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3. The facts leading to the filing of the present appeals are, that investigation in the scrip of Chromatic India Limited was carried out to ascertain whether the appropriate disclosures were made by the appellants with regard to the Global Depositories Receipts ("GDRs" for convenience) issue made in October 2010 and whether the GDR issue was carried out in accordance with the procedures prescribed by law. Based on the investigation a show cause notice dated June 28, 2017 was issued by the WTM under Section 11B of the SEBI Act, 1992 which after considering the replies of the appellants an order dated September 30, 2019 was passed restraining the company Chromatic India Limited from accessing the securities market for a period of 5 years. The directors were restrained from buying and selling for a limited period.

6. The brief facts are, that a Resolution of the Board of Directors was passed on August 13, 2010 for opening a bank account for the purpose of the GDR issue based on which in October 2011 GDR issue amounting to USD 35.78 million which is approximately 159 crores were subscribed. According to the replies given by the appellants the GDR issues was in accordance with the prescribed procedure and proper disclosures were duly made under the SEBI Act and the PFUTP Regulations. It was urged that the GDR was issued to expand the business and that the company would get the benefit of flow of foreign capital and that the company will get the benefit of the global stock exchange. The WTM and the AO after perusing the evidence give separate findings but came to a conclusion that Vintage FZE ("Vintage") was the only subscriber to the issue which misled the investors. The authority found that the company misled the regulatory authorities in giving a list of subscribers which upon investigation was found to be fictitious and non existent and that only Vintage was the sole subscriber. The authorities further found and held in the impugned orders that pursuant to a Loan Agreement and Pledge Agreement Vintage took a loan on the basis of which Vintage could subscribe to the entire GDR issue which fact was concealed to the investors in India. The authorities also came to the conclusion that the Pledge Agreement was executed to secure the obligations of Vintage in order to subscribe to the issue. It was found that the GDR proceeds were not available to the company Chromatic India Limited but was utilized by Vintage and that the company was dependent on the repayment to be made by Vintage. It was found that the action of the company in giving the loan to Vintage for the purpose of subscribing to the GDR issues was a fraud played by them to deceive the gullible investors. It was further found that the amount refunded by Vintage was immediately transferred by the company to its subsidiary companies abroad as a result of which no monies came into India. It was further found that the Pledge Agreement and the Loan Agreement was concealed by the company and no disclosure was made under the Listing Agreement. Such fraudulent act committed by the company and its directors and giving misleading disclosure was a fraudulent act. On these findings, the impugned orders were passed the WTM restraining the appellants from accessing the securities market and the AO imposed the penalties.

9. In view of the statement made by Shri Manish Changani, the learned counsel appearing for Chromatic India Limited the company and its directors Vinod Kumar Kaushik the findings given by the WTM in its order dated September 30, 2019 and findings given by the AO in its order dated March 31, 2020 is hereby confirmed.

10. The learned counsel submitted that the penalty imposed is very high and excessive and does not commensurate with the offence. It was urged that the principle of proportionality has been disregarded. In this regard, the learned counsel has placed a comparative chart indicating various orders that has been passed by SEBI against various entities with regard to the GDR issue and submitted that a perusal of the subscription generated from the GDR in many cases the penalty imposed upon the company and upon the directors was far less than what was imposed upon the appellants in the instant case. It was contended that the managing directors in other companies were penalized Rs. 20 lakhs to Rs. 1 crore whereas in the instant case the appellant Vinod Kumar Kaushik has been penalized Rs. 5 crore.

20. Without dwelling on the aforesaid aspect, we are of the opinion that in order to implicate a person, namely, a director of any fraudulent act it is necessary for the authority to further find any evidence which would show that the said person or director was involved in the fraud with regard to the GDR issue or that he was involved in the defalcation of the funds which was raised through GDR issue. In the instant case, we find that there is no such evidence against the appellant Vipin Sharma other than the fact that he was part of the Resolution dated August 13, 2010 which has been disputed by the appellant. We are of the opinion that the Resolution dated August 13, 2010 by itself does not create any suspicion nor create any fraudulent act. The Resolution by itself does not violate any provision of the SEBI Act or PFUTP Regulations. In view of the aforesaid, the order of the WTM giving a caution solely on the ground of being present when the Resolution dated August 13, 2010 was passed cannot be sustained. The finding of the WTM that he was aware of the objectives behind the passing of the Resolution dated August 13, 2010 is based on surmises and conjectures. The order of the AO imposing a penalty of Rs. 3 lakhs is also unwarranted in the facts of the present case. The orders of the WTM and the AO in this regard cannot be sustained.