sebi:WTM/RKA/EFD/126/2016
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Facts / Headnote
Company and its directors held liable for violating Companies Act, 1956 provisions; directed to refund subscription money with 15% interest within three months, restrained from capital market access and association with public companies for four years or till refund, whichever is later; interim order disposed of.
Provisions invoked
- s. 19
- s. 28A
- s. 67(3)
- s. 56
- s. 73(2)
- s. 291
- s. 2(36)
- s. 60
- s. 56(1)
- s. 56(4)
Regulations
- Reg. 107
- Reg. 111
Parties
- Rightmax Technotrade International Limited
- Shri Srinivasan Kozhinjapara Ramasamy
- Shri Sivakumar Gangadharan
- Shri Rabindra Kumar Jena
Holding
The company's issuance of Redeemable Preference Shares to 2,763 allottees constituting a 'public issue' under the first proviso to section 67(3) of the Companies Act, 1956, without complying with sections 56, 60 read with section 2(36), and 73, renders the company and its directors liable, requiring refund of subscription money with 15% interest and imposing market access restraints.
Full text
Order in respect of Rightmax Technotrade International Limited and others. Page 2 of 6 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. RTIL and its abovementioned Directors, are restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, either directly or indirectly, till further directions; iv. RTIL shall provide a full inventory of all its assets and properties; v. RTIL's abovementioned Directors shall provide a full inventory of all their assets and properties; vi. RTIL 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 offer of RPS, without prior permission from SEBI; vii. RTIL and its abovementioned Directors shall not divert any funds raised from public at large through the offer of RPS, which are kept in bank account(s) and/or in the custody of RTIL; viii. RTIL and its abovementioned Directors shall furnish complete and relevant information within 21 days from the date of receipt of this Order.”
Order in respect of Rightmax Technotrade International Limited and others. Page 3 of 6 Table A S. No. Date of Allotment/ Board resolution No. of RPS allotted Number of Allottees Amount raised (`) 1 October 08, 2010 6,830 7 6,79,60,110 2 October 15, 2010 1,061 483 1,05,35,000 3 October 30, 2010 926 456 92,20,000 4 November 13, 2010 1,047 501 1,04,20,000 5 December 03, 2010 2,432 887 2,41,75,000 6 January 06, 2011 907 429 89,65,000
Order in respect of Rightmax Technotrade International Limited and others. Page 4 of 6 instrumental in formulation of a plan to mobilize public funds without complying with the public issue norms. In terms of section 291 of the Companies Act, 1956, the Board of Directors of a company shall be entitled to exercise all such powers and do all such acts and things as the company is authorized to exercise and do. Therefore, the Board of Directors being responsible for the conduct of the business of a company will be liable for any non-compliance of law and such liability shall be upon the individual directors also. Section 56(1) and 56(3) read with section 56(4) of the Companies Act, 1956 imposes the liability for the non-compliance of the said provisions, on the company, every director, and other persons responsible for the issuance of the prospectus. The liability for non-compliance of section 60 of the Companies Act, 1956 is on the Company, and every person who is a party to the non-compliance of issuing the prospectus as per the said section. The liability of the company and directors to repay under section 73(2) of the Companies Act, 1956 would remain until the whole of the subscription amount along with interest is refunded to the allottees/ investors. In this regard, I refer to the following observations made by the Hon’ble High Court of Madras in Madhavan Nambiar vs Registrar of Companies (2002 108 Comp Cas 1 Mad):
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Source: SecMarx — sebi:WTM/RKA/EFD/126/2016. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.