Appeal No. 29 of 2005
Date of Decision
29.6.2006
Tulsidas B. Goyal
Versus
Securities & Exchange Board of India
Present : Mr. Kamal Katha & Mr. Sunil Ganjan, Advocate for the appellant
Ms. Bhavana Ravikumar, Legal Officer of the respondent
Coram:
Justice N.K. Sodhi, Presiding Officer
C. Bhattacharya, Member
R. N. Bhardwaj, Member
Per: Justice N.K. Sodhi, Presiding Officer (oral)
By an order dated 10.10.2003 the then Chairman of the Securities and Exchange Board of India (for short the Board) exercising his power under Section 11(1) and 11(4)(b) read with Section 11B of the Securities and Exchange Board of India Act, 1992 (for short the Act) directed M/s. Enkay Texofood (for short the Company) and its directors including the appellant herein not to associate themselves with the securities market for a period of 5 years and further restrained them from dealing in securities in any manner whatsoever for the said period. It is this order which is under challenge in this appeal filed under Section 15T of the Act. Mr. Tulsidas B. Goyal who was the managing director of the Company has come up in appeal against the order.
2. The Company was formed sometime in the year 1995-96 and the appellant was its managing director. The Company received several complaints from its investors most of which pertain to non-receipt of share certificates. These complaints were filed in the year 1996, 1997, 1998 and thereafter. Since the grievances were not redressed the Board as per its letter dated 5.4.2002 advised the Company to meet its officials. The Company failed to do so. Thereafter a notice was issued in May 2002 to the Company and its directors including the appellant to show cause why action be not taken against them under Section 11B of the Act read with Section 621 of the Companies Act for violating the provisions of the latter Act. No reply was received from the Company. The Board by its order dated 14.10.2003 directed the Company to redress the grievances of its investors within a period of one month from the date of the order. The Company was also warned that in case of failure to redress the investor grievances prosecution could be ordered under Section 621 of the Companies Act and that the Company and its directors could be debarred from dealing in and/or accessing the capital market for a period of 5 years. This order became final as no appeal was filed against it. Despite the order having become final the Company failed to redress the grievances within the time specified in the order dated 14.10.2002. The Board then initiated proceedings to debar the Company and its directors from dealing in securities and accessing the securities market. After affording an opportunity of hearing and on a consideration of the material collected by the Board the impugned order was passed.
3. We have heard the learned counsel for the appellant and also representative of the Board and find no ground to interfere with the impugned order. What is contended by the learned counsel for the appellant is that the Company was in financial difficulties and therefore it could not pay the dues of its share transfer agent with whom lay the entire record pertaining to the transfer of shares and therefore it (the Company) was unable to transfer the shares of the investors in their names. He also contended that the Company had become sick and is before the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985 and, therefore, the Board was not justified in passing the impugned order against the company and its directors. We are unable to accept these contentions. On an enquiry made by us the learned counsel for the appellant informs us that the proceedings before BIFR commenced in the year 2001 and he also informs us that the share transfer agent which is another limited company had stopped rendering services to the Company sometime in the year 2000 on account of non-payment of its dues. If this were so, nothing prevented the Company from redressing the grievances of the investors with regard to the complaints which were pending since the year 1996, 1997, 1998 and thereafter. Non-transfer of shares in favour of those who had invested in the Company was a serious matter and a large number of investors in this regard were held to ransom by the Company by not transferring the shares in their names. The Board had advised the Company to redress the grievances but it had no effect. We are also of the view that even if the Company were in financial difficulties, it should have taken steps to collect the records from the share transfer agents to transfer the shares in favour of the investors. The learned counsel for the appellant could not point out any steps initiated either by the Company or by its managing director or any of its officer in this regard. It appears that the Company was paying no heed to the grievances of its investors. In this view of the matter the Board was justified in passing the impugned order and restraining the appellant from dealing in securities and accessing the capital market for a period of 5 years. There is, thus, no merit in the appeal and the same stands dismissed with no order as to costs.
Sd/-Justice N. K. SodhiPresiding OfficerSd/-C. BhattacharyaMemberSd/-R. N. BhardwajMember