order in respect of rdb rasayans ltd. and its directors, mr. sunder lal dugar , mr. shanti lal baid...

7/26/2019 Order in respect of RDB Rasayans Ltd. and its directors, Mr. Sunder Lal Dugar , Mr. Shanti Lal Baid and Mr.Sandee

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Order in the matter of RDB Rasayans Limited Page 1 of 23

WTM/RKA/EFD-DRA-II /160/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

UNDER SECTIONS 11(1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE

BOARD OF INDIA ACT, 1992.

IN RESPECT OF RDB RASAYANS LTD. AND ITS DIRECTORS, MR. SUNDER

LAL DUGAR (CHAIRMAN),MR.SHANTI LAL BAID (MANAGING DIRECTOR)

AND MR. SANDEEP BAID (WHOLE TIME DIRECTOR)

1. RDB Rasayans Limited (hereinafter referred to as "RDB"), a company based in Kolkata,

came out with an Initial Public Offering ("IPO") for 45,00,000 equity shares of face valueof `10 each in the price band of `72-`79 per share during the period 21-23 September,

2011 through 100% book building route. The issue size was`35.55 crore. The shares were

allotted at a upper price band of `79 each to the shareholders and the scrip was listed on

BSE Limited (BSE) on October 07 2011. The registrar to the issue was Link Intime India

Private Limited and the Book Running Lead Manager (BRLM) was Chartered Capital

Investment Limited. Brickworks Rating had assigned IPO Grade of 2, i.e., 'Below Average

Fundamentals' to the said IPO.

2.

The 'Objects of the issues' as stated in the prospectus of RDB are given below:

Sr. No. Particulars Amount

(in cr)

1 To finance the capital expenditure to enhance the

manufacturing capacity by 7450 MTPA by establishing the

UnitII

27.82

2 To meet General Corporate Purpose 5.01

3 To meet Issue Expenses 2.72TOTAL 35.55

(Source: RDB Prospectus)

3. Wide fluctuations in the price of the scrip of RDB were noticed on the listing day of its

IPO (October 07, 2011) as the scrip opened at`85/- and closed at`26.95/-. In view of the

same, a preliminary investigation was conducted by Securities and Exchange Board of India

(SEBI), into the IPO of RDB Rasayans Limited.

4.

During the preliminary investigation, the following inter alia was observed:(a) RDB had made mis-statements in its Red Herring Prospectus (RHP)/Prospectus by

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failing to disclose certain material developments;

(b)RDB had mis-utilized the IPO proceeds for the purposes other than the objects stated

in the RHP/Prospectus;

(c) RDB had transferred `31.6 crores from the IPO proceeds to its group entity, RDB

Realty and Infrastructure Limited (RDBRIL) which was not in line with the objects ofthe issues as stated in the Prospectus;

(d)There were several transfers of issue proceeds of RDB to certain trading clients namely,

Prakashbhai Ishwarbhai Rana (Prakashbhai), Dave Harihar Kiritbhai (Dave), BMD

Exports Pvt. Ltd. (BMD) and Shreyanshnath Shares and Financial Services Private

Limited (Shreyashnath) (hereinafter collectively referred to as the trading clients or

individually by their respective names) who had incurred losses by trading in the scrip

on the listing day.

5.

On the basis of these findings of the preliminary investigation and pending completion of

the investigation, SEBI passed an ad interim ex-parte order dated December 28, 2011

(hereinafter referred to as the interimorder), which inter alia, issued the following directions

against RDB and its directors:

(a) Prohibiting RDB from raising any further capital from the securities market, in any

manner whatsoever, till further directions.

(b)Prohibiting RDB as well as Mr. Sunder Lal Dugar (Chairman), Mr. Shanti Lal Baid

(Managing Director), Mr. Sandeep Baid (Whole-time Director) from buying, selling or

dealing in the securities market in any manner whatsoever, till further directions(c) Directing RDB to call back`31.60 crores from RDBRIL which has been given as inter

corporate loan and to deposit these amounts in an interest bearing escrow account with

a scheduled commercial bank, till further orders. A confirmation on compliance of this

direction was directed to be sent by the RDB to BSE, within 7 days from the date of

this order.

6. SEBI also granted an opportunity to RDB and Mr. Sunder Lal Dugar, Mr. Shanti Lal Baid,

Mr. Sandeep Baid (hereinafter collectively referred to as the Noticees or individually by

their respective names) to file their objections within 21 days from the date of the interim

orderand avail an opportunity of personal hearing. However, RDB and Mr. Shanti Lal Baid

(hereinafter collectively referred to as the two petitioners) filed a writ petition (Writ

Petition no. 1971 (W) of 2012) before the Honble Calcutta High Court contending inter alia

that sections 11, 11B and 19 of the Securities and Exchange Board of India Act, 1992 (the

SEBI Act) are ultra viresthe Constitution of India and prayed for a stay on the operation of

the interim order. By an order dated February 08, 2012, while the Hon'ble Calcutta High

Court, observed that it did not find any reason to stay the impugned interimorderbut that

the same shall not prevent SEBI from carrying on further investigation into the matter. Italso directed SEBI not to pass any further order in the pending proceedings during the



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pendency of the petition.

7. Pursuant to the same, the two petitioners filed an application before the Ld. Single Judge of

the Hon'ble High Court seeking modification of the order dated February 08, 2012 to the

extent that RDB be allowed to withdraw an amount of `6.5 Crores from the amountdeposited in the escrow bank account. Vide interim order dated July 18, 2012, the Ld.

Single Judge allowed RDB to withdraw the said amount. Aggrieved by the said order, SEBI

preferred an appeal before the Division Bench of the Hon'ble High Court which, vide

order dated October 16, 2012, observed that there was no scope for granting any interim

relief at that stage. Therefore, SEBI filed a Special Leave Petition before the Hon'ble

Supreme Court against the said order of the Division Bench.

8. In the meantime, before the petition came up for hearing before the Hon'ble Supreme

Court, the detailed investigation carried out by SEBI, subsequent to the preliminary

investigation elicited the following:

(a) RDB and its directors had failed to disclose the details of the proposal of the board of

directors of RDB to lend surplus funds in the form of loan to RDBRIL (which was

clearly meant to be the IPO proceeds because the accumulation of such a huge surplus

could have taken a considerable time) and intentionally bypassed the prospective IPO

shareholders by hurriedly calling an EGM on September 28, 2011 just before the

allotment of shares to the IPO applicants and that too after giving a shorter notice for

the EGMand the samewas not disclosed in the RHP dated September 13, 2011 and

the final Prospectus dated 26, 2011.

(b)RDB and its directors had failed to disclose the details of the ensuing labour problems

which had a direct effect on the operations of the company as well as the expansion

project for which IPO was made.

(c) RDB and its directors had transferred IPO proceeds in the form of an inter corporate

loan to its group company to enable the latter to repay its overdue debts and the same

was not disclosed in the prospectus.

(d) Mr. Sandeep Baid, the Whole Time Director had acted as the Chairman of the Audit

Committee meeting held on October 07, 2011 (which recommended that the IPO

proceeds be given as a loan to RDBRIL), in violation of clause 49 of the Listing

Agreement read with section 21 of the Securities Contract (Regulations) Act, 1956 (the

SCRA).

(e) RDB had transferred a part of the IPO proceeds to persons trading in its scrip on the

listing day of scrip through various inter connected entities, which was utilized to cover



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up the trading losses incurred by them.

9. It may be relevant to state here that before the matter came up for hearing before the

Hon'ble Supreme Court, a common show cause notice (SCN) dated August 05, 2013 was

issued to the aforesaid Noticees inter aliaalleging that RDB and its directors Mr. Shanti LalBaid, Mr. Sunder Lal Dugar and Mr. Sandeep Baid had failed in their duties and

responsibilities towards the investors and thus had violated the provisions of regulation

57(1) and (2) read with Schedule VIII Part A (16), and 60(4) of the Securities and Exchange

Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (the

ICDR Regulations); Clause 49 of Listing agreement read with section 21 of the SCRA;

sections 62, 63 and 68 read with 55A of the Companies Act, 1956; and section 12A(a), (b)

and (c) of the SEBI Act read with regulations 3(a), (b), (c), (d), 4(1), 4(2)(a), (d), (e) of the

Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade

Practices relating to Securities Market) Regulations, 2003 (the PFUTP Regulations) and

therefore advised the Noticees to show cause as to why suitable directions should not be

issued against them under sections 11(1), 11(4) read with section 11B of the SEBI Act,

1992, for allegedly violating the aforesaid provisions of law. The relevant provisions of law

that are alleged to have been contravened in this case are reproduced hereunder:

Companies Act, 1956

55A.POWERS OF SECURITIES AND EXCHANGE BOARD OF INDIA

The provisions contained in sections 55 to 58, 59 to 81 (including sections 68A, 77A and 80A),

108, 109, 110, 112, 113, 116, 117, 118, 119, 120, 121, 122, 206, 206A and 207, so far as

they relate to issue and transfer of securities and non-payment of dividend shall, -

(a) in case of listed public companies ;

(b) in case of those public companies which intend to get their securities listed on any recognised stock

exchange in India, be administered by the Securities and Exchange Board of India ; and

(c) in any other case, be administered by the Central Government.

62. Civil liability for misstatements in prospectus.

(1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in

or debentures of a company, the following persons shall be liable to pay compensation to every person who

subscribes for any shares or debentures on the faith of the prospectus for any loss or damage he may have

sustained by reason of any untrue statement included therein, that is to say,-

(a) every person who is a director of the company at the time of the issue of the prospectus;

(b) every person who has authorised himself to be named and is named in the prospectus either as a

director, or as having agreed to become a director, either immediately or after an interval of time;(c) every person who is a promoter of the company; and



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(d) every person who has authorised the issue of the prospectus:

Provided that where, under section 58, the consent of a person is required to the issue of a prospectus

and he has given that consent, or where under sub-section (3) of section 60, the consent of a person

named in a prospectus is required and he has given that consent, he shall not, by reason of having givensuch consent, be liable under this sub-section as a person who has authorised the issue of the prospectus

except in respect of an untrue statement, if any purporting to be made by him as an expert.

(2) No person shall be liable under sub-section (1), if he proves-

(a) that, having consented to become a director of the company, he withdrew his consent before the issue of

the prospectus, and that it was issued without his authority or consent;

(b) that the prospectus was issued without his knowledge or consent, and that on becoming aware of its

issue, he forthwith gave reasonable public notice that it was issued without his knowledge or consent;

(c) that, after the issue of the prospectus and before allotment thereunder, he, on becoming aware of any

untrue statement therein, withdrew his consent to the prospectus and gave reasonable public notice of the

withdrawal and of the reason therefor; or

(d) that-

(i) as regards every untrue statement not purporting to be made on the authority of an expert or of a

public official document or statement, he had reasonable ground to believe, and did up to the time of the

allotment of the shares or debentures, as the case may be, believe, that the statement was true; and

(ii) as regards every untrue statement purporting to be a statement by an expert or contained in what

purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair

representation of the statement, or a correct copy of, or a correct and fair extract from, the report orvaluation; and he had reasonable ground to believe, and did up to the time of the issue of the prospectus

believe, that the person making the statement was competent to make it and that that person had given

the consent required by section 58 to the issue of the prospectus and had not withdrawn that consent

before delivery of a copy of the prospectus for registration or, to the defendants knowledge, before

allotment thereunder; and

(iii) as regards every untrue statement purporting to be a statement made by an official person or

contained in what purports to be a copy of or extract from a public official document, it was a correct and

fair representation of the statement, or a correct copy of or a correct and fair extract from, the document:

Provided that this sub-section shall not apply in the case of a person liable, by reason of his having

given a consent required of him by section 58, as a person who has authorised the issue of the prospectus

in respect of an untrue statement, purporting to be made by him as an expert.

(3) A person who, apart from this sub-section, would, under sub-section (1), be liable by reason of his

having given a consent required of him by section 58 as a person who has authorised the issue of a

prospectus in respect of an untrue statement, purporting to be made by him as an expert, shall not be so

liable, if he proves-

(a) that, having given his consent under section 58 to the issue of the prospectus, he withdrew it inwriting before delivery of a copy of the prospectus for registration;



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(b) that, after delivery of a copy of the prospectus for registration and before allotment thereunder, he, on

becoming aware of the untrue statement, withdrew his consent in writing and gave reasonable public

notice of the withdrawal and of the reason therefor; or

(c) that he was competent to make the statement and that he has reasonable ground to believe, and did

up to the time of the allotment of the shares or debentures, believe, that the statement was true.

(4) Where-

(a) the prospectus specifies the name of a person as a director of the company, or as having agreed to

become a director thereof, and he has not consented to become a director, or has withdrawn his consent

before the issue of the prospectus, and has not authorised or consented to the issue thereof; or

(b) the consent of a person is required under section 58 to the issue of the prospectus and he either has

not given that consent or has withdrawn it before the issue of the prospectus;

the directors of the company excluding those without whose knowledge or consent the prospectus wasissued, and every other person who authorised the issue thereof, shall be liable to indemnify the person

referred to in clause (a) or clause (b), as the case may be, against all damages, costs and expenses to

which he may be made liable by reason of his name having been inserted in the prospectus or of the

inclusion therein of a statement purporting to be made by him as an expert, as the case may be, or in

defending himself against any suit or legal proceeding brought against him in respect thereof:

Provided that a person shall not be deemed for the purposes of this sub-section to have authorised the

issue of a prospectus by reason only of his having given the consent required by section 58 to the inclusion

therein of a statement purporting to be made by him as an expert.

(5) Every person who, becomes liable to make any payment by virtue of this section, may recover

contribution, as in cases of contract, from any other person who, if sued separately, would have been

liable to make the same payment, unless the former person was, and the latter person was not, guilty of

fraudulent misrepresentation.

(6) For the purposes of this section-

(a) the expression "promoter" means a promoter who was a party to the preparation of the prospectus or

of the portion thereof containing the untrue statement, but does not include any person by reason of his

acting in a professional capacity for persons engaged in procuring the formation of the company; and(b) the expression "expert" has the same meaning as in section 58.

63. Criminal liability for mis-statements in prospectus

(1) Where a prospectus issued after the commencement of this Act includes any untrue statement, every

person who authorised the issue of the prospectus shall be punishable with imprisonment for a term

which may extend to two years, or with fine which may extend to [fifty] thousand rupees], or with both,

unless he proves either that the statement was immaterial or that he had reasonable ground to believe,

and did up to the time of the issue of the prospectus believe, that the statement was true.



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68. Penalty for fraudulently inducing persons to invest money.

Any person who, either by knowingly or recklessly making any statement, promise or forecast which is

false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to

induce another person to enter into, or to offer to enter into-

(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting sharesor debentures; or

(b) any agreement the purpose or pretended purpose of which is to secure aprofit to any of the parties from

the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures; shall

be punishable with imprisonment for a term which may extend to five years, or with fine which may

extend to ten thousand rupees, or with both.

Section 12 A (a),(b),(c) of the SEBI Act, 1992

Prohibition of Manipulative and Deceptive Devices, Insider Trading and Substantial Acquisition of

Securities or Control

12A.No person shall directly or indirectly

(a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be

listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in

contravention of the provisions of this Act or the rules or the regulations made thereunder;

(b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities

which are listed or proposed to be listed on a recognized stock exchange;

(c) engage in any act, practice, course of business which operates or would operate as fraud or deceit

upon any person, in connection with the issue, dealing in securities which are listed or proposed to belisted on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the

regulations made thereunder;

The SEBI (PFUTP) Regulations, 2003

3. Prohibition of certain dealings in securities

No person shall directly or indirectly-

(a) buy, sell or otherwise deal in securities in a fraudulent manner;

(b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed

in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of

the provisions of the Act or the rules or the regulations made there under;

(c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities

which are listed or proposed to be listed on a recognized stock exchange;

(d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon

any person in connection with any dealing in or issue of securities which are listed or proposed to be listed

on a recognized stock exchange in contravention of the provisions of the Act or the rules and the

regulations made thereunder.

4. (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an

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unfair trade practice in securities.

(2)Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud

and may include all or any of the following, namely:-

(a) indulging in an act which creates false or misleading appearance of trading in the securities market;

....................................................................................................................................................(d) paying, offering or agreeing to pay or offer, directly or indirectly, to any person any money or moneys

worth for inducing such person for dealing in any security with the object of inflating, depressing,

maintaining or causing fluctuation in the price of such security;

(e) any act or omission amounting to manipulation of the price of a security;"

10. Vide its letter dated October 18, 2013 RDB filed its reply to the SCN. Vide their separate

letters Mr. Sandeep Baid (October 18, 2013), Mr. Sunder Lal Duggar (October 19, 2013)

and Mr. Shanti Lal Baid (October 21, 2013) filed their replies and adopted the submissions

made by RDB. The Noticees were also afforded an opportunity of personal hearing on

December 12, 2013 before me when Mr. Vinay Chauhan (Advocate), Mr. K. C. Jacob

(Advocate) appeared along with and Mr. Sandeep Baid on behalf of the Noticees and made

oral submissions in line with their written replies. The Noticees were given liberty to file

any additional submissions within 10 days and vide letter dated March 03, 2014, filed their

additional submissions reiterating the earlier submissions in the matter. The replies and

submissions of the Noticees interaliaare as under:

A. Submissions of RDB:

(a) No misstatements were made in the offer documents nor was there any failure to

disclose material developments. Further, the IPO proceeds were not diverted as alleged.

(b)As per SEBI's directions, it had, interalia, recalled the entire loan amount (i.e., `31.60

crores) from RDBIL along with interest @ 15% (`1.83 crores) and deposited the same

in the escrow account. The details of the said deposit have also been informed to SEBI

vide letter dated March 31, 2012.

(c) On September 12, 2011, the board of RDB had passed a resolution for investing

company's surplus funds by way of grant of loan to RDBRIL, its group company, for its

business purposes in tranches. The said decision was based on the request of RDBRIL

seeking financial assistance from it for its business purposes.

(d)RDBRIL is a company listed on BSE and Calcutta Stock Exchange (CSE) since 2010

and is in the business of real estate and infrastructure. RDB and RDBRIL have common

promoters and some common directors. Since both the companies are group

companies, they enjoy good relationship. In the past both have been giving and

receiving loans from/to each other on commercial terms in the ordinary course of

business. Grant of loan by companies to its group companies is not unusual and

abnormal and same is a routine matter.(e)As on September 12, 2011 it did not intend to transfer the IPO proceeds as loan to its



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group company, as insinuated. In terms of the resolution passed by its board, it was not

mandatory for the company to grant loan to RDBRIL. Idea was that as and when

surplus funds would be available, same would be granted as demand loan to RDBRIL

for its business purposes.

(f)

The situation in Haldia Industrial belt where its unit is located is going through turmoilwith regard to labour relations for past few months. Same was widely reported in the

media, newspapers etc. For decades the labour unions in this belt were controlled by

one prominent political party. With the change of political scenario in West Bengal,

turmoil in labour sector, interalia, in Haldia started. It was in these circumstances, the

management decided to keep the further investments in the projects at Haldia on hold

for the time being and to watch how the situation pans out and decided not to

immediately commit the proceeds of IPO for the project.

(g) Since the IPO proceeds were not immediately required for utilization by RDB towards

the objects of the issue for the reasons stated above, the said funds were in the nature of

surplus with the company. Therefore, in order to avoid keeping the funds idle also in the

light of the request of RDBRIL seeking financial assistance for its business purposes, the

board, based on the recommendations of the Audit Committee, decided to temporarily

transfer the surplus funds as demand loan to the group company.

(h)The Audit Committee of RDB, vide its recommendation dated October 07, 2011, inter

aliarecommended to the board that since managing the funds for the proposed project

will require considerable time and appropriate recommendations from the executives of

the company, the unutilized funds for the time being should be invested in high qualityinterest bearing instruments for the profitability of the company. Further, the Audit

Committee proposed that RDB provide secured loan to its group company(ies) which

will be repayable on demand.

(i) The said transfer of IPO proceeds was in consonance with the disclosures made by it

since it was disclosed in the prospectus that pending utilization of the issue proceeds it

intends to invest the funds in high quality interest bearing instruments.

(j) They had not deliberately reduced the notice period of EGM to 15 days as alleged. The

allegation is completely contrary to factual position on record. The shortening of the

notice period was done in peculiar circumstances, after following the applicable

provisions of the Companies Act.

(k)The recommendations made by the Audit Committee and the decision taken by the

board for grant of demand loan, was in the right interest, inter alia based on several

factors including faith in the financial credibility of the group company, comfort level,

certainty and assurance of repayment with interest. RDB was not dealing with a stranger

or a rank outsider. The discretion exercised by the board, which was permissible in

terms of the disclosure made in the prospectus, was bona fide, in the best interest of the

company and its shareholders and the same cannot be questioned and viewed seriously



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by taking a very restricted, narrow and myopic view regarding ability of RDBRIL to

repay the demand loan.

(l) Further, it is not the case that the loan was casually given without proper security.

Admittedly, the loan was backed by security of mortgage and deposit of post dated

cheques covering the entire loan amount.(m)It had no role to play in the alleged fraudulent and unfair trade practices.

(n)Post transfer of funds from its account to the account of RDBRIL as loan, it was not

aware of the usage of the fund or further transfers by RDBRIL.

(o)No adverse inferences can be drawn against it based on the transfers of funds by

RDBRIL to other entities. It has no say or control over the acts of the other entities.

(p)The observations in the interimorderthat the clients who incurred losses while trading in

the shares had received IPO proceeds or that IPO proceeds were routed to their bank

accounts by RDB is unfounded and baseless. It has not paid any monies to any clients

who traded in the scrip of company on October 07, 2011.

(q)With regard to Audit Committee meeting chaired by a Whole Time Member, it is

submitted that on October 07, 201 Mr. Sachin Sridhar, Independent Director and the

Chairman of the Audit Committee was on leave and was not available. It was in these

circumstances that the meeting was chaired by Mr. Sandeep Baid based on the bonafide

belief he can chair the meeting. Hence there was no violation of the provisions of clause

49 of the Listing Agreement read with section 21 of the SCRA as alleged or the other

provisions alleged to have been violated.

B. Submissions of Mr. Sandeep Baid:

(a) He has acted bonafideand made proper disclosure in the Prospectus, utilized the IPO

proceed strictly in consonance with the disclosures made and always acted in the best

interest of the company and its shareholders. There was no violation of any provisions

as alleged.

(b)He also adopted the submissions made by RDB in support of his contention that he as

well as the board of directors of RDB had acted bonafideand in the best interest of the

company and its shareholders at all points of time, in consonance with all applicable

provisions of law.

(c) He has already suffered debarment for a period of 25 months as on date which

continues. As a result of punitive directions the growth of the company has already

impeded and suffered considerably, to the detriment not only to the company but also

its shareholders.

C. Submissions of Mr. Sunder Lal Dugar:

(a) He has acted bona fideand made proper disclosure in the Prospectus, utilized the IPO

proceed strictly in consonance with the disclosures made and always acted in the bestinterest of the company and its shareholders. He also denied violating any provisions as



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alleged.

(b)He has also adopted the submissions made by RDB in support of his contention that he

as well as the board of directors of RDB have acted in bonafideand best interest of the

company and its shareholders at all points of time, in consonance with all applicable

provisions of law.(c) He has already suffered debarment for a period of 25 months as on date which

continues. As a result of punitive directions the growth of the company has already

impeded and suffered considerably, to the detriment not only to the company but also

to its shareholders.

(d) Further, the IPO proceeds to the extent of `26.13 crores continue to remain

idle/unutilized till date.

D. Submissions of Mr. Shanti Lal Baid:

(a)

He has acted bona fideand made proper disclosure in the Prospectus, utilized the IPO

proceed strictly in consonance with the disclosures made and always acted in the best

interest of RDB and its shareholders. He denied violating any provisions as alleged.

(b)He adopted the submissions made by RDB in support of his contention that he as well

as the board of directors of RDB had acted in bona fideand best interest of the company

and its shareholders at all points of time, in consonance with all applicable provisions of

law.

(c) He has already suffered debarment for a period of 25 months as on date which

continues. As a result of punitive directions, the growth of the company has alreadyimpeded and suffered considerably, to the detriment not only of the company but also

its shareholders.

11. When the matter came up for hearing before the Hon'ble Supreme Court, SEBI and the

two petitioners filed a joint application before the Hon'ble Supreme Court on September

18, 2014 for passing an order as agreed upon between the parties. Hence, the Hon'ble

Supreme Court, vide its order dated September 22, 2014, disposed of the Special Leave

Petition filed by SEBI in terms of the joint application observing as hereunder:

(a) The parties to withdraw their writ petition before the Calcutta High Court and the

same is therefore dismissed as withdrawn;

(b) All interim orders in the aforesaid writ petition before the Calcutta High Court to

stand vacated and the appeal filed by SEBI dismissed as in fructuous

(c) The parties not to transfer/encumber and/or alienate the fixed assets of RDB to the

value of `6.5 corers or raise further capital in the market and the monies lying

deposited in the escrow account to remain so deposited till further orders by WTM,



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SEBI.

(d) SEBI to pass an order in accordance with law in the matter after consideration of the

objections/reply to the SCN already submitted by the parties, within a period of three

months.

(e) The SLP to stand disposed accordingly.

12. In terms of (d) above and as directed by the Hon'ble Supreme Court, and since all pending

proceedings before the Hon'ble Calcutta High Court stand dismissed, the present

proceedings are taken up for consideration. It is noted that only two of the noticees

approached the Honble High Court and were thus parties to the order of the Hon ble

Supreme Court. However, keeping in mind the fact that the remaining two Noticees are the

Chairman and Whole Time Director of RDB and that a common SCN was issued to themand they have all adopted the same defense I deem it fit to dispose of the SCN against all

Noticees by this common order.

13. I have carefully considered the SCN dated August 05, 2013, replies and submissions of the

Noticees, the terms submitted before the Hon'ble Supreme Court and the relevant

provisions of the law alleged to have been violated.

14. The first charge/allegation against Noticees pertains to the non disclosure of material

developments in the RHP/prospectus as required under regulations 57(1) and 57(2) readwith Schedule VIII Part A and regulation 60(4) of the ICDR Regulations, 2009 in terms of

which the RHP and the Prospectus should disclose all material facts as required under the

aforesaid regulations. The said regulations read as follows:

"SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009

57. (1) The offer document shall contain all material disclosures which are true and adequate so as to enable the

applicants to take an informed investment decision.

(2) Without prejudice to the generality of sub-regulation (1):

(a) the red-herring prospectus, shelf prospectus and prospectus shall contain:

(i) the disclosures specified in Schedule II of the Companies Act, 1956; and

(ii) the disclosures specified in Part A of Schedule VIII, subject to the provisions of Parts B and C thereof.

Public communications, publicity materials, advertisements and research reports.

60. (4) The issuer shall make prompt, true and fair disclosure of all material developments which take place

during the following period mentioned in this sub-regulation, relating to its business and securities and also

relating to the business and securities of its subsidiaries, group companies, etc., which may have a material effect on

the issuer, by issuing public notices in all the newspapers in which the issuer had issued pre-issue advertisement

under regulation 47 or regulation 55, as the case may be:



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(a) in case of public issue, between the date of registering final prospectus or the red herring prospectus, as the case

may be, with the Registrar of Companies, and the date of allotment of specified securities;

15. Thus, in accordance with these provisions, RDB was under an obligation to make

disclosures of all material developments relating to its business which may have a materialeffect on it by issuing public notices in all the newspapers in which it had issued pre-issue

advertisement.

16. The Noticees have contended that the resolution of the board of directors of RDB to grant

some of its surplus funds by way of loans to RDBRIL was an enabling resolution in the

bona fidebelief that passing of the said enabling resolution in the ordinary course of business

to grant loans to the group company out of surplus funds over a period of time did not

warrant any explicit disclosures in the prospectus. RDB has also submitted thatsince the

IPO proceeds were not immediately required for utilization by the company towards theobjects of the issue for the reasons stated by it in its reply, the said funds were in the nature

of surplus with the company as on date and that in order to avoid keeping the funds idle

and also in light of the request of RDBRIL seeking financial assistance for its business

purposes, the board of RDB, based on the recommendations of its Audit Committee,

decided to temporarily transfer the surplus funds as demand loan to the group company.

17. I, however, note that the amount of loan given to RDBRIL was three times the net worth

of RDB (`17.8 crore). Moreover, 90% of the IPO proceeds, i.e., an amount of`31.6 crores

(the IPO size was `35.55 crore) were transferred to RDBRIL. Therefore, the surplus fund

to an extent of`50 crores which was referred to in the EGM notice dated September 12,

2011 could have only been part of the IPO proceeds. Thus, the decision to transfer the

IPO proceeds in the form of inter corporate loan to a group company and the notice for

the EGM to seek approval of the shareholders to this effect was a material development

relating to the issue that ought to have been disclosed. I, however, note that it was neither

disclosed in the Prospectus of RDB dated September 26, 2011 which was filed with SEBI

nor was any advertisement issued in newspapers to that effect as required under regulation

57(1) and 57(2) read with Schedule VIII Part A and regulation 60(4) of the ICDRRegulations, 2009. The fact that the issue proceeds would be substantially transferred to its

group company was, in fact, a material disclosure required to be made to the investors.

Clearly, the Noticees withheld/failed to make material disclosures in the prospectus

regarding the proposal and approval for passing on/granting the IPO proceeds in the form

of inter corporate loan to RDBRIL. The investing public was, thus, deprived of the

information that their money, instead of being used for the objects as stated in the

prospectus, was being transferred to a group company. This clearly amounts to a failure on

the part of RDB and its Noticee directors to inform the investors regarding material facts

as required by law.



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18. In order to determine whether withholding of information by the Noticees was deliberate

and amounted to making a mis-statement in the prospectus, I have perused the Prospectus

and note that it was mentioned therein that pending utilization, the issue proceeds would be

invested in high quality interest bearing liquid instruments, including money market mutualfunds and deposits with banks. As per the agreement between RDB and RDBRIL, the

annual interest on the loan given by RDB to RDBRIL on an amount of `31.60 crores

works out to`4.65 crore. Further, as per the Register of Inter Corporate Loan maintained

under section 372A of the Companies Act, 1956 by RDB, it had given a total of`7.28 crore

as an Inter Corporate loan to RDBRIL on five different instances starting from April 16,

2011 till October 01, 2011 at an interest rate of 15% per annum. However, RDB had

received back only `1.18 crore without any interest component till October 01, 2011.

Moreover, RDBRIL had taken unsecured loans from various other parties to the tune of

`6.5 crore during the period May 05, 2011 to May 11, 2011 none of which it could repay by

the due date of 120 days and further requested the lenders in the last week of August, to

further extend the repayment by 90 days. The details of some of the loans are as under:

(a) `1 crore from Swarnpushpa Vanijya Pvt. Ltd. @ 12% p.a. for 120 days dated May

07, 2011.

(b) `50 lacs from Ritesh Projects Pvt. Ltd. @ 12% p.a. for 120 days dated May 10, 2011.

(c) `1 crore from Sweety Trade and Agency Pvt. Ltd. @ 13% p.a. for 120 days dated

May 6, 2011.(d) `1.25 crore from Kamlesh Mercantile Credit Pvt. Ltd. @ 12% p.a. for 120 days

dated May 05, 2011.

(e) `1 crore from MKJ Enterprises Pvt. Ltd. @ 12% p.a. for 120 days dated May 05,

2011. Further,`1.5 crore @ 12% p.a. dated May 10, 2011.

(f) `25 lakh from Jagrani Leasing and Finance Company Pvt. Ltd. @ 12% p.a. for 120

days dated May 09, 2011.

19. In view of the above facts, it is clear that RDBRIL was not in a sound financial condition.

In fact, RDB transferred`7.5 crore out of IPO proceeds to RDBRIL in their axis Bank

account on October 12, 2011 so as to enable RDBRIL to repay its debts and out of these

transferred funds, an amount of `6.5 crore was used by RDBRIL to repay some of its

debts.

20. I also note that the balance sheet of RDBRIL, during the year ended March 31, 2011

indicated a profit after tax on standalone basis of `6.13 crore (audited) and during the

quarter ended June 30, 2011 of`1.14 crore (unaudited). It is also noted that the cash flows

for the company were negative.



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21. Considering the financial condition of RDBRIL, as discussed earlier, the loan given to

RDBRIL cannot be considered as a high quality interest bearing instrument comparable to

money market mutual funds and deposits with the banks. The submission of the Noticees

that the loan was backed by security of mortgage and deposit of post dated chequescovering the entire loan amount is not acceptable since they do not classify as liquid

instruments. A liquid instrument is generally one which can be converted into cash quickly

with minimal impact on the final price.

22. From the facts above discussed, it is clear that RDB and the Noticee directors knowingly

utilized the issue proceeds in a manner other than as stated in the prospectus, which

amounts to mis-utilization of IPO proceeds.

23.

In this regard, I refer to the order of the Supreme Court of India in N. Parthasarathy, Etc. vsController Of Capital Issues and Anr.[1991 SCC (3) 153] which has quoted Palmer's Company

Law (24th Edition) by C.M. Schmitthoff under the caption "The golden rule" as to framing

prospectuses at page 332-333 which states as follows:

"Those who issue a prospectus, holding out to the public the great advantages which will accrue to

persons who will take shares in a proposed undertaking, and inviting them to take shares on the faith of

the representations therein contained, are bound to state everything with strict and scrupulous accuracy,

and not only to abstain from stating as fact that which is not so, but to omit no one fact within their

knowledge, the existence of which might in any degree affect the nature, or extent, or quality, of the

privileges and advantages which the prospectus holds out as inducements to take shares."

24. I note that RDB not only failed to disclose the fact that the proceeds of its IPO would be

substantially transferred to its group company but also made wrong statements in its

Prospectus stating that the IPO proceeds, if unutilized, would be invested in high interest

bearing liquid instruments when in fact the funds were transferred as loans to its group

company and thus making mis-statements in the Prospectus.

25.

I have considered the issue whether the notice for the EGM which approved the transfer

of substantial portion of the IPO funds of RDB to RDBRIL was shortened by RDB to

facilitate the same, and note that it is a matter of record that the RHP of RDB was dated

September 13, 2011 and the Prospectus was dated September 26, 2011. The date of

finalization of the basis of allotment of the IPO was September 29, 2011. Admittedly, the

decision to grant some of its surplus funds by way of loans to RDBRIL up to the extent of

`50 crores, the same being repayable on demand, was taken by RDB by passing a

resolution in its board meeting held on September 12, 2011.

26. I note that since providing the said loan to RDBRIL required approval from shareholders,



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RDB/its board of directors had deliberately reduced the notice period for the EGM to 15

days because had the notice period been 21 days as stipulated in section 171(1) of the

Companies Act, 1956, the EGM date would have fallen on October 03, 2011, i.e., after the

date of finalization of the basis of allotment (September 29, 2011) and also after the date of

board meeting where it was resolved to effect delivery of 45 lakh shares to the respectivebeneficiary accounts of the allottees of the IPO of RDB. In that case, RDB would have had

to take approval from the public shareholders through postal ballot in accordance with

section 192A of the Companies Act, 1956 read with Companies (Passing of Resolution by

Postal ballot) Rules, 2011. I note that the Registrar of Companies (RoC) filing in respect of

the AGM held on September 28, 2011 was done by RDB on the same date while in respect

of the EGM held on the September 28, 2011 for according the consent of shareholders to

give some of the surplus funds of the company in the form of loan to RDBRIL the RoC

filing was done by RDB on October 19, 2011. Further, no plausible reason for filing of the

same forms on different dates (with a gap of 3 weeks) for the meetings held on the same

date has been given by the Noticees.

27. I also note that from Para 11 on page xii and page 56 of RHP dated September 13, 2011

and the Prospectus dated September 26, 2011, as per the terms of loan agreement entered

into by RDB with banks for various credit facilities, RDB was not allowed to ''invest by way of

share capital in or lend or advance funds to or place deposits with any other concern. Normal trade credit or

security deposits in the usual course of business or advance to employees, are, however, not covered by this

covenant''. During the investigation, Axis Bank was queried as to whether RDB had obtainedprior permission from them for giving loan of`31.60 crore to RDBRIL. In this regard, I

note that Axis Bank vide its email dated March 20, 2012 informed SEBI that ''as confirmed by

our Corporate Banking Branch, Kolkata, we have not issued any confirmation/NOC to RDB Rasayans

Ltd. for giving inter corporate loan''. I, therefore, find that RDB had failed to fulfill the

conditions mentioned in loan agreement and to that extent deviated from the disclosure in

the prospectus.

28. Apart from the issue of non-disclosure and mis-statements discussed earlier, there are

several other instances of wrong disclosures made in the Prospectus of RDB. For example,

a part of the IPO proceeds was paid to Axis Bank for repaying the working capital demand

loan (Account number: 911030026045377). This tantamount to false disclosure in the

Prospectus about the use of IPO proceeds as mentioned in Para 7, page xi and page 26 of

the RHP and the Prospectus filed with SEBI.

29. Moreover, I note that the disclosures related to labour related problem made by RDB in its

Prospectus were inadequate regarding the gravity of the situation. The disclosures in the

RHP/Prospectus regarding past instances of labour problem and as a general risk factor for

future labour related problems are reproduced hereunder:



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Failure to effectively manage labour or failure to ensure availability of sufficient labourcould affect the

business operations of the Company:- There has been a strike in the manufacturing unit for the period

from June 23, 2009 to July 28, 2009 for the wage dispute. The sales and profitability of the Company

was adversely affected for these 36 days. Such sort of labour unrest may also arise in future which mayhave its effect on the sales & profitability of the company... "

"Our business is dependent on our manufacturing facilities. The loss of or shutdown of operations at any

of our manufacturing facilities may have a material adverse effect on our business, financial condition

and results of operations.....

30. Admittedly, the situation in Haldia Industrial belt where its unit was located was going

through turmoil because of labour unrest for the past few months. RDB has submitted that

this was mainly due to the change of political scenario in West Bengal and that in thesecircumstances, the management decided to keep further investments in the projects at

Haldia on hold for the time being. RDB has further submitted that it decided to watch how

the situation unfolds and therefore, took a decision not to immediately commit the IPO

proceeds to the project. The facts detailed above clearly indicate that the Noticees had

failed to adequately disclose the serious nature of the labour unrest which was currently

going on in its unit for which it had to stall production at the unit for some time.

31. In their replies the Noticees have stated that after the directions dated December 28, 2011

was issued by SEBI, to deposit the entire loan amount in the escrow account within 7 days

from the date of order, RDB had inter alia recalled the entire loan amount (i.e., `31.60

crores) from RDBIL along with interest @ 15% (`1.83 crores) and deposited the same in

the Escrow Account. The details of the said deposit have also been informed to SEBI vide

its letter dated March 31, 2012. On perusal of the said details I note that the said amount

was deposited in the escrow account though with a delay.

32. With regard to the issue that the Audit Committee meeting of RDB held on October 07,

2011, wherein it was recommended that the IPO proceeds be utilized by giving it as a loan

to RDBRIL, was chaired by Mr. Sandeep Baid, the Whole time Director and not by an

independent director, it has been submitted by the Noticees that on October 07, 2011 Mr.

Sachin Sridhar (an independent director and the Chairman of the Audit Committee) was on

leave and not available. In these circumstances, the meeting was chaired by Mr. Sandeep

Baid based on the bona fidebelief that he could chair the meeting. I note that clause 49 of

the listing agreement mandates that the Audit Committee meeting must be chaired by an

independent director. Admittedly, Mr. Sandeep Baid who presided over the said audit

committee meeting was not an independent director of RDB. I, therefore, find that there

was a clear violation of clause 49 of the Listing Agreement read with section 21 of the



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SCRA. It is also pertinent to note here that in the said meeting of the Audit Committee

chaired by Mr. Sandeep Baid had recommended the transfer of the IPO proceeds to

RDBRIL.

33.

The second allegation pertains to the Noticees indulging in fraudulent and unfair tradepractices. I note that the scrip of RDB got listed on BSE on October 07, 2011. The listing

day witnessed volumes to the tune of 3,50,09,187 shares through 2,04,524 trades. The post

issue equity shares capital of the company is 1,77,14,800 shares. Thus, the number of shares

traded on the first day of listing represents 1.98 times of the paid up capital of RDB. Out of

3.50 crore shares traded on the listing date, 40,17,005 shares were the net delivered

quantity. Thus, the delivery to trade percentage was 11.48%. Further, the deliverable

quantity of 40,17,005 shares out of the 45 lakh shares issued through IPO represents

89.27%. Thus, a large portion of the allottees of RDB IPO had sold their shares on the day

of listing. The Price Volume chart on the listing day is presented below:

(Chart Source: Trade details on BSE)

34. I have perused the bank account transaction of RDB, and the following are observed from

the same:

(a) RDB had transferred Rs 24.1 crore (`19.5 and`4.6 crore) in two tranches from their

Oriental Bank Of Commerce account to the account of RDBRIL maintained with

Oriental Bank Of Commerce (account no. 10491131001009) on October 07, 2011.

(b) On October 12, 2011,`7.5 crore was transferred in two tranches from the Axis bank

account no. 005010300020837 of RDB to the account of RDBRIL held with Axis

Bank (account no. 153010300000851).

(c) On October 7, 2011, RDBRIL transferred`9.15 crore from their Oriental Bank of

Commerce account to the account of Namokar Duplicating Pvt. Ltd (Namokar)held with UCO Bank (account no. 13390200001286).



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(d) On the same day, i.e., October 07, 2011, Namokar transferred `8.4 crore to the

account of Mercury Fund Management Company Pvt. Ltd. (Mercury) (account

with Bank of Maharashtra having account no. 60047104985). Kishore Jhunjhunwala,

Kamal Singh Nahata and Kundan Mal Banthia are the Directors of Mercury.

(e) On October 8, 2011, Mercury transferred`5.5 crore to the account of Deesha Tie

Up Pvt. Ltd. (Deesha) held with Development Credit Bank (account no.

03622400999999), (Directors of Deesha - Sanjay Shah, Ajay Kumar Shah, Kiritkumar

Mohanlal Patel, Jayeshkumar Ambalal Patel).

(f) On October 10, 2011, Deesha transferred `4 crore to the account of Dharamnath

Shares and Services Pvt. Ltd (Dharamnath) held with IndusInd Bank (account no.

0009-M67085-060).

(g) Dharamnath later on transferred`4.5 crore to the account of Subodhsagar Shares

and Service Pvt. Ltd (Subodhsagar) held with Axis Bank (account no.

728010200001366), (Directors of Subodhsagar - Kiritkumar Mohanlal Patel,

Jayeshkumar Ambalal Patel).

(h) Subodhsagar then transferred `4 crore to the account of Sardhav Investment and

Finance Pvt. Ltd. (Sardhav) held with AXISBank (account no. 910020018160486),

(Directors of Sardhav- Dineshkumar Manilal Patel, Sumankumar Natvarlal Patel).

(i) Sardhav transferred the money received from Subodhsagar to four major loss making

trading clientswho had dealt in RDB shares on the listing day of its IPO, i.e., October

7, 2011, namely, Prakashbhai (ING Vyasya account no. 670011000640), Dave (Kotak

Mahindra Bank account no. 08122090002092), BMD (Royal Bank of Scotland

account no. 1645730) and Shreyanshnath (Axis Bank account no. 728010200001380).

35. The aforesaid flow of funds is shown in the flow chart given hereunder. As seen in the

Chart, a part of IPO proceeds flowed, directly and indirectly, from RDB to the four trading

clients,i.e., out of the IPO proceeds,`4.20 crores were transferred to bank accounts of these

trading clients. The amounts received by the trading clientswere transferred to their respective

brokers to compensate for the losses incurred by them while trading in the scrip of RDB

on the listing day of its IPO.



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36.

The details of trades of these trading clientsare shown below:

Clnt Name Gr Buy Vol

%age of

Market

buys

Gr Sell

Vol

%age of

Market

Sell

Gr Buy

Value

Gr Sell

ValueNet Loss

Buys before

Price Fall

Prakashbhai 3,57,405 1.02% 3,57,405 1.02% 2,90,19,243 1,30,66,149 1,59,53,094 357,000

BMD 3,30,000 0.94% 3,30,000 0.94% 2,14,96,692 89,25,281 1,25,71,411 230,000

Dave 1,46,000 0.42% 1,46,000 0.42% 1,18,26,000 41,24,898 77,01,102 146,000

Shreyanshnath 84,000 0.24% 84,000 0.24% 68,88,000 17,74,532 51,13,468 84,000



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37. Thus, Prakashbhai had incurred the highest loss among all the trading clientson account of

his trading on the listing day. Further, as seen from last column of the table, all the trading

clients had bought their shares before 01:15 p.m. (as observed from Chart mentioned

above), i.e., before the price fall period (except 1 lac shares bought by BMD).

38. The Noticees have submitted that the transfer of funds from the IPO to the trading clients

who had incurred losses while trading on the listing day is of no concern to them and that

they had no role to play in the same. RDB had transferred the funds from its account to the

account of RDBRIL as a secured loan. The Noticees were not aware of the usage of the

fund or further transfers by RDBRIL. RDB has no say or control over the acts of the other

entities and that it has not paid any monies to any entity who traded in the scrip of

company on October 07, 2011. The Noticees have contended that no adverse inferences

can be drawn against them on the bases of transfers by RDBRIL and further transactions

thereafter by the trading clients.

39. I note that Namokar has significant shareholding in RDB Insurance Broking Services Pvt.

Ltd., which is a group company of RDB. Moreover, Dharamnath and Deesha are related in

the following manner:

(a)The director of Dharamnath, Mr. Maheshbhai Patel and the director of Deesha, Mr.

Mohanlal Patel have common address as ''233, Mukhivas, New Civil, Janakpura,

Ahmedabad''.

(b)

Subodhsagar and Deesha have common director, Mr. Mohanlal Patel.(c)As per the MCA website, Subodhsagar and Sardhav have common email-ids as

''[email protected]''.

40. I note from the bank account statements that a portion of the funds raised by RDB

through its IPO has moved through various entities to the four trading clients. These entities

had traded on the listing day in the shares of RDB and had suffered losses. The entities

through which the money reached these trading clientswere mostly connected. In light of

these facts there is reasonable ground to conclude that the submissions made by the

Noticees that they had nothing to do with the acts of the other entities is unacceptable.

41. I also note that RDB had transferred the IPO proceeds before actually entering into a loan

agreement with RDBRIL. It is seen from the minutes of the board meeting of RDB held

on October 7, 2011 at 5:00 p.m. that its board of directors had decided that the unutilized

funds of the IPO for the time being shall be provided as secured loan to its group company

which will be repayable on demand. The board had resolved to enter into a loan agreement

with RDBRIL for providing a loan upto`40 crore which was repayable on demand at an

interest of 15% p.a. I, however, note that out of the IPO proceeds of`35.5 crore RDB had

transferred funds amounting to`24.1 crore to the account of RDBRIL through its bank



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account in Oriental Bank of Commerce even before 5:00 p.m. on October 7, 2011. I,

therefore, find that RDB had utilized the IPO proceeds for purposes other than those

disclosed in the Prospectus even before obtaining the approval of its board of directors at

5:00 p.m. on October 7, 2011. Subsequently, a part of these proceeds were transferred to

the trading clientswho in turn used this money to make payments to their respective stockbrokers on time as per T+2 settlement mechanism.

42. I have noted that directions have already been issued against the Noticees vide ad-interimex-

parteSEBI order dated December 28, 2011, as stated earlier based on preliminary findings.

The facts as detailed above as found in the detailed investigation, post the passing of the

interimorderhas further established the allegations leveled against the Noticees. It has also

been proved that the misdeeds committed by RDB were done with active involvement of

the Noticee directors.

43. From the material available on record, I also note all the Noticee directors have been

signatories to offer documents, i.e., RHP and Prospectus containing several misstatements.

None of the Noticee directors have questioned even a single decision taken by the

company and instead have authorized the misdeeds in their Audit Committee meetings and

board meetings and thus have failed in their duties and responsibilities towards the

investors. In this regard, it is relevant to mention the following observations of the Hon'ble

Supreme Court of India in its order dated April 26, 2013 in the matter of Shri N. Narayanan

Vs. SEBI:

"... Company though a legal entity cannot act by itself, it can act only through its Directors. They are expected to

exercise their power on behalf of the company with utmost care, skill and diligence....

A word of caution:

SEBI, the market regulator, has to deal sternly with companies and their Directors indulging in manipulative

and deceptive devices, insider trading etc or else they will be failing in their duty to promote orderly and healthy

growth of the Securities market..."

44. In light of the aforesaid facts and circumstances of the case and my observations, I

conclude that the Noticees had failed to disclose material facts and instead made

misstatements in the RHP and Prospectus of RDB. By doing so, RDB and the Noticee

directors have perpetrated a fraud on the investors by routing IPO money to entities which

traded on the listing day of its IPO and suffered losses, through a web of inter connected

entities. The amount routed to the aforesaid trading clientswho incurred losses on the day of

listing of RDB shares was used to make payments to respective brokers of the clients on

time, i.e., as per T+2 settlement mechanism thus resulting in the creation of false and

misleading appearance of trading in the said scrip.

45. In view of the above, I find that the charges levelled against the Noticees in the SCN dated



23/23

August 05, 2013 regarding the violations of the provisions of regulation 57(1) and (2) read

with Schedule VIII Part A (16), and 60(4) of the ICDR Regulations, 2009; clause 49 of

Listing agreement read with section 21 of the SCRA, 1956; sections 62, 63 and 68 read with

55A of the Companies Act, 1956; and section 12A(a), (b) and (c) of the SEBI Act, 1992

read with regulations 3(a), (b), (c), (d), 4(1),4 (2)(a), (d), (e) of the PFUTP Regulations, 2003are established.

46. I note that RDB and its Noticee directors, Mr. Shanti Lal Baid, Mr. Sandeep Baid and Mr.

Sunder Lal Dugar have already undergone debarment for a period of more than 35 months

and that the said debarment is in operation till date. I also note that RDB had called back

the entire amount diverted by it to RDBRIL and the same is lying in the escrow account.

47. Considering the above facts and circumstances of this case, I, in exercise of powers

conferred upon me by virtue of section 19 read with sections 11, 11A and 11B of theSecurities and Exchange Board of India Act, 1992 read with regulation 11 of the SEBI

(Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)

Regulations, 2003 and regulation 107 of the SEBI (Issue of Capital and Disclosure

Requirements) Regulations, 2009, and section 12A of the Securities Contracts (Regulation)

Act, 1956 hereby issue the following directions:

(a) RDB Rasayans Ltd. and the Noticee directors, Mr. Sunder Lal Dugar, Mr. Shanti Lal

Baid and Mr. Sandeep Baid are debarred from accessing the securities market and are

also prohibited from buying, selling, and otherwise dealing in securities market, directlyor indirectly, in any manner whatsoever, for a period of four years. The period of

prohibition already undergone by the Noticees pursuant to the interim order dated

December 28, 2011, shall be taken into account for the purpose of computing the

period of prohibition imposed in this order.

(b)Subject to the applicable provisions of Companies Act, 1956 and Companies Act, 2013,

as the case may be, RDB Rasayans Ltd. shall utilize the funds raised in the IPO and

lying in the escrow account for purposes disclosed in its Prospectus.

48. This order shall come into force with immediate effect. A copy of this order shall be served

on the Noticees, all the recognized stock exchanges and depositories for ensuring due

compliance with the above directions.

Sd/-

DATE: DECEMBER 19th, 2014 RAJEEV KUMAR AGARWAL

PLACE: MUMBAI WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

order in respect of rdb rasayans ltd. and its directors, mr. sunder lal dugar , mr. shanti lal baid...

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