IN RE : BODH GAYA CERAMICS LIMITED AND ITS DIRECTORS Vs. STATE
SECURITIES APPELLATE TRIBUNAL
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(1.) 0 Background
1.1 A Co-ordination and Monitoring Committee (hereinafter referred to as the 'CMC') was set up jointly by the Department of Company Affairs (hereinafter referred to as 'the DCA') and the Securities and Exchange Board of India (hereinafter referred to as 'SEBI') in 1999 in respect of companies which raised money from the public and which were not traceable. These companies were identified as vanishing companies. A Task Force for each region was also set up consisting of Officers of DCA, SEBI and the concerned Stock Exchange to assist the CMC in identifying vanishing companies in the region and recommending the action to be taken by DCA and SEBI against such companies.
1.2 In the fifth meeting of the CMC held on 1.7.2000, the criteria for identifying vanishing companies has been laid down and companies that met the following criteria were to be considered as vanishing companies:
a) Companies which have not complied with listing requirements / filing requirements of Stock Exchange / Registrar of Companies respectively for a period of 2 yeaRs.
b) Where no correspondence has been received by the Exchange from the company for a long time.
c) Where no office of the company is located at the registered office address at the time of Stock Exchange inspection.
1.3 The Magadh Stock Exchange (MSE) vide letter dated 16.10.02 stated that Bodh Gaya Ceramics Ltd (hereinafter referred to as "BGCL") could not be traced at its Registered Office address during the physical verification conducted by MSE. In the meeting of the co-ordination and Monitoring Committee held on 25.2.2003, BGCL was identified as one of the vanishing companies in the Eastern Region. Further, in the meeting of the Calcutta Task Force held on 18.6.2003 it was decided to initiate prosecution and lodge First Information Report (FIR) against BCGL.
(2.) 0 Public issue by BGCL
2.1 BGCL came out with a public issue of 4, 94, 900 equity shares of Rs 10/- each for cash at par through a prospectus dated 6.8.1990. The issue opened on 19.9.1990, the earliest closing date was 22.9.1990 and the latest closing date 1.10.1990. It has been stated in the prospectus that applications have been made to the Stock Exchanges at Patna and Mumbai for listing of the shares.
2.2 In the prospectus, the address of the registered office of BGCL is given as D/69, Srikrishnapuri, Patna - 800 001. The directors of BGCL included :
1. Shri Brajesh Kumar Sinha Chairman M/s . Bodh Gaya Ceramics Ltd. 84/40, Officers Flat Bailey Road, Patna
2. Dr. Gyan Dhar Singh Director M/s . Bodh Gaya Ceramics Ltd. B/173, Gandhi Vihar Police Colony, Anisabad Patna - 800 002
Shri Harinandan Prasad Sinha Director M/s . Bodh Gaya Ceramics Ltd. B/N Lane, Mithapur, Patna - 800 001
(3.) SHRI Harshad Nandlal Bhutta Director M/s . Bodh Gaya Ceramics Ltd. Samudri - 17, Ashok Nagar Society, Mumbai 400 044
5 SHRI Mumtaz Alam
6 Dr. Mera Gharpure
7 SHRI Ashok Ganphule
8 Late Achyut Ganphule
3.0 Bodh Gaya Ceramics Limited - a vanishing company.
3.1 After the said public issue, the shares of BGCL were listed at the Stock Exchange of Mumbai and Magadh Stock Exchange, its Regional Stock Exchange. It has been found that BGCL has not been complying with various clauses of the Listing Agreement entered into by it with the Stock Exchange viz., not submitting statutory reports, directors reports and other required reports, not furnishing financial results including Cash Flow Statements, Balance sheet and Profit & Loss Account etc. to the concerned Stock Exchange. The non-compliance of listing agreement by the said company is in violation of the provisions of section 21 of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as SCRA). BGCL was delisted from the Magadh Stock Exchange w.e.f. 18.12.2001. This was communicated to SEBI by the Magadh Stock Exchange vide its letter dated 22.8.2003.
4.0 Show cause notice
4.1 In the meeting of the co-ordination and monitoring committee held on 25.2.2003, the name of BGCL was added as one of the vanishing companies in the Eastern Region. In view of the above, a show cause notice dated 12.5.2003 was issued by SEBI to BGCL calling upon them to explain why action, including specific directions under section 11B of the SEBI Act prohibiting BGCL from accessing the capital market for a period of five years should not be taken under the SEBI Act and the Securities Contracts (Regulation) Act, 1956, . Similar show cause notice dated 12.5.2003 were also issued to the directoRs. No reply was received from the promoters or the directoRs.
4.2 BGCL and its directors were also given an opportunity of a personal hearing before me on 14.8.2003. BGCL and its directors namely, SHRI Brajesh Kumar Sinha, Dr. Gyan Dhar Singh, SHRI Harinandan Prasad Sinha and SHRI Harshad Nandlal Bhutta failed to respond and appear for personal hearing. However, 3 of the directors mentioned in the prospectus - Mumtaz Alam, Dr. Meera Kharpure and Ashok Ganphule appeared in person.
4.2.1 SHRI Mumtaz Alam, who was the nominee of Bihar State Credit & Investment Corporation (BSCIC), appeared before me and submitted that BSCIC which had granted a term loan of Rs. 60.00 Lakhs to BGCL, had nominated him on the Board as its nominee director. He had no shareholding in the company and that he was withdrawn from the Board and in his place one C. Singh had been nominated. He also submitted that the project for which the loan was granted was incomplete and that the main promoters had fled. He further submitted that Bank of Baroda had obtained a decree against the company from the Debt Recovery Tribunal and that BSCIC had advertised for sale of assets of the company in March 2002. He also submitted a compilation of documents in respect of the company.
4.2.2 Dr. Meera Gharpure and Ashok Ghanpule also appeared before me and was represented by their counsel, SHRI K K Sardal. Counsel submitted that Dr. Meera Gahrpure had resigned from the Board as director in 1994 and that SHRI Ashok Ganphule also ceased to be director from 1994. They further submitted that Balance sheets had been filed till 1993 and that thereafter, due to the maladministration by the promoters and non-intervention by BSPCDC which was the public sector undertaking that held 26%, they had relinquished office as directoRs.;
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