Shobha Sudhakar Acharya vs Securities And Exchange Board Of India

Tarun Agarwala, Presiding Officera

The present appeal has been filed against the order dated March 31, 2022 passed by the Adjudicating officer (hereinafter referred to as AO’) of Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) imposing a penalty of Rs. 2 lacs for violation of Regulation 3(b), (c), (d) and 4(1), 4(2), (f), (k) and (r) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’) read with Section 12A(a), (b) and (c) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’) and Regulations 57(1), 67(7)(a) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (hereinafter referred to as ‘ICDR Regulations’).

The facts leading to the filing of the present appeal is, that Acropetal Technologies Ltd. came out with an Initial Public Offer (hereinafter referred to as ‘IPO’) for issue of 1,88,88,889 equity shares of the face value of Rs. 10/- each at a price of Rs. 90/- per share aggregating to Rs. 170 crores in February 2011. SEBI conducted investigation to ascertain as to whether there was any violation of the SEBI Act and ICDR Regulations which revealed a, prima-facie, non-utilization of IPO proceeds, deviation from the objects of the issue, diversion of IPO money and not deploying the IPO proceeds for stated objects of issue as disclosed in the prospectus, wrongful disclosures in the prospectus and wrongful disclosures to the stock exchanges.

Consequently, on the aforesaid violation, a show cause notice was issued to the appellant as well as to 17 other entities including the company and its directors. The allegations with regard to the discrepancy in the utilization of the IPO proceeds, wrongful disclosures in the prospectus, wrongful disclosures to the stock exchanges and diversion of IPO proceeds were found to be true and the company and its directors were found to be guilty. Accordingly, various penalties were imposed upon the company and other entities / noticees by the impugned order.

The appellant was the Company Secretary and was appointed in the year 2009 and resigned on March 16, 2012. During her tenure the company came out with the IPO proceeds. In paragraph No. 101 of the impugned order, the AO found that the Company Secretary is responsible with respect to the veracity of the disclosures made in the prospectus and that the appellant is performing the job of the secretary to the board of directors and it was the duty of the appellant to aid and advice and assist the board in ensuring that the prospectus contained all the true information before the same was approved. The AO accordingly found that since the appellant did not properly advise nor assist the board of directors, the appellant is responsible for the wrongful disclosures in the prospectus and accordingly imposed a penalty of Rs. 2 lacs.

We find that the finding of the AO in paragraph No. 101 of the impugned order is not based on any evidence and is based on surmises and conjunctures. The AO has wrongfully applied the decision of this Tribunal in Mr. Bhuwneshwar Mishra vs. SEBI in Appeal No. 7 of 2014 decided on July 31, 2014.

We also find that no rule or regulation has been shown to show the duties of the Company Secretary and, therefore, we are of the opinion that the finding that it was the duty of the appellant to aid and assist to board of directors in ensuring that the prospectus contained all the true information is patently erroneous and based on surmises and conjunctures.

On the other hand, we find that the duties of the appellant as Company Secretary were indicated in the prospectus, namely, that the appellant is responsible for the maintaining all the secretarial records of the company. Thus, we are of the opinion that the finding that it was duty of the appellant to advise and assist board of directors in ensuring that the prospectus contained true information is not borne out from any record. We also find that the decision of this Tribunal in V. Shankar vs. SEBI in Appeal No. 283 of 2022 decided on November 1, 2022 is applicable to the facts and circumstances of the present case.

Consequently, for the reasons stated aforesaid, the impugned order in so far as it relates to the appellant cannot be sustained and is quashed. The appeal is allowed with no order as to costs.

This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.