Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal: The Bench of Justice Tarun Agarwala (Presiding Officer) and Justice M. T. Joshi (Judicial Member), reserved its order on the controversial issue of the dubious role of the Pradip Kumar Khaitan (respondent 4) as an independent director in Dhunseri Ventures Ltd.

Background

The Dhunseri Ventures Ltd. is a Company incorporated at Kolkata under the laws of India holding CIN No. L15492WB1916PLC002697 and is listed on the BSE (BSE Code 523736) and the NSE (NSE Symbol COMPANY). The Appellant, one of the supportive shareholders of the company for over a period of 20 years, had filed a complaint before the SEBI pointing out change in designation of respondent 4 from being a Non-Independent Director (Year 2010 to 2014) of the company to an Independent Director (22-05-2014 to 03-07-2015) and thereafter, being designated as a Non- Independent Director again (03-07-2015 to 17-12-2019) despite having familial relations with the Promoters of the company.

The Appellant had highlighted that despite the relationship which could never qualify respondent 4 as independent and despite being non-independent’ director prior to being designated as an independent director, he had acted as an Independent Director and actively participated in functioning of the company for a period before reverting to the Non- Independent Status and finally resigning from the designation of Non-Independent Director in 2019. The Appellant had also pointed out that apart from being non-independent on account of the relationship with the Promoters, respondent 4 also had material pecuniary relationship with the company which further established his non-independence and raised serious doubts on his functioning as an independent director.

The appellant alleged that in spite of detailed representations from the Appellant before SEBI and BSE, a computer-generated Order was passed by the SEBI disposing his complaint on the SCORES platform in a cryptic, unreasoned and mechanical manner. While the Order acknowledged that the information furnished by the Appellant pointed to allegation of violation of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) it simply refused to register any formal complaint against the company without assigning any reason for the same in complete violation of the principles of natural justice apart from being self-contradictory.

The appellant contended that SEBI had closed his detailed complaint in a perfunctory manner by treating the furnished information as a mere “market Intelligence” and at the same time also stating that appellant would not be able to ascertain the status of information furnished by it before SEBI though the information would be kept confidential and analysed by it (SEBI). The order further stated that the existence of any examination of the information furnished by the appellant would neither be confirmed nor denied by it (SEBI).

Submissions before SAT

The Appellant had challenged the order dated 11-11-2020, communicated by SEBI to the appellant with respect to Complaint bearing No. SEBIE/MH20/0006790/1 (BSE reference No. 20200700003) filed by the Appellant on 07-07-2020 pointing out inter alia the non independent and dubious role of respondent 4 in the company and consequential violation of provisions of the Listing Agreement, Companies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations) and interest of the shareholders.

The appellant argued that the Impugned Order was illegal and had been passed without any application of judicial mind as it did not take into consideration that respondent 4 had been appointed as a non-independent director, despite having familial relations with the Promoters of the company. It was contended by the appellant that the promoter group of the company is the Dhanuka Family in Kolkata. Respondent 5 (C. K. Dhanuka) is the Non-Independent Promoter chairman of the company while respondent 4 was one of the Directors till the date of his resignation on 17-12-2019.

The fundamental question raised by the appellant was to establish the role of Independent Directors as representatives of minority shareholders’ interests vis-à-vis the promoters. The appellant alleged that this was a peculiar case where respondent 4 had tried to outsmart the regulator, SEBI, and impersonated as an “Independent” director in the company. It was further contended by the appellant that there was an overreliance on the submissions made by the company and a complete lack of independent judgement by the SEBI; as it (SEBI) claimed that Mrs. Tarulika Khaitan (daughter of respondent 5) as not related to respondent 4 by virtue of being his “son’s wife” since respondent 4 was her “father-in-law” and reciprocal relationship is not prescribed under SEBI.

Contending that such a dichotomy would defeat the principles of natural justice, especially when Clause 49 reads, “Independent director shall mean a non-executive director of the company who…” clearly display that no relationship should exist from the proposed independent director’s point of view, the appellant argued that respondent 4 was clearly a “relative” in as much as “Son’s wife” is included in the List of relatives in terms of Clause 77 of Section 2 of Companies Act, 2013 which disqualified him as an Independent Director in terms of Clause 49 – I. (A) (iii) (b) of the Listing Agreement. Therefore, respondent 4 could never have been lawfully appointed as an “Independent Director” in company and that he kept juggling between “Independent” and “Non-Independent” directorships in other listed companies. Hence, the appellant urged the Tribunal to take corrective action and bar respondent 4 from acting as a “Director” in any listed company for the protection of minority and public shareholders.

Having heard the appellant in person and noticing that respondent 4 had not made appearance of filed any reply; the tribunal had reserved the order.[Arvind Parasramka v. SEBI, Appeal No. 70 of 2021, order dated 10-05-2021]


Kamini Sharma, Editorial Assistant has reported this brief.


Appearance before the Tribunal:

For the Appellant: Mr. Keshav Parasramka, Appellant in Person.

For SEBI: Adv. Vishal Kanade with Adv.  Anubhav Ghosh and Adv. Ravishekhar Pandey

For BSE: Adv. Abhiraj Arora with Adv. Karthik Narayan and Adv. Rashi Dalmia

For Dhunseri Ventures Ltd.: Adv. Mainak Bose with Adv. Nikhil Jhunjhunwala

Case BriefsHigh Courts

Allahabad High Court: Ravi Nath Tilhari, J., addressed a matter wherein a person being the director of the company signed a cheque on behalf of the company and since the said cheque got dishonoured, he was made liable, without the company being made liable under the offence of Section 138 of Negotiable Instruments Act, 1881.

The instant petition was filed under Section 482 of the Code of Criminal Procedure, 1973 for quashing of summoning order passed by Additional Chief Judicial Magistrate under Section 138 of the Negotiable Instruments Act.

Facts as stated by the applicant

Applicant has been stated to be the Director of a Company and complainant/OP 2, an employee in the railways, by giving assurance of contract of road construction from his superior officers in favour of applicant’s company obtained post-dated cheque of 5 lakh rupees in terms of security money.

Complainant had assured the applicant that once he starts earning profits from the said contract work he would return the post-dated cheques.

However, applicant without any prior notice to the company, complainant presented the cheque in the bank which was dishonoured due to non-availability of funds. One of the legal notice, though was not received by the applicant, but the second notice was served.

Points that arose for consideration:

High Court formulated the following points of consideration:

  • Whether criminal prosecution against the person in charge of, and responsible for conduct of the business of the company under Section 138 NI Act, can be maintained, in the absence of any prosecution of the Company for such offence and without making the company an accused, in view of Section 141 of the NI Act?
  • Whether the cheque in question was issued by the applicant in his personal capacity or in the capacity of director of the company?
  • Whether the orders under challenge and the criminal proceedings against the applicant deserve to be quashed in the exercise of jurisdiction under Section 482 CrPC?

Analysis of the above points:

In order to consider the first point, Court referred to Sections 138 and 141 of the Negotiable Instruments Act, 1881.

On perusal of the said provisions, the essential ingredients of offence under Section 138 NI Act as laid down by the Bench were:

  • The person drew a cheque on an account maintained by him with the banker
  • When such a cheque is presented to the bank is returned by the bank unpaid
  • such cheque was presented to the bank within a period of six months from the date it was drawn or within the period of its validity, whichever is earlier;
  • the payee demanded in writing from the drawer of the cheque the payment of the amount of money due under the cheque to the payee
  • Such a notice of payment is made within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding return of the cheque, as unpaid and
  • Inspite of the demand notice the drawer of the cheque failed to make the payment within a period of 15 days from the date of receipt of the demand notice

For the offence to be constituted under Section 138 NI Act, all the above ingredients need to co-exist.

Supreme Court decision in Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661, held that Section 141 of NI Act is concerned with the offences by the company. It makes the other persons, vicariously liable for commission of an offence on the part of the company.

The vicarious liability gets attracted when the condition precedent laid down in Section 141 NI Act stands satisfied. There can be no vicarious liability unless there is a prosecution against the company. For maintaining a prosecution under Section 141 NI Act, arraying of the company as an accused is imperative.

 In Supreme Court’s decision of Standard Chartered Bank v. State of Maharashtra, (2016) 6 SCC 62, it was held that there cannot be any vicarious liability unless there was a prosecution against the Company.

In Harihara Krishnan v. J Thomas, (2018) 13 SCC 663, Supreme Court held that Section 141 stipulates the liability for the offence punishable under Section 138 NI Act when the person committing such an offence happens to be a company.

In Aneeta Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661, it was settled that for maintaining a prosecution against the person in charge of and responsible for conduct of the business of the company under Section 138 NI Act, arraigning of the Company as an accused is imperative in view of Section 141 of the Act, as such a person can only be held vicariously liable.

With regard to point 1, hence Court held that such a person, cannot be prosecuted unless there was prosecution of the company.

Second Point

 Whether the cheque in question was issued by the applicant in his personal capacity or in the capacity of the Director of the Company?

The above-stated question can be determined from perusal of the cheque itself. It is one of the essential ingredients to constitute an offence under Section 138 NI Act, that the person drew a cheque on an account maintained with the Banker and the existence of this ingredient is to be proved from the document itself, i.e. the cheque, and for its proof no other evidence is required. Hence, Court could determine if the cheque was issued as authorized signatory or in personal capacity by the applicant by exercising its jurisdiction under Section 482 CrPC.

On perusal of the copy f the cheque it was found that the said was signed by Sanjay Singh, the applicant for Udit Infraheights Private Limited, as its authorized signatory.

Hence the cheque was not issued in the applicant’s personal capacity.

In the absence of the company, as accused, any offence was not made out, even prima facie, against the applicant for his summoning under Section 138 read with Section 141 of the NI Act.

While referring to the Supreme Court decision in Ashoke Bafna v. Upper India Steel Manufacturing and Engineering Company Ltd., (2018) 14 SCC 202, it was held that before summoning an accused under Section 138 NI Act, the Magistrate is expected to examine the nature of the allegations made in the complaint and the evidence, both oral and documentary, in support thereof, and then to proceed further with the proper application of mind to the legal principle of the issue.

Last Point

 With regard to the last point of consideration, Bench referred to the decision of Supreme Court in Rishipal Singh v. State of U.P., (2014) 7 SCC 215, Supreme Court, while considering the scope of Section 482 CrPC held that when a prosecution at the initial stage is asked to be quashed, the test to be applied is as to whether the uncontroverted allegations as made in the complaint prima facie establish the case.

In Pooja Ravinder Devidasani v. State of Maharshtra, (2015) 88 ACC 613, Supreme Court held that the Superior Court should maintain purity in the administration of justice and should not allow the abuse of process of the Court.

Therefore, Court opined that the complaint was not filed against the company, as the company was not made a party accused and no vicarious liability could be imposed upon the accused applicant.

Since, the cheque was not signed by the applicant in his personal capacity, the complaint could not have proceeded against him and no offence could be made out against the applicant.

Petition was allowed and the orders challenged were quashed. [Sanjay Singh v. State of U.P., 2021 SCC OnLine All 120, decided on 10-02-2021]

Case BriefsHigh Courts

Karnataka High Court: B. M Shyam Prasad J dismissed the appeal being devoid of merits.

The facts of the case are such that the first respondent – the Karnataka State Financial Corporation filed a petition under Section 31 (1)(aa) and 32 of the State Financial Corporations Act, 1951 before VI Additional City Civil Judge, Bengaluru City, against the appellant and the second and third respondents invoking Bank Guarantee executed by them. Hence the petition was filed under Section 31 (1) (aa) and 32 of the State Financial Corporation Act, 1951 which was allowed, assailing this order another petition under Order IX Rule 13 of the Code of Civil Procedure, 1908 was filed which was dismissed ex parte as inspite of giving repeated reminders no one appeared before the Court. Aggrieved by the dismissal of the petition instant appeal was filed before XXXVII Additional City Civil and Sessions Judge, Bengaluru City.

Counsel for the appellants submitted that the first respondent had shown his address at Wilson Garden, Bengaluru for service of notice but he had sold the property way back in 1992 and shifted his residence and been a resident of this new place ever since. He further submitted that this is the reason why the appellant did not know about the petition and came to know only in the month of September 2008 when he visited Sub Registrars Office for verification of documents.

The Court observed that the question of the appellant being served at the address other than the address mentioned in the petition viz., address of the principal borrower and there was a complete cessation of all association with the principal borrower. It was further observed that when it is admitted that he was one of the directors of the principal borrower and he continued to be a director of the principal borrower as of the relevant date, the service of notice at the first instance at the principal borrower’s address could be reasonably inferred as due service of notice. Also, it would not be reasonable to infer that the appellant has no knowledge of the petition merely because the appellant contends that he shifted his residential address.

The court thus held that based on documents placed on record it is amply clear that there is no information available that the appellant informed the first respondent about his shifting of residence and his new address. Thus, there stands no reason for interference.

In view of the above, appeal was dismissed.[N. Nagaraja Reddy v. Karnataka State Financial Corporation, Miscellaneous First Appeal No. 1413 of 2013 (CPC), decided on 03-01-2021]


Arunima Bose, Editorial Assistant has put this story together

Case BriefsHigh Courts

And, that’s a wrap!

Here’s the list of our coverage on Negotiable Instruments Act in the year 2020.

 [Allahabad High Court]

All HC | Can a complaint filed in light of S. 138 NI Act be dismissed on ground of one day delay? Read Court’s reasoned order

[Pankaj Sharma v. State of U.P., 2020 SCC OnLine All 1339, decided on 22-09-2020]

All HC | Principle contained in S. 141 of NI Act is not applicable to a sole-proprietary concern, firm need not be arraigned as an accused while making a claim for recovery under S. 138 of the NI Act

[Dhirendra Singh v. State of U.P., 2020 SCC OnLine All 1130, decided on 13-10-2020]

All HC | Once the intention of the party is clear that he does not wish to make payment, should complainant wait for 15 days to file a complaint for dishonour of cheque? HC answers

[Ravi Dixit v. State of U.P., 2020 SCC OnLine All 1056, decided on 23-09-2020]


[Bombay High Court]

Bom HC | Does NI Act authorises a complainant to fill an incomplete cheque? Court discusses while reversing acquittal of accused under S. 138 NI Act

[Kiran Rameshlal Bhandari v. Narayan Purushottam Sarada, 2020 SCC OnLine Bom 3562, decided on 07-12-2020]

Bom HC | Appeal filed against conviction under S. 138 NI Act cannot be dismissed for non-payment of fine without going into merits of appeal

[Adesh Prakashchand Jain v. Harish Punamchand Une, 2020 SCC OnLine Bom 96, decided on 08-01-2020]

Bom HC | S. 139 NI Act imposes evidentiary burden and not a persuasive burden; acquittal upheld where complainant failed to prove capacity to give loan

[Tasneem Murshedkar Mazhar v. Ramesh, 2020 SCC OnLine Bom 20, decided on 02-01-2020]


[Delhi High Court]

Del HC | Can a director who has resigned from company be held liable for cheques subsequently issued and dishonoured? HC explains in light of S. 141 NI Act

[Alibaba Nabibasha v. Small Farmers Agri-Business Consortium, 2020 SCC OnLine Del 1250, decided on 23-09-2020]

Del HC | Proceedings under S. 138 NI Act quashed against Independent Non-executive Directors not involved in day-to-day affairs of Company

[Sunita Palta v. Kit Marketing (P) Ltd., Crl. MC No. 1410 of 2018, decided on 03-03-2020]

Del HC | Ss. 143-147 NI Act lay down Special Code for trial, recourse to S. 482 CrPC as a substitute for initiating second revision petition denied

[Tathagat Exports (P) Ltd. v. PEC Ltd., 2020 SCC OnLine Del 405, decided on 20-01-2020]


[Himachal Pradesh High Court]

HP HC | Legislative intent of NI Act, 1881 is not to send the people to suffer incarceration but to execute recovery of cheque amount by showing teeth of penalty loss; conviction set aside

[Gaurav Sharma v. Ishwari Nand, 2020 SCC OnLine HP 2464, decided on 13-11-2020]

HP HC | Whether the trial court can exercise any discretion while entertaining an application under S.145 of the NI Act; HC elucidates upon procedural nuances

[Vikas Sharma v. Vishant Bali,  2020 SCC OnLine HP 2876, decided on 08-12-2020]

HP HC | While exercising power under S. 147 of NI Act the Court can proceed to compound the offence even after recording of conviction

[Satish Kumar v. Rahul Kumar, 2020 SCC OnLine HP 338, decided by 03-03-2020]


[Jharkhand High Court]

 Jhar HC | Object of NI Act is primarily compensatory; Court can discharge accused on full payment and amicable settlement

[Alok Kumar v. State of Jharkhand, Cr. Revision No. 694 of 2019, decided on 06-03 2020]


[Kerala High Court]

[Negotiable Instruments Act] Ker HC | What determines commencement of period of presentation is date of cheque and not the date of delivery of cheque

[Subanamma Ninan v. George Veeran, 2020 SCC OnLine Ker 4151, decided on 18-09-2020]


[Karnataka High Court]

 Kar HC | In a case where both the complainant and the accused remained continuously absent, Court ought to have “dismissed the complaint for non-prosecution under S. 256 CrPC and not on merits”

[Karage Gowda v. S. Nagaraj, 2020 SCC OnLine Kar 2012, decided on 11-12-2020]

Kar HC | If the complainant produces evidence regarding the transaction as well as dishonour of cheque, is it still necessary to examine the banker to prove the endorsement issued by him? HC decides

[M. Narayanaswamy v. Nagaraj N.S., 2020 SCC OnLine Kar 2013, decided on 11-12-2020]

Kar HC | No legal basis for Family Courts insisting on personal presence of petitioners at the time of filing cases; Presence of complainant while filing S. 138 NI Act case not necessary

[High Court of Karnataka v. State of Karnataka, 2020 SCC OnLine Kar 543 , decided on 03-06-2020]


[Madras High Court]

Madras HC | Can a ‘Non-Executive Director’ who is not responsible for day-to-day affairs of company be made vicariously liable for offence committed by the company? Court’s interpretation in light of S. 141 NI Act

[Vijaya Arun v. New Link Overseas Finance Ltd., Crl. OP Nos. 5, 8 & 11 of 2020, decided on 18-08-2020]

[Malafide Litigation] Madras HC | Proceedings under S. 420 IPC quashed for being counterblast to complaint instituted under S. 138 NI Act

[M. Chandrasekar v. R. Rajamani, 2020 SCC OnLine Mad 4777, decided on 24-08-2020]


[Madhya Pradesh High Court]

[Dishonour of Cheque] MP HC | Director/MD/JD/other officers and employees of a company can not be prosecuted under S. 138 of NI Act unless the company is impleaded as an accused

[Bhupendra Suryawanshi v. Sai Traders, 2020 SCC OnLine MP 1277, decided on 09-06-2020]


[Punjab and Haryana High Court]

[S. 138 NI Act] P&H HC | Do sympathetic consideration have any role to play in the matter of sentencing? Court discusses

[Rakesh Kumar v. Jasbir Singh, 2020 SCC OnLine P&H 1197, decided on 11-08-2020]


[Tripura High Court]

Tri HC | What is the purpose of a serving a ‘Statutory Notice’ under Negotiable Instruments Act? Detailed analysis of significance of ‘Statutory Presumption’

[Nitai Majumder v. Tanmoy Krishna Das, 2020 SCC OnLine Tri 537, decided on 17-11-2020]


Also Read:

2020 Wrap Up — Flashback of Stories on Consumer Cases

2020 Wrap-Up — Family Law & Allied Provisions

Case BriefsSupreme Court

Supreme Court: On the question of liability to be proceeded with for offence under Section 68 of FERA, 1973, the bench of Ashok Bhushan and R. Subhash Reddy, JJ has held that the same depends on the role one plays in the affairs of the company and not on mere designation or status. The Court explained,

“for proceeding against a Director of a company for contravention of provisions of FERA, 1973, the necessary ingredient for proceeding shall be that at the time offence was committed, the Director was in charge of and was responsible to the company for the conduct of the business of the company.”

Drawing correlation between Section 141 of the Negotiable Instruments Act, 1981 and Section 68 of FERA, 1973, the Court explained that Section 141 of NI Act contains the same conditions for a person to be proceeded with and punished for offence as contained in Section 68 of FERA, 1973. While coming to the aforementioned conclusion, the Court noticed that Section 141(1) of NI Act uses the same expression “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”. It, hence, said that Section 68 of FERA, 1973 as well as Section 141 of the Negotiable Instruments Act deals with the offences by the companies in the same manner.

The bench noticed that Section 68 of FERA, 1973 deals with “Offences by companies” and Section 68(1) creates a legal fiction, i.e., “shall be deemed to be guilty”. The legal fiction triggers on fulfilment of conditions as contained in the section. The words “every person who, at the time of the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business” has to be given some meaning and purpose.

“The provision cannot be read to mean that whosoever was a Director of a company at the relevant time when contravention took place, shall be deemed to be guilty of the contravention. Had the legislature intended that all the Directors irrespective of their role and responsibilities shall be deemed to be guilty of contravention, the section could have been worded in different manner. When a person is proceeded with for committing an offence and is to be punished, necessary ingredients of the offence as required by Section 68 should be present.”

The bench agreed with the submission that FERA, 1973 does not contemplate any complaint but the Scheme of the Act indicates that a person, who is to be proceeded with has to be made aware of the necessary allegations, which may constitute an offence on his part. It said that though a person in the commercial world having a transaction with company is entitled to presume that the Directors of the company are in charge of the affairs of the company, the presumption of a person in the commercial world is a rebuttable presumption and when adjudicating authority proceeds to impose a penalty for a contravention of FERA, 1973, essential ingredients constituting an offence under the FERA read with Section 68 has to be communicated to the person proceeded with to enable him to make effective representation in the matter.

It further explained that in FERA, 1973 for imposing a penalty under Section 50, the adjudicating officer is required to hold an enquiry after giving the person a reasonable opportunity for making a representation in the matter. Even though, FERA, 1973 does not contemplate filing of a written complaint but in proceedings as contemplated by Section 51, the person, who has to be proceeded with has to be informed of the contravention for which penalty proceedings are initiated. The expression “after giving that person a reasonable opportunity for making a representation in the matter” as occurring in Section 51 itself contemplate due communication of the allegations of contravention and unless allegations contains complete ingredients of offence within the meaning of Section 68, it cannot be said that a reasonable opportunity for making a representation in the matter has been given to the person, who is to be proceeded with.

[Shailendra Swarup v. Deputy Director, Enforcement Directorate, 2020 SCC OnLine SC 600 , decided on 27.07.2020]


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Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal, Mumbai : A Coram of Tarun Agarwala (Presiding Officer) J., Dr C.K.G. Nair (Member),  M.T. Joshi (Judicial Member), J. allowed three appeals filed by Dr Prannoy Roy, Radhika Roy and RRPR Holding Pvt. Ltd. against a common order passed by the Whole Time Member ( herein ‘WTM’) of Securities and Exchange Board of India (herein ‘SEBI’).

Quantum Securities Pvt. Ltd. made a complaint which led SEBI to investigate and on the basis of an investigation report, a show cause notice was issued to the appellants to file their reply and the impugned order[1] was passed stating that the appellants had acted fraudulently in a manner detrimental to the interests of New Delhi Television Limited (herein ‘NDTV’) and its shareholders by omitting to disclose material information to the shareholders about loan agreements entered into by them with Vishvapradhan Commercial Private Limited (herein ‘VCPL’) and ICICI Bank Limited (herein ‘ICICI’). Accordingly, SEBI ordered that the Roys were restrained from accessing the securities market and were further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of two years. It also directed that they were restrained from holding or occupying a position as Director or any Key Managerial personnel in NDTV for a period of two years.

The facts that led to the order were that RRPR Holding Pvt. Ltd. took a loan of Rs 350 crore from ICICI. This loan was required to be repaid within a stipulated period. Finding it difficult to repay the interest and principal amount RRPR Holding Pvt. Ltd. took two loans from Vishvapradhan Commercial Private Limited (herein ‘VCPL’) totaling approximately Rs 400 crore. RRPR Holding Pvt. Ltd. held shares in NDTV. Based on the loan taken from VCPL it was alleged that the loan of ICICI was liquidated. While taking a loan from VCPL certain agreements were entered, namely, that VCPL will give interest free loan for a period of 10 years on the condition that the principal amount would be paid within 10 years and that the VCPL will have a right of first refusal on 50% of the shares in the event the said shares are sold in the market. Further, a call option agreement was made whereby an option was given to two associates of VCPL for transfer of 30% of the shareholding of RRPR Holding Pvt. Ltd. to it at the price of Rs 214.65 per share. It was stated that at the time when the loan agreement was executed the price of the NDTV share was Rs 130 per share. It was also stated that the price of 214.65 per share was fixed in order to cover the loan amount of Rs 403.85 crore. The agreement further stipulated that RRPR Holding Pvt. Ltd. would have the sole control and will not sell the shares without the right of the first refusal by VCPL. It came on record that the call option was never exercised. SEBI considered the loan agreement in detail and gave a finding that the said loan agreement was nothing else but a sham agreement and that no prudent person/entity would enter into such an agreement giving a loan without any interest. In fact, SEBI further found that the transfer of money, in fact, was to control the listed company NDTV. SEBI further found that the transfer of 9% individual shares of Prannoy Roy and Radhika Roy to its holding company, namely, RRPR Holding Pvt. Ltd. amounted to non-disclosure of transfer of shares inviting violations of disclosure obligations.

This Tribunal noted that whether the loan agreement was a sham transaction or not and whether the loan agreement, in fact, wrested control of NDTV to VCPL was a question which was required to be considered in detail. Whether the call option gives an unfettered right of controlling the company without exercising the right of call option was also required to be considered.

However, upon the interpretation of the loan agreement at this stage, it was of the opinion that these agreements had remained in existence for the past 10 years. The loan agreements were executed in the year 2009 and 2010.remarked that at this stage, prime-facie, NDTV which was managed by the appellants holding more than 61% of the total shares could not remain headless. Thus, the impugned order restraining the appellants from occupying a position as a Director or in any Key Managerial personnel in NDTV for a period of two years would not be in the interest of the shareholders of the NDTV, or for that matter the investors at this stage.

Considering the aforesaid, the Tribunal stayed the effect and operation of the impugned order dated till the next date of hearing and granted the respondent six weeks time to file a reply, and three weeks thereafter to the appellant to file a rejoinder.

The matter has been listed for admission and for final disposal on 16-09-2019. SAT further ordered SEBI to supply a copy of the impugned order to the appellants and accordingly, directed the appellants to apply for a certified copy of the impugned order.[Dr Prannoy Roy v. Securities and Exchange Board of India, 2019 SCC OnLine SAT 37, decided on 18-06-2019]


Further reading:

[1] https://blog.scconline.com/post/2019/06/16/sebi-dr-prannoy-roy-chairman-and-radhika-roy-md-of-ndtv-guilty-of-committing-fraud-barred-from-accessing-securities-market-for-2-years/

Appointments & TransfersNews

Dr A.K. Mohanty, distinguished Scientist and Director, physics group of the Bhabha Atomic Research Centre (BARC) and Director, Saha Institute of Nuclear Physics, Kolkata, took over as Director, BARC on 12-03-2019 from Shri K.N. Vyas, Chairman, Atomic Energy Commission and Secretary to the Government of India, Department of Atomic Energy.  Dr Mohanty graduated from the 26thbatch of the BARC Training School and joined the Nuclear Physics Division of Bhabha Atomic Research Centre in 1983.  During the past 36 years, Dr. Mohanty has worked in several areas of nuclear physics covering collision energy from sub-Coulomb barrier to the relativistic regime.

Dr Mohanty is the recipient of Young Scientists Award of Indian Physical Society (1988), Young Physicist Award by Indian National Science Academy (1991) and Department of Atomic EnergyHomi Bhabha Science & Technology Award (2001).

While taking over as Director-BARC, Dr Mohanty has expressed gratitude towards his predecessors in Physics Group who have helped him in understanding finer nuances of low and high energy nuclear physics. He also gratefully acknowledged the efforts put in by his seniors which have helped in the completion of projects of national and international importance in which he could contribute, and said he is committed to continue further the work of BARC in the fields of societal importance.

Ministry of Science & Technology

Case BriefsHigh Courts

Patna High Court: The Bench of Ahsanuddin Amanullah, J. allowed an application filed under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of a criminal case.

Respondent 2 herein had filed a complaint against petitioner and few other people alleging that he had induced him to invest Rs 28 lakhs in a construction company. The Magistrate took cognizance of the said offence under Sections 120 B, 420 of the Penal Code, 1860 and Section 138 of the Negotiable Instruments Act, 1881 and issued summon against the petitioner. Aggrieved thereby, the instant application was filed.

The petitioner’s case was that there was no material on record to show that he had induced respondent 2 to invest in the company. It was argued that making the petitioner an accused in the case, only because he was a Director of the Company, was abuse of process of the Court.

The Court noted that there being absolutely no allegation against petitioner in the entire complaint with regard to either inducement or entrustment of money or even issuance of cheque; just because he was a Director in the concerned company, it would not make him liable for any of the allegations levelled against other co-accused. It was concluded that prosecution against the petitioner was with malafide intention and only to harass him. Accordingly, the entire criminal proceeding against him was quashed.[Ramanjee Jha v. State Of Bihar, 2019 SCC OnLine Pat 228, Order dated 21-02-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal: The Bench of Tarun Agarwala, Presiding Officer and Dr C.K.G. Nair, Member rejected an application filed at a later stage wherein the applicant had failed to provide documents so as to prove that he had resigned as a director from two other companies. 

The facts of the case are that the applicant had prayed for rectification of the order passed in 2004 by Securities Appellate Tribunal. By the rectification application, the applicant sought that an error had crept in the order which needed rectification. It was stated that the appellant was a director of various companies whereas the applicant urged that he was the director of only one company and not in the other two companies, and, therefore, this error which was apparent on the face of the record needed to be rectified. 

The Tribunal found out that the Securities and Exchange Board of India had initiated proceedings under Section 11C(2) of the Act which required the appellant to produce the books, registers and other documents and records relating to the company. In this proceeding, the appellant failed to produce any documents to show that he had resigned as director or was never appointed as a director of the two other companies. The Tribunal held that at a belated stage, it was not open to the applicant to file a rectification application which amounted to reviewing the order of 2004. [Anil D. Doshi v. SEBI, Misc. Application No. 253 of 2018, Order dated 19-02-2019]

Case BriefsSupreme Court

Supreme Court: The Bench comprising of CJ Ranjan Gogoi and Sanjay Kishan Kaul and K.M. Joseph, JJ., laid down some interim arrangement in order to govern the present situation.

Background:

The Central Government divested the CBI Director Alok Verma and his deputy Special Director Rakesh Asthana of all their powers and sent them on leave pending enquiry against them in the alleged corruption charges.

The decision was taken on the recommendation of the Central Vigilance Commission which stated that Alok Verma was not cooperating in inquiry in the allegations of corruption and criminal misconduct levelled against him by Rakesh Asthana and it would be only fair to take both off duty till the charges are probed. Furthermore, M. Nageswara Rao, a 1986 Odisha cadre IPS officer who joined the CBI in 2016 was appointed as interim Director of India’s premier investigating the agency.

Alok Verma has approached the Supreme Court against the order of the Central Government that stripped him off his powers and sent him on forced leave.

The interim directions by the court are as follows:

  • Enquiry in regard to the allegations made against the present Director, Central Bureau of Investigation (CBI) Alok Verma shall be completed by the Central Vigilance Commission (CVC) within a period of two weeks.
  • The stated enquiry will be conducted under the supervision of the retired judge of the Supreme Court of India, Justice A.K. Patnaik.
  • M. Nageswara Rao who has been entrusted with the task of looking after the duties of the Director of the CBI shall not take any policy decisions or any major decisions and will perform the routine tasks that are essential to keep the functionality of CBI.

Further, the Supreme Court made it clear that the supervision of on-going enquiry by the CVC to a former judge is an exception being taken due to the necessity being felt on considering the facts of the present case.

The matter has been listed immediately after the Diwali holidays i.e. on 12-11-2018. Alok Verma is represented by veteran advocate Fali S. Nariman, while Attorney General K.K. Venugopal is appearing for the Central Government. [Alok Kumar Verma v. Union of India,2018 SCC OnLine SC 2249, Order dated 26-10-2018]

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Amidst the unprecedented tussle between the top two officers of the Central Bureau of Investigation, the Central Government divested the CBI Director Alok Verma and his deputy Special Director Rakesh Asthana of all their powers and sent them on leave pending enquiry against them in the alleged corruption charges.

The decision was taken on the recommendation of the Central Vigilance Commission which stated that Alok Verma was not cooperating in inquiry in the allegations of corruption and criminal misconduct levelled against him by Rakesh Asthana and it would be only fair to take both off duty till the charges are probed. Furthermore, M. Nageswara Rao, a 1986 Odisha cadre IPS officer who joined the CBI in 2016 was appointed as interim Director of India’s premier investigating agency.

Rakesh Asthana had complained of corruption against the CBI Director. Per contra, the Bureau filed a case under Prevention of Corruption Act, 1968 against its own Special Director Rakesh Asthana and his deputy DSP Devender Kumar. Asthana had approached the Delhi High Court challenging the FIR filed against him in the said bribery case. The Court while ordering the status quo has posted the matter for next hearing on October 29. The matter relates to a case involving meat exporter Moin Qureshi, which was headed by Asthana, while Kumar was its chief investigating officer. The CBI has accused the duo of forgery in recording the statement of Satish Sana, another accused in the case.

Alok Verma has approached the Supreme Court against the order of the Central Government that stripped him off his powers and sent him on forced leave. The Supreme Court is likely to take up the matter today.