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WTM/PS/38/NRO/AUG/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER

ORDER

Under Sections 11 and 11B of Securities and Exchange Board of India Act, 1992 In the matter of Alchemist Holdings Limited In respect of:

1. Alchemist Holdings Limited [PAN: AAACM5575D], 2. Mr. Brij Mohan Mahajan [DIN: 00031819], 3. Mr. Vikramaditya Singh [DIN: 01865565] and 4. Mr. Chandra Shekhar Chauhan [DIN: 02517955].

Date of Hearing: August 08, 2014 and March 10, 2015 Appearance: Mr. C.S. Chauhan, Director Mr. Prateek Jalan, Advocate Mr. Darpan Wadhwa, Advocate Ms. Sonia Dube, Advocate Mr. Saurabh Seth, Advocate Mr. Nikhil Singhvi, Advocate Mr. Shatadru Chakroborty, Advocate Mr. Ankit Yadav, Advocate Mr. Rahul Kriplani, Advocate For SEBI: Mr. Narendra Rawat, Deputy General Manager, Ms. Anupama Chadha, Assistant General Manager, Mr. Yogesh Dudi, Assistant General Manager, Mr. Pradeep Kumar, Assistant General Manager. _________________________________________________________________________ 1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI'), had pursuant to a

preliminary enquiry into the non-compliances with the public issue norms stipulated under the

provisions of the Companies Act, 1956 including Sections 56, 60 and 73 thereof by the

company, Alchemist Holdings Limited (hereinafter referred to as 'Alchemist' or 'the

Company') in respect of offer of Redeemable Preference Shares (hereinafter referred to as

'RPS'), issued an ex-parte interim order dated September 20, 2013 (hereinafter referred to as 'the

interim order') against the Company and its directors including Mr. Sunil Kanti Kar, Mr. Brij

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Mohan Mahajan, Mr. Balvir Singh, Mr. Sukrit Sood, Ms. Ashima Sood, Mr. Vikramaditya

Singh and Mr. Chandra Shekhar Chauhan (hereinafter collectively referred to as 'noticees').

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

safeguard the interest of investors and the assets/ property acquired through the funds of

such investors and to prevent the Company from further carrying on with its fund mobilizing

activity under its offer and issue of RPS, the following directions were issued by SEBI vide the

interim order :

"... 31. For the aforesaid reasons, I, in exercise of powers conferred upon me by virtue of section 19 of the SEBI Act, issue the following directions under sections 11 and 11B thereof, by way of this ad-interim ex-parte order :- (a) Alchemist Holdings Limited (PAN AAACM5575D) having its Registered office at 405, Jyoti

Shikar Tower, Janankpuri District Complex New Delhi-110058 and its directors including Mr. Sunil KantiKar (DIN 00476819), Mr. Brij Mohan Mahajan (DIN 00031819), Mr. Balvir Singh (DIN 00139599), Mr. Sukrit Sood (DIN 00084077), Ms. Ashima Sood (DIN 00037854), Mr. Vikramaditya Singh (DIN 01865565) and Mr. Chandra Shekhar Chauhan (DIN 02517955) are hereby directed not to collect any money from investors till further orders;

(b) The properties/assets which have been owned or acquired by Alchemist Holdings Limited shall not be disposed of by it without prior permission of SEBI; and

(c) Alchemist Holdings Limited is hereby directed not to divert any funds raised by it from the public at large, kept in bank account(s) and/or in the custody of AHL.

32. This order is without prejudice to the right of SEBI to take any other action that may be initiated against AHL, its promoters and directors in accordance with law. 33. This order shall be also be treated as a show cause notice to Alchemist Holdings Limited and its directors including Mr. Sunil Kanti Kar, Mr. Brij Mohan Mahajan, Mr. Balvir Singh, Mr. Sukrit Sood, Ms. Ashima Sood, Mr. Vikramaditya Singh and Mr. Chandra Shekhar Chauhan who may show cause as to why appropriate actions under the SEBI Act should not be taken/issued against them for non-compliance with the provisions of the Companies Act including sections 56, 60, 69 and 73 of the said Act. ... ... 35. This Order shall come into force with immediate effect and the directions issued hereinabove shall continue till further orders."

3. The interim order advised the noticees to treat the same as a show cause notice to explain why

appropriate action under the SEBI Act, 1992 (hereinafter referred to as 'SEBI Act') should not

be taken/issued against them for the alleged non-compliance with the provisions of the

Companies Act, 1956 including Sections 56, 60, 69, 73, etc. thereof. The interim order afforded

opportunity to the noticees to file their reply in the matter and also for a personal hearing, if

they so desired. The letters forwarding the interim order were delivered to the Company and its

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three directors namely Mr. Brij Mohan Mahajan, Mr. Vikramaditya Singh and Mr. Chandra

Shekhar Chauhan. The letters issued to Mr. Sunil Kanti Kar, Mr. Balvir Singh, Mr. Sukrit Sood

and Ms. Ashima Sood returned undelivered. Subsequently, the letters of these persons were

forwarded to the Company for onward delivery to the respective directors.

4. In the meantime, the Company filed a Writ Petition before the Hon'ble Delhi High Court

against the interim order of SEBI. While the said Writ Petition was pending, the Company vide

its letter dated April 09, 2014, replied to the interim order. Vide another letter dated April 11,

2014, the Company submitted an annexure which was earlier left out from its reply. The

Hon'ble Delhi High Court vide order dated May 02, 2014, while taking note of the reply filed

by the Company dismissed the said Writ Petition as withdrawn.

5. Before proceeding further with the matter, an opportunity of personal hearing was granted to

the noticees on June 20, 2014. The notices for the hearing issued to Mr. Balvir Singh, Mr.

Sukrit Sood, Ms. Ashima Sood, Mr. Vikramaditya Singh and Mr. Sunil Kanti Kar had returned

undelivered. All such notices were then forwarded to the Company for onward delivery. The

Company vide its letter dated June 02, 2014, replied and submitted that Mr. Sunil Kanti Kar

had expired. As regards, the noticees namely Mr. Sukrit Sood and Mr. Balvir Singh, the

Company replied that they had ceased to be the directors of the Company since April 01, 2006

and October 15, 2013 respectively. As regards, Ms. Ashima Sood it was submitted that she

also ceased to be the director of the Company.

6. The Company vide its another letter also dated June 02, 2014, requested for postponing of the

personal hearing to a date after July 15, 2014, as its counsel was unavailable for June 20, 2014.

The request of the Company for postponement was considered and the matter was adjourned

to June 30, 2014. However, the Company vide its letter dated June 23, 2014, again requested

to postpone the personal hearing after July 15, 2014, with a reason that its counsel was not

available till July 10, 2014. The requests of the noticees were considered and an opportunity of

personal hearing was granted on July 21, 2014. This time again, the Company vide its letter

dated July 16, 2014, expressed the unavailability of its counsel for the date fixed. SEBI

considering the request postponed the personal hearing to August 08, 2014, as last

opportunity. On this date, Mr. Prateek Jalan, Mr. Darpan Wadhwa, Ms. Sonia Dube, Mr.

Saurabh Seth, Mr. Nikhil Singhvi, Mr. Shatadru Chakroborty, Mr. Ankit Yadav and Mr. Rahul

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Kriplani, advocates appeared as representatives for the personal hearing for the noticees

namely Alchemist, Mr. Vikramaditya Singh and Mr. Chandra Shekar Chauhan. It was

intimated by these that the noticees namely Mr. Brij Mohan Mahajan and Mr. Balvir Singh had

resigned. As regards, the noticee namely Mr. Sunil Kanti Kar, it was intimated that he had

expired, however, no death certificate was submitted. During the course of personal hearing,

the representatives of the noticees requested for a copy of the complaint dated June 02, 2010,

relied upon in the interim order. To this, SEBI was directed that the copy of the complaint (as

relied in the interim order) be provided to the Company and the Company in turn was directed

to submit the response to the same within a period of two weeks, thereafter.

7. SEBI vide its letter dated August 08, 2014, forwarded the copy of the complaint to the

Company. The Company, however, failed to file its reply within the time prescribed. In view

of the same, a reminder letter was sent to the Company on December 12, 2014. Thereafter,

the Company vide its letter dated December 18, 2014, submitted the reply on the complaint

and requested to treat the same as an additional/ supplementary reply to their earlier reply

dated April 09, 2014. The Company vide this letter also requested for an opportunity of

personal hearing.

8. Before proceeding further, as requested, an opportunity of personal hearing was granted to

the noticees on February 03, 2015. However, the noticee namely Mr. Chandra Shekhar

Chauhan while writing on his behalf and the Company vide letter dated January 30, 2015,

requested to postpone the hearing on account of marriage in his family. The request was

considered and another opportunity of personal hearing was granted on February 23, 2015.

Alchemist vide its letter dated February 18, 2015, requested for postponement of the personal

hearing as its counsel was not available for the scheduled date. This request of the Company

was rejected for the reason that the hearing was scheduled as per the request of the Company

itself. However, vide another letter February 21, 2015, the Company again requested SEBI to

reconsider its request for postponement. In the interest of justice, one last opportunity of

personal hearing was granted to the noticees on March 10, 2015.

On March 10, 2015, the noticee namely Mr. Chandra Shekhar Chauhan appeared along with

his advocates Mr. Prateek Jalan, Mr. Darpan Wadhwa, Mr. Saurabh Seth, Mr. Shatadru

Chakroborty, Mr. Ankit Yadav and made oral submissions. During the course of personal

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hearing, an addendum dated March 10, 2015 to the reply dated December 18, 2014, was also

submitted by the representatives, which was taken on record. On conclusion of the personal

hearing, the authorised representatives sought one weeks‟ time for submitting the written

submission, which was duly granted. Thereafter, the Company vide its letter received by SEBI

on March 24, 2015, filed the written submissions, which was taken on record.

9. I note that none of the noticees except the Company has replied to the interim order. The

Company vide its letter dated June 02, 2014, had submitted that the noticee namely Mr. Sunil

Kanti Kar had expired, however, no death certificate has been submitted in this regard. As

regards the other noticees i.e. Mr. Sukrit Sood, Ms. Ashima Sood and Mr. Balvir Singh, the

Company vide the same letter submitted that these had resigned, however, no supporting

document was submitted. From the records available, it is seen that the interim order as well as

the hearing letters have not been delivered to the noticees namely Mr. Sunil Kanti Kar

(claimed to be deceased by the Company), Mr. Sukrit Sood, Ms. Ashima Sood and Mr. Balvir

Singh. It is noted that the Company has also not confirmed the delivery of the interim order

and the hearing notices to these noticees provided to it for onward delivery. Further, no public

notice has been done in this regard, therefore, proceeding further against these persons is not

appropriate. In view of the same, SEBI may take appropriate steps to effect delivery of the

interim order to Mr. Sunil Kanti Kar, Mr. Sukrit Sood, Ms. Ashima Sood and Mr. Balvir Singh.

10. The submissions of the Company, in brief, are as under:

a. The interim order is without jurisdiction as the Company was at the relevant time an NBFC,

duly registered with the Reserve Bank of India (hereinafter referred to as „RBI‟) and the same

exempts it from the applicability of the Section 67(3) of the Companies Act, 1956.

b. The Company was incorporated as „Mahindra Finlease Pvt. Limited‟ on December 22, 1995

and its name was subsequently changed to 'Alchemist Holdings Pvt. Limited‟ and thereafter to

„Alchemist Holdings Limited‟. The said „Mahindra Finlease Pvt. Limited‟ was granted

certificate of registration under Section 45 IA of the RBI Act on September 11, 2000.

Pursuant to the change of name, the Company was granted another certificate of registration

dated May 02, 2006 by the RBI.

c. As regards the NBFCs, the issue with respect to 'public offer' is to be governed by the

guidelines to be issued by SEBI in consultation with the RBI under Section 67(3A) of the

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Companies Act, 1956. No such guidelines had been issued by the SEBI or RBI at the relevant

time. Therefore, ex facie the provisions sought to be invoked by the SEBI are not applicable to

the Company and no action for the alleged violation can be taken against the Company or its

Directors.

d. SEBI in an advertisement dated November 15, 2013 had stated that "Schemes/ Arrangements

made or offered by Cooperative Societies, deposits accepted by NBFCs...... are outside the purview of SEBI's

jurisdiction".

e. The offer of the RPS made by the Company was on a private placement basis. The Company

has neither issued any prospectus in relation to shares nor has it offered the same for public

subscription. The names and details of the investors have already been provided to SEBI. As

the Company does not intend to be listed on the stock exchange, Section 73 of the Companies

Act would not be attracted.

f. RBI has also taken a view that Section 67 of the Companies Act, 1956 does not apply to

NBFCs. In this regard, the Company has relied upon the Financial Stability Report issued by

RBI dated December 2010. It has also been said that the circular dated June 27, 2013 and July

02, 2013, issued by RBI had laid down the guidelines for NBFC in the matter of private

placement. With the same, private placement has been subjected to regulatory restrictions,

including inter alia as to the spacing of placements, number of investors etc., only in the year

2013 and no such restriction were applicable at the time when the Company had issued the

RPS in question. The said circulars had amended the operation of the provisions of Section 67

of the Companies Act, 1956 to the extent that NBFCs were also subjected to the '49 persons'

rule which was inapplicable to NBFCs prior thereto.

g. The RBI circular dated June 27, 2013 seeks to amend/ modify the extant legal position.

However, the said circular does not apply retrospectively and shall apply to future issue of

shares by NBFCs. The allegation raised by the SEBI in all its communications relate to

issuance of RPS in the year 2006.

h. RoC, Chandigarh, in the case of its associated company, namely Alchemist Capital Limited,

had accepted the stand that the provisions of Section 67 of the Companies Act, 1956, do not

apply to NBFCs. In the Writ Petition filed by Alchemist Capital Limited before the Hon'ble

High Court of Punjab & Haryana challenging inter alia the show cause notice issued by the

RoC, under Sections 60 and 73 of the Companies Act, 1956, RoC, Chandigarh in the matter

has clarified that upon being informed about the fact that the said Company is an NBFC, RoC

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had not taken any further action under the said notice. The said Writ Petition has been

disposed of by the Hon'ble High Court of Punjab & Haryana. Therefore, on a matter of

interpretation of the provisions of the Companies Act, 1956, SEBI cannot take a different

view.

i. On January 17, 2013, the RoC, Delhi also had issued a similar notice for alleged violation of

Section 67(3) read with Section 73 of the Companies Act, 1956. The same was challenged by

the Company by way of Writ Petition, highlighting therein inter alia that the provisions of

Sections 67(3) and Section 73 are inapplicable to the Company, in view of the fact that it was

an NBFC registered with the RBI. The Hon‟ble Delhi High Court disposed of the matter with

a direction that “before proceeding further in the matter, the respondents will decide the issue of jurisdiction,

since it is the case of the petitioners that, petitioner no. 1 being a Non-Banking Financial Company (NBFC),

it is exempted from the rigour of the second proviso of Section 67(3) of the Act.” Thereafter, the Company

had filed its reply with the RoC, Delhi. However, till date no further action has been taken by

the RoC, Delhi in the matter.

j. The observation in the interim order that the Company had issued 46,71,200 RPS on March 25,

2006 for a sum of ₹ 4,67,12,000 prior to obtaining the certificate of registration dated May 02,

2006 is not correct as the Company had placed on record the earlier „Registration Certificate‟

dated September 11, 2000 under Section 45IA of the RBI Act on September 11, 2000. As

stated earlier, pursuant to the change of name, the Company was granted another Certificate

of Registration dated May 02, 2006 by the RBI. Under Section 23(3) of the Companies Act,

1956, mere change of name does not affect any rights or obligations of the Company.

k. SEBI has issued the interim order on the presumption that merely because the offer was made

to more than fifty persons, the same would indicate that it came within the purview of a public

offer and the Company failed to meet the requirements of a „private placement‟. This

approach tantamount to application of the first proviso of Section 67 of the Companies Act,

1956 to an NBFC, which is in complete contradiction to the second proviso to sub-section 3

and sub-section 3A of the Section 67 and RBI's own reports and circulars.

l. Section 67(3A) of the Companies Act, 1956, is the applicable provision under the present

circumstances and would have entitled SEBI to regulate the affairs of the NBFCs under the

Companies Act, 1956. However, in the absence of any such guideline, no directions could

have been passed against the Company and its directors.

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m. The onus to establish that a particular issue of shares is in fact a public issue lies upon SEBI

and not on the Company. The same has been settled by the Hon‟ble Securities Appellate

Tribunal in the matter of Toubro Infotech & Industries Limited Vs. SEBI. Therefore, shifting the

entire onus on the Company was against the settled principles of law.

n. SEBI has not considered that Section 55A of the Companies Act, 1956 has limited jurisdiction

which has been granted only qua the companies which intend to get their shares listed on any

recognised stock exchange and the same can only be exercised in terms of the powers which

are provided under the various sections as specified in Section 55A of the Companies Act,

1956.

o. SEBI has failed to appreciate the scope of its power while administering the provisions of the

Companies Act, 1956 in respect of the Companies mentioned in Section 55 A of the

Companies Act, 1956. Section 55A of the Companies Act, 1956 vests SEBI with the power to

administer certain provisions of that Act in respect of a specified class of companies. While so

acting, SEBI is only empowered to act in terms of the Companies Act, 1956 and not to pass

directions under the SEBI Act. Section 55 A of the Companies Act, 1956 does not vest SEBI

with any other powers or authority than expressly provided thereunder.

p. Supreme Court has consciously in the matter of Sahara India Real Estate Corporation Limited and

Ors. Vs. SEBI & Ors. held that the applicability of Section 67(3) of the Companies Act, 1956

cannot be extended to NBFCs.

q. The interim order has passed sweeping directions against the Company and its Directors

without any hearing, seven years after the transactions in question, and three years after the

receipt of the alleged complaint against the Company. The delay itself vitiates the interim order

issued by SEBI. There was no occasion for SEBI to pass interim order on such belated

complaint that too after a lapse of a further period of 3 years.

r. The complaint received by SEBI against the Company contains general allegations,

unsubstantiated by any specific particulars or documentary evidence.

s. Certain media reports have stated that the complainant himself is a director of „Rose Valley

Group of Companies‟ which has been under the scanner of both regulatory authorities and

the higher courts of the Country for running illegal collective investment schemes in different

parts of the Count and is not worthy of credibility.

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11. I have considered the interim order against the noticees, replies and the submissions of the

noticees, documents furnished and the material available on record. The interim order has

observed that:

a. The Company is a Non Banking Financial Company (hereinafter referred to as „NBFC‟) and

had been granted the certificate of registration dated May 02, 2006. As per the certificate of

registration, the Company is authorised to carry on the business of an NBFC without

accepting or holding public deposits.

b. The Board of Directors of the Company, at a board meeting held on February 10, 2006, had

passed a resolution approving the issue of RPS on a private placement basis aggregating to

₹ 12 crores (provided along with the letter dated November 30, 2010). The said resolution

also included the terms and conditions of offer of the RPS, the same were as under:

Plan A B C D E F

Issue price (minimum 100 preference

shares) (₹ )

1000 1000 1000 1000 1000 1000

Redemption Period (Years) 4 6 9 12 15 16

Redemption Premium (₹ ) 500 1,000 2,000 4,100 7,000 9,000

Maturity value (₹ ) 1,500 2,000 3,000 5,100 8,000 10,000

Annualised Yield on investment (%) 10.25 11.72 12.40 13.81 14.10 14.65

The resolution also mentioned that the said issue of RPS did not require any prior approval or

rating from the Government, SEBI or other statutory authorities.

c. In the Board resolution dated February 10, 2006, the invitation was made for the subscription

to its issue of RPS to "Individuals, trusts, Corporate Bodies, Minors (through Guardians), Financial

Institutions, Mutual Funds, HUFs and Co-operative Bodies".

d. The Minutes of the Meetings of the Board of Directors (i.e., for meetings held on March 25,

2006, June 04, 2006, August 31, 2006, February 14, 2007, May 31, 2007, September 25, 2007,

February 29, 2008, June 30, 2008, October 31, 2008 and February 28, 2009) revealed that the

Board of the Company had passed similar resolutions inter alia approving the allotment of RPS

of ₹ 10 each to "as per list of applicants, showing the necessary details placed on the table, duly initialled by

Chairman".

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e. The Company has admittedly issued RPS to 4,26,676 investors and total funds raised by issue

of these was ₹ 444.67 crores. The details of the allotment of RPS on various dates and the

amount raised as noted from the Form 2, are as under:

S.No. Date of issue/allotment of the preference shares

No. of shares of face value ₹ 10/- each approved for allotment

Amount raised (₹ )

1. 25/03/2006 46,71,200 4,67,12,000/-

2. 04/06/2006 2,43,25,300 24,32,53,000/-

3. 31/08/2006 3,81,53,400 38,15,34,000/-

4. 14/02/2007 8,34,64,400 83,46,44,000/-

5. 31/05/2007 4,74,67,500 47,46,75,000/-

6. 25/09/2007 5,79,47,500 57,94,75,000/-

7. 29/02/2008 5,01,45,500 50,14,55,000/-

8. 30/06/2008 4,40,50,400 44,05,04,000/-

9. 31/10/2008* 5,42,02,900 54,20,29,000/-

10. 28/02/2009 4,02,44,700 40,24,47,000/-

Total 44,46,72,800 444,67,28,000/-

* As per Form 2 filed with RoC, 5,42,02,900RPS were allotted on October 31, 2008. The date of special resolution authorising the issue of 5,42,02,900 RPS is February 25, 2008.

f. From the Annual Report for the financial year 2012-2013 of the Company, it was observed

that 44,16,46,610 RPS amounting to ₹ 441.64 crores were outstanding as on March 31, 2012.

g. The interim order has also observed as under:

“19. … the second proviso to sub-section (3) of section 67 is not a blanket rule, and does not exempt NBFCs and PFIs from the applicability of provisions pertaining to private placements contained in sub-section (3) of section 67. Thus, the rule of automatic applicability of the public offer requirements of the Companies Act would not be triggered by an NBFC or PFI making an offer to fifty or more persons, only if the concerned NBFC or PFI can show that the offer was a private placement in terms of sub-section (3) of the section 67 of the Companies Act. In order to comply with sub-section (3) of section 67, AHL is required show that it had an intention to offer the shares or debentures to only those persons who receive the offer, or that the offer is a domestic concern of AHL and the persons receiving the said offer. In view of the foregoing, as a registered NBFC, AHL can be exempted from the requirements pertaining to a public offer only if AHL can prove that the offer was a private placement in terms of sub-section (3) of the section 67 of the Companies Act. … … 21. In view of sub-section (3) of section 67, AHL is required to show that the offer made to each of the 426676 persons who were allotted redeemable preference shares in the instant case was not intended to be available for subscription by the general public. I observe that AHL has not made available to SEBI any material or information to indicate that the offer of redeemable preference shares by AHL to 4,26,676 allottees which raised Rs. 444,67,28,000/- between the years 2006 and 2009, was intended to be a private placement meant only for a specific or selected group of persons, as required by sub-section (3) of section 67 of the Companies Act. … There is no evidence of any prior determination of the identity of the offerees of what has been claimed by AHL to be the private placement of redeemable preference shares.”

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It was therefore alleged that the offer made by Alchemist to as many as 4,26,676 allottees for a

total sum of ₹ 444.67 crores cannot be a private placement as laid down in Section 67(3) of

the Companies Act, 1956.

h. As there was no evidence on record regarding the compliance with the provisions of Sections

56, 60, 69 and 73 of the Companies Act, 1956, the interim order alleged that the Company does

not appear to have complied with the applicable provisions of the Companies Act, 1956,

including, inter alia, Sections 56, 60, 69 and 73 thereof, which deals with issues pertaining to

the allotment of shares, i.e. the matters to be set out in the prospectus, registration of the

prospectus, minimum subscription requirements, etc.

i. The present director of the Company are Mr. Vikramaditya Singh, Mr. Chandra Shekhar

Chauhan, Mr. Krishna Kumar Singh and Rajiv Kumar Nayar.

12. The interim order has alleged that the offers and allotments of RPS were made by the

Company without complying with the norms related to public issues as stipulated under the

Companies Act, 1956. I note from the submissions of the Company that it was incorporated

as Mahindra Finlease Pvt. Limited on December 22, 1995 and its name was subsequently

changed to Alchemist Holdings Pvt. Limited on December 17, 2005 and thereafter to

Alchemist Holdings Limited on February 01, 2006. The Company has submitted that the said

Mahindra Finlease Pvt. Limited was granted a certificate of registration under Section 45IA of

the RBI Act on September 11, 2000 to act as NBFC. After the change of name the Company

was granted another certificate of registration dated May 02, 2006 [No. B-14.01844].

13. Before proceeding further, let me consider the preliminary submission of the Company that in

the case of Alchemist Capital Limited as referred by the Company [CWP No. 3090 of 2013],

the RoC, Chandigarh had taken the stand that as the Company was NBFC registered with

RBI, no action has been taken for alleged violation of Sections 60, 67 and 73 of the

Companies Act, 1956. The said CWP was filed by the Company against the show cause notice

issued by the RoC, Chandigarh alleging that the Company had issued shares to more than 50

persons and violated the provisions relating to issuance of prospectus and listing as contained

in Sections 60, 67 and 73 of the Companies Act. Hon'ble High Court of Punjab and Haryana

at Chandigarh in its judgement dated October 31, 2014, had ordered as under:

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"Although the prayer in the petition pertains a challenge to the show cause notice issued under Section 60 and 67(3) read with Section 73 of the Companies Act, no orders are necessary in light of the reply of the State that they are not taking any action pursuant to the notice since the petitioner is a Non-Banking Financial Institution to which the said provisions will not be applicable."

The Company has argued that Hon‟ble High Court has put its imprimatur on a matter of

interpretation and SEBI cannot take a different view. I have considered the submission made

by the Company. I note that in the above referred matter, SEBI was not a party, therefore, it

could not have put forth its views on the interpretation of Section 67 of the Companies Act,

1956. Further, Hon‟ble High Court did not go into merits of the case but disposed of the case

on the basis of reply of the RoC that they were not taking any action. It also needs to be noted

that Section 55A of the Companies Act, 1956 empowers SEBI to inter alia administer

provisions relating to public issue of securities in Sections 56, 60 and 73 of the Companies

Act, 1956. Further, Section 11A of the SEBI Act also empowers SEBI to regulate public issue

and the matters related thereto.

14. I now refer to the provision of Section 67 of the Companies Act, 1956 which provides the

guidance to determine whether an issue or placement of securities is a 'private placement' or a

'public issue'. The same reads as under:

"67. Construction of reference to offering shares or debentures to the public, etc. 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) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended 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. (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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Sub section 3 of the above provision and the two provisos thereafter, are important for the

present matter in hand. As per the same, an offer/ invitation shall not be treated as made to

the public if such offer/ invitation can be regarded in all circumstances as not being calculated

to result, directly or indirectly, in the securities becoming available for subscription or purchase by

persons other than those receiving the offer or invitation; if the same is a domestic concern of

the persons making and receiving the offer or invitation.

The proviso also states that an offer/ invitation made to more than 49 persons is a public

issue and the NBFCs/ PFIs are exempted only from the applicability of the first proviso to

Section 67(3) i.e. the offer/ invitation to more than 49 person will not be a public issue.

15. Having considered the same, NBFC and PFI do not have any restriction on the number of

allottees as opposed to a Company which is neither an NBFC nor a PFI, as long as the issue

satisfies the provisions of Section 67(3) of the Companies Act, 1956. It is important to bear in

mind that in respect of NBFCs and PFIs, though as discussed, these may be exempted from

the limit of 49 persons, they still require to comply with the clauses (a) and (b) to Section 67(3)

of the Companies Act, 1956. Therefore, in a case involving an NBFC or a PFI, in order to

take a view that they did not make a public issue, it has to be proved that their offer or

invitation did not result, directly or indirectly, in the securities becoming available for subscription

or purchase by persons other than those receiving the offer or invitation or such offer or

invitation was a domestic concern of the persons making and receiving the offer or invitation.

The Hon'ble Supreme Court of India in the matter of Sahara India Real Estate Corporation

Limited & Others Vs. SEBI and another (Civil Appeal Nos. 9813 and 9833 of 2011) (hereinafter

referred to as „the Sahara case‟) had observed as under:

"84. Section 67(1) deals with the offer of shares and debentures to the public and Section 67(2) deals with invitation to the public to subscribe for shares and debentures and how those expressions are to be understood, when reference is made to the Act or in the articles of a company. The emphasis in Section 67(1) and (2) is on the “section of the public”. Section 67(3) states that no offer or invitation shall be treated as made to the public, by virtue of subsections (1) and (2), that is to any section of the public, if the offer or invitation is 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 otherwise as being a domestic concern of the persons making and receiving the offer or invitations. Section 67(3) is, therefore, an exception to Sections 67(1) and (2). If the circumstances mentioned in clauses (1) and (b) of Section 67(3) are satisfied, then the offer/invitation would not be treated as being made to the public.

Page 14 of 26

85. The first proviso to Section 67(3) was inserted by the Companies (Amendment) Act, 2000 w.e.f. 13.12.2000, which clearly indicates, nothing contained in Sub-section (3) of Section 67 shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more. Resultantly, after 13.12.2000, any offer of securities by a public company to fifty persons or more will be treated as a public issue under the Companies Act, even if it is of domestic concern or it is proved that the shares or debentures are not available for subscription or purchase by persons other than those receiving the offer or invitation. A public company can escape from the rigor of provisions, if the offer is made by companies mentioned under Section 67(3A), i.e. by public financial institutions specified under Section 4A or by non-banking financial companies referred to in Section 45I(f) of the Reserve Bank of India Act, 1934. Following situations, it is generally regarded, as not an offer made to public.

Offer of securities made to less than 50 persons;

Offer made only to the existing shareholders of the company (Right Issue);

Offer made to a particular addressee and be accepted only persons to whom it is addressed;

Offer or invitation being made and it is the domestic concern of those making and receiving the offer.

86. Resultantly, if an offer of securities is made to fifty or more persons, it would be deemed to be a public issue, even if it is of domestic concern or proved that the shares or debentures are not available for subscription or purchase by persons other than those received the offer or invitation.…"

16. I note that the Company in its submissions has contended that as it is an NBFC, the same

exempts it from the applicability of Section 67(3) of the Companies Act, 1956. In this regard,

as discussed above, the 'exemption' as available to an NBFC, is in terms of the second proviso

to Section 67(3). In terms of Section 67(3)(a) and (b) of the Companies Act, 1956, for showing

that an offer was not made to public, it is required to be proved that the offer or invitation did

not result in the securities being available for subscription to a person who did not receive the

offer or that the offer/ invitation was a domestic concern of the person making and receiving

such offer. In terms of the first proviso, the above proof was not required if a company made

offer to 50 or more persons.

As the second proviso provided that nothing contained in the first proviso would apply to

NBFCs or PFIs, such entities could make offer or invitation to 50 or more persons subject to

the provisions contained in clauses (a) and (b) of Section 67(3) of the Companies Act, 1956.

Accordingly, an NBFC may make an offer to more than 49 persons and has to prove that its

offer did not result in the securities being available for subscription to a person who did not

receive the offer or that the offer or invitation was a domestic concern of the person making

Page 15 of 26

and receiving such offer, in order to claim that such offer and allotment was done through a

'private placement'.

17. The Company while referring to the order of Hon'ble SAT in the matter of Toubro Infotech&

Industries Limited vs. SEBI (Appeal No. 141/2003) has stated that the Hon'ble SAT held that the

onus to establish that a particular issue is intended to be a public issue lies upon SEBI. In the

present case, the Company, being an NBFC, has admittedly made an offer and allotted

44,46,72,800 RPS to 4,26,676 persons during the Financial Years 2005-2006, 2006-2007, 2007-

2008 and 2008-2009. These offers and allotments as per the Company were made pursuant to

the grant of a certificate of registration from the RBI to act as an NBFC. Therefore, for the

Company in order to claim that it had made a „private placement‟ of such securities, it has to

show that it had complied with either clause (a) or (b) of Section 67(3) of the Companies Act,

1956 and further prove that its case fell within the ambit of either of the said clauses.

In this regard, I note the following observation made in the interim order:

“AHL is required to show that the offer made to each of the 426676 persons who were allotted redeemable preference shares in the instant case was not intended to be available for subscription by the general public. I observe that AHL has not made available to SEBI any material or information to indicate that the offer of redeemable preference shares by AHL to 4,26,676 allottees which raised Rs. 444,67,28,000/- between the years 2006 and 2009, was intended to be a private placement meant only for a specific or selected group of persons, as required by sub-section (3) of section 67 of the Companies Act. It is noted from the contents of the Board resolution dated February 10, 2006 passed by AHL, that the persons who could invest in the redeemable preference shares are listed as "Individuals, trusts, Corporate Bodies, Minors (through Guardians), Financial Institutions, Mutual Funds, HUFs and Co-operative Bodies". These are general categories of persons who were permitted to apply for the redeemable preference shares of AHL, and do not satisfy the element of specificity required by the sub-section (3) of section 67. There is no evidence of any prior determination of the identity of the offerees of what has been claimed by AHL to be the private placement of redeemable preference shares.”

I also note that even after passing of the interim order making the allegations, the Company

while making submissions on the merits of the case, has not forwarded any material to

substantiate that its offer was made to identified persons or that its offer was a 'domestic

concern'. In view of the same, the manner of placement of RPS cannot be considered as

having offered the securities to an identified person or to consider the same as a 'domestic

concern' in terms of clause (b) of Section 67(3) of the Companies Act, 1956. At the stage, I

find it relevant to refer to the observations from the interim order that “association between the

offeror company and offerees for determining whether an offer is in the nature of a private placement needs to be

Page 16 of 26

established on a case-to-case basis.” In this regard, I refer to the following observations made by the

Hon'ble Supreme Court in the Sahara case:

“51. ............. Documents produced before us and before the fact finding authorities do not show the relationship Sahara Group had with the investors. Claim of Saharas was that the investors were their friends, associated group companies, workers/employees and other individuals who were associated/affiliated or connected with Sahara Group. Saharas, in the bonds, sought for a declaration from the applicants that they had been associated with Sahara Group. No details had been furnished to show what types of association the investors had with Sahara Group. Bonds also required to name an introducer, whose job evidently was to introduce the company to the prospective investor. If the offer was made to those persons related or associated with Sahara Group, there was no necessity of an introducer and an introduction. Burden of proof is entirely on Saharas to show that the investors are/were their employees/ workers or associated with them in any other capacity which they have not discharged.”

18. In view of the above, I do not find any merit in the submissions of the Company that the

onus to establish that a particular issue of shares is in fact a public issue lies upon SEBI. The

onus is always on the Company as it has claimed that it had made a private placement of

securities. In this regard, even though the standards of Evidence Act, 1872 need not be

complied in quasi-judicial proceedings, under the principles of natural justice, it will be

instructive to refer to section 103 of the said Act, which reads as under -

"103. Burden of proof as to particular fact The burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. Illustration A prosecutes B for theft, and wishes the Court to believe that B admitted the theft to C, A must prove the admission. B wishes the Court to believe that, at the time in question, he was elsewhere. He must prove it."

The Hon'ble Supreme Court in the Sahara case has inter alia held that if an offer is made to a

particular addressee and is accepted only by the persons to whom it is addressed, then the

same is not a public offer. The interim order in this regard has observed that “AHL has not

submitted the invitation letter and offer document through which it sought subscription from the investors,

despite such information having been sought by SEBI repeatedly”.

The Company as discussed above, has failed to provide any documents that the offer was

made to a particular addressee. It has also failed to provide complete information/ documents

as sought by SEBI vide letters dated September 27, 2010, October 08, 2010, November 16,

2010, December 16, 2010 and January 13, 2011. In this regard, I note that the Hon'ble

Bombay High Court in ICI India Ltd. Vs. Presiding Officer and others [1993 (3) BomCR 387] had

Page 17 of 26

observed that an adverse inference was justified when a party who was ordered to produce the

documents failed to produce them. The relevant observation is as below:

“… The Respondents had moved an application before the Tribunal seeking a direction to the petitioner for production of certain documents and information. As expected, the application was vehemently opposed. The Tribunal made an order dated October, 21, 1988 and directed the petitioner to produce: (i) documents showing the details of the pension schemes formulated for the non-management staff from 1961 onwards. (ii) the details of the pension scheme or schemes for the management staff with effect from April 1, 1985. showing all pensionary benefits given to the management staff and (iii) the details of the pension funds. The response of the petitioner was truncated and half-hearted. It produced some, but did not produce other material, as according to it the material was irrelevant for adjudication. In the face of the failure to comply with its direction, the Tribunal was fully justified in drawing an adverse inference. ........... If the employer resorts to hide and seek, he runs the risk of an adverse inference. I am by no means satisfied that the Tribunal has acted without jurisdiction or justification, in drawing the adverse inference against the employer in the instant case.”

I have seen the list of investors as provided by the Company and note that there is nothing on

record to show that the subscription by the persons was on receipt of offer/ invitation or

these were domestic concern. It is seen that the investors were from various walks i.e.,

agriculture, service, professional, business, retired, housewife, others, etc. SEBI had taken a

prima facie view in the interim order that the offer or invitation made by the Company was not a

private placement and that such offer was made to the general public. The same has not been

disproved by the Company. The Company did not produce documents as sought by SEBI and

thus failed to substantiate its contention that its allotment was on private placement as

provided under Section 67(3)(a) and (b) of the Companies Act, 1956. In view of the above, I

conclude that the offer and allotment of RPS made by the Company during the Financial

Years 2005-2006, 2006-2007, 2007-2008 and 2008-2009, was a 'public issue'.

19. The Company has also referred to the Financial Stability Report of the RBI and the Circulars

issued by RBI in the year 2013 and submitted that -

- the Financial Stability Report of the RBI of 2010 records that NBFCs are exempt from the

provisions of Section 67 of the Companies Act and that RBI was in the process of

formulating guidelines in conjunction with the MCA to plug the contemporaneous regulatory

gap;

- the issuance of RBI circulars dated June 27, 2013 and July 02, 2013 for NBFCs made it clear

that no restrictions were applicable at the time when the Company issued the RPS.

Page 18 of 26

I have perused the Financial Stability Report of the RBI and note that in paragraph 5.62, it is

stated "5.62 NBFCs are exempt from the provisions of Section 67 of the Companies Act, 1956, in terms of

which issuance of shares/debentures to more than 49 investors needs to be through public issuance. This means

that NBFCs, particularly those not regulated by the Reserve Bank, could issue debt or quasi-debt instruments

to a large number of retail/institutional investors on a private placement basis. This would be tantamount to

raising public deposits outside the extant regulatory framework.

5.63 Specific concerns in this regard have arisen in the past in the context of private placement of Convertible

Preference Shares (CPS) by few NBFCs."

From the above, it can be noted that the focus is on the exemption to NBFCs from the

provisions of Section 67 of the Companies Act, 1956 [i.e. second proviso to section 67(3)].

The report does not state that NBFCs are also exempt from satisfying clauses (a) & (b) to

Section 67(3) of the Companies Act, 1956. Therefore, as discussed above, an NBFC, prior to

June 27, 2013, had to have enough proof that its issue was on private placement satisfying

clauses (a) and (b) of Section 67(3) of the Companies Act and from June 27, 2013 onwards

had to comply with the restriction of allotting to not more than 49 in a private placement.

20. The Company has also argued that SEBI in an advertisement dated November 15, 2013 had

stated that „Schemes/Arrangements made or offered by Cooperative Societies, deposits accepted by NBFCs

..... are outside the purview of SEBI's jurisdiction‟. With the same it has been argued that the stand of

SEBI is that NBFCs are outside the purview of its jurisdiction. I note that the SEBI

advertisement refers only to the „deposits‟ by NBFCs and not offer or issuance of securities by

NBFCs. As discussed above, NBFCs also have restraints in respect of the offer and issuance

of securities to the public and these have to necessarily comply with the public issue norms

mandated under the Companies Act, 1956 and the SEBI Act.

21. In view of the above, I conclude that the Company had made a public issue of RPS as alleged

in the interim order. The interim order has also alleged that the Company had failed to comply

with the provisions of Sections 56, 60, 69, 73 of the Companies Act, 1956, which deal with

issues pertaining to the allotment of shares, such as the matters to be set out in the prospectus,

registration of the prospectus, minimum subscription requirements, etc. The above discussion,

confirms the finding that the issue of RPS was a „public issue‟ of such securities in terms of

Page 19 of 26

the first proviso to Section 67(3) of the Companies Act, 1956. Having arrived at a conclusion

that the Company had made a public issue of securities, it was under an obligation to comply

with the Companies Act, 1956, SEBI Act, and the rules, regulations and guidelines framed

thereunder which regulate the public issue of equity shares. In this regard, I find it necessary

to refer to the judgment of the Hon'ble Supreme Court of India made in the Sahara case:

"………. Resultantly, after 13.12.2000, any offer of securities by a public company to fifty persons or more

will be treated as a public issue under the Companies Act, even if it is of domestic concern or it is proved that

the shares or debentures are not available for subscription or purchase by persons other than those receiving the

offer or invitation."

"90. ……… in India 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."

22. While examining the scope of Section 55A of the Companies Act, 1956, the Hon'ble Supreme

Court of India in the Sahara case had observed:

"We, therefore, hold that, so far as the provisions enumerated in the opening portion of Section 55A of the Companies Act, so far as they relate to issue and transfer of securities and non-payment of dividend is concerned, SEBI has the power to administer in the case of listed public companies and in the case of those public companies which intend to get their securities listed on a recognized stock exchange in India."

In view of the above observation of Hon'ble Supreme Court of India, I find that SEBI has all

the powers to act on the provisions as mentioned in Section 55A of the Companies Act, 1956.

For administering such provisions, SEBI also gets powers from the SEBI Act. I note that

when a company makes a public issue of securities, it is mandated to apply for and list such

securities as required under Section 73 of the Companies Act, 1956. The Hon'ble Supreme

Court of India in the Sahara case while examining Section 73 had made the following

observations:

"Section 73(1) of the Act casts an obligation on every company intending to offer shares or debentures to the public to apply on a stock exchange for listing of its securities. Such companies have no option or choice but to list their securities on a recognized stock exchange, once they invite subscription from over forty nine investors from the public. If an unlisted company expresses its intention, by conduct or otherwise, to offer its securities to the public by the issue of a prospectus, the legal obligation to make an application on a recognized stock exchange for listing starts. Sub-section (1A) of Section 73 gives indication of what are the particulars to be stated in such a prospectus. The consequences of not applying for the permission under sub-section (1) of Section 73 or not granting of permission is clearly stipulated in sub-section (3) of Section 73. Obligation to refund the amount

Page 20 of 26

collected from the public with interest is also mandatory as per Section 73(2) of the Act. Listing is, therefore, a legal responsibility of the company which offers securities to the public, provided offers are made to more than 50 persons."

I note that the Company has admittedly neither issued any prospectus in relation to shares nor

has it offered the same for public subscription. The Company has not provided any proof to

show that it applied for listing permission from a stock exchange. Rather, the Company has

always maintained that its issuance was on private placement. I note that Section 73(2) of the

Companies Act, 1956 mandates that if permission for listing has not been applied for or not

granted, the company is required to forthwith repay with interest all moneys received from the

applicants and, if any such money is not repaid within eight days after the company becomes

liable to repay it, the company and every director of the company who is an officer in default

shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that

money with interest at such rate, not less than four per cent and not more than fifteen per

cent, as may be prescribed, having regard to the length of the period of delay in making the

repayment of such money. Section 73(3) mandates that 'All moneys received as aforesaid shall be

kept in a separate bank account maintained with a Scheduled Bank until the permission has been granted, or

where an appeal has been preferred against the refusal to grant such. permission, until the disposal of the

appeal, and the money standing in such separate account shall, where the permission has not been applied for as

aforesaid or has not been granted, be repaid within the time and in the manner specified in sub- section (2); and

if default is made in complying with this sub- section, the company, and every officer of the company who is in

default, shall be punishable with fine which may extend to five thousand rupees.'. As listing was not done,

the Company had to repay the money in terms of this provision. Accordingly, the Company is

in violation of Section 73(2) and (3) of the Companies Act, 1956 also.

23. Section 2(36) of the Companies Act, 1956 read with section 60 thereof, mandates a company

to register its 'prospectus' with the RoC, before making a public offer/ issuing the

'prospectus'. As per Section 2(36) of the Companies Act, 1956 'prospectus' means any document

described or issued as a prospectus and includes any notice, circular, advertisement or other

document inviting deposits from the public or inviting offers from the public for the subscription

or purchase of any shares in, or debentures of, a body corporate. 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.

Page 21 of 26

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. As the Company had admitted that it did not file any

'prospectus' with respect to its offer and allotment of RPS, as found above in this Order, I find

that the Company has contravened the above provisions of the Companies Act, 1956.

24. In view of the above, the Company is found to have contravened the provisions of Sections

56, 60, 69, 73 of the Companies Act, 1956. The Company shall therefore be liable to make

refunds as per the mandate under Section 73(2) of the Companies Act, 1956 and also for

regulatory action for committing the above violations.

25. I note that the interim order was issued against the directors of the Company, namely Mr. Sunil

Kanti Kar, Mr. Brij Mohan Mahajan, Mr. Balvir Singh, Mr. Sukrit Sood, Ms. Ashima Sood,

Mr. Vikramaditya Singh and Mr. Chandra Shekhar Chauhan. The following table provides the

details regarding the period of the directorship of the above persons and other directors of the

in the Company:

Date of Appointment Date of Resignation

Mr. Balvir Singh 02/11/2005 15/10/2013

Mr. Brij Mohan Mahajan 06/12/2004 20/03/2009

Ms. Ashima Sood 22/12/1995 01/04/2006

Mr. Sukrit Sood 31/08/2004 01/04/2006

Mr. Vikramaditya Singh 08/03/2008

Mr. Sunil Kanti Kar 19/11/2004 08/03/2008

Mr. Chandra Shekhar Chauhan 19/02/2009

Mr. Narayan Madhav Kumar 20/01/2009 19/02/2009

I note that the noticee namely Mr. Brij Mohan Mahajan has not responded to the interim order

or the hearing letters issued to these.

It is also noted that one Mr. Narayan Madhav Kumar was appointed as director of the

Company on January 20, 2009 and had resigned on February 19, 2009, however, his name was

not included in the interim order. In view of the same, SEBI is advised to examine his role and

take appropriate steps in this regard.

As noted earlier, the interim order and the hearing letters issued to Mr. Balvir Singh, Mr. Sukrit

Sood, Ms. Ashima Sood and Mr. Sunil Kanti Kar had returned undelivered. It is seen from the

Page 22 of 26

Article of Association and the Memorandum of Association filed with RoC that Ms. Ashima

Sood was the original subscribers of the equity share capital of the Company and was also one

of the directors of the Company as noted from the table above. Ms. Ashima Sood and Mr.

Sukrit Sood had resigned from the Company on April 01, 2006 i.e. after the first tranche of

allotment of RPS to public on March 25, 2006.

It can therefore be concluded that Mr. Brij Mohan Mahajan, Mr. Vikramaditya Singh and Mr.

Chandra Shekhar Chauhan being the persons in-charge of the affairs and policies of the

Company, were responsible for the contraventions committed by the Company as found

above. For such violations, appropriate directions need to be issued to the above directors.

Further, the above directors are 'officers in default' and were liable in terms of Section 73(2) of

the Companies Act, 1956 to make the repayments to investors. However, the above directors

failed to do so. As the liability to make the repayment under Section 73 is jointly and severally

on the Company and its directors who are officers in default, the above directors should also

be directed along with the Company to make the repayments along with interest at 15% from

the date when the repayments became due till the date of actual payment.

26. From the information available from the MCA website, Mr. Vikramaditya Singh, Mr. Chandra

Shekhar Chauhan, Mr. Krishna Kumar Singh and Rajiv Kumar Nayar are the current directors

in the Company. Mr. Krishna Kumar Singh and Rajiv Kumar Nayar being the present

directors in the Company, they are also under liability to make repayments to investors in

terms of Section 73 of the Companies Act, 1956.

27. The Company has argued that SEBI has passed sweeping directions against the Company and

its directors without any hearing, seven years after the transactions in question and three years

after the receipt of the alleged complaint against the Company. In this regard, I note the

following from the interim order:

"29. ..., SEBI has a statutory duty to protect the interests of investors in securities and promote the development of, and to regulate, the securities market. Section 11 of the SEBI Act empowers SEBI to take such measures as it thinks fit for fulfilling its legislative mandate. SEBI's powers under sections 11, 11A and 11B of the SEBI Act, as interpreted by judicial authorities, empower SEBI to take necessary measures for the protection of investors in securities. For this purpose, SEBI can exercise its jurisdiction and issue necessary directions under sections 11(1), 11A(1)(b) and 11B of the SEBI Act over companies which issue shares or debentures in the nature of a public issue, but do not comply with the applicable provisions of the Companies Act including section 73(1).

Page 23 of 26

30. Further, in order to ensure that AHL does not collect further funds and also to safeguard the assets or property acquired through such funds of the investing public till complete details are brought out and a final decision is accordingly taken in the matter, it becomes necessary for SEBI to take urgent preventive and remedial action by way of this ex-parte order. In the absence of such preventive action, irreparable loss and damage may be caused to investors."

From above, it is seen that the necessities for passing the interim order has already been

explained in the interim order itself.

28. In view of the discussion above, appropriate action in accordance with law needs to be

initiated against the Company and the directors/ promoters in charge of the affairs of the

Company during the relevant period.

29. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of

the Securities and Exchange Board of India Act, 1992 read with sections 11 and 11B thereof

hereby issue the following directions :

a. The Company, Alchemist Holdings Limited [PAN: AAACM5575D], Mr. Brij Mohan Mahajan

[DIN: 00031819], Mr. Vikramaditya Singh [DIN: 01865565], Mr. Chandra Shekhar Chauhan

[DIN: 02517955], Mr. Krishna Kumar Singh [DIN: 06629621] and Rajiv Kumar Nayar [DIN:

06636653] jointly and severally, shall forthwith refund the money collected by the Company

through the issuance of Redeemable Preference Shares (which have been found to be issued in

contravention of the public issue norms stipulated under the Companies Act, 1956), to the investors

including the money collected from investors, till date, pending allotment of NCD, if any, with

an interest of 15% per annum compounded at half yearly intervals, from the date when the

repayments became due (in terms of Section 73(2) of the Companies Act, 1956) to the investors till

the date of actual payment.

b. The repayments to investors shall be effected only in cash through Bank Demand Draft or

Pay Order.

c. The Company/ its present management are permitted to sell the assets of the Company

only for the sole purpose of making the refunds as directed above and deposit the proceeds in

an Escrow Account opened with a nationalised Bank.

Page 24 of 26

d. The Company shall issue public notice, in all editions of two National Dailies (one English

and one Hindi) and in one local daily with wide circulation, detailing the modalities for refund,

including details on contact persons including names, addresses and contact details, within

fifteen days of this Order coming into effect.

e. After completing the aforesaid repayments, the Company shall file a report of such

completion of repayment with SEBI, within a period of three months from the date of this

order, certified by two independent peer reviewed Chartered Accountants who are in the

panel of any public authority or public institution. For the purpose of this Order, a peer

reviewed Chartered Accountant shall mean a Chartered Accountant, who has been categorized

so by the Institute of Chartered Accountants of India ('ICAI').

f. Alchemist Holdings Limited, Mr. Brij Mohan Mahajan, Mr. Vikramaditya Singh, Mr. Chandra

Shekhar Chauhan, Mr. Krishna Kumar Singh and Rajiv Kumar Nayar are also directed to

provide a full inventory of all their assets and properties and details of all their bank accounts,

demat accounts and holdings of shares/securities, if held in physical form.

g. In case of failure of Alchemist Holdings Limited, Mr. Brij Mohan Mahajan, Mr. Vikramaditya

Singh, Mr. Chandra Shekhar Chauhan, Mr. Krishna Kumar Singh and Rajiv Kumar Nayar, to

comply with the aforesaid directions SEBI, on the expiry of the three months period from the

date of this order,-

i. shall recover such amounts in accordance with Section 28A of the SEBI Act including

such other provisions contained in securities laws.

ii. may initiate appropriate action against the Company, its promoters/directors and the

persons/officers who are in default, including adjudication proceedings against them, in

accordance with law.

iii. would make a reference to the State Government/ Local Police to register a civil/

criminal case against the Company, its promoters, directors and its managers/ persons

in-charge of the business and its schemes, for offences of fraud, cheating, criminal

breach of trust and misappropriation of public funds; and

iv. would also make a reference to the Ministry of Corporate Affairs, to initiate the process

of winding up of the Company.

Page 25 of 26

h. The Company is directed not to, directly or indirectly, access the capital market by issuing

prospectus, offer document or advertisement soliciting money from the public and is 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

four years from the date of completion of refunds to investors, made to the satisfaction of

SEBI, as directed above.

i. Alchemist Holdings Limited and its promoters and directors including Mr. Brij Mohan

Mahajan, Mr. Vikramaditya Singh, Mr. Chandra Shekhar Chauhan are restrained from

accessing the securities market and are further prohibited from buying, selling or otherwise

dealing in securities, directly or indirectly, with immediate effect. They are also restrained from

associating themselves with any listed public company and any public company which intends

to raise money from the public, with immediate effect. This restraint shall come into force

with immediate effect and shall continue to be in force from the date of this Order till the

expiry of four (4) years from the date of completion of the repayments to the investors, as

directed above.

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

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

proceedings that might be taken by SEBI in respect of the above violations committed by the

Company, its promoters, directors and other key persons.

31. SEBI is directed to take appropriate steps to complete the service of the interim order on Mr.

Sunil Kanti Kar, Mr. Sukrit Sood, Ms. Ashima Sood and Mr. Balvir Singh and proceed further.

In view of the same, the interim directions issued vide the interim order dated September 20,

2013, against these persons shall continue in force.

32. SEBI is directed to issue a show cause notice to Mr. Krishna Kumar Singh and Mr. Rajiv

Kumar Nayar for any further appropriate directions including restraining these from accessing

the securities market.

33. As mentioned above, SEBI is advised to examine the role of Mr. Narayan Madhav Kumar and

take appropriate steps, in this regard.

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

information and necessary action.

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

Registrar of Companies, for their information and necessary action with respect to the

directions/restraint imposed above against the Company and the individuals.

DATE : August 14th, 2015 PRASHANT SARAN PLACE : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA