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Date of Decision: February 07, 2017
COUNCIL OF THE INSTT. OF CHARTERED ACCOUNTANTS OF INDIA ..... Petitioner
Represented by: Mr.Rakesh Aggarwal, Advocate with
Mr.Pulkit Aggarwal, Advocate
Represented by: None
HON'BLE MR. JUSTICE YOGESH KHANNA PRADEEP NANDRAJOG, J. (Oral)
JUDGMENT
1. A company by the name of Padmini Packaging Pvt. Ltd. changed its name to Padmini Polymers Pvt. Ltd. on December 23, 1992. It changed its name with effect from June 14, 2000 to Padmini Technologies Ltd.
2. When named Padmini Polymers Pvt. Ltd. the company invited applications on June 20, 1999 for allotment of 1,80,00,000 preferential shares for cash at par. These shares were listed for trading at Delhi Stock Exchange on December 23, 1999 and with the Bombay Stock Exchange on December 30, 1999 on the strength of three certificates issued by the respondent. The certificate dated June 30, 1999 certified that the company received `8,52,50,000/- as share money in respect of the preferential shares. The language of the certificate issued by the respondent reads, inter-alia, as 2017:DHC:719-DB under:- “……… On, the basis of our verification, we certify that the Company had already received `8,52,50,000/- Share money in respect of Preferential issue of 2,00,00,000 new Equity Shares of `10/- per share aggregating `20,00,00,000/-, as per details given below: Number of shares Amount (`)- per share Total Amount ` 47,00,000 10.00 4,70,00,000/- 1,53,00,000 2.50 3,82,50,000/-
3. The second certificate of even date, being a due diligence certificate, issued by the respondent reads as under:- “DUE DILIGENCE CERTIFICATE Re: Padmini Polymers Limited Preferential Allotment of 2,00,00,000/- Equity Shares of `10/each aggregating to `20,00,00,000/i) We have examined various documents and materials facts/papers in connection with the Preferential Allotment. ii) On the basis of such examination and discussion with the Company, its Directors and other Officers, Other Agencies, independent verification of the statements concerning the objects of the Preferential Allotment, Price justification and the contents of other Documents and papers furnished by the Company. We confirm that: (a) The Preferential Allotment of Shares is in conformity with the documents/materials and papers relevant to the Preferential Allotment. (b) All legal requirements connected with said Allotment as also the guidelines and instructions etc. issued by SEBI, the Government and any other competent authority in this behalf have been duly complied with”
4. The third certificate dated November 13, 1999 issued by the respondent reads as under:- “TO WHOMSOEVER IT MAY CONCERN This is to certify the detail of receipt of Share Application Money aggrebgating to `8,52,50,000/- realised & credited to the account of M/s Padmini Polymers Limited is given as under:- S.No.
NAME OF ALLOTIES CHQ NO. CHQ.
DT DRAWN ON AMOUNT
1. Contessa Commercial Co Pvt. Ltd 175826 21.05.99 State Bank of Hyderabad 90,00,000.00
2. Bhumenfeld Ltd 307471 17.05.88 State Bank of Bikaner and Jaipur 90,00,000.00
3. Jiwansagar Promoters Pvt. Ltd 671542 07.06.99 State Bank of Hyderabad 22,50,000.00
4. Bhagwandas Sagarmal 155361 28.06.99 State Bank of Hyderabad
5. Cherry Marketing P. Ltd 43682 01.06.99 Vijaya Bank 22,50,000.00
6. Alok Khelan 149653 25.05.99 HDFC Bank 22,50,000.00
7. J.P. Promoters P. Ltd 780801 21.05.99 Canara Bank 90,00,000.00
8. Herrnonite Surgicals P. Ltd 19870 03.06.99 Vijaya Bank 22,50,000.00
9. Royal Bengal Exports P. Ltd 750970 03.05.99 The Fedral Bank Ltd.
10. Prakash Kumar Damani (HUF) 612294 01.06.89 Vijaya Bank 22,50,000.00
11. Carna Enterprises P. Ltd 43565 01.06.99 Vijaya Bank 22,50,000.00
12. Raj Kumar Kishorepuria 931394 01.06.99 State Bank of Hyderabad
13. Zinga Chemicals Pvt. Ltd 22965 02.06.99 Vijaya Bank 22,50,000.00
14. Hennonite Consultants P Ltd. 42454 02.06.99 Vijaya Bank 22,50,000.00
15. Savara Tic-up Pvt. Ltd 739153 03.06.99 The Federal Bank Ltd.
16. HT Ferro P Ltd. 596160 03.06.99 Bank of Baroda
17. Pramod Kumar Kishorepuna 915595 25.05.[9] State Bank of …..
18. Prakash Kumar Damani 92047 01.05.99 Vijaya Bank 22,50,000.00
19. VB IMpex P. Ltd. 651401 21.05.99 Vijaya Bank 22,50,000.00
20. S. Benwal 413113 28.05.99 Union Bank of ……
21. Unit Trust of India 445867 25.05.99 UTI Bank Ltd. 2000,00,000.00 Total 8,62,60,000.00
5. Being relevant for the purposes of the fate of the respondent, we need to highlight that in the third certificate the respondent mentioned the name of the allottee, the cheque number issued by the allottee, the date of the cheque, the bank on which the cheque was drawn. The date of encashment of the cheque has consciously not being recorded in the certificate. We shall deal with this aspect while reasoning.
6. It came to the notice of the SEBI that the share price of the company unduly increased from December 13, 1999 to March 09, 2000. From `60.95 it rose to `266/-. Thereafter the price of the shares declined and by May 15, 2000 it fell to `47/-. Subsequently the price increased to `118.10 on July 06, 2000 and fell to `55.65 on August 08, 2000.
7. In view of the unusual price movement, SEBI conducted an investigation in which it was revealed that 2,00,00,000/- equity shares for cash at par were allotted as under:-
┌────────────────────────────────────────────────────────────────────────────────────────────────────────┐ │ Sl. Allotment Date Name of Allottees Shares Allotted Paid up │ │ No. value │ │ (`/share) │ ├────────────────────────────────────────────────────────────────────────────────────────────────────────┤ │ 1. 31.5.1998 Unit Trust of India 2000000 10 │ │ 2. 20.5.1999 Contessa Commercial Co. P 900000 2.5 │ │ Ltd. │ │ Chat.A.Ref.No.3/2011 Page 4 of 10 │ │ 2017:DHC:719-DB │ │ 3. -do- Billumenfeld Ltd. 900000 10 │ │ 4. -do- Jiwansagar Promoters Pvt. 900000 2.5 │ │ Ltd │ │ 5. -do- Bhagwandas Sagarmal 900000 2.5 │ │ 6. -do- Raj Kumar Kishorepuria 900000 2.5 │ │ 7. -do- Pramod Kumar Kishorepuria 900000 2.5 │ │ 8. -do- Alok Khetan 900000 2.5 │ │ 9. -do- Savera Tie-up P Ltd 900000 2.5 │ │ 10. -do- Royal Bengal Exports Pvt. Ltd 900000 2.5 │ │ 11. -do- S. Benwal 900000 2.5 │ │ 12. -do- Prakash Kumar Damani 900000 2.5 │ │ (HUF) │ │ 13. -do- Prakash Kumar Damani 900000 2.5 │ │ 14. -do- Carna Enterprises P Ltd 900000 2.5 │ │ 15. -do- Zinga Chemicals P. Ltd 900000 2.5 │ │ 16. -do- Hemmonite Consultant P Ltd 900000 2.5 │ │ 17. -do- Cherry Marketing P Ltd. 900000 2.5 │ │ 18. -do- HT Ferro P Ltd 900000 2.5 │ │ 19. -do- Hermonite Surgicals P Ltd 900000 2.5 │ │ 20. -do- V B Impex P Ltd. 900000 10 │ │ 21. -do- J P Promoters P Ltd. 900000 10 │ │ 2,00,00,000 │ └────────────────────────────────────────────────────────────────────────────────────────────────────────┘
22. Unfortunately we do not have any assistance from the respondent who has chosen not to appear today and would therefore highlight that in the certificate dated November 13, 1999 the respondent has consciously omitted to add the column of the date when the cheques were encashed for the reason he knew that no cheque had been encashed by the date he gave the certificate. We would also highlight that before the Disciplinary Committee that the respondent relied upon Form 2 which had been submitted by the Company to the Registrar of Companies, and suffice it to record that said form could not form the basis on which the respondent issued the certificates because the date of issue of said form under signatures of the Company Secretary of the Company, is much after the date when the three certificates were issued by the respondent.
23. Accepting the report of the Disciplinary Committee, the Council at its meeting recommended penalty of removal of the name of the respondent from the Register of Members of the Institute for a period of five years.
24. We concur.
25. The reference is disposed of levying penalty of removal of the name of the respondent from the Register of Members of the Institute of Chartered Accountants for a period of five years.
26. No cost. (PRADEEP NANDRAJOG) JUDGE (YOGESH KHANNA)