Order in the matter of Golden Life Agro India Limited

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WTM/PS/ERO/64/JAN/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM : PRASHANT SARAN, WHOLE TIME MEMBER

ORDER

Under sections 11(1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act,

1992

In respect of (1) Golden Life Agro India Limited, its Directors, namely, (2) Mr. Tipu Sultan,

(3) Mr. Biswanath Mondal, (4) Mr. Subhas Sarkar, (5) Mr. Nirjal Pal, (6) Mr. Swapan

Sadhukhan, (7) Mr. Chandan Debnath and (8) Mr. Uttam Chakraborty and its Debenture

Trustees, namely, (9) Mrs. Jyotsna Sadhukhan and (10) Mrs. Jharna Sarkar

Date of hearing : July 08, 2014

Mr. Bichitra Nanda Muni, Advocate appeared on behalf of all the noticees

For Securities and Exchange Board of India : Ms. Anitha Anoop, Deputy General Manager, Mr.

Prasenjit Dey, Assistant General Manager and Mr. T. Vinay Rajneesh, Assistant General Manager

1. Securities and Exchange Board of India ("the SEBI") had conducted an enquiry into the

business activities of the company, Golden Life Agro India Limited (hereinafter referred to as "the

Company" or "GLAIL") pursuant to the receipt of the copy of the Order dated July 15, 2013 passed

by the Hon'ble High Court of Calcutta ("the Hon'ble High Court") in the matter of Golden Life Agro

India Ltd. vs. State of West Bengal [W. P. No. 16338 (W) of 2013], wherein it was directed:

"Let the matter appear three weeks hence for independent reports to be filed by the State, the Reserve Bank of

India and the SEBI into the business conducted by the petitioner company (GLAIL) and its legitimacy."

2. The abovementioned W. P. No. 16338 (W) of 2013 was filed by the Company challenging

the Notification issued vide Order No. 1650(19) by the Inspector General Registration, State of

West Bengal, "banning the execution and registration of Deed of Conveyance and/or any way transfer the properties

of the listed companies.".

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3. In the course of the examination, SEBI vide its letters dated July 22, 2013 issued to the

Company and its Advocate, inter alia stated "It has come to our notice that you (GLAIL) are raising funds

from public by issuing Non-Convertible Redeemable Secured Debentures (hereinafter referred to as "NCDs")

ostensibly by way of private placement. No Prospectus or DRHP or statement in lieu of prospectus or information

memorandum (was) filed with (SEBI)", and sought the following information/documents :

i. Copy of Prospectus/Red Herring Prospectus/Statement in lieu of

Prospectus/Information Memorandum filed with ROC for issuance of NCDs.

ii. Copy of the Memorandum and Articles of Association of the company;

iii. Audited Balance Sheet and Profit & Loss Account of the company for the last 3 years;

iv. Name, addresses and occupation of all the promoters/directors of the company;

v. Names and details of the Key Managerial Personnel of the company;

vi. Other information in respect of every series of NCDs issued by the company, viz. –

a. Date of opening and closing of the subscription list;

b. Details regarding the number of application forms circulated inviting subscription;

c. Details regarding the number of applications received;

d. Details regarding the number of allottees and list of such allottees;

e. Number of NCDs allotted and value of such allotment against each allottee's

name.

f. Details regarding subscription amount raised;

g. Date of allotment of NCDs;

h. Copies of the minutes of Board/Committee meeting in which the resolution has

been passed for allotment;

i. Date of dispatch of NCDs;

j. Details of the total number of applicants for each of GLAIL's scheme besides the

list of final allottee;

k. Copies of application forms, pamphlets, advertisements and other promotional

material circulated for issuance of NCDs.

l. Terms and conditions of the issue of NCDs.

4. Though the letter issued to the Company returned undelivered, the Advocate of the

Company, Mr. T. Talukder, vide reply dated August 6, 2013, while forwarding a copy of the Audited

Balance Sheet and Profit & Loss Account for the year ended March 31, 2012 along with a Compact

Disc containing details of NCDs issued by GLAIL, inter alia had submitted the following –

i. "Copy of Prospectus – No copy filed with ROC as the issue of debenture is on Private Placement.


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ii. Date of opening and closing – Date of opening 27.12.2010 and date of closing 31.03.2013.

iii. Details regarding the number of applications – No application form circulated to the general public. The

application form provided only to the intended subscribers without any right to pass on the offer to any

other person to whom the offer was not made directly."

5. The Hon'ble High Court vide Order dated August 06, 2013 passed in the abovementioned

matter [i.e., in W. P. No. 16338 (W) of 2013], had directed as under:

"Let the matter appear three weeks hence to establish comprehensive reports or affidavits to be filed by the

Finance Department of the Government of West Bengal, Reserve Bank of India and the SEBI on the

functioning of the petitioner company (GLAIL), the legitimacy of its business and the persons from whom

money may have been obtained by the petitioner company. The petitioner company should also indicate a

comprehensive list of all its assets and properties.

There will be an order of injunction restraining the petitioner company from dealing with or disposing or

alienating any of its fixed assets without the previous leave of Court."

6. Thereafter, in compliance with the Order dated August 06, 2013 of the Hon'ble High Court,

SEBI submitted an 'Examination Report' on the activities of the Company, in the hearing held in the

matter on September 2, 2013. On the said date, while disposing of the W. P. No. 16338 (W) of 2013,

the Hon'ble High Court made the following observations/directions:

"SEBI has filed a report, following the representations made by the petitioner company. The report indicates

violation of several provisions including the company having resorted to obtaining funds from the public

without either applying for mandatory listing or having its offer documents vetted by the appropriate

authorities.

In view of what appears from the SEBI report, the appropriate authorities are directed to take steps in

accordance with law against the petitioner and particularly the officers of the petitioner company responsible for

the multiple defaults.

There will be an order of injunction restraining the petitioner company from dealing with or disposing of or

alienating or encumbering any of its assets without the previous leave of the SEBI and the SEBI leave should

not be granted without an Executive Director of SEBI approving the same.

It will be open to the petitioners to cause all of any of their assets or properties to be sold under the aegis of

SEBI under any asset sale committee that may be set up by SEBI for the purpose of refund of money which


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appears to have been illegally obtained from the depositors. Both the SEBI and the ROC should monitor the

activities of the petitioner company and ensure strict compliance of this order."

7. In the meanwhile, SEBI had also sought explanations/clarification from M/s. C K Jain &

Company, Chartered Accountants (the Auditors of the Company) regarding the 'Audit Report for

the year ended March 31, 2013' and also from Neha Kedia (the Company Secretary of the Company)

regarding the 'Compliance Certificate for the year ended March 31, 2013'. Pursuant to submission

of 'Examination Report' to the Hon'ble High Court and upon receipt of the abovementioned replies

from Auditors and Company Secretary, SEBI had vide letter dated October 25, 2013, sought

clarification and also advised GLAIL to submit rectified copies of Annual Account and Annual

Report of the company for the year ended March 31, 2012 and also the annual account for the year

2012–13, in view of inter alia the following –

"Auditor's report for the year 2011 – 2012, auditor has certified that the company has not issued any

debentures during the year. As per the Audited Balance Sheet of your company for the year 2011-2012, it

was noticed that the company had issued debentures for ₹11,90,62,085. It is observed that such issuance on more than

once occasion to more than 49 persons without following SEBI Regulations and without filing any offer document with

SEBI, prima facie, is in contravention of SEBI Act, 1992 and Regulations made thereunder.

… Page 34 of the report for the same year; practicing company secretary has certified that there was no

redemption of preference shares or debentures during the financial year. But as per Audited

Balance Sheet for the year 2011-2012, there is a redemption of debentures in the same year for an amount of

`2,50,16,855.

… we had taken up the matter with your auditor as well as the company secretary … it was replied by your auditor

that the company did issue debentures in the year 2011 – 12 for an amount of `12,19,64,355 and confirmed that they

had already submitted the rectified report to the management. … However it is noticed that you had not filed the

rectified report through your advocate on August 6, 2013, although the same was available with you …

Further, as per debenture details given by you, it was observed that the company has also issued debentures in the year

2009 – 2010 for an amount of `5000 but as per the submissions made by you and MCA portal, date of

incorporation of the company is September 15, 2010. If that be so, please clarify as to how the company has issued

debentures prior to its incorporation."

8. A copy of the abovementioned letter dated October 25, 2013, which was returned to SEBI

as undelivered, was subsequently forwarded to the Company's Advocate, Mr. T. Talukder on


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November 22, 2013, in accordance with the request made by him vide letter dated October 28, 2013.

However, the Company (through its advocate) failed to respond to this letter. Thereafter, SEBI

issued a public advisory in several leading national and regional newspapers on November 27, 2013,

cautioning investors against the illegal mobilization of funds by GLAIL. In response to the

abovementioned public advisory issued by SEBI, the Company vide letter dated December 27, 2013,

while stating that it had instructed its Advocate to challenge the Order of the Hon'ble High Court

dated September 2, 2013 [in W. P. No. 16338 (W) of 2013], inter alia requested SEBI to not make any

such further publication. SEBI vide letter dated January 10, 2014, while acknowledging the receipt of

GLAIL's letter dated December 27, 2013, advised it to the submit the following

information/documents:

i. Certified copies of Balance Sheet, P&L and Cash Flow Statement of the company for

the last three years i.e. 2010–11, 2011–12 & 2012–13;

ii. Details of all the movable and immovable assets of GLAIL.

9. A copy of the abovementioned letter dated January 10, 2014, which returned undelivered,

was subsequently forwarded to the Mr. B. N. Muni, Advocate on February 10, 2014, in accordance

with the request made by the Company vide letter dated December 27, 2013. However, GLAIL

(through its advocate) has not responded to the abovementioned letter.

10. Thereafter, SEBI on considering the material available on record i.e. correspondences

exchanged between SEBI and the Company, the documents contained therein; information obtained

from the 'MCA 21 Portal'; the Examination Report submitted to the Hon'ble High Court; replies

received from the Company's Auditors and the Company Secretary, the documents available on

record, SEBI came to a prima facie observation that the Company is engaged in fund mobilizing

activity from the public through its offer of Non-Convertible Redeemable Secured Debentures

("NCDs") which were done in contravention of the provisions of sections 56, 2(36) read with 60,

73, 117B and 117C of the Companies Act, 1956 read with the Companies Act, 2013 and the various

provisions of the SEBI (Issue and Listing of Debt Securities), Regulations, 2008 ("the Debt

Securities Regulations"). In view of such prima facie violations committed by the Company, its

directors and debenture trustees, and in order to protect the interest of investors and to ensure only

legitimate fund raising activities are carried on by the Company, SEBI vide an ex-parte interim


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Order dated May 15, 2014 ("the SEBI Order") had issued the following directions against the

Company and its directors :

"..........

14. 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 read with the Debt Securities Regulations and the Debenture Trustee Regulations,

hereby issue the following directions –

i. GLAIL shall not mobilize funds from investors through the issue of Non–Convertible Redeemable

Secured Debentures or through the issuance 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. GLAIL and its Directors, viz. Shri Tipu Sultan, Shri Biswanath Mondal, Shri Subhas Sarkar,

Shri Nirjal Pal, Shri Swapan Sadhukhan, Shri Chandan Debnath and Shri Uttam Chakraborty,

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. GLAIL 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 Non–Convertible

Redeemable Secured Debentures, without prior permission from SEBI, in consonance with the Order of

the Hon'ble Kolkata High Court passed on September 2, 2013 in W. P. No. 16338(W) of 2013;

iv. GLAIL and its abovementioned Directors shall not divert any funds raised from public at large

through the issue of Non–Convertible Redeemable Secured Debentures, which are kept in bank

account(s) and/or in the custody of GLAIL;

v. Smt. Jyotsna Sadhukhan and Smt. Jharna Sarkar are prohibited from continuing with their present

assignment as debenture trustees in respect of the issue of Non–Convertible Redeemable Secured

Debentures of GLAIL and also from taking up any new assignment or involvement in any new issue of

debentures, etc. in a similar capacity, from the date of this order till further directions."

11. The SEBI Order has also observed that the Company was incorporated on September 15,

2010 with the Registrar of Companies, Kolkata, West Bengal. The Directors of the Company are

Mr. Tipu Sultan, Mr. Biswanath Mondal, Mr. Subhas Sarkar, Mr. Nirjal Pal, Mr. Swapan Sadhukhan,

Mr. Chandan Debnath and Mr. Uttam Chakraborty. The Company had invited subscription for

NCDs of `2546 lakhs in accordance with its schemes/plans.


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(i) As per Scheme I (Multiplier Non-Convertible Redeemable Secured Debenture) under Plan A, 36

debentures are issued for a price of Rs.3600/- and the redemption value is Rs.4230/- after a period

of 15 months+ 1 day. Similarly, under this Plan, the Company has solicited subscriptions for issue

of 48 debentures (issue price: Rs.4800/-; redemption value - Rs.6315/- ; and redemption period - 27

months + 1 day), 36 debentures (issue price - Rs.3600/-; redemption value - Rs.5238/- ; and

redemption period : 39 months + 1 day) and 60 debentures (issue price - Rs.6000/- ; redemption

value - Rs.10410/- ; and redemption period - 63 months + 1 day).

(ii) As per Scheme II, the Company has three plans - Plan B, C and D. The issue price (for minimum

10 debentures) under such plans is Rs.1000/- and the redemption value changes as per the

redemption period. For example, under Plan B, the redemption value is Rs.1500/- for a 3 years

redemption period; and Rs.2000/- for a 4.5 years redemption period. Under Plan C, the redemption

value is Rs.3000/- for 7 years redemption period and Rs.6000/- for a 10 years redemption period.

For plan C, the redemption periods are 12 years (Rs.10000/-) and 15 years (Rs.14000/-).

(iii) Under Scheme III and Plan E, the Company solicits a minimum subscription of Rs.50,000/-

with 'Dividend payable monthly' and the rate of such 'dividend' varies as per the redemption period.

For redemption period of 1 year +1 day, the rate is 12%; for 3 years it is 13%; for 5 years it is 14%

and for 10 years, the rate is 15%. The brochure/solicitation material also mentions that a maturity

bonus of 1.5% for 5 years and 2% for 10 years is available for this plan.

(d) The Company had issued NCDs on several occasions since incorporation, to a large number of

investors, details of which are reproduced below:

Year Type of Security

No. of subscribers to the Issue

Total Amount

(` in Crores)

*2009-10 NCDs

1 0.0005

2010-11 NCDs 4998 2.31

2011-12 NCDs 19904 8.91

2012-13 NCDs 12 0.0855

Total

24915 11.30 (approx.)

* (seems to be a typographical error by the company, as the company was incorporated on Sept 15, 2010, i.e., during FY 2010-2011)


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(e) As the Company had offered and allotted NCDs to more than 49 investors during the

financial years 2010-2011 and 2011-2012, the issue of NCDs was a public issue in terms of first

proviso to section 67(3) of the Companies Act, 1956.

(f) The SEBI Order had also observed from the provisional balance sheet of the Company for

the year 2012-2013, that Debentures issued by the Company was for `22.50 Crores and the application

money received on such Debentures was `7.70 Crores. The SEBI Order has alleged that the Company

failed to comply with the requirements specified for public issue of securities as provided under

section 56, section 60 read with section 2(36), section 73 of the Companies Act, 1956 read with the

provisions of the Debt Securities Regulations.

(g) The SEBI Order had further observed that the Company had failed to provide

information/documents to SEBI in respect of its issuance of NCDs to the public, as advised by

SEBI during the preliminary examination. The Company was also alleged to have provided

incomplete and contradictory information with respect to its offer of NCDs for the period 2012-

2013. The relevant observation from the SEBI Order is mentioned below :

"13.12 In addition, I note that GLAIL submitted incomplete and contradictory information in respect of the "Offer

of NCDs" for the period 2012–13, wherein while submitting to SEBI that the amount raised during the period was

`0.0855 Crores, it was however, observed from the provisional balance sheet for that financial year (as submitted by

GLAIL in W. P. No. 16338 (W) of 2013), that the Debentures issued by that company was `22.50 Crores and

the application money received on such Debentures was `7.70 Crores ............ I find that more than a reasonable

opportunity has been afforded to GLAIL to respond to SEBI and its refusal do so, when considered in light of the

abovementioned prima facie finding at paragraphs 13.1–13.11, leads me to believe that such refusal to submit the

information sought was only to conceal the true nature and operation of the fund mobilising activity by way of the

"Offer of NCDs".

(h) The SEBI Order further observed that the Company had appointed Mrs. Jyotsna Sadhukhan

and Mrs. Jharna Sarkar as its Debenture Trustees with respect to its issue of NCDs and that the said


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individuals have prima facie failed to meet the eligibility criteria specified under the SEBI (Debenture

Trustees) Regulations, 1993 ("the DT Regulations). Therefore, the Debenture Trustees were alleged

to have acted as unregistered Debenture Trustees in violation of section 12(1) of the Securities and

Exchange Board of India Act, 1992 ("the SEBI Act") and regulation 7 of the DT Regulations.

12. The directions issued vide the SEBI Order came into immediate effect from the date of the

Order. The SEBI Order advised the Company, its directors and debenture trustees that they may file

their reply and avail an opportunity of personal hearing. For the sake of convenience, the Company,

its directors and debenture trustees are collectively referred to as "the noticees".

13. Thereafter, the Company vide letter dated June 04, 2014 sought extension of time for filing

its reply. In this regard, the noticees were afforded an opportunity of personal hearing on July 08,

2014 and the same was communicated vide SEBI's letter dated June 23, 2014.

14. In the personal hearing held on the scheduled date, Mr. Bichitra Nanda Muni, Advocate

appeared for the noticees and requested permission to file written submissions with respect to the

observations and allegations contained in the SEBI Order. This request was allowed. Thereafter, the

learned Advocate filed written submissions vide letter dated July 12, 2014, wherein the following

submissions were inter alia made:

a) The Company has obtained 'charge creation certificate' for the amount of

Rs.25,46,00,000/- from the concerned Registrar of Companies regarding its privately

placed debentures.

b) The Hon'ble High Court of Calcutta vide Order dated September 02, 2013 has

observed "It will be open to the petitioners to cause all or any of their assets or properties to be sold

under the aegis of SEBI under any asset sale committee that may be set up by SEBI for the purpose

of refund of money which appears to have been illegally obtained from the depositors. Both SEBI

and Registrar of Companies, West Bengal, should monitor the activities of the petitioner company

and ensure strict compliance of this order. " This portion of the Hon'ble High Court's was

not taken into consideration in the SEBI Order.

c) The request made by Company/Advocate vide letter dated December 27, 2013 for

formation of 'sale committee' and the name of members was not answered.


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d) In pursuance of the Hon'ble High Court's Order, the Company claims to provide the

list of its assets (immovable) along with photo-copy of sale deeds. (Annexure 'C' of

this reply).

e) The valuation report of the cold storage and other such assets of the Company were

stated to be placed as Annexure 'D' of the reply.

f) The audited balance sheet for the year ended on March 31, 2013 was annexed as

Annexure 'E'.

g) The Company undertook that it does not mobilize any funds from investors by

further issuance of equity shares or any other securities or by way of any invitation

from public, either directly or indirectly, or through any unsecured loans.

h) The Company and its directors undertook not to issue any prospectus or any offer

documents or issue advertisements soliciting money from public by issue of any sort

of securities either directly or indirectly.

i) The Company and its directors further undertook that they would not divert,

dispose, alienate and encumber any assets and properties of the Company.

j) The Debenture Trustees of the Company undertook that they will not involve any

such new assignment or involvement in any new issue of debentures till further

orders.

The Company has submitted that it has provided substantial assets vide annexures 'C' and 'D' for

earlier redemption of total unpaid debentures and accordingly it is desirable that SEBI treats the

matter as closed and no action be contemplated against the Company or its directors. Vide letter

dated July 24, 2014, the Company has submitted that it is engaged in fulfilling its commitment made

towards the customers and is trying its utmost effort for disposing its assets and make payments.

15. Thereafter, vide letter dated November 03, 2014, the Company stated that since the filing of

the writ petition before the Hon'ble Calcutta High Court (i.e., W.P. 16338 of 2013), the Company is

not collecting money from the general public. The Company reiterated that it has submitted the list

of its assets and requested SEBI to speed up the formation of the 'Asset Sale Committee' in

compliance with the directions of the Hon'ble Calcutta High Court. The Company undertook to

provide information and documents if sought by SEBI. The Company also stated that in order to

prove its bonafide intention in making payments to its creditors and to comply with the Order of the


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Calcutta High Court and to assist the SEBI/Asset Sale Committee, it is willing to make a suitable

newspaper advertisement in leading dailies. The Company also forwarded a letter dated November

17, 2014 requesting SEBI to form the 'Asset Sale Committee'.

16. I have perused the observations and allegations made in the SEBI Order, the submissions

made by the Company/noticees and other material available on record. The allegation against the

noticees are that -

(a) the Company had issued NCDs to the public {in terms of the first proviso to section 67(3) of the

Companies Act, 1956} without complying with the public issue norms laid down under sections 56,

60 read with 2(36) and 73 of the Companies Act, 1956 (read with section 465 of the Companies Act,

2013) and the other requirements specified under the Debt Securities Regulations ;

(b) The directors of the Company namely Mr. Tipu Sultan, Mr. Biswanath Mondal, Mr. Subhas

Sarkar, Mr. Nirjal Pal, Mr. Swapan Sadhukhan, Mr. Chandan Debnath and Mr. Uttam Chakraborty,

are responsible for the above alleged violations ; and

(c) The Debenture Trustees, namely, Mrs. Jyotsna Sadhukhan and Mrs. Jharna Sarkar did not meet

the eligibility criteria as they were not registered as Debenture Trustees with SEBI, as required under

section 12(1) of the SEBI Act and regulation 7 of the DT Regulations.

17. I have perused the reference/letter dated January 24, 2014 from the Office of Registrar of

Companies (West Bengal) to SEBI, wherein, it is stated that as per Form-20B (Form for filing annual

return by a company having a share capital with the RoC) dated August 14, 2012 in respect of Annual

Return of the Company for the year ended March 31, 2012, the indebtedness of the Company is

shown as Rs.11,29,99,400/-. The Company had informed RoC that it has raised/issued debentures

of Rs.11,29,99,400/- till March 31, 2012 from 24,915 allottees. In view of the same, RoC had

inferred that debentures were issued to large number of persons thereby violating public issue norms

governed by SEBI.

18. I have perused the Balance Sheet of the Company for the financial year 2012-2013, wherein

the Company has stated that as at March 31, 2013, its Long Term Borrowing (Note:3) i.e., Non-

Convertible Debenture was Rs.16,22,41,930/- (Rs.16 crores approx.). This amount stood at

Rs.9,40,45,230/- as on March 31, 2012. The Company has also stated that the "above Non Convertible

debentures have been issued at an effective interest rate of 14% p.a....".


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19. The Company, as per the SEBI Order, is alleged to have offered and issued securities i.e.,

NCDs during the financial years 2010-2011, 2011-2012 and 2012-2013 to 24,915 investors and

raised approximately 11.30 crores from the public. The SEBI Order has stated that the Company

had issued NCDs to 12 investors during 2012-2013 and raised Rs.85,500/-. However, as per the

Balance Sheet which has now been filed, it is seen that the Company has raised Rs.6,81,96,700/-

during 2012-2013. The Balance Sheet does not disclose the number of allottees. However, going by

the past trends, it is likely that this substantial amount too might have been raised from more than

49 investors. The noticees have not asserted that this amount was raised from less than 50 investors.

Further, the latest Balance Sheet i.e., for the period 2013-2014 is not available on the MCA website.

Therefore, SEBI is not able to ascertain the amount collected by the Company from the public by

issuing the NCDs during the financial year 2013-2014 and thereafter.

20. Considering the above, it can be observed that the Company by issuing NCDs to more than

49 investors during the financial years - 2010-2011, 2011-2012 and 2012-2013 had made a public

issue of NCDs by virtue of first proviso to section 67(3) of the Companies Act, 1956. Section 67 of

the Companies Act, 1956, reads as under :

"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).”


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A reading of the above, makes it clear that in terms of the first proviso to section 67, the provisions of

Section 67(3) shall not apply in a case where the offer or invitation to subscribe for shares or

debentures is made to fifty persons or more. In this case, the Company had issued and allotted

NCDs during the above said financial years to investors who are substantially in excess of 49.

Therefore, the offer and issue of NCDs by the Company cannot be said to be a 'private placement',

as contended by the Company. By virtue of the above provision, the issue of NCDs by the

Company is a public issue of such securities. 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. …"

21. As it is found that the Company has issued NCDs to the public during FY-2010-2011, 2011-

2012 and 2012-2013, it was supposed to comply with public issue norms as prescribed under the

Companies Act, 1956 including sections 56, 60 [read with section 2(36)] and 73 of the Companies

Act, 1956. 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'. Further, by issuing NCDs 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 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 appears to have 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


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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 admittedly did not comply

with the above said provisions of law.

22. In terms of section 55A of the Companies Act, 1956, 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 they relate to the issue and transfer of securities shall be in the case of listed public

companies and in the case of those public companies which intend to get their securities listed on

any recognized stock exchange in India, be administered by SEBI. Accordingly, under sections 11

and 11A of the SEBI Act, SEBI could regulate inter alia the issue of capital by companies and the

contents of prospectus for such issue. Whenever a company which raises capital from the public

through issue of securities, it has to comply with the SEBI Act and the rules, regulations and

guidelines framed thereunder in addition to the provisions of the Companies Act. This position has

been strongly reiterated by the Hon'ble Supreme Court also in the Sahara case.

23. The Company had issued NCDs. SEBI has framed the Debt Securities Regulations in order

to govern and regulate the issuance of debt securities including debentures. As alleged in the SEBI

Order, the Company has contravened the following provisions of the Debt Securities as it did not

comply with the same in respect of its issuance of NCDs during the relevant years:

Regulation 4(2)(a) – Application for listing of debt securities

Regulation 4(2)(b) – In-principle approval for listing of debt securities

Regulation 4(2)(c) – Credit rating has been obtained

Regulation 4(2)(d) – Dematerialization of debt securities

Regulation 4(4) – Appointment of Debenture Trustee

Regulation 5(2)(b) – Disclosure requirements in the Offer Document

Regulation 6 – Filing of draft Offer Document

Regulation 7 – Mode of disclosure of Offer Document

Regulation 8 – Advertisements for Public Issues

Regulation 9 – Abridged Prospectus and application forms

Regulation 12 – Minimum subscription

Regulation 14 – Prohibition of mis-statements in the Offer Document

Regulation 15 – Trust Deed

Regulation 16 – Debenture Redemption Reserve

Regulation 17 – Creation of security


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Regulation 19 – Mandatory Listing

Regulation 26 – Obligations of the Issuer, etc.

24. I also note that Mr. Tipu Sultan, Mr. Biswanath Mondal, Mr. Subhas Sarkar, Mr. Nirjal Pal,

Mr. Swapan Sadhukhan, Mr. Chandan Debnath and Mr. Uttam Chakraborty are the directors of the

Company. There has been no dispute regarding this fact from anyone of the individuals. These

individuals were the first subscribers to the Company's Memorandum of Association, executed on

September 06, 2010. They, therefore, are also the promoters of the Company. These directors are

responsible for the above contraventions committed by the Company in not adhering to the public

issue norms stipulated under the Companies Act, as alleged in the SEBI Order. The RoC reference

dated January 24, 2014 has given the following details with respect to the directors:

Sr.No. Name and

Father's Name Address Date of

Appointment Remarks

1 Subhas Sarkar, S/o Kunjalal Sarkar

Subhash Mayanguri, Jalpaiguri, West Bengal 735224

15/09/2010

2 Biswanath Mondal, S/o Gobindo Chandra Mondal

Somra Madhyapara, Mauja Somra JL No. 3, Somra 2 No. Balagrah, West Bengal 712123

15/09/2010 Resigned w.e.f 01/10/2012

3 Swapan Sadukhan S/o Rabindranath Sadhukhan

At-AModghata, GP Mogra-1, PS Mogra, Dist. Hoogly, Mogra, West Bengal 712502

15/09/2014 Resigned w.e.f 01/10/2012

4 Niraj Pal, S/o Niranjan Pal

Vill Sripurbazar PO, Sripurbazar, Hoogly, West Bengal 712514

15/09/2014 Resigned w.e.f 01/10/2012

5 Uttam Chakraborty S/o Kamalakanta Chakraborty

At Purba Tarapur, Pashimpara, Mouja, Tarapura District Nadia, Ranaghat, West Bengal 741201

15/09/2014

6 Tipu Sultan, S/o Haidar Ali

Barui Para, Kalna, Burdwan, West Bengal 713409

15/09/2014 Appointed as MD w.e.f 0/104/2011

7 Chandan Debnath S/o Priyalal Debnath

At- Dakshin Para (AmtalaSomira, Sukhariya, Balagarh Dist. Hooghly, West Bengal 712123

15/09/2014


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Though a few directors, namely Mr. Biswanath Mondal, Mr. Swapan Sadhukhan and Mr. Nirjal Pal

have resigned from their position as directors, they would be liable for the contravention committed

by the Company for the period during which they were the directors. Further, it is noted that all the

above persons are the promoters of the Company, wherein Mr. Tipu Sultan (Managing Director)

holds 15.79% and the others hold 14.04% each in the Company's equity capital.

The RoC reference has also stated the following :

"..................

6) The Balance Sheet of the company for the year ended 31/03/2012 shows that the amount of issued Debentures

Rs. 940.95 lac, Other Long Term Liabilities Rs. 89.97 lac, Other Current Liabilities Rs.195.91 lac, Trade

Payables Rs. 4.65 lac. Whereas the Tangible Assets Rs. 759.49 lac, Long Term Loans and Advance Rs. 173.00

lac, Inventories Rs. 36.41 lac, Non current Assets Rs. 59.71 lac, Other Current Assets Rs. 11. 5 0 lac and Cash

and Equivalents Rs. 125.60 lac. This indicates that almost entire amount of assets of the company are made from

borrowed and loaned money either from the issue of Debentures or from Current Liabilities.

7) In regard to the amount of issued Debentures of Rs. 940.45 as on 31/03/2012, neither, any list of debenture

holders available nor any Debenture Redemption Reserved (DRR) has been created. This is an alarming fact that the

company has no provisions for repayment of borrowed money collected by issue of Debentures.

.........."

25. As regards the Debenture Trustees, Mrs. Jyotsna Sadhukhan and Mrs. Jharna Sarkar, I note

that the SEBI Order has alleged that they are not registered as debenture trustees as required under

section 12(1) of the SEBI Act and the DT Regulations. In this regard, I have perused the copy of

the Extract of Minutes of the Extra Ordinary General Meeting of the Board of Directors of the

Company held at its registered office of December 10, 2010, wherein the Board had unanimously

decided to appoint Mrs. Jyotsna Sadhukhan and Mrs. Jharna Sarkar as debenture trustees for issue of

various series of secured debentures of the Company. The board had authorized Mr. Tipu Sultan,

Managing Director of the Company to inter alia take all steps for the execution of the debenture trust

deed and creation of charge in favour of the debenture trustees from time to time. I have also

perused the Deed of Trust executed on December 10, 2010 between the aforesaid debenture

trustees and the Company. In the written submissions filed pursuant to the personal hearing, the

Debenture Trustees of the Company undertook that they will not involve any such new assignment

or involvement in any new issue of debentures till further orders.


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26. To perform the functions or act as a debenture trustee, SEBI has, under section 12(1) read

with section 11(2)(b) of the SEBI Act, mandated that a trustee (in respect of debentures) who is

associated with the securities market shall buy, sell or deal in securities except under and in

accordance with the conditions of a certificate of registration obtained from SEBI in accordance

with the regulation made under the SEBI Act. SEBI has also framed the DT Regulations,

prescribing the conditions, responsibilities and obligations of a debenture trustee. Chapter II thereof

deal with 'Registration of Debenture Trustees'. Regulation 3 prescribes about the manner of making

an application for registration, regulation 5 states that such application should conform to

requirements and regulation 6A deals with criteria for fit and proper person. Further, regulation 7

stipulates that only (i) a schedule bank carrying on commercial activity or (ii) a public financial

institution within the meaning of section 4A of the Companies Act, 1956 or (iii) an insurance

company or (iv) body corporate shall be entitled to act as a debenture trustee. The individuals who

are appointed by the Company are natural persons and do not satisfy the eligibility conditions

prescribed under the DT Regulations. Therefore, Mrs. Jyotsna Sadhukhan and Mrs. Jharna Sarkar

have contravened the provisions of section 12(1) of the SEBI Act and the DT Regulations, as

alleged vide the SEBI Order.

27. Therefore, in view of the violations committed by the Company, its directors and the

persons appointed as debenture trustees and in order to safeguard the interest of investors who had

invested in the Company and also the integrity of the securities market, I deem it appropriate to pass

a direction against the Company to repay the monies collected against issue of NCDs or against

promise to allot NCDs (monies which are kept pending allotment) and other attendant directions. I

also note that the Hon'ble High Court of Calcutta vide Order dated September 02, 2013 in W.P.

16338(W) of 2013 - Golden Life Agro India Limited and others vs. State of Bengal and others had

observed/directed the following :

"............

There will be an order of injunction restraining the petitioner company from dealing with or disposing of or

alienating or encumbering any of its assets without previous leave of the SEBI and the SEBI leave should not be

granted without an Executive Director of SEBI approving the same.

It will be open to the petitioners to cause all or any of their assets or properties to be sold under the aegis of

SEBI under any asset sale committee that may be set up by SEBI for that purpose of refund of money which appears


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to have been illegally obtained from the depositors. Both SEBI and the Registrar of Companies, West Bengal, should

monitor the activities of the petitioner company and ensure strict compliance of this order.

................"

In this respect, I also note the following remark made by the RoC vide its reference dated January

24, 2014 to SEBI -

"This indicates that almost entire amount of assets of the company are made from borrowed and loaned money either

from the issue of Debentures or from Current Liabilities".

As there is no bar or restraint on SEBI in passing of this Order and considering the above

observations, it would be in the interest of investors that the Company liquidates its assets and

properties for the sole purpose of making the repayments as directed below. However, any sale of

assets by the Company for the purpose of refunds to its investors shall be done under the aegis of

the Asset Sale Committee constituted by SEBI pursuant to the aforesaid directions of the Hon'ble

High Court of Calcutta.

28. In view of the foregoing, 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), 11A, 11B and 11(4)

thereof and regulation 28 of the Debt Securities Regulations, hereby issue the following directions :

(i) Golden Life Agro India Limited (CIN - U01403WB2010PLC153027, PAN –

AADCG9933C), its Directors and promoters, namely, Mr. Tipu Sultan (DIN - 02417223,

PAN – AVJPS0723J), Mr. Biswanath Mondal (DIN – 03188599), Mr. Subhas Sarkar

(DIN – 03034180, PAN – APNPS2689K), Mr. Nirjal Pal (DIN – 03034193, PAN –

AQOPP4638B), Mr. Swapan Sadhukhan (DIN – 03188592, PAN – BYHPS5176F), Mr.

Chandan Debnath (DIN – 03188595, ATZPD5725F) and Mr. Uttam Chakraborty (DIN

– 03188597), shall jointly and severally, forthwith refund the money collected by the

Company through its illegal and irregular offer and allotment of NCDs including the money

collected from investors, till date, pending allotment of securities, if any, with interest of

15% per annum from the date of receipt of money from the investors till the date of

repayment.


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(ii) As the Hon'ble Calcutta High Court had vide Order dated September 02, 2013 restrained the

Company from disposing of or alienating or encumbering any of its assets without previous

leave of the SEBI and has also directed the Company/petitioners to cause all or any of their

assets or properties to be sold under the aegis of SEBI under any Asset Sale Committee that

may be set up by SEBI for the purpose of refunding of money to the depositors, the

Company is directed to handover all the original documents of the properties and peaceful

possession of the properties and the possession of saleable movable assets and an inventory

of all its assets, to such Asset Sale Committee. The Company shall thereafter arrange for sale

of its assets under the aegis of such Asset Sale Committee in compliance with the directions

of the Hon'ble High Court for making the above directed refunds to the investors.

(iii) The proceeds of such sale shall be kept with an Escrow Agent who shall preferably be a

Scheduled Commercial Bank or an Asset Reconstruction Company ('ARC') or an institution

of standing, as may be decided by the Asset Sale Committee, who would release the funds to

the debenture holders/investors with the supervision of the Asset Sale Committee.

(iv) The Asset Sale Committee shall cause a public notice to be issued, in all editions of two

National Dailies (one English and one Hindi) with wide circulation and also a vernacular

daily (Bengali language), detailing the modalities for refund, including details of contact

persons including names, addresses and contact details, within fifteen days of this Order

coming into effect.

(v) Golden Life Agro India Limited, its Directors and promoters, namely, Mr. Tipu Sultan, Mr.

Biswanath Mondal, Mr. Subhas Sarkar, Mr. Nirjal Pal, Mr. Swapan Sadhukhan, Mr. Chandan

Debnath and Mr. Uttam Chakraborty are 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.


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(vi) Mr. Tipu Sultan, Mr. Biswanath Mondal, Mr. Subhas Sarkar, Mr. Nirjal Pal, Mr. Swapan

Sadhukhan, Mr. Chandan Debnath and Mr. Uttam Chakraborty are restrained from

associating themselves, as a director or a promoter, with any listed public company and any

public company which intends to raise money from the public, from the date of this Order

till expiry of 4 years from the date of completion of refunds to investors as directed above.

(vii) Mrs. Jyotsna Sadhukhan and Mrs. Jharna Sarkar shall not offer themselves to be engaged

as debenture trustees or in any capacity as an intermediary in the securities market, without

obtaining a certificate of registration to undertake that assignment as required under law.

Further, these individuals are restrained from accessing the securities market and are further

restrained from buying, selling or dealing in securities, in any manner whatsoever, for a

period of 4 years.

29. The above directions shall come into force with immediate effect.

30. This Order shall be without prejudice to any further action that may be initiated by SEBI, in

accordance with law, against the Company and its directors/promoters for the violations as

observed in this Order.

31. Copies of this Order shall be served on the recognised stock exchanges and depositories for

information and necessary action.

PRASHANT SARAN WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA Date : January 07, 2015 Place: Mumbai


Documents

Order in the matter of Golden Life Agro India Limited