. CW-1/32. (Objected to by counsel for the accused to the mode of proof). The directions passed under the order dated 07.12.2000 were also communicated to the accused vide a public notice published in newspapers dated 14.01.2001. The said public notice is now Ex. CW-1/33. The name of accused no. 1 company is appearing at serial no. 503 at point A on Ex. CW-1/33. SEBI is in receipt of various investor complaints against the accused no. I company. These were regarding non refund of investor's money by the accused no. 1 company. SEBI had prepared a list of investor complaints received against the accused No. 1 company. I have brought the list of investor's complaint against the accused no. 1 company received by SEBI upto 28.07.2006 and the same remained unresolved till 28.07.2006. The list of investor's complaints is Ex. CW-1/34. (Objected to by counsel for the accused to the mode of proof). As per the list there were about 1194 investor complaints pending resolution by the company CC No. 663/2023 Page No. 12 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
accused till 28.07.2006.
Accused No. 1 company vide a letter dated 01.02.2002 intimated to SEBI about its total liability as on 31.12.2001 which is Rs.5,41,00,000/-. The said letter is now Ex. CW-1/35. The said letter is signed by the accused No. 2 Sh. Kamaljeet Singh, director of the accused no. I company. SEBI vide a letter dated 10.06.2002 advised the accused no. 1 to do the needful to resolve the investor's complaints sent to the accused no. 1, the said letter dated 10.06.2002 is Mark C. In response thereto, the accused no.1 vide a letter dated 29.06.2002 sent to SEBI Auditor Certificate mentioning the year-wise amount mobilized by the accused no. 1 under its various CIS schemes. As per the list the company accused had mobilized Rs.96,22,729/- in the financial year 1995-1996, Rs.6,73,70,259/- in the financial year 1996-1997, Rs.8,92,65,820/- in 1997- 1998. In 2000-2001 the total amount outstanding was Rs.5,57.06.024/- at the financial year 2000-2001. Letter dated 29.06.2002 alongwith the Auditor's Certificate is collectively exhibited as Ex. CW-1/36. (Objected to by counsel for the accused to the mode of proof). The accused no. 1 company failed to redress the investor's complaint. The accused no. 1 company also failed to refund the investor's money despite the directions issued by SEBI under Section 11-B of the SEBI Act. The accused No. 1 to 4 also failed to comply with the provisions of SEBI Act and SEBI CIS regulations, 1999.
SEBI received various investor complaints against the accused inter-alia stating non receipt of refund of their investments. The said investor complaints were forwarded to accused no. 1 company for redressal vide letters dated 02.08.2006 and 11.08.2006. The copy of the said letters are Mark D and Mark E respectively. (Objected to) SEBI received a letter dated 19.07.2007 from the accused no. 1 company, which is Ex.CW1/37. (Objected to) In response thereto the complainant vide letter dated 11.07.2007 advice the accused no. 1 company to forward the complete information in terms of SEBI letter dated 02.08.2006. The office copy of the letter dated 11.07.2007 is Ex.CW1/38. (Objected to) Subsequent thereof accused no. 1 company vide letter dated 31.07.2007 (received by SEBI on 06.08.2007) submitted their submissions regarding investor companies. The said letter is Ex.CW1/39. (Objected to) CC No. 663/2023 Page No. 13 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
The said letter was duly replied by SEBI vide letter dated 10.08.2007. The office copy of the said letter is Ex.CW1/40. (Objected to) SEBI received investor complaint from Ms. Gunjan Chaudhary on 21.08.2007 inter-alia stating that she had not received the money as assured by the accused no. 1 company. The complaint of Ms. Gunjan Chaudhary is Ex.CW1/41. (Objected to) After receipt of the said complaint, SEBI sent a letter dated 27.08.2007 and forwarded the said complaint to the accused no. 1 company. Further it was informed to the accused no. 1 that the claim of repayment made by the accused no. 1 cannot be accepted in view of the said investor complaint of Ms. Gunjan Chaudhary. The office copy of the said letter along with copy of complaint of Ms. Gunjan Chaudhary is Ex.CW1/42. (Objected to). Subsequently, SEBI also received another investor complaint from Mr. Siddharth on 24.08.2007 inter-alia stating that he has not received the payment as assured by the accused no. 1 company. The said complaint is Ex.CW1/43. (Objected to) SEBI vide letter dated 03.09.2007 forwarded complaint of Mr. Siddharth to the accused no. 1 company and inter-alia stating that claim of refund made by the company cannot be accepted. The office copy of the said letter along with copy of the complaint of Mr. Siddharth is Ex.CW1/44. (Objected to) Subsequently, SEBI vide letter dated 15.10.2007 forwarded another complaint of Mr. Sushil Kumar Gupta to the accused no. 1 company. The office copy of the said letter along with copy of the complaint of Mr. Sushil Kumar Gupta is Ex.CW1/45. (Objected to) SEBI vide letter dated 30.11.2011 had sought information regarding the accused no. 1 company and its Directors from ROC, U.P. In response thereto, ROC, U.P. vide letter dated 29.12.2011 inter-alia provided information regarding the accused no. 1 and its Directors. The said letter along with its annexures appended therein is Ex.CW1/46. (consisting 152 pages) (OSR). (Objected to) The accused no. 1 company neither repaid the investments to the investor nor filed winding up and repayment of the schemes in the Bature of collective investment schemes run by the accused no. 1 company. SEBI had never given registration to the accused no. 1 company for sponsoring and running of its collective investment schemes. The accused no. 1 company had not filed the statutory report prescribed under CC No. 663/2023 Page No. 14 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
Regulation 73 of SEBI (CIS) Regulations, 1999. The accused no. 2 to 4 were the Directors and Persons Incharge of the Affairs of the accused no. 1 company at all relevant times i.e. launch, sponsor or carrying of collective investment schemes without obtaining registration of its schemes from SEBI."
He was duly cross examined by Ld. Counsel for accused No. 1 to 4.
17. Thereafter, CE was closed. Statements under Section 313 r/w 281 Cr.PC of accused No. 2 to 4 were recorded wherein all the incriminating evidence which came on record was put to them, which they denied all the allegations put to them.
18. Accused persons did not lead any defence evidence.
Arguments on behalf of complainant
19. Sh. Sanjay Mann, ld. counsel for complainant/SEBI had argued that accused No.1 company was incorporated on 28.09.1994. Ld. counsel for the complainant/SEBI had futher argued that CW-1 has deposed that an amount of Rs.16 crores approximately was mobilised and the repayments were made and an amount of Rs.5.41 crores was outstanding as per information furnished by accused no.1 company vide its letter dated 01.02.2002 Ex.CW1/35. Ld. counsel for complainant had argued that this letter is not objected by accused persons and therefore, there is no doubt that accused no.1 company had launched a collective investment scheme. He has further submitted that inadvertently in the complaint, amount mobilised is stated to be Rs.50 lakhs only whereas it is Rs.5.41 crores.
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20. Ld. counsel for complainant had further argued that an application was filed by accused no.1 company vide letter dated 31.03.2000 Ex.CW1/27 for registration, however, SEBI vide its letter dated 04.04.2000 Ex.CW1/28 informed accused no.1 company that its application Ex.CW1/27 was not an application for seeking registration as it was not in the prescribed format. Ld. counsel for complainant had further argued that accused no.1 company did not comply with the regulations and the Act in pursuance of which show cause notice was issued and finally the directions Ex.CW1/30 under Section 11B of SEBI Act were passed by the Board which were duly communicated to accused no.1 company vide letter Ex.CW1/31. Ld. counsel for complainant had further argued that directions under Section 11B of SEBI Act were also communicated vide public notice published in newspaper dated 14.01.2001 Ex.CW1/33 wherein the name of accused no.1 company appeared at Serial No.503. Ld. counsel had further argued that there is no dispute to the fact that winding up report and details of repayment to the investors has not been filed before SEBI at any point of time. Ld. counsel for complainant had further argued that from own documents of accused persons, it is clear that accused no.2 to 4 were the directors of accused no.1 company who were responsible for conducting day to day affairs of accused no.1 company, therefore, they be convicted alongwith accused No.1 company for violation of the offence for which notice has been framed against them.
21. Ld. counsel for complainant had relied upon the CC No. 663/2023 Page No. 16 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. following judgments in support of his contentions:
(i) Ankur Forest and Project vs. Securities and Exchange Board of India, Crl.A. no.220/2010 dated 08.02.20211 Delhi High Court (Paras 11, 12, and 14)
(ii) S.M.S. Pharmaceuticals Ltd. vs. Neeta Bhalla, Manu/SC/0622/2005 (Para 16)
(iii) Gunmala Sales Pvt. Ltd. vs. Anu Mehta, Laws (SC) 2014 134 (Para 33)
(iv) A.R. Radha Krishna vs. Dasari Deepthi & Ors., Crl.A. Nos.403-405 of 2019 decided on 28.02.2019 (Para 9)
(v) H.R. Kapoor vs. Securities and Exchange Board of India, Laws (DLH) 2008 (2) 12 (Paras 6, 7 and 10) Arguments on behalf of accused persons
22. Sh. Ajayinder Sangwan, Advocate alongwith Sh.Summinder Paswan, Advocate for accused persons had argued that in the present case, which was filed in July, 2002, the complainant's witness i.e. CW-1 Ms. Jyoti Jindgar was examined in year 2005 where only 15 documents were exhibited. However, the said witness was substituted by CW-1 Sh. Vivek Yadav and he deposed as CW-1 on 02.11.2017 wherein he exhibited 46 documents which were objected since inception by accused persons. He had further argued that these documents were neither the part of the complaint nor any leave was sought from the Court while placing them on record and therefore, none of these documents can be read in evidence.
23. Ld. counsel for accused persons had further argued that in the complaint filed by SEBI, the address of accused no.1 company is given as that of Noida, U.P., remaining three accused persons i.e. accused no.2 to 4 are shown to be residents of Lucknow and address of complainant/SEBI is of Mumbai, CC No. 663/2023 Page No. 17 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. therefore, this Court has no jurisdiction to try this case and pass final orders.
24. Ld. counsel for the accused persons had further argued that the complaint is also barred by limitation as the alleged directions were issued by SEBI on 07.12.2000 whereas the complaint was filed on 04.07.2002. He had further argued that Section 468 CrPC creates a bar on taking cognizance after expiry of period of limitation. Ld. counsel for the accused persons had further argued that under the unamended provisions of Section 24 of SEBI Act, the maximum punishment provided is one year and therefore, the period of limitation in taking cognizance in the present case is also one year which ended on 07.12.2001 whereas the present complaint was filed on 04.07.2002 and therefore, the same is time barred. Ld. counsel for the accused persons had relied upon SEBI vs. Gaurav Varshney & Anr. (2016) 14 SCC 430 in support of his submission.
25. Ld. counsel for accused persons had argued that no specific role has been attributed to accused no.2 to 4 other than being shown as directors and even otherwise, accused no.4 had resigned on 04.06.1998. Ld. counsel had further argued that accused persons had never been in charge of day to day affairs and functioning of the accused no.1 company. Ld. counsels for the accused persons had argued that no case is made out against any of the accused persons and therefore, they be acquitted.
26. Ld. counsel for accused persons has relied upon the following judgments in support of his submissions:
CC No. 663/2023 Page No. 18 of 35SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
(i) Rahul vs. State of Delhi, Ministry of Home Affairs & Anr., Crl.A. no.611/2022 decided on 07.11.2022
(ii) National Small Industries corporation Ltd. vs. Harmeet Singh Paintal & Anr. (2010) 3 SCC 330 Analyisis, Reasoning & Findings
27. I have heard ld. counsel for SEBI and ld. counsel for accused persons and have also carefully perused the record.
28. Before returning a finding on the merits of the case, it is necessary to deal with the objection of ld. counsel for accused persons pertaining to lack of territorial jurisdiction. Undoubtedly, in the memo of parties, the complainant/SEBI bears the address of Mumbai, accused no.1 company bears the address of Noida, U.P. and accused no.2 to 4 were shown to be the residents of Lucknow, however, on perusal of the documents filed by complaint, it is found that the Regional Office of SEBI is shown to be situated at Rajendra Place, New Delhi on its letter head. It is further noticed from correspondence made by accused no.1 company with the SEBI via Ex.CW1/8 that the registered office of the accused no.1 company was in Noida, U.P. whereas its Corporate Office was in Lajpat Nagar, New Delhi and not at Mumbai address. These letters further show that accused no.1 company had made a correspondence with the officers of SEBI at address of Rajendra Place, New Delhi. Therefore, in these facts, it cannot be said that this Court has no territorial jurisdiction. This Court is well within its territorial jurisdiction to entertain and decide the present complaint case.
29. Insofar as argument of learned counsel for accused CC No. 663/2023 Page No. 19 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. persons regarding limitation period is concerned, it is to be noted that the violation of offence under Section 24 of SEBI Act is a continuing offence till the time payment to investors is made. Reliance is placed onVishnu Prakash Bajpai vs. SEBI 2010 (115) DRJ 702. Hence, the complaint is not at all barred by limitation. The arguments led by ld. counsel for accused persons in this regard are not at all acceptable.
30. Before proceeding with the appreciation of evidence and documents on record, it would be relevant to note the relevant provisions of the SEBI Act.
31. Section 11B of SEBI Act provides the powers of SEBI to issue directions in the interest of investors and Section 12(1B) of SEBI Act provides for registration of the CIS by the company. Section 11B and 12(1B) of SEBI Act are reproduced hereinunder:
"11B. Power to issue directions [and levy penalty] [(1)] Save as otherwise provided in section 11, if after making or causing to be made an enquiry, the Board is satisfied that it is necessary,--
(i) in the interest of investors, or orderly development of securities market; or
(ii) to prevent the affairs of any intermediary or other persons referred to in section 12 being conducted in a manner detrimental to the interest of investors or securities market; or
(iii) to secure the proper management of any such intermediary or person, it may issue such directions,--
(a) to any person or class of persons referred to in section 12, or associated with the securities market; or
(b) to any company in respect of matters specified CC No. 663/2023 Page No. 20 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
in section 11A, as may be appropriate in the interests of investors in securities and the securities market.
[Explanation.--For the removal of doubts, it is hereby declared that the power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention.] [(2) Without prejudice to the provisions contained in sub-section(1), sub-section (4A) of section 11 and section 15-I, the Board may, by an order, for reasons to be recorded in writing, levy penalty under sections 15A, 15B, 15C, 15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB after holding an inquiry in the prescribed manner.]
12. (1B) No person shall sponsor or cause to be sponsored or carry on or caused to be carried on any venture capital funds or collective investment schemes including mutual funds, unless he obtains a certificate of registration from the Board in accordance with the regulations:
PROVIDED that any person sponsoring or causing to be sponsored, carrying or causing to be carried on any venture capital funds or collective investment schemes operating in the securities market immediately before the commencement of the Securities Laws (Amendment) Act, 1995, for which no certificate of registration was required prior to such commencement, may continue to operate till such time regulations are made under clause (d) of sub-section (2) of section 30.] [Explanation: For the removal of doubts, it is hereby declared that, for purposes of this section, a CC No. 663/2023 Page No. 21 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
collective investment scheme or mutual fund shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment besides the component of insurance issued by an insurer.]"
32. The violations are punishable under Section 24 r/w Section 27 of the SEBI Act against company and its directors.
33. Section 24 and Section 27 of SEBI Act provides as under:
"Offences.
24. (1) Without prejudice to any award of penalty by the adjudicating officer under this Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations made thereunder, he shall be punishable with imprisonment for a term which may extend to [ten years, or with fine, which may extend to twenty-five crore rupees or with both].
(2) If any person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any of his directions or orders, he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to [ten years, or with fine, which may extend to twenty-five crore rupees or with both].
xxx xxx Offences by companies.
27. (1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
CC No. 663/2023 Page No. 22 of 35SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) xxx xxx Explanation : For the purposes of this section,--
(a) "company", means any body corporate and includes a firm or other association of individuals;
and
(b) "director", in relation to a firm, means a partner in the firm."
34. Certain regulations of CIS Regulations which are relevant for the present case are also provided hereinunder:
"Application by existing Collective Investment Schemes.
5. (1) Any person who immediately prior to the commencement of these regulations was operating a [collective investment scheme], shall subject to the provisions of Chapter IX of these regulations make an application to the Board for the grant of a certificate within a period of two months from such date."
35. Regulation 68(1) and (2) of CIS Regulations provides as under:
"Existing schemes to obtain provisional registration
68. (1) Any person who has been operating a collective investment scheme at the time of commencement of these regulations shall be deem ed to be an existing collective investment scheme and shall also comply with the provisions of this Chapter.CC No. 663/2023 Page No. 23 of 35
SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
Explanation : The expression 'operating a collective investment scheme' shall include carrying out the obligations undertaken in the various documents entered into with the investors who have subscribed to the [collective investment scheme] (2) An existing collective investment scheme shall make an application to the Board in the manner specified in regulation 5."
36. The existing CIS are granted registration in accordance with the provisions of the Act and the Regulations under Regulations 72. The existing CIS which fails to make any application for the registration to the Board, Regulation 73 and 74 provides that the company shall wind up such existing CIS and make repayment to the investors. Regulation 73 and 74 are reproduced hereinunder for the sake of convenience:-
"Manner of repayment and winding up
73. (1) An existing collective investment scheme which:
(a) has failed to make an application for registration to the Board;
or
(b) has not been granted provisional registration by the Board; or
(c) having obtained provisional registration fails to comply with the provisions of regulation 71;
shall wind up the existing [collective investment scheme].
(2) The existing Collective Investment Scheme to be wound up under sub-regulation (1) shall send an information memorandum to the investors who have subscribed to the [collective investment scheme]s, within two months from the date of receipt of intimation from the Board, detailing the state of affairs of the [collective investment scheme], the amount repayable to each investor CC No. 663/2023 Page No. 24 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
and the manner in which such amount is determined.
(3) The information memorandum referred to in sub-regulation (2) shall be dated and signed by all the directors of the [collective investment scheme].
(4) The Board may specify such other disclosures to be made in the information memorandum, as it deems fit.
(5) The information memorandum shall be sent to the investors within one week from the date of the information memorandum.
(6) The information memorandum shall explicitly state that investors desirous of continuing with the [collective investment scheme] shall have to give a positive consent within one month from the date of the information memorandum to continue with the [collective investment scheme].
(7) The investors who give positive consent under sub-regulation (6), shall continue with the [collective investment scheme] at their risk and responsibility :
Provided that if the positive consent to continue with the [collective investment scheme], is received from only twenty-five per cent or less of the total number of existing investors, the [collective investment scheme] shall be wound up.
(8) The payment to the investors, shall be made within three months of the date of the information memorandum.
(9) On completion of the winding up, the existing collective investment scheme shall file with the Board such reports, as may be specified by the Board.
Existing [collective investment scheme] not desirous of obtaining registration to repay
74. An existing collective investment scheme which is not desirous of obtaining provisional registration from the Board shall formulate a [collective investment scheme] of repayment and CC No. 663/2023 Page No. 25 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
make such repayment to the existing investors in the manner specified in regulation 73."
37. Further, it is necessary to deal with the submissions of counsel for the accused persons in respect of the documents exhibited by CW-1 Sh. Vivek Yadav. Perusal of the record shows that complaint was filed in the year 2002. CW-1 Ms. Jyoti Jindgar was examined-in-chief on 04.08.2005 wherein she exhibited 15 documents. Cross examination of the witness was deferred at the request of ld. counsel for the accused persons wherein the request was made that he was not prepared on that day. Thereafter, the matter got stayed by Hon'ble High Court of Delhi which is recorded in the order dated 29.10.2005. The stay continued in the present matter and this matter was adjourned sine die on 12.02.2014. On 11.04.2016 the file was taken up again on the order of Hon'ble High Court of Delhi dated 11.02.2016 wherein it was submitted by ld. counsel for the complainant that stay was vacated by Hon'ble High Court of Delhi on 11.02.2016. Notice was issued to the opposite party and thereafter, the parties started appearing before the Court. In view of the amendment under Section 26A and 26B of SEBI Act, the then ld. ACMM (Special Acts) transferred the file to the Court of Sessions for the purposes of trial. The application seeking substitution of AR of the complainant was moved on 01.05.2017. On 18.07.2017, certain documents (documents in question) were filed by SEBI alongwith list of documents. On that date, accused no.2, 3 and 4 were present with their counsel. Application for substitution of AR was allowed. Though no explicit order for taking the documents filed by SEBI on record was passed by ld. Predecessor on that day, however, at the same CC No. 663/2023 Page No. 26 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. time, no order was passed by which the Court denied to take those documents on record. Therefore, it is implicit that those documents were taken on record and matter was listed for complainant's evidence. CW-1 Sh. Vivek Yadav was examined- in-chief and 5-6 dates were taken by the SEBI to complete examination-in-chief of CW-1 Sh. Vivek Yadav. However, at no point of time any objection was raised on exhibiting the documents which were filed by SEBI on 18.07.2017. Thereafter, he was cross examined and even during cross examination of the said witness, no contest was raised to those documents. The submissions of learned counsel for accused persons that objection was raised during exhibition of those documents is fount to be incorrect. In these circumstances, it cannot be said that these documents which were tendered by CW-1 cannot be read in evidence. This argument of ld. counsel for the accused persons is not acceptable and is liable to be rejected.
38. Now coming to the merits of the case, CW-1 Sh. Vivek Yadav has deposed that SEBI vide press releases dated 18.11.1997 and 26.11.1997 notified the provisions of Section 12(1B) of SEBI Act which prohibited collective investment schemes including mutual funds from sponsoring any new scheme till regulations were notified in this regard. He further deposed that entities operating collective investment scheme were directed to provide details of their schemes, other information as asked in the press release. In response to the said press release/public notice, accused no.1 company sent a letter received by SEBI on 15.01.1998 whereby accused no.1 company sent Memorandum of Information of their Agro Plantation CC No. 663/2023 Page No. 27 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. Project. The said letter alongwith documents was exhibited as Ex.CW1/6. It is pertinent to mention here that no objection was raised either to the exhibition of the press release dated 26.11.1997 as CW1/4 (original of which was also produced during evidence of CW-1) as well as to the letter Ex.CW1/6 or the annexures filed alongwith it. The careful reading of the said documents shows that a Memorandum of Information which was filed by accused no.1 company in respect of their Agro Plantation Project contained the names of promoters in the management. Under the head 'Promoters', it was written that company was incorporated originally under the Chairmanship of one Gurjeet Singh & his associates on 28.09.1994 and it was operating in a very microscopic level upto 31.03.1995 and Kamaljit Singh and his associates had joined the company as main promoters on 15.05.1995. It is relevant to note here that Kamaljit Singh is accused no.2 herein, however, the name of his associates were not given above. Thereafter, the particulars of the directors were given which contained name of accused no.3 and 4 apart from one Kala Sahay who is not an accused herein. In a nutshell, this document shows that as on the date of issuance of Memorandum of Information of Agro Plantation Project, Kamal Jeet Singh was shown as the promoter as well as director whereas accused no.3 and 4 namely Rakesh Kumar Singh and Diptesh Kumar Sarkar respectively were shown to be the directors. This document also clarifies that accused no.3 and 4 had no concern with the company at the time of incorporation of accused no.1 company. This fact is further fortified from the document Ex.CW1/8 which is a letter dated 30.04.1998 addressed by accused no.1 to SEBI CC No. 663/2023 Page No. 28 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. whereby accused company has furnished the following information to the SEBI via said letter:
(i) Certified copy of the Memorandum & Artiles of Association
(ii) Latest Audited Balance Sheet
(iii) Names, Addresses and occupation of all the directors of the company
(iv) A compliance certificate from the director in the prescribed format.
(v) The balance sheet of the company and the statement of deployment of funds mobilised under various schemes is under preparation and the same will be forwarded to you shortly."
39. It is relevant to note here that this letter was written in response to letter of SEBI which has been exhibited as Ex.CW1/7. The letter Ex.CW1/7 was objected to during the examination-in-chief of CW-1 for the mode of proof. However, since Ex.CW1/8 i.e. letter furnishing the information in response to Ex.CW1/7 to SEBI is not disputed, therefore, Ex.CW1/7 also stands proved. Alongwith letter Ex.CW1/8, the Memorandum and Articles of Association of company was annexed wherein only accused no.2 Kamaljit Singh was shown to be the subscriber/promoter since incorporation and neither accused no.3 nor accused no.4 were related to the company at that time. Alongwith the said letter Ex.CW1/8, the audited balance sheet of the accused no.1 company as on 31.03.1996 was also annexed which was sent under the names of two directors i.e. accused no.2 Kamaljit Singh and one Gurjeet Singh. In the said balance sheet, the amount of investor's fund is shown to be Rs.80,53,087/-. This means that as on 31.03.1996 the company had mobilised an amount of Rs.80 lakhs from the general public after launching CIS. Further perusal of the record shows that CC No. 663/2023 Page No. 29 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. during the correspondence with the SEBI, accused no.1 company had sent a letter Ex.CW1/35 dated 01.02.2002 i.e. before filing of the present complaint wherein the total liability as on 31.12.2001 was shown to be Rs.541.00 lakhs (Rs.5.41 crores). In this letter, schedule was given for the following years showing the amount/liability intended to be cleared by them in the next following years. The aforesaid discussion fully establishes that accused no.1 company had been raising funds from the public under CIS and before filing of the present complaint, approximately Rs.5.41 crores was outstanding for which no winding up report and details in respect of repayment to the investors was ever filed either with the SEBI or with this Court during the pendency of the present case. Accused No.1 company was incorporated on 28.09.1994 before introduction of Section 12(1B) of Amended Act. There is no doubt that as on the date of incorporation, accused no.1 company was free to launch CIS and therefore, Section 12(1B) of SEBI Act is not applicable. However, at the same time, it is to be noticed that accused no.1 company fell within the four corners of proviso to Section 12(1B) of SEBI Act wherein it is provided that the company which has launched CIS before introduction of Section 12(1B) shall also apply for registration on coming into force of the CIS Regulations.
40. Now it is to be seen whether the accused no.1 company applied for registration. CW-1 Sh. Vivek Yadav has deposed that accused no.1 had applied for registration of its scheme vide letter Ex.CW1/27 and the SEBI vide its letter dated 04.04.2000 intimated the accused no.1 company that this application CC No. 663/2023 Page No. 30 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. Ex.CW1/27 was not an application for registration under CIS Regulations as it was not in the format specified in From-A. At this stage, it is relevant to point out that during examination-in- chief of CW-1, application Ex.CW1/27 vide which the accused no.1 applied for registration, though in a wrong format, was objected to by ld. counsel for the accused persons on the mode of proof. Apart from this application, there is no other document on record which shows that accused no.1 company had applied for registration of its CIS at any point of time and therefore, it stands proved that accused no.1 company did not file any application seeking grant of registration of its CIS.
41. There is no document on record to show that the company had filed its winding up report and the repayment report in pursuance of the orders passed by SEBI under Section 11B of SEBI Act which was duly communicated by individual letter Ex.CW1/31 (never objected to by accused persons during evidence of CW-1) as well as by public notice published in newspaper Ex.CW1/33 wherein the name of accused no.1 company appeared at Serial No.503. No cross examination of CW-1 was conducted by accused persons on this point and therefore it stands established that order under Section 11B of SEBI Act was duly served upon accused no.1 company and despite that no winding up report and details in respect of repayment to the investors was ever furnished by accused no.1 company to the SEBI.
42. In view of above discussion, it stands proved beyond reasonable doubt that accused no.1 company had violated the CC No. 663/2023 Page No. 31 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. provisions of Section 11B & 12(1B) of SEBI Act and Regulation 5(1) r/w Regulation 68(1), 68(2), 73 and 74 of the CIS Regulations, punishable under Section 24(1) r/w 27 of SEBI Act.
43. Now coming to the role of accused no.2 to 4. Insofar as accused no.2 Kamaljit Singh is concerned, he signed the financials of the company. His name is reflected in the ROC records. Certified copies of ROC records have been exhibited as Ex.CW1/46. In the annual report for AGM dated 29.09.2008, accused no.2 is shown to be appointed as a Director on 16.02.1995 and he was still the director as on 29.09.2008. In the Memorandum of Information of Agro Plantation Project, he was shown to be the promoter. The audited balance sheet which was forwarded to the SEBI alongwith letter Ex.CW1/8 finds mention of his name as director. There is yet another letter Ex.CW1/35 wherein the outstanding amount of CIS to be repaid to investors was given. This was also signed on behalf of accused no.2, he being the director of accused no.1 company. There is another letter Ex.CW1/15 duly signed by accused no.2, original of which was produced during evidence of CW-1 in which he was shown to be the director as well as promoter. His name also appeared as subscriber to the Memorandum of Association and therefore, it stands duly proved that he was involved in the day to day affairs of accused no.1 company and is vicariously liable for the violation of the said offences.
44. Insofar as accused no.3 Rakesh Kumar Singh is concerned, though his name is referred to as one of the directors in the memorandum of Information of Agro Plantation Project CC No. 663/2023 Page No. 32 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. which is a material evidence against him, however, ROC record indicates the contrary. The ROC record containing the annual return of the AGM dated 29.09.2008 has been proved by CW-1. In the said AGM, date of his appointment is shown to be 30.06.1998 and date of cessation is 31.08.2008. Accused no.3 has been charged for the offence for the reason that he was stated to be involved in the day to day affairs of accused no.1 company at the time when the amount was mobilised as well as the time when the compliance in respect of Regulation 73 for filing the winding up report and the details in respect of the repayment to the investors was to be done. Letter Ex.CW1/6 containing Memorandum of Information of Agro Plantation Project indicates that he was director since beginning whereas the ROC records indicate that he joined as director on 30.06.1998. Both the documents are filed by the complainant, but they prove two mutually contradictory facts. Ld. counsel for complainant has failed to explain as to when accused no.3 was appointed as the director on 30.06.1998, how could he be instrumental in running the company at the time when the brochure of CIS was floated amongst the general public. Meaning thereby, at the time when this Memorandum of Information of Agro Plantation Project was circulated, he was not holding the post of the Director and he became director only on 30.06.1998. There is no clarification/explanation in respect of the same.
45. Additionally, he is not shown to be the subscriber to the Memorandum of Association wherein the name of accused no.2 duly appears. Merely because, he has joined the company at the CC No. 663/2023 Page No. 33 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors. time when the compliances were to be made, he cannot be said to be guilty for the acts which were committed prior to his appointment as a Director. There is not even a single document on record which could indicate that he had taken any position or signed any financials of the company in executive position at any point of time. In these circumstances, accused no.3 Rakesh Kumar Singh cannot be made vicariously liable for any of the offences charged with.
46. Insofar as accused no.4 Diptesh Kumar Sarkar is concerned, in the annual return for the AGM dated 29.09.2008 annexed alongwith the ROC record Ex.CW1/46, it is seen that accused no.4 is shown to have resigned on 04.11.2001. Though Form-32 in respect of his cessation as director on 04.11.2001 is found in ROC record, however, there is no Form-32 in order to prove that as to when he joined as director in the accused no.1 company. He was not a subscriber to the Memorandum of Association. There is not even a single document on record which could indicate that he had taken any position or signed any financials of the company in executive position. It is pertinent to mention here that the complainant has proved the letter Ex.CW1/5 under the name of accused no.2 wherein accused no.2 and 3 have been shown to be the directors/promoters whereas accused no.4 has been shown to be "Professional Outside Director", meaning thereby he was not holding position of director in accused no.1 company at any point of time. Therefore, accused no.4 Diptesh Kumar Sarkar cannot be made vicariously liable for any of the offences charged with.
CC No. 663/2023 Page No. 34 of 35SEBI vs. M/s. Versatile Plantations Ltd. & Ors.
47. Under these facts and circumstances, accused no.1 company i.e. M/s. Versatile Plantation Ltd. is held guilty of the offence Section 11B & 12(1B) of SEBI Act and Regulation 5(1) r/w Regulation 68(1), 68(2), 73 and 74 of the CIS Regulations, punishable under Section 24(1) of SEBI Act and accused no.2 Kamaljit Singh is held guilty of the offence under Section Section 11B & 12(1B) of SEBI Act and Regulation 5(1) r/w Regulation 68(1), 68(2), 73 and 74 of the CIS Regulations, punishable under Section 24(1) r/w 27 of SEBI Act and convicted accordingly and accused No.3 Rakesh Kumar Singh and accused no.4 Diptesh Kumar Sarkar are acquitted of the charges for which notice was framed against them.
Digitally signed by
Announced in open court VANDANA VANDANA JAIN
on 22.11.2024 JAIN Date: 2024.11.22
14:59:34 +0530
(Vandana Jain)
ASJ-03 & Special Judge (Companies Act)
Dwarka Courts (SW)/New Delhi/22.11.2024 Note: This judgment contains thirty-five (35) pages and having my signature on each page. Digitally signed by VANDANA VANDANA JAIN JAIN Date: 2024.11.22 14:59:39 +0530 (Vandana Jain) ASJ-03 & Special Judge (Companies Act) Dwarka Courts (SW)/New Delhi/22.11.2024 CC No. 663/2023 Page No. 35 of 35 SEBI vs. M/s. Versatile Plantations Ltd. & Ors.