WTM/PS/07/ERO/APR/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
ORDER
Under sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act,
1992
In the matter of Sunplant Forgings Limited
In respect of
1. Sunplant Forgings Limited
and its directors2. Mr. Abhinandan Kumar Singh (DIN: 01916461),
3. Mr. Sumanta Sinha (DIN: 03573218) and
4. Mr. Neeraj Pathak (DIN: 03561265)

Date of hearing : October 17, 2014

Appearance
For Sunplant Forgings Limited : Ms. Amrita Panda and Mr. Debesh Panda, Advocates and Mr.
Abhinandan Kumar Singh, Director.
For SEBI : Ms. Anitha Anoop, Deputy General Manager, Mr. T. Vinay Rajneesh, Assistant General
Manager and Ms. Nikki Agarwal, Assistant Manager.
1.

Securities and Exchange Board of India (hereinafter referred to as "SEBI") had passed an

ex-parte interim order dated July 16, 2014 ("the interim order") against the company, Sunplant
Forgings Limited ("the Company") and its directors, Mr. Abhinandan Kumar Singh, Mr.
Sumanta Sinha and Mr. Neeraj Pathak, for alleged violations of sections 56, 60 {read with
section 2(36)}, 73 of the Companies Act, 1956 read with section 67(3) thereof, in respect of the
Company's offer and issuance of Redeemable Preference Shares ("RPS") during the financial year
2011-2012.

In this regard, the following observations/allegations made in the interim order are

relevant:
a) The Company was incorporated on July 23, 2004 and registered with the Registrar of
Companies, Kolkata, West Bengal.

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b) The Company had issued 96,98,100 - 14% Cumulative RPS to approximately 6658 investors.
The Board of Directors of the Company had passed multiple resolutions for allotting the
RPS and also filed multiple numbers of Form-2 (return of allotment).
c) It was observed from the various Minutes of the Board Meetings of the Company (i.e., for
meetings held on May 16, 2011; May 25, 2011; June 10, 2011; June 25, 2011; July 25, 2011;
August 10, 2011; October 28, 2011; October 29, 2011; October 31, 2011; November 1,
2011; November 4, 2011; November 8, 2011; November 9, 2011; November 11, 2011;
November 12, 2011; November 14, 2011; November 15, 2011; November 16, 2011;
November 17, 2011; November 18, 2011; November 21, 2011; November 22, 2011;
November 23, 2011 and November 24, 2011) that the Board of the Company passed similar
resolutions inter alia approving the allotment of RPS of Rs.10/- each to "persons/Business
Associates at par redeemable after 58 months from the date of allotment as per list tabled before the Board
and initialed by the Chairman for the purpose of identification"
d) The allotments made during the financial year 2011-2012, consisted of inter alia the following
series of allotments :
Sl. No.

Date of
allotment

No. of shares
allotted

No. of persons
to whom issued

1.

28.10.2011

576000

391

2.

29.10.2011

482800

390

3.

31.10.2011

488600

384

4.

01.11.2011

414500

340

5.

04.11.2011

106100

98

6.

08.11.2011

415700

343

7.

09.11.2011

591900

392

8.

11.11.2011

653500

392

9.

12.11.2011

570100

390

10.

14.11.2011

545800

392

11.

15.11.2011

763700

388

12.

16.11.2011

630800

383

13.

17.11.2011

664300

392

14.

18.11.2011

614200

390

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No. of Board
Resolutions passed

15.

21.11.2011

532700

392

16.

22.11.2011

495000

388

17.

23.11.2011

463600

392

18.

24.11.2011

527800

391

e) Multiple allotments were made on the same date in order to keep the number of
allottees/persons equal to or less than 49. In this regard, it was noted that on October 28,
2011, the Company had allotted 5,76,000 shares to 391 investors by passing 8 Board
Resolutions on the same day. These Board Resolutions approved allotments to
49,49,49,49,49,49,49 and 48 investors respectively, aggregating 391 investors/persons. The
same modus operandi was followed by the Company while making allotments on various other
dates.
f) While it was observed that each allotment of RPS was approved by a resolution passed by
the Board of Directors of the Company, the frequency and time span between such
approvals coupled with the series of allotments made thereafter, prima facie indicated that the
offer and issue of RPS was a 'public issue' of such securities and such method adopted by
the Company for mobilization of public funds was a device to circumvent the provisions of
section 67(3) of the Companies Act, 1956.
g) Though the offer and issue of RPS was stated to be made on 'private placement', the
Company had admittedly circulated 11,904 Application Forms inviting subscription towards
the issue of RPS and allotted RPS to 6,662 investors. The Company had stated that it
allotted 96,98,100 RPS of Rs.10/- each.
h) The Company also admitted of having mobilized funds to the tune of approximately
Rs.17.51 Crores through subscription.
i) The invitation made by the Company for subscription to its issue of RPS extended to
Individuals, HUF, Corporate Bodies, Trusts, Partnership Firms, Minors (through
Guardians), Institutions, Co-operative Bodies, etc. and that such a generalized category of
investor(s) cannot be said to satisfy the condition of specificity as required under section

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67(3) of the Companies Act. The aforesaid facts clearly indicated that the number of persons
to whom the issue of RPS was made by the Company in tranches during the financial year
201112, was 6662 and hence, was way beyond the limit of 49 persons as prescribed under
section 67(3) of the Companies Act, 1956.
j) As the Company was not stated to be a non-banking financial company or a public financial
institution within the meaning of Section 4A of the Companies Act, it was not covered
under the second proviso to section 67(3).
k) The issue of RPS prima facie qualified as a 'public issue' in terms of the first proviso to section
67(3) of the Companies Act, 1956. Accordingly, the Company was mandated to comply
with the requirement of listing such securities in a stock exchange in terms of section 73(1)
of the Companies Act. However, the Company failed to do so. In view of the same, the
Company was mandated, under section 73(2) to repay the amounts within a period of 8 days
after the same became due. The Company failed to repay and therefore such liability to make
repayments extended to the directors also who were liable along with Company, to jointly
and severally repay with interest, as directed therein. From the Balance Sheet of the
Company (as on March 31, 2012), it was observed that Rs.8.46 Crores was shown as 'Share
Application Money pending allotment'. Out of the said amount, allotment of 80,81,070 preference
shares was pending for more than 90 days. It was alleged that the Company failed to comply
with section 73(2).
l) As there was no evidence on record to indicate whether or not funds received from the
investors under the issue of RPS were kept in separate bank account by the Company, the
interim order also alleged that the Company prima facie failed to comply with the provisions
of section 73(3) of Companies Act, 1956.
m) The Company was also alleged to have not complied with sections 56 and 60 {read with
section 2(36)} of the Companies Act, 1956.
2.

In view of such alleged contraventions committed by the Company and its directors, to

safeguard the investors and from preventing the Company from further carrying on with its fund

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mobilizing activity under its offer and issue of RPS, the following directions were issued vide the
interim order :
8.

"................
In view of the foregoing, I, in exercise of the powers conferred upon me under Sections 11, 11(4), 11A and
11B of the SEBI Act, hereby issue the following directions
i.

SFL shall not mobilize funds from investors through the issue of RPS or through the issue of equity
shares or any other securities, to the public and/or invite subscription, in any manner whatsoever, either
directly or indirectly till further directions;
ii. SFL and its Directors, viz. Shri Abhinandan Kumar Singh, Shri Sumanta Sinha and Shri Neeraj
Pathak, are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting
money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly,
till further orders;
iii. SFL and its abovementioned Directors shall provide a full inventory of all its assets and properties;
iv. SFL and its abovementioned Directors shall not dispose of any of the properties or alienate or encumber
any of the assets owned/acquired by that company through the issue of RPS, without prior permission
from SEBI;
v. SFL and its abovementioned Directors shall not divert any funds raised from public at large through the
issue of RPS, which are kept in bank account(s) and/or in the custody of SFL;
9.

The above directions shall take effect immediately and shall be in force until further orders.

10.

......................

11.

This Order is without prejudice to the right of SEBI to take any other action that may be initiated against
SFL and its abovementioned Directors, in accordance with law."

3.

The interim order advised that the Company and its directors, Mr. Abhinandan Kumar

Singh, Mr. Sumanta Sinha and Mr. Neeraj Pathak (collectively referred to as "the noticees") that
they may file their replies and also to seek an opportunity of personal hearing.
4.

The Company vide letter dated August 13, 2014, while acknowledging the receipt of the

interim order and seeking an opportunity of personal hearing, inter alia stated that (a) the interim order was passed without affording an opportunity of personal hearing;
(b) the Company is law abiding and had co-operated with SEBI;
(c) the Company would obey the directions as given in paragraph 8 of the interim order;

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(d) the Company differs with the view taken in paragraph 5.10 of the interim order regarding the
'fund mobilization activity from public';
(e) its statutory auditor was not co-operating and the same was the reason for not filing the Balance
Sheet. The Company would get in touch with them and would try to do the needful;
(f) the latest figure of RPS would be negligible.
The interim orders sent to Mr. Sumanta Sinha and Mr. Neeraj Pathak returned undelivered with the
remarks 'intimation service failed' and 'left' respectively.
5.

An opportunity of personal hearing was afforded to the noticees on October 09, 2014. It is

noted that the SEBI notices dated September 05, 2014 informing the noticees, Mr. Sumanta Sinha
and Mr. Neeraj Pathak of the personal hearing, returned with the remark 'left'.
6.

Subsequently, vide letter dated September 26, 2014, Ms. Amrita Panda, Advocate stated that

she is representing the Company in the matter. Citing her personal difficulty in attending the
personal hearing scheduled on October 09, 2014, the Advocate requested SEBI to adjourn the
hearing to any date between October 15-17, 2014. The request was accepted and the personal
hearing was adjourned to October 17, 2014.

There were no correspondence from the other

noticees regarding the personal hearing fixed on October 09, 2014. Accordingly, the other noticees
were also afforded another opportunity on October 17, 2014. The notice dated September 30, 2014
informing the fresh schedule of personal hearing returned undelivered in respect of Mr. Neeraj
Pathak with the remark 'left'.
7.

Thereafter, the Company sent a letter dated October 08, 2014 (signed by its directors Mr.

Sumanta Sinha and Mr. Abhinandan Kumar Singh) stating that Ms. Amrita Panda and Mr. Debesh
Panda, Advocates would represent them in the personal hearing. Vide letter dated October 8, 2014,
Mr. Sumanta Sinha informed SEBI that he has authorized Mr. Abhinandan Kumar Singh to attend
the personal hearing on his behalf. As there were representations from the Company, Mr. Sumanta
Sinha and Mr. Abhinandan Kumar Singh, it is inferred that they were aware of the present
proceedings and that service of interim order/notices on them are complete.

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8.

On October 17, 2014, Mr. Amrita Panda and Mr. Debesh Panda, Advocates and Mr.

Abhinandan Kumar Singh appeared in the personal hearing. The Advocates requested for a ruling
on the preliminary issue of the jurisdiction contending that in terms of section 55A of the
Companies Act, 1956, SEBI had no role to play in the matter of securities issued by the Company,
which were impugned in the interim order, as the Company was (i) not a listed company and (ii) did
not intend to get its securities listed. The Advocates argued that in accordance with section 55A(c),
only the Central Government had jurisdiction over the Company in respect of the RPS issued by it.
I had advised the learned Advocates that they may make their preliminary submissions along with
their submissions on the merits of the case. The Advocates agreed to the same and in addition to
the above preliminary issue made submissions on the merits of the case. Such submissions inter alia
are as noted below:
a) The Advocates contended that the offer made by the Company was not an offer to the
public but a private offer. They also contended that there was no instance in which the offer
was made to more than 50 persons and that RPS were issued each time though a Board
Resolution.
b) The Advocates contended that even as per the interim order, the Company had issued RPS
to 48/49 persons and the view taken in the interim order that the series of allotments to
48/49 persons was an artificial restraint not supported by the judgment passed by the
Hon'ble Supreme Court in the matter of Sahara companies. It is their further contention
that there is no restriction on the number of times offer can be made. Therefore, the
statutory requirements of sections 67(3) and 73 were not applicable in the instant case, where
the Company had made multiple offers and allotted shares to less than 50 persons.
c) The Advocates submitted that the interim order was an ex-parte order passed without
hearing the Company and contended that order did not mention as to what the
emergency/circumstances were which had persuaded SEBI to pass an ex-parte order
without affording the need for a pre-decisional hearing. The Advocates also submitted that
the Company was co-operating with SEBI and there was no need for SEBI to pass an exparte order.

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d) The Advocates submitted that because of the directions in the interim order, the business of
the Company was restricted.
e) As regards the 'share application money pending allotment', the Advocates argued that for this
allegations, it was the MCA/RoC that could take action and not SEBI.
f) The Advocates contended that the interim order did not allege violations of any SEBI
regulations by the Company. It was also submitted that the Company had stopped raising
money from February 2012 and was no longer issuing RPSs.
g) The Advocates also made submissions with respect to what can be considered as 'ratio
decidendi' in separate concurring judgments of the Division Bench in the matter of Sahara.
The Advocates also relied upon few case laws in support of their contentions and sought liberty to
file written submissions with all material which they wished to rely in the matter. Liberty was granted
and the Company was advised to file written submissions within a period of three weeks. The
Advocates were also advised to provide the copies of special resolutions passed by the Company's
Shareholders in the General Meetings convened by it as alleged by the noticees during the personal
hearing. with respect to the impugned allotments.
The Company failed to submit its written submissions as undertaken during the personal hearing.
Thereafter, vide letter dated December 04, 2014, the Company submitted that it could not file its
written submissions, as undertaken during the hearing, due to unavoidable circumstances and
informed that the same would be filed within three weeks. However, no submissions were filed by
the Company.
Thereafter, SEBI vide letter dated March 31, 2015 (issued to the Company and its directors) referred
to the personal hearing held on October 17, 2014, wherein their Advocates made oral submissions
on preliminary as well as on the merits of the case and had requested time for filing written
submissions, which was allowed. SEBI, vide the above letter also referred to the Company's letter
dated December 04, 2014 informing that the submissions would be submitted within three week.
The Company was informed that no submissions were received and advised them, as a final
opportunity, to submit the same, if any, by April 07, 2015. However, the Company did not file its
reply/written submissions till date and the special resolutions as advised during the hearing.

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Considering that adequate opportunities have been afforded to the Company to file its reply/written
submissions in the matter, I find that further opportunity need not be afforded and the matter could
be proceeded on the basis of the material available on record.
9.

I have perused the interim order - the observations and allegations made therein against the

noticees, the oral submissions made during the personal hearing and other material available on
record. The preliminary issues regarding 'jurisdiction' and 'emergency that arose for passing the ex-parte order '
made by the Advocates for the Company would be dealt with as and when the related allegations are
discussed.
10.

For consideration, the basis or facts that lead to the allegations made in the interim order are

referred to below :
a. During the Financial Year 2011-2012, the Company had issued 96,98,100 Cumulative RPSs
to 6658 investors.
b. In some cases, the Company had allotted shares to more than 49 persons on a single day and
that the Board of Directors of the Company had passed multiple resolutions for allotting
RPS. In this regard, the following table (mentioned in page 4-paragraph 5.2 of the interim
order) providing details such as date of allotment, number of RPS allotted, number of
persons to whom allotments were made, number of Board Resolutions were passed and total
amount raised needs to be referred to in this regard.
Sl. No.

Date of
allotment

No. of shares
allotted

No. of persons
to whom issued

1.

16.05.2011

51000

0.0510

2.

25.05.2011

56000

0.0560

3.

10.06.2011

13500

0.0135

4.

25.06.2011

10000

0.0100

5.

25.07.2011

500

0.0005

6.

10.08.2011

30000

0.0300

7.

28.10.2011

576000

391

0.5760

8.

29.10.2011

482800

390

0.4828

9.

31.10.2011

488600

384

0.4886

10.

01.11.2011

414500

340

0.4145

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No. of Board
Resolutions passed

Total Amount
(Rs.in Crores)

11.

04.11.2011

106100

98

0.1061

12.

08.11.2011

415700

343

0.4157

13.

09.11.2011

591900

392

0.5919

14.

11.11.2011

653500

392

0.6535

15.

12.11.2011

570100

390

0.5701

16.

14.11.2011

545800

392

0.5458

17.

15.11.2011

763700

388

0.7637

18.

16.11.2011

630800

383

0.6308

19.

17.11.2011

664300

392

0.6643

20.

18.11.2011

614200

390

0.6142

21.

21.11.2011

532700

392

0.5327

22.

22.11.2011

495000

388

0.4950

23.

23.11.2011

463600

392

0.4636

24.

24.11.2011

527800

391

0.5278

9698100

Approx. 6658

142

9.6981

Total

c. The Board had passed multiple resolutions (on the days highlighted above in the table) inter
alia approving the allotment of RPS of Rs.10/- each to "persons/Business Associates at par
redeemable after 58 months from the date of allotment as per list tabled before the Board and initialed by the
Chairman for the purpose of identification".
d. The interim order has also observed that the Company had filed multiple Form-2 for each
of the allotments made.
11.

The interim order has alleged that the manner of allotments made by the Company i.e., by

passing multiple resolutions and allotting shares to 48 or 49 persons only was to circumvent the
provisions of section 67(3) of the Companies Act, 1956. As mentioned above, the Advocates who
represented the Company in the hearing had contended that the same did not attract the provisions
of section 67(3) and therefore the issue of RPS made by the Company was a 'private offer'. Section
67 of the Companies Act, 1956, lays down the criteria to test whether the offer of securities is made
on a private basis or made to the public at large. Accordingly, it would be important to refer to the
provisions of section 67(1) and (3) of the Companies Act, 1956.

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"67. (1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall,
subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and
(4), be construed as including a reference to offering them to any section of the public, whether selected as members or
debenture holders of the company concerned or as clients of the person issuing the prospectus or in any other manner.
(2) ...
(3) No offer or invitation shall be treated as made to the public by virtue of sub-section (1) or sub- section (2), as the
case may be, if the offer or invitation can properly be regarded, in all the circumstances(a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for
subscription or purchase by persons other than those receiving the offer or invitation; or
(b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation
Provided that nothing contained in this sub-section shall apply in a case where the offer or
invitation to subscribe for shares or debentures is made to fifty persons or more:
Provided further that nothing contained in the first proviso shall apply to non-banking financial companies or
public financial institutions specified in section 4A of the Companies Act, 1956 (1 of 1956).
In terms of the first proviso to section 67(3), any offer or invitation to subscribe for shares or
debentures made to 50 persons or more is construed to be an offer made to the public. The
allegation of SEBI is that the Company, by making an offer and allotting securities to more than 49
persons, had made a public issue. The Company has contended that it had allotted securities in
tranches by passing multiple resolutions and had kept the number of allottees to less than 50 in each
of the allotments. Therefore, the question before me is to test whether this manner of allotment can
be considered to be a private placement or a public issue of RPS.
12.

I again refer to the table mentioned in paragraph 5.2 of the interim order (same reproduced

in this order also) and note that from October 28, 2011 till November 24, 2011, the Company has
passed multiple resolutions (as many as 8 resolutions) on the same day for allotting RPS. As an
example, on November 04, 2011, the Company had passed 2 Board Resolutions and allotted 106100
RPS to 98 persons. It can be construed that each of the Board Resolution authorized allotments to
be made to 48/49 persons. Likewise, on November 24, 2011, the Board of the Company had passed
8 resolutions for allotments and had allotted 5,27,800 RPS to a total of 391 persons, indicating that

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the number of persons to whom allotments were made in each of the allotment were less than 49
persons. I also note that such allotments were either made on consecutive days or were done after
one or two days after the previous allotment. In terms of the first proviso to section 67(3) of the
Companies Act, an offer or invitation to subscribe for shares or debentures if made to fifty persons or more shall be
construed as a 'public issue' notwithstanding the provisions of section 67(3)(a) and (b).
I also note that as per the terms and conditions of issue of preference shares, as mentioned in the
sample application form of the Company, the following persons could subscribe to the RPS Individuals, HUF, Corporate Bodies, Trusts, Partnership Firms, Minor (through Guardian), Institutions, Cooperative Bodies etc. The above broad categories of persons who were made eligible to apply would
clearly prove the 'public' nature of the offer made by the Company for its issue of RPS.
13.

Considering the above modus operandi that was adopted by the Company and allotting RPS to

less than 49 persons on in each allotment within a span of 28 days (consecutive days or with a gap of less
than one or two days between allotments), indicates that the Company had adopted an artifice or device to
circumvent the law laid down under the first proviso to section 67(3) of the Companies Act.
The Hon'ble Courts have always criticized persons/entities who employ a colourable scheme to
evade the provisions of law. In this regard, I refer to the following observations made by the
Hon'ble Courts:
(a) The Hon'ble Supreme Court of India in the matter of Hindustan Lever & Anr vs State Of
Maharashtra & Anr decided on November 18, 2003 had observed "In Hindustan Lever Employees Union
case (supra) it has been held by this Court that Section 394 casts an obligation on the Court to be satisfied that the
scheme of amalgamation or merger was not contrary to the public interest; the basic principle of such satisfaction is none
other than the broad and general principle inherent in any compromise or settlement entered between the parties that it
should not be unfair or contrary to public policy or unconscionable or that the scheme should not be a device to evade the
law."
(b) The Hon'ble Gujarat High Court in Patel Ratilal Maganbhai [2003 (1) GLR 562] had observed
that "... Equity is always known to defend the law from crafty evasions and new subtleties invented to evade law...".

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(c) There are plethora of cases, wherein the Courts/Tribunal have considered whether a 'scheme'
was a colourable device to evade the payment of tax by an assessee. The Courts have held that tax
could be avoided within the four corners of law but colourable device shall not be allowed for
evading tax.
In view of the above observations, it can be concluded that the Company in its effort to mobilize
money from the public through its issue of RPS had devised a means to keep the allotments to less
than 50 persons in order to stay away from the regulatory purview and evade the liability of
complying with the public issue norms as alleged in the interim order. Accordingly, I hereby
conclude that the Company had made a public issue of RPS, as alleged in the interim order.
14.
5.3.7

I also note the following observations from the interim order:

".....
............. invitation made by SFL for subscription to the issue of RPS extended to Individuals, HUF,
Corporate Bodies, Trusts, Partnership Firms, Minors (through Guardians), Institutions, Co-operative
Bodies, etc. Such a generalized category of investor(s) cannot be said to satisfy the condition of specificity as
required under Section 67(3) of the Companies Act. The aforesaid facts clearly indicate that the number of
persons to whom the issue of RPS was made by SFL in tranches during the financial year 201112, was
6662 and hence, was way beyond the limit of fortynine persons as prescribed under Section 67(3) of the
Companies Act, 1956.

5.3.8

In addition, SFL is not stated to be a non-banking financial company or a public financial institution within
the meaning of Section 4A of the Companies Act and therefore, is not covered under the second proviso to
Section 67(3)".

15.

Accordingly, the offer and allotment of RPS made to approximately 6658 investors

(considering the allotments made in the table mentioned at paragraph 5.2 at page 4 of the interim
order) during the financial year 2011-2012 is definitely a 'public offer of RPSs'. I also note here that
the interim order while noticing the submissions made by the Company
"5.3.7 ................. through the same offer, SFL circulated 11904 Application Forms inviting subscription towards
the issue of RPS, out of which it admittedly allotted RPS to 6662 investors and mobilized funds amounting to

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approximately `17.51 Crores. .............. The aforesaid facts clearly indicate that the number of persons to whom the
issue of RPS was made by SFL in tranches during the financial year 201112, was 6662 and hence, was way
beyond the limit of fortynine persons as prescribed under Section 67(3) of the Companies Act, 1956".
By making a public issue of RPS, the Company was mandated to comply with all the legal provisions
that govern and regulate such public issue of such securities, including the Companies Act, 1956 and
the SEBI Act and regulations. In this context, I refer and rely on the below mentioned observation
made by the Hon'ble Supreme Court of India in the matter of Sahara India Real Estate Corporation
Limited & Ors. Vs. SEBI (Civil Appeal no. 9813 and 9833 of 2011) (hereinafter referred to as the 'Sahara
Case'):
... ... that any share or debenture issue beyond forty nine persons, would be a public issue attracting all the relevant
provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. "
In view of the above observations, by virtue of section 55A(a) and (b), the SEBI has jurisdiction and
would govern the issue of RPS as the same was made to more than 49 persons. Therefore, the
contention of the Advocates that the Central Government alone had jurisdiction in the matter of
offer and issue of RPS made by the Company is misplaced.
16.

As alleged in the SEBI Order, the Company was mandated to comply with the provisions of

sections 56, 60 and 73 of the Companies Act, 1956 in respect of its offer and issue of RPS. In terms
of section 56(1) of the Companies Act, 1956, every prospectus issued by or on behalf of a company,
shall state the matters specified in Part I and set out the reports specified in Part II of Schedule II of
that Act. Further, as per section 56(3) of the Companies Act, 1956, no one shall issue any form of
application for shares in a company, unless the form is accompanied by abridged prospectus,
contain disclosures as specified. Section 2(36) of the Companies Act read with section 60 thereof,
mandates a company to register its 'prospectus' with the RoC, before making a public offer/ issuing
the 'prospectus'. As recorded in the SEBI Order, the Company has admitted that it did not issue
any Prospectus, Advertisement or other promotional material for issuing RPS.
17.

Further, by issuing RPS to more than 50 persons, the Company had to compulsorily list such

securities in compliance with section 73 of the Companies Act, 1956. As per section 73(1) and (2) of

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the Companies Act, 1956, a company is required to make an application to one or more recognized
stock exchanges for permission for the shares or debentures to be offered to be dealt with in the
stock exchange and if permission has not been applied for or not granted, the company is required
to forthwith repay with interest all moneys received from the applicants. The Company has
contravened the said provisions as it has neither made an application seeking listing permission nor
refunded the amounts on account of such failure. The Company has also not complied with the
provisions of section 73(3) as it has not kept the amounts received from investors in a separate bank
account and failed to repay the same in accordance with section 73(2) as observed above. The
Company has not complied with the above said provisions of law and is therefore liable for the
contraventions.
18.

In view of the failure of the Company to repay its investors in terms of section 73(2) of the

Companies Act, 1956, it would be necessary to direct the Company to make repayments to the
investors. Considering the failure to make repayments, it is appropriate and necessary that the
Company is directed to make the repayments along with interest at 15% from the date when the
repayments became due till the date of actual payment. Further, in respect of the violations,
appropriate directions inter alia restraining the Company from accessing the securities market for a
fixed period also needs to be passed.
19.

Liability of directors:

(a)

I note that the interim order was also issued to the Company's directors Mr. Abhinandan

Kumar Singh, Mr. Sumanta Sinha and Mr. Neeraj Pathak. I note that Mr. Abhinandan Kumar Singh
became a director of the Company on December 31, 2008 and continues to be the director. Mr.
Sumanta Sinha became a director on April 29, 2011 and continues to be the director. It is noted that
Mr. Neeraj Pathak became a director on February 27, 2012 and ceased to be a director with effect
from January 05, 2015. Mr. Abhinandan Kumar Singh, Mr. Sumanta Sinha were the directors of the
Company when the impugned offer and allotments of RPS were made to the public. It can therefore
be concluded that they being the persons in-charge of the affairs and policies of the Company were
responsible for the contraventions committed by the Company as found above. For such violations,
appropriate directions need to be issued to the above directors. Further, the above directors are
'officers in default' and were liable in terms of section 73(2) of the Companies Act, 1956 to make the

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repayments to investors. Though Mr. Neeraj Pathak became a director in the Company during
February 2012, he as an 'officer in default' was also cast with the statutory responsibility to make
repayments to the investors. However, the above three directors failed to do so. As the liability to
make the repayment under section 73 is jointly and severally on the company and its directors who
are officers in default, the above directors should also be directed along with the Company to make
the repayments along with interest at 15% from the date when the repayments became due till the
date of actual payment.
(b)

From the information available from the MCA website, it is noted that one Arup Kumar

De (DIN - 07133085) was appointed as a director in the Company with effect from March 10, 2015.
As this person is one of the present directors in the Company, he is also under liability to make
repayments to investors in terms of section 73 of the Companies Act. SEBI is advised to issue a
show cause notice to him for any further appropriate directions in case the Company and directors
fail to refund the amounts collected from investors against offer and/or allotment of RPS.
20.

I note that the Advocates have contended that the interim order did not allege violation of

any SEBI Regulations. By virtue of section 55A of the Companies Act, the provisions contained in
sections 55 to 58, 59 to 81 (including sections 68A, 77A and 80A), 108, 109, 110, 112, 113, 116, 117,
118, 119, 120, 121, 122, 206, 206A and 207, so far as it relates to issue and transfer of securities, shall
be administered by SEBI in the case of listed companies and companies who intend to get their
securities listed. The sections 56, 60, 67 and 73 that have been found to be contravened by the
Company are covered under section 55A of the Companies Act. When the Company made the
offer and issued RPS to more than 49 persons, it was mandated to list such securities in a stock
exchange and also comply with other 'public issue' norms. It is also noted that during the period
when the Company made the offer and allotted RPS, the provisions of the Companies Act governed
the offer and issue and other related matters pertaining to RPS. Therefore, the Company was
supposed to comply with the public issue norms mandated under the Companies Act. By not
alleging violation of any SEBI regulations in this case would not make the proceedings deficient in
any manner or vitiate the same. Accordingly, I do not find merit in the above submission.

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21.

The Advocates had also contended that the interim order did not mention the circumstance

or emergency which necessitated the passing of the interim order without affording an opportunity
of hearing the Company. In this regard, I note the following observations made in the interim
order:
"7. Protecting the interest of investors is the foremost mandate for SEBI and therefore, steps have to be taken in the
instant matter to ensure only legitimate fund raising activities are carried on by SFL and no investors are defrauded.
In light of the facts in the instant matter, I find that there is no other alternative but to take recourse through an
interim action against SFL and its Directors, for preventing that company from further carrying on with its fund
mobilising activity under the issue of RPS."
The need for an ex-parte order has been spelt in the interim order itself. SEBI had to ensure that
the Company did not continue with its fund mobilization which is in contravention of the norms
and also to ensure that the investors are defrauded.
22.

The interim order, while referring to the Balance Sheet of the Company (as on March 31,

2012), observed that Rs.8.46 Crores was shown as 'Share Application Money pending allotment'. Out of
the said amount, allotment of 80,81,070 preference shares was pending for more than 90 days. The
Advocates had also contended that MCA/RoC was the concerned authority to take action for 'share
application money pending allotment'. I note that this submission was made without citing any particular
legal provision, either of the Companies Act or that of the SEBI Act. I am of the view that in terms
of section 73(2), monies collected through subscription against issue of securities shall be repaid if
the company failed to make application for listing or listing permission was not obtained.
Therefore, the above said application money was also liable to be repaid.
23.

In view of the foregoing observations and findings, I in exercise of the powers conferred

under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11(1),
11(4), 11A and 11B thereof, hereby issue the following directions :
(a) Sunplant Forgings Limited (PAN:AABCN9633N;CIN: U28991WB2004PLC099218)
and its promoters and directors including Mr. Abhinandan Kumar Singh (PAN:

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BEMPS1317D; DIN: 01916461), Mr. Sumanta Sinha (PAN: ALBPS3314F; DIN:

03573218), Mr. Neeraj Pathak (PAN: BAZPP2860B; DIN: 035612650) and Mr. Arup
Kumar De (DIN:07133085) shall jointly and severally, forthwith refund the money
collected by the Company through the issuance of Redeemable Preference Shares (which have
been found to be offered and issued in contravention of the public issue norms stipulated under the Companies
Act, 1956) to the investors including the money collected from investors, till date, pending
allotment of RPS, if any, with an interest of 15% per annum compounded at half yearly
intervals, from the date when the repayments became due (in terms of section 73(2) of the
Companies Act, 1956) to the investors till the date of actual payment.
(b) The repayments to investors shall be effected only in cash through Bank Demand Draft or
Pay Order.
(c) Sunplant Forgings Limited/its present management is permitted to sell the assets of
the Company only for the sole purpose of making the refunds as directed above and deposit
the proceeds in an Escrow Account opened with a nationalised Bank.
(d) Sunplant Forgings Limited, its promoters and directors shall issue public notice, in all
editions of two National Dailies (one English and one Hindi) and in one local daily (in
Bengali) with wide circulation, detailing the modalities for refund, including details on
contact persons including names, addresses and contact details, within fifteen days of this
Order coming into effect.
(e) After completing the aforesaid repayments, the Company shall file a certificate of such
completion with SEBI from two independent peer reviewed Chartered Accountants who are
in the panel of any public authority or public institution. For the purpose of this Order, a
peer reviewed Chartered Accountant shall mean a Chartered Accountant, who has been
categorized so by the Institute of Chartered Accountants of India ("ICAI").
(f) Sunplant Forgings Limited and its promoters and directors including Mr. Abhinandan
Kumar Singh, Mr. Sumanta Sinha, Mr. Neeraj Pathak and Mr. Arup Kumar De are also
directed to provide a full inventory of all their assets and properties and details of all their
bank accounts, demat accounts and holdings of shares/securities, if held in physical form.

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(g) Sunplant Forgings Limited is directed not to, directly or indirectly, access the capital
market by issuing prospectus, offer document or advertisement soliciting money from the
public and are further restrained and prohibited from buying, selling or otherwise dealing in
the securities market, directly or indirectly in whatsoever manner, from the date of this
Order till the expiry of 4 years from the date of completion of refunds to investors as
directed above.
(h) Mr. Abhinandan Kumar Singh, Mr. Sumanta Sinha and Mr. Neeraj Pathak are
restrained from accessing the securities market and further prohibited from buying, selling or
otherwise dealing in the securities market, directly or indirectly in whatsoever manner, with
immediate effect. They are also restrained from associating themselves with any listed public
company and any public company which intends to raise money from the public, or any
intermediary registered with SEBI. The above directions shall come into force with
immediate effect and shall continue to be in force from the date of this Order till the expiry
of 4 years from the date of completion of refunds to investors as directed above.
(i) The above directions shall come into force with immediate effect.
24.

In case of failure of Sunplant Forgings Limited and its promoters and directors including

Mr. Abhinandan Kumar Singh, Mr. Sumanta Sinha, Mr. Neeraj Pathak, and Mr. Arup Kumar De to
comply with the aforesaid directions, SEBI (a) shall recover such amounts in accordance with section 28A of the SEBI Act including such other
provisions contained in securities laws.
(b) may initiate appropriate action against the Company, its promoters/directors and the
persons/officers who are in default, including adjudication proceedings against them, in accordance
with law.
(c) would make a reference to the State Government/ Local Police to register a civil/ criminal
case against the Company, its promoters, directors and its managers/ persons in-charge of the
business and its schemes, for offences of fraud, cheating, criminal breach of trust and
misappropriation of public funds; and
(d) would also make a reference to the Ministry of Corporate Affairs, to initiate the process of
winding up of the Company.

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25.

This Order is without prejudice to any action, including adjudication and prosecution

proceedings, that might be taken by SEBI in respect of the above violations committed by the
Company, its promoters, directors and other key persons.
26.

Copy of this Order shall be forwarded to the recognised stock exchanges and depositories

for information and necessary action.

27.

A copy of this Order shall also be forwarded to the Ministry of Corporate Affairs/concerned

Registrar of Companies, for their information and necessary action with respect to the
directions/restraint imposed above against the Company, its directors and promoters and other
individuals.

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Date : April 29, 2015
Place: Mumbai

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