WTM/PS/69/ERO/FEB/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
ORDER
Under sections 11, 11(4), 11A and 11B of the Securities and Exchange Board of India Act, 1992 in
respect of (1) Greater Kolkata Infrastructure Limited ;
its Directors, (2) Mr. Subir Dutta, (3) Mr. Nakhat Sing Agarwalla and (4) Mr. Bimalendu Rakshit;
and its Debenture Trustee, (5) Mr. Bimalendu Rakshit, (6) Mr. Sujay Roy Choudhury and (7) Smt.
Sherrie Lal Vasdev
Date of personal hearing : August 07, 2014
Appearance :
For the noticees : Mr. Bichitra Nanda Muni, Advocate
For the Securities and Exchange Board of India :
1. Ms. Anitha Anoop, Deputy General Manager
2. Mr. T. Vinay Rajneesh, Assistant General Manager
3. Mr. Sumit Sarraf, Assistant Manager

1.

Securities and Exchange Board of India (hereinafter referred to as "the SEBI") had received

references dated October 12, 2012 and October 26, 2012 from the Office of the Director, Bureau of
Investigation (E.O.), Guwahati, Assam, inter alia stating that the company, Greater Kolkata
Infrastructure Limited (hereinafter referred to as "the Company" or "GKIL") has issued NonConvertible Redeemable Debentures to the public without permission from SEBI.
2.

On receipt of such reference, SEBI initiated an examination into the affairs relating to the

issue of securities by the Company.

During the preliminary examination, SEBI inter alia

observed/found that (a)

The Company (CIN No. U45400WB2009PLC138699) was incorporated on October 05,

2009 with the RoC, Kolkata, West Bengal.

(b)

The registered office of the Company was at 22/2, Gariahat Road, Kolkata 700029, West

Bengal, India.

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(c)

The Directors of the Company are Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr.

Bimalendu Rakshit.
(d)

The Company has invited subscription for its Secured Non-convertible Redeemable

Debentures ("NCDs") and that the Company claimed that it made its offer of NCDs to only to the
registered member of the Calcutta Government Employee's Shelter and Welfare Association, a registered association
under the provisions of West Bengal Society Registration Act, 1961 on purely Private Placement Basis.
(e)

Since its incorporation, the Company had issued NCDs to a large number of investors, as

per details below:

Total Amount (`in
Crores)

Type of Security

2009 10

Secured Non Convertible Redeemable Debenture

5,356

1.02

2010 11

Secured Non Convertible Redeemable Debenture

4,198

5.77

2011 12

Secured Non Convertible Redeemable Debenture

529

2.21

10,083

9.00

Total

(f)

No. of
Subscribers to
the Issue

Year

As the Company had allotted the aforesaid securities to more than 49 investors, its offer and

issue of NCDs was deemed to be a public issue of such securities in terms of the first proviso to
section 67(3) of the Companies Act, 1956. The Company had to therefore comply with the
provisions of sections 56, 60 read with section 2(36), 73, 117B and 117C of the Companies Act and
the provisions of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 ("the ILDS
Regulations"). It appeared that the Company failed to comply with such statutory provisions in
respect of its offer and issue of NCDs.
(g)

The Company had also not complied with the provisions of sections 117B (appoint a debenture

trustee) and 117C (creation of a debenture redemption reserve) of the Companies Act, 1956. In this regard, it
was also observed that the Company had appointed Mr. Bimalendu Rakshit, Mr. Sujay Roy
Choudhury and Smt. Sherrie Lal Vasdev as its Debenture Trustees. However, the said persons
did not prima facie satisfy the eligibility criteria specified under the SEBI (Debenture Trustees)
Regulations, 1993 ("the DT Regulations") and therefore had acted as unregistered debenture
trustees in violation of section 12(1) of the SEBI Act read with the DT Regulations.
3.

In order to protect the interest of investors, to ensure only legitimate fund raising activities

are carried on by the Company and to prevent the Company from further carrying on with its fund

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mobilizing activity under its offer of NCDs, SEBI passed an ex-parte interim Order dated May
30, 2014 (hereinafter referred to as "the SEBI Order"), wherein the following directions were
issued against the Company, its directors and persons named as debenture trustees:
" ...........................
13.

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.

GKIL shall not mobilize funds from investors through the issue of Secured NonConvertible
Redeemable 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.

GKIL and its Directors, viz. Shri Subir Dutta, Shri Nakhat Sing Agarwalla, Shri Bimalendu
Rakshit, 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. GKIL shall provide a full inventory of all its assets and properties;
iv. GKIL 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 Secured Non
Convertible Redeemable Debentures, without prior permission from SEBI;
v.

GKIL and its abovementioned Directors shall not divert any funds raised from public at large through
the issue of Secured NonConvertible Redeemable Debentures, which are kept in bank account(s)
and/or in the custody of GKIL;

vi. GKIL shall produce proof for its claim (made vide letter dated October 1, 2013) that it has already
"paid entire amount of Debentures, which were raised in purely private placement basis, pending the
remaining amount of `53,28,000 and the interest calculated thereon for the same `8,30,000 ", by
providing a Certificate from a Chartered Accountant in the panel of any public authority or public
institution, who would examine the veracity of such claim. This certificate shall be submitted by GKIL
within a period of 30 days from the date of receipt of this Order.
vii. Shri Bimalendu Rakshit, Shri Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev are prohibited
from continuing with their present assignment as debenture trustees in respect of the issue of Secured
NonConvertible Redeemable Debentures of GKIL 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.

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14.

The above directions shall take effect immediately and shall be in force until further orders.

15.

The prima facie observations contained in this Order are made on the basis of the material available on record
i.e. correspondences exchanged between SEBI and GKIL alongwith the documents contained therein. In this
context, GKIL and its abovementioned Directors; its Debenture Trustees, viz. Shri Bimalendu Rakshit,
Shri Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev may, within 21 days from the date of receipt of
this Order, file their reply, if any, to this Order and may also indicate whether they desire to avail themselves
an opportunity of personal hearing on a date and time to be fixed on a specific request made in that regard.

16.

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

4.

Mr. Sujoy Roy Choudhury vide letter dated June 23, 2014 stated that he had submitted his

resignation from the office of trustee of the Greater Kolkata Infrastructure Debenture Trust on
January 20, 2011, which was accepted by the Trust and communicated to him vide letter dated
January 31, 2011. He stated that he has no connection with the Trust thereafter.
5.

Vide letter dated June 24, 2014 (stated to be the reply of the Company and all its directors), the

following submissions were inter alia made :

o It is an admitted fact that the Company, after obtaining due permission from the concerned
RoC, proceeded in issuing the Secured Non-Convertible Redeemable Debentures
("SNCRDs") not exceeding Rs.9 crores which was repayable on or before 6

1/2

years from

the date of issue of the said securities.

o The offer of such SNCRDs was made to only a registered association namely the Calcutta
Government Employees' Shelter and Welfare Association, registered under the provisions of
the West Bengal Society Registration Act, 1961 on a purely private placement basis.
Subsequently, the said Association, being the original allottee of SNCRDs issued by the
Company requested for transfer of such SNCRDs in favour of a total of 10,083 members of
the Association during the years 2009-2010 to 2011-2012 amounting to a total of Rs.8.92
crores.
o The Company had made payments against some debentures, thereby reducing its liability.
o However, due to inadvertence and oversight, the Company in its earlier letters to SEBI
informed that the original allottees where the members of the registered association rather
than mentioning that those members were mere transferees/nominees of the SNCRDs.

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o Such mistake on the part of the Company was purely a mistake of facts inadvertently. Such
allotment and subsequent transfers made by the Company amply proves that the original
allotment made by the Company was to a single body and not to many persons. As a result,
the offer of SNCRDs was made to less than the maximum as per the provisions of the
Companies Act, 1956 and hence cannot be treated or deemed to be a public issue as
provided under section 67 of the Companies Act, 1956.
o The Company is neither a non-banking financial company nor a public financial institution
within the meaning of section 4A of the Companies Act, 1956. As the securities were
issued/offered initially to the registered association, the Company was not required to list
such securities on a recognised stock exchange as prescribed under section 73 of the
Companies Act, 1956.
o The payments of interest to the debenture holders were either 'properly appropriated/paid
by the company' as and when such debentures were/are redeemed.
o As the SNCRDs were issued on a private placement basis, there was no need to register the
Prospectus with the RoC. Therefore, the provisions of section 60 read with section 2(36)
and 56 of the Companies Act, 1956 are not applicable to the Company in this case.
Therefore, the IDLS Regulations are also not applicable.
o Though the Company did not create or maintain a Debenture Redemption Reserve Account
for the purpose of redemption of debentures, the Company was doing the necessary
redemptions from time to time effectively.
o The properties, as mentioned in the agreement for issuance of the SNCRDs, were equitably
mortgaged with Greater Kolkata Infrastructure Debenture Trust (a private trust registered
under the Indian Trust Act, 1882) against the SNCRDs which were issued. The agreement of
mortgage with the trustee was a pre-requirement of filing of Form-10 (as available in MCA
21 portal) with the concerned RoC. Some of the mortgaged properties, under mortgage of
the debenture trustee, for securing the debentures, belonged to the directors of the
Company and others were third party security.
o The properties charged with the Debenture Trustess had an estimated value of Rs.9.64
crores and none of the properties (which were charged against the issuance of debentures)
belongs to the Company directly. Accordingly, the value of fixed assets including its capital
work in progress of the Company as on March 31, 2010 totals Rs.1.67 crore as reflected in
the Balance Sheet of the Company made upto March 31, 2010.

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o As the issue of SNCRDs was duly covered by sufficient assets the interests of the debenture
holders of the Company are/were fully protected and hence the Company has full ability to
fulfill its obligation in redeeming the debentures on maturity. Therefore, the debt-equity ratio
of 180:1 as alleged does not apply to the Company.
o The Company has decided to redeem the balance debentures which are lying unpaid with the
Company and that the Company has already started the process of redeeming and repaying
the unpaid SNCRDs in consultation with the Debenture Trustees.
The Company and its directors also undertook (i) not to mobilize any fund 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 either directly or indirectly;
(ii) not to issue any prospectus or any offer documents or issue advertisement soliciting
money from the public by issue of any sort of securities either directly or indirectly;
(iii) to provide full inventory of its assets and properties;
(iv) not to divert/dispose/alienate/encumber any assets and properties of the Company;
(v) to submit necessary certificates regarding unpaid debentures;
The Company submitted that as it has taken appropriate steps for earlier redemption of the unpaid
debentures, it was desirable that the case be closed and no further action against the Company/its
directors should be contemplated by SEBI. The Company further stated that SEBI is at liberty to
verify the facts and can call upon the directors of the Company to place necessary documents as may
be proper. The Company further requested SEBI to recall the SEBI Order.
6.

The Greater Kolkata Infrastructure Debenture Trust (this entity is not registered with SEBI as

a debenture trustee), vide letter dated June 26, 2014, inter alia made the following submissions:
"On receipt of your letter under reference the undersigned took up the matter with M/s Greater Kolkata
Infrastructure Limited wherein the undersigned was informed that a similar letter under reference was also
forwarded to the said company and necessary reply to the said letter has already been sent to your good office.
On perusal of such reply of the company the undersigned came to a conclusion that the company has already
made necessary arrangements for repayment of the balance unpaid / due amount of issued Debentures.

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The said private trust being run and managed by remaining two trustees, as because one of the trustee named
as Mr. Sujoy Roy Choudhury resigned from trusteeship vide his resignation letter dated 20/11/2011, and
the Board of the Trustee of the said private trust, accordingly released him from such duty. The said private
trust who always works on behest of the protection of interest of such debenture holders of the company and
one of such trustee named as Mr. Bimalendu Rakshit, being the director (nominee) of the said company and
acting as nominee director of the said company with effect from 01/04/2011.
After due payment all such unpaid / outstanding dues arising from issuance of such privately placed
debentures, the undersigned with the directors of the said company necessary steps will be taken forthwith
satisfaction of the charge created by the company, in accordance to law and further the said private trust will
release the balance immovable properties as lying with the trustee as mortgage."
The Trust requested that the notice issued to it be withdrawn.
7.

In response to the notice informing the date of personal hearing, Mr. Sujoy Roy Choudhury

vide letter dated July 02, 2014, while reiterating his earlier submission (made vide his letter dated June 23,
2014) stated that his presence in the personal hearing is not required and requested SEBI to
appreciate his submissions.
8.

An opportunity of personal hearing was afforded in the matter on August 07, 2014, when

Mr. Bichitra Nanda Muni, Advocate submitted that he represents the Company, its directors and
Debenture Trustees and filed a statement stating that the Company has complied with paragraph 13
of the SEBI Order and that (a) the Company and its directors have stopped the activities of mobilizing funds through the
impugned debentures;
(b) the list of immovable properties and assets of the Company were claimed to be attached;
(c) the Company has a liability of Rs.61,58,000/- (including interest of Rs.8,30,000/- as on October
01, 2013). The Auditor's Certificate was stated to have been submitted earlier.
The Advocate also undertook to furnish a fresh Auditor's Certificate and the debenture liability as
on date (i.e., as on the date of hearing).
9.

I have considered the allegations and observations made in the SEBI Order, the submissions

made by the Company, its directors and debenture trustees and the material available on record.

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The Company is alleged to have contravened the provisions relating to the norms for issuing
securities to the public stipulated under section 56, 60 read with 2(36) and 73 of the Companies Act,
1956 and the relevant provisions of the ILDS Regulations in respect of its issuance of NCDs. As
per the SEBI Order, the Company had issued NCDs since incorporation to the a large number of
investors as per details below:

Year

Type of Security

No. of Subscribers to the Issue

2009 10

Secured NCDs

5,356

1.02

2010 11

Secured NCDs

4,198

5.77

2011 12

Secured NCDs

529

2.21

10,083

9.00

Total

Total Amount (`in Crores)

As per the above details, the Company has issued NCDs during the years 2009-2010 to 2011-2012
and has mobilised an amount of Rs.9 crores. The Company has admitted that it had, after obtaining
due permission from the concerned RoC, proceeded in issuing the Secured NCDs not exceeding
Rs.9 crores which was repayable on or before 6 1/2 years from the date of issue of the said securities.
10.

The Company had initially submitted (vide letter dated November 23, 2012) that it had issued

such securities to the members of the Calcutta Government Employees' Shelter and Welfare Association,
registered under the provisions of the West Bengal Society Registration Act, 1961, on a purely
private placement basis. However, vide its reply dated June 24, 2014, to the SEBI Order, the
Company and its directors have contended that the offer of such SNCRDs was made only to the
Calcutta Government Employees' Shelter and Welfare Association and that the said Association
(being the original allottee of SNCRDs) had subsequently requested the Company for transfer of
such NCDs in favour of a total of 10,083 members of the Association during the years 2009-2010 to
2011-2012 amounting to a total of Rs.8.92 crores. The Company further submitted that due to
inadvertence and oversight, it informed SEBI that the original allottees were the members of the
registered association instead of submitting that those members were mere transferees/nominees of
the NCDs. However, the Company or its directors did not file any documents with respect to this
contention and have merely stated that its directors could be called for placing the documents.

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11.

During the personal hearing too, the Advocate did not present the above contention with

supporting documents and had on the other hand stated that the Company has redeemed the
debentures and has a liability of only Rs.61,58,000/- against the unpaid debentures and interest. The
Company had also submitted that it is taking steps for early redemption of the debentures.
Considering the above facts and circumstances, I find that the contentions now made by the
Company are not supported by documents and therefore dismissed accordingly. I also note that
SEBI has made a reference to the Director, Economic Offences Cell, Finance Department, Kolkata
referring to the Company's submission that 'it has allotted debentures to the registered members of
the Government Employees' Association' and that "it is possible that illegal allotment might have been made
to the government employees, we request you to take necessary action".
12.

As alleged in the SEBI Order, I refer to section 67 of the Companies Act, 1956, which 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).
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, in all the above financial years i.e, 20092010, 2010-2011 and 2011-2012, the number of investors to whom the NCDs were allotted exceed
50 persons. Therefore, without any iota of doubt the issue of NCDs made by the Company during

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the aforesaid period is a public issue of such securities and that the offer of such NCDs was made to
the 'public'.

While examining the scope of section 67 of the Companies Act, 1956, 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'), had observed
that:
"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.
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, 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.
... ... 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. "
[Emphasis supplied]
Having therefore made a public issue of NCDs during 2009-2010, 2010-2011 and 2011-2012, the
Company was mandated to comply with all the applicable provisions of the Companies Act, 1956

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including compliance with sections 56, 60 and 73 of the Companies Act, 1956. In terms of the
section 2(36) of the Companies Act read with section 60 thereof, a company needs to register its
'prospectus' with the RoC, before making a public offer/ issuing the 'prospectus'. 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. The Company has not allegedly complied with these provisions of law. Further, by
offering and 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 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.
In the matter of the Saharas, the Hon'ble Supreme Court of India, while examining the provisions of
section 73 of the Companies Act, 1956 has observed as under :
"93. 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 collected from the public with interest is also mandatory
as per Section 73(2) of the Act.

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94. Listing is, therefore, a legal responsibility of the company which offers securities to the public, provided offers are
made to more than 50 persons. ... ... A company cannot be heard to contend that it has no such intention or idea to
make an application to the stock exchange. "
The above requirements are statutory in nature and a company which has made a public issue of
securities cannot have any option but to comply with such statutory provisions. The Company has
belatedly contended that it has allotted securities to the Association and therefore it is not required
to comply with the above provisions. The above contention has already been dismissed as made
without any supporting documents. Therefore, I hereby conclude that the Company has failed to
comply with the provisions of sections 56, 60 read with 2(36) and 73 of the Companies Act, 1956 in
respect of its offer and issuance of NCDs during the aforesaid Financial Years.
13.

The Company is also alleged of failing to comply with the following provisions of the ILDS

Regulations in respect of its offer and issuance of NCDs:

i. Regulation 4(2)(a) Application for listing of debt securities
ii. Regulation 4(2)(b) In-principle approval for listing of debt securities
iii. Regulation 4(2)(c) Requirement of Credit rating
iv. Regulation 4(2)(d) Dematerialization of debt securities
v. Regulation 4(4) Appointment of Debenture Trustee
vi. Regulation 5(2)(b) Disclosure requirements in the Offer Document
vii. Regulation 6 Filing of draft Offer Document
viii. Regulation 7 Mode of disclosure of Offer Document
ix. Regulation 8 Advertisements for Public Issues
x. Regulation 9 Abridged Prospectus and application forms
xi. Regulation 12 Minimum subscription
xii. Regulation 14 Prohibition of mis-statements in the Offer Document
xiii. Regulation 15 Trust Deed
xiv. Regulation 16(1) Debenture Redemption Reserve
xv. Regulation 17 Creation of security
xvi. Regulation 19 Mandatory Listing
xvii. Regulation 26 Obligations of the Issuer, etc.
In view of the above finding that the offer and issuance of NCDs by the Company was a public
issue of such securities, the Company was mandated to comply with the provisions of the ILDS

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Regulations as the NCDs are in the nature of 'debt securities' as defined under the ILDS Regulations.
The Company admittedly did not comply with the same and has contended that the said regulations
are not applicable to its offer and issue of NCDs. However, in view of the above observations, I
hereby find the Company culpable of having failed to comply with the ILDS Regulations also in
respect of its offer and issue of NCDs.
14.

I also note that the SEBI had inter alia observed " GKIL was incorporated on October 5, 2009. The

Offer of NCDs was stated to have been made on a private placement basis pursuant to the Resolution passed at the
Board Meeting of GKIL held on November 5, 2009. The "Offer of NCDs" therefore, occurred immediately within a
month of GKIL's date of incorporation". The SEBI Order has also observed "From the Balance Sheet for the
year ending March 31, 2012, it is observed that there was a significantly high DebtEquity ratio i.e. 180:1. Such a
high DebtEquity ratio is prejudicial to the interest of the debenture holders and may significantly hamper the ability
of the company to fulfill its obligation of redeeming the debentures on maturity". While perusing the Balance
Sheet for the year 2011-2012, I note that the Company has stated that it has issued Secured
Bonds/debentures for Rs.9,00,00,000/- as on March 31, 2012 and the said figure for the year ended
March 31, 2011 was Rs.6,79,15,400/-.
15.

As regards the Debenture Trustees, namely, Mr. Bimalendu Rakshit (one of the Company's

directors), Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev, the SEBI Order has observed "11.1
From information obtained by SEBI from the MCA 21 Portal, it is observed that GKIL appointed Shri Bimalendu
Rakshit, Shri Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev as Debenture Trustees for the issue of NCDs by
that company. Further, it is observed that an Agreement for issue of NCDs was executed between GKIL and Shri
Bimalendu Rakshit, Shri Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev (representing Greater Kolkata
Infrastructure Debenture Trust) on November 7, 2009." The SEBI Order has alleged that the above
persons appointed as 'debenture trustees' of the Company do not meet the eligibility criteria
specified under regulation 7 of the DT Regulations and that the said debenture trustees are not
registered with SEBI as required under section 12(1) of the SEBI Act.
I have perused Form-10 (particulars of registration of charges for debentures) with respect
to 'Creation of Charge', wherein it is mentioned that the Trustees of Greater Kolkata Infrastructure
Debenture Trust are 'the trustee of debenture holders or charge holder'. As per this document, the
date of creation of charge was on November 07, 2009.

The charge was for 'Entire series of

debentures' and the date of issue of series was on November 07, 2009.

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I have also perused a copy of the Agreement dated November 07, 2009 executed between
the Company and the Greater Kolkata Infrastructure Debenture Trust with respect to securing the
NCDs so issued by the Company. As per this Agreement, the Trustees of the above Trust are Mr.
Bimalendu Rakshit (Managing Trustee), Mr. Sujay Roy Choudhury (Debenture Trustee) and Smt.
Sherrie Lal Vasdev (Debenture Trustee), and that they have been appointed on November 05, 2009.
The Greater Kolkata Infrastructure Debenture Trust, Mr. Bimalendu Rakshit and Smt. Sherrie Lal
Vasdev, while not refuting the allegations leveled against them in the SEBI Order have submitted
that the Company 'has already made necessary arrangements for repayment of the balance unpaid / due amount of
issued Debentures.' It was further submitted that "After due payment all such unpaid / outstanding dues arising
from issuance of such privately placed debentures, the undersigned with the directors of the said company necessary steps
will be taken forthwith satisfaction of the charge created by the company, in accordance to law and further the said
private trust will release the balance immovable properties as lying with the trustee as mortgage". As the Trust and
its Trustees are not registered with SEBI as "Debenture Trustees" and are not eligible in terms of
regulation 7 of the DT Regulations, I hereby find that such persons have contravened section 12(1)
of the SEBI Act. This finding shall hold good as against Mr. Sujay Roy Choudhury also regardless of
the fact that he had resigned as a trustee during 2011.
The SEBI Order has also alleged that the Company has contravened sections 117B and
117C of the Companies Act, 1956. By failing to file a Prospectus and stating that the Company has
appointed a Debenture Trustee and further stating on the face of it that the debenture trustees have
consented for being appointed, the Company has contravened section 117B of the Companies Act.
The Company has admitted that it did not create a

debenture redemption reserve for the

redemption of such debentures. In view of the same, the Company has contravened section 117C of
the said Act.

I also note that SEBI has referred the above violations to the Regional Director,

Ministry of Corporate Affairs and requested them to take necessary action.

The SEBI Order has alleged that the charge created for securing the debentures was not
supported by adequate assets/security. In this regard, I note the following observation from the
SEBI Order :
"Form 10 (filed by GKIL with the ROC in accordance with the provisions of the Companies Act, 1956), reveals
that GKIL created Charge for an amount of `9 Crores on November 7, 2009, in respect of the Offer of NCDs.
Further, the aforesaid document reveals that the debentures so issued, shall be secured by way of deposit of title deeds of

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immovable property (value of which was estimated at `9.64 Crores) with the Debenture Trustee. However, from the
Balance Sheet for the year ending March 31, 2010 (as submitted by GKIL), it is seen that the value of fixed assets
including capital work-in-progress (WIP) was only `1.67 Crores. The aforesaid fact clearly indicates that Charge
created by GKIL to secure the issuance of debentures, was not backed by sufficient assets."
In this regard, the Company submitted that the properties charged with the Debenture
Trustess had an estimated value of Rs.9.64 crores and none of the properties belonged to the
Company directly and further submitted " .....the value of fixed assets including its capital work in progress of
the Company as on March 31, 2010 totals Rs.1.67 crore as reflected in the Balance Sheet of the Company made upto
March 31, 2010".

The Company has submitted that the properties kept as security with the

Debenture Trustees do not belong to the Company and that some of the mortgaged properties (for
securing the debentures) belonged to the directors of the Company and third parties. In view of
such submissions, it is not clear as to how the Company has secured the entire series of debentures
totaling Rs.9 crores issued by it.
16.

The SEBI Order has stated that as per the details submitted by the Company, its directors

are Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit. As per the information
('List of Signatories' and 'Companies in which a person is/was a director') available from the website of the
Ministry of Corporate Affairs, the following are their details :
List of Signatories
DIN/DPIN/PAN

Full Name

Present residential
address

Designation

Date of
Appointment

01642274

SUBIR DUTTA

49/58PRINCE GOLAM MD
SHAH ROAD LP 31/13/4,
KOLKATA, 700045, West
Bengal, INDIA

Director

04/03/2013

02732014

99/1B LAKE TERRACE

NAKHAT SING AGARWALLA KOLKATA-700029, KOLKATA,
700029, West Bengal, INDIA

Director

21/02/2013

03145637

BIMALENDU RAKSHIT

5/21CHITTARANJAN COLONY,
KOLKATA MUNICIPAL
JADAVPUR SOUTH 24
Director
PARGANAS, KOLKATA, 700032,
West Bengal, INDIA

Date of original
appointment

05/10/2009

05/10/2009

01/04/2011
01/04/2011

As mentioned above, Mr. Subir Dutta and Mr. Nakhat Sing Agarwalla were appointed as a director
on October 05, 2009. Mr. Bimalendu Rakshit was appointed on April 01, 2011. These persons were
in-charge of the affairs of the Company during the period when the impugned offer and issue of
securities were made to the public. Accordingly, Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and

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Mr. Bimalendu Rakshit are liable, as the directors of the Company during the relevant period, for the
contraventions committed by the Company in respect of its issue of NCDs.
17.

In view of the above violations and irregularities committed by the Company and its

directors in raising funds against issuance of debentures, the natural consequence would be to direct
the Company/its directors to refunds the money so collected from the investors with returns that
were promised under such debentures. I also note that SEBI is in receipt of complaints from
investors who had subscribed to the debentures offered and issued by the Company, alleging that
the Company has, through its agent, collected the original debenture certificates and has not
redeemed the debentures and paid them their dues.
18.

During the personal hearing, the Company through its Advocate, has submitted that the

Company has a liability of Rs.61,58,000/- only (including interest of Rs.8,30,000/- as on October 01,
2013) under its debentures. In this regard, I note the following contents made in the Certificate
dated June 24, 2013 issued by the Chartered Accountant of the Company, as tendered during the
personal hearing :
"...........
.....certify that upto 20th day of June, 2013, the company collected the fund of Rs.9,00,00,000.00 [Rupees
nine crore only] ............ Secured Redeemable Non-Convertible Debenture from Calcutta Government Employee's
Shelter and Welfare Association .... also the above mentioned society (had) raised those funds from their 10,083
members.
I also certify that upto 20th day of June, 2013, the company has already redeemed the Secured Redeemable
Non-Convertible Debenture of Rs.8,38,41,100.00 .... as on 20th day of June 2013 as per books of accounts of the
company, the outstanding balance of Secured Redeemable Non-Convertible Debenture is Rs.61,58,900.00...."
However, the Company has not produced any other evidence (bank statements, receipts etc)
to prove its claimed refunds to the investors. Though the Advocate had assured during the personal
hearing that the Company would file a latest statement regarding its liability, it has not been done.
19.

In view of the foregoing observations and findings, 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 SEBI (Issue and Listing of Debt Securities)
Regulations, 2008, hereby issue the following directions :

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(a) Greater Kolkata Infrastructure Limited (CIN No. U45400WB2009PLC138699 and

PAN AADCG5611P), its promoters and directors including Mr. Subir Dutta (PAN AFYPD5024N and DIN - 01642274), Mr. Nakhat Sing Agarwalla (DIN - 02732014)
and Mr. Bimalendu Rakshit (PAN - AVIPR2257F and DIN - 03145637), 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.
(b) The repayments to investors shall be effected only in cash through Bank Demand Draft or
Pay Order.
(c) The Company and its directors, Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr.
Bimalendu Rakshit 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.
(d) The Company and its directors, Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr.
Bimalendu Rakshit 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.
(e) Greater Kolkata Infrastructure Limited, its promoters and directors including Mr. Subir
Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit shall issue public
notice, in all editions of two National Dailies (one English and one Hindi) and in one local
daily (in Bengali) 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.
(f) After completing the aforesaid repayments, the Company shall file a certificate of such
completion with SEBI from 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").
(g) As the Company has claimed to have repaid a sum of Rs.8,38,41,100/- to its investors
through redemption of debentures, the claimed repayments shall also be certified by
Chartered Accountants, as directed in sub-paragraph (f) above.

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(h) Greater Kolkata Infrastructure Limited and its directors Mr. Subir Dutta, Mr. Nakhat
Sing Agarwalla and Mr. Bimalendu Rakshit 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.
(i) Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit 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.
(j) Mr. Bimalendu Rakshit, Mr. Sujay Roy Choudhury and Smt. Sherrie Lal Vasdev, the
persons who were been appointed as debenture trustees in contravention of law, 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.
(k) The period of debarment as directed against Mr. Bimalendu Rakshit in sub-paragraphs (h)
and (j) shall run concurrently.
(l) The above directions shall come into force with immediate effect.
20.

In case of failure of the company, Greater Kolkata Infrastructure Limited and its

directors Mr. Subir Dutta, Mr. Nakhat Sing Agarwalla and Mr. Bimalendu Rakshit to comply
with the aforesaid directions, SEBI shall take appropriate action against them and other
persons/officers who are in default, including launching of prosecution proceedings, adjudication
proceedings and recovery proceedings against them, in accordance with law.
21.

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.

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22.

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

information and necessary action.

23.

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 its directors.

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Date : FEBRUARY 06, 2015
Place: Mumbai

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