before the adjudicating officer - SEBI

Page 1 of 16

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. EAD-2/DSR/RG/654/2017] ___________________________________________________________________ UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA

ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING

INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES,

1995.

In respect of

SHRI UMESH KHARIWALA

(PAN: AFMPK0325F)

In the matter of

KOLAR BIOTECH LIMITED

1. The Hon’ble Securities Appellate Tribunal (SAT), in Appeal No. 174 of 2015, vide

order dated August 20, 2015, while setting aside the adjudication order dated

November 28, 2008, remanded the case to the Adjudicating Officer for passing

fresh order on merits and in accordance with law against the Appellant viz. Shri

Umesh Khariwala (hereinafter referred to as the Noticee) for the violations of the

provisions of Regulation 3 and 4(1) & 4(2)(a) & (d) of the SEBI (Prohibition of

Fraudulent and Unfair Trade Practices) Regulations, 2003 (hereinafter referred to

as the PFUTP Regulations) in the matter of Kolar Biotech Limited (hereinafter

referred to as KBL / Company). The Hon'ble SAT observed that-

“Basic grievance of the appellant is that the impugned ex-parte orders are passed

without hearing the appellant as the Notices were sent to the address of the

company and not to the address of the appellant…..

Accordingly, impugned orders dated February 25, 2010 and November 28, 2008

are quashed and set aside and the matters are restored to the file of the

adjudicating officer for passing of fresh order on merits and in accordance with

law.

Appellant-in-person states that the address shown in the memo of appeal is the

correct address of the appellant ……………….”

Page 2 of 16

APPOINTMENT OF ADJUDICATING OFFICER

2. I have been appointed as the Adjudicating Officer vide order dated October 26,

2015 under Section 15-I of the SEBI Act, 1992 (hereinafter referred to as the Act)

read with Rule 3 of the SEBI (Procedure for Holding Inquiry and Imposing

Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the said

“Rules”) to inquire into and adjudge the alleged violations of PFUTP Regulations

by the Noticee.

NOTICE,REPLY AND PERSONAL HEARING

3. Vide letter dated January 12, 2016, a copy of the show cause notice bearing no.

EAD/DSR/ADJ/EIF-28/124034/2008 dated April 25, 2008 (hereinafter referred to

as the SCN) was sent to the Noticee at his address: 5/18, Jai Jalaram CHS,

Kharkar Lane, Next to A.K.M. Ground, Thane (West)-400601 by Hand Delivery

and Speed Post A.D. The said SCN was duly delivered to the Noticee and the

proof thereof is available on record. Thereafter, vide letter dated January 27,

2017, the Noticee submitted his rely to the SCN. Accordingly, in the interest of

natural justice and in order to conduct an inquiry as per Rule 4(3) of the

Adjudication Rules, vide notice dated June 13, 2017, an opportunity of personal

hearing was granted to the Noticee on June 30, 2017. The Noticee attended the

said hearing in person and made oral submissions. During the hearing, the

Noticee produced certain documentary evidence in support of his submissions

made in the reply dated January 27, 2017. Therefore, the Noticee was advised to

submit the copies of the said documents on or before July 07, 2017. Accordingly,

vide letter dated July 04, 2017, the Noticee submitted all the documents in

support of his submissions in the matter.

CONSIDERATION OF EVIDENCE AND FINDINGS

4. I have carefully perused the charges leveled against the Noticee in the SCN,

written submissions made by the Noticee and the documents available on record.

In the instant matter, the following issues arise for consideration and

determination:-

(a) Whether the Noticee has violated the provisions of Regulation 3, 4(1)

and 4(2)(a) & (d) of the PFUTP Regulations?

Page 3 of 16

(b) Whether the Noticee is liable for monetary penalty as prescribed under

Section15 HA of the SEBI Act for the aforesaid violation?

(c) If so, what should be the quantum of monetary penalty?

5. Before proceeding further, I would like to refer to the relevant provisions of law,

which read as under:

Relevant provisions of PFUTP Regulations

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 there under.

4.Prohibition of manipulative, fraudulent and unfair trade practices

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in

a fraudulent or an 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;

(b)………………..

(c)………………….

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

any money or money’s 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;

6. I find from the investigation report and the SCN issued that SEBI had conducted

an investigation into the scrip of KBL during the period July 01, 2004 to August

31, 2004. The reason for the investigation was that SEBI had received a

Page 4 of 16

complaint from one Mr. Anil Khanna vide email dated August 13, 2004 regarding

alleged fraud in the scrip of KBL. The complainant had stated that the promoters

of the company had escaped the country after committing a fraud of over ` 1000

crores. It had been also stated in the said complaint that the company had

announced a bonus issue of 2:1 and ` 50 Crores Global Depository Receipt

(GDR) issue and had advertised the same in the widely circulated business daily

viz. Economic Times (ET). However, in the ET there was also a notice by the

Bank of India regarding sale of property of Shri Raj Kumar Basantani who was

the main promoter of KBL. It was mentioned in the said complaint that the

registered office of KBL had been sealed by various banks, yet the company had

advertised that the meeting to consider the GDR issue would be held at its

registered office. Further, various other complaints against the company and its

promoter / directors were also received.

7. Further, upon investigation, it was observed that KBL was incorporated on

January 13, 1994 with an initial focus on providing services as Registrar and

Transfer Agents and other financial services. It was initially promoted in the name

of Kolar Securities Services P. Ltd by Shri Nazeer Ahmed N. Desai and Shri

Maqbool Matwanker. On February 28, 1994, ACL, a company controlled by Shri

Raj Kumar Basantani and individuals / entities related / connected / associated

with him, subscribed 19,99,830 shares of Kolar Securities Services P. Ltd. By

virtue of their holding of 19,99,830 shares out of total equity of 20,00,000 shares,

Kolar Securities Services P. Ltd became subsidiary of ACL. By November 15,

1996, ACL’s holding in Kolar Securities Services P. Ltd increased to 19,99,910

shares. Shri Raj Kumar Basantani was since then the main promoter / person

controlling the company. In the year 1997, the company had come out with a

public issue of 60,00,00 shares of ` 10 each at par aggregating to ` 6 Crores. In

the year 1998, Kolar Securities Services P. Ltd changed its name to Kolar

Information Technologies Ltd and the focus of the Company was changed to

development and trading of computer software and hardware. Thereafter, in the

year 2003, the name of the company was changed to KBL with main focus in

biotech sector. The shares of the company were listed on the Bombay Stock

Exchange Ltd (BSE) and Ahmedabad Stock Exchange Ltd (ASE) on April 25,

Page 5 of 16

1997. It is observed that the trading in the shares of KBL was suspended at the

stock exchanges with effect from October 11, 2004 for non-compliance of various

clauses of Listing Agreement.

8. Subsequent to the public issue, on February 28, 2002, KBL had a stock split of

shares from ` 10/- per share to Re. 1/- per share. The shares of KBL were

admitted on the National Securities Depository Ltd (NSDL) on March 04, 1999

and on February 04, 2000 on Central Depository Services Ltd (CDSL). The

registered office of the company was located at : Narayan Building, 2nd Floor, 23,

Lakshmi Napoor Road, Dadar (East), Mumbai – 400014. Since July 27, 2004, the

registered office of the company was sealed by the Office of Special Recovery

and Sales Officer of Co-operative Department, Mumbai (Government of

Maharashtra) on behalf of The Greater Bombay Cooperative Bank Limited, vide

its notice no. GBCB/Rec/SRB/3692/2004 dated July 28, 2004, in execution of the

Recovery Certificate obtained by the Bank in the matter of recovery of advances

given to SIL, a group entity of KBL.

9. It was alleged in the SCN that during the period of investigation, KBL/ Shri Raj

Kumar Basantani and his related / connected /associated entities / individuals

had issued false and misleading advertisements related to KBL, created artificial

volumes and price in the scrip and subsequently off-loaded the shares in the

market through connected entities at higher price.

10. It was observed that after the declaration of the bonus issue by the Board of

Directors of KBL on August 04, 2004, the average daily volumes during the

period August 05, 2004 to August 17, 2004 surged by around 540% as compared

to the average daily volumes in the scrip for the earlier periods viz. July 26, 2004

to August 04, 2004. The price of the scrip had increased after August 04, 2004

i.e. the date of approval of Bonus issue in the ratio of 2:1 by the Board of

Directors of the company from ` 1.04 on August 04, 2004 to ` 2.12 as on August

10, 2004. It was further observed that the BSE officials had visited the registered

address of KBL on August 18, 2004 and it was noted that the office was sealed

vide the abovementioned notice dated July 28, 2004. Although the company did

not intimate the exchange regarding the adverse developments, it intimated the

Page 6 of 16

exchange, vide its letter dated July 29, 2004 about convening a board meeting for

consideration of the bonus issue/GDR issue at its registered office on August 03,

2004. The venue of the said Board meeting was already sealed before the date

of communication by the company.

11. The entities related to the company are Cavelier Securities Ltd, Giridharbhai

Karu, Adam Comsof Ltd, Adsul Trading P. Ltd, Mahesh Mistry, Structure Housing

& Finance P. Ltd, Million Investrade Ltd, Mastermind Mercantile Co-op Ltd,

Sangam Infotech Ltd, Jugnu Securities P. Ltd and Albeit Trading Limited. These

entities were observed to be the net sellers to the tune of 3,45,38,628 shares i.e.

about 34.54% of the share capital of the company which had been sold after the

announcement of approval of bonus issue by the Board (i.e. from August 05,

2004 to August 17, 2004) and 29.60% of the trading volume during the period

between August 05, 2004 to August 17, 2004. Upon analysis of the price volume

data of the scrip during the relevant period, it was observed that for the period

July 01, 2004 to August 31, 2004, the price of the scrip was in the range of ` 0.46

to ` 2.29 with wide variations / fluctuations in volumes. The price of the scrip

touched a low of ` 0.46 on July 23, 2004 and touched a high of ` 2.29 on

August 11, 2004. The volumes in the scrip increased drastically after the

announcement of the bonus issue on August 04, 2004 with the average volume

of 7 lakh shares before the announcement of bonus issue to 1.30 crore shares

after the said announcement by the company. It was observed that during the

relevant period, the scrip touched its upper circuit limit of 20% on 7 days

immediately after the announcement of bonus issue.

12. The details of the shareholding for the quarter ended September 30, 2003 and

December 31, 2003 filed with the stock exchanges in terms of Clause 35 of the

Listing Agreement is as under:

Sr. No.

Name of the Promoter/ related entities

September 30, 2003

% of share capital

December 31, 2003

% of share capital

Promoters Holding

1. Adam Comsof Limited

1,99,99,100 19.99 1,99,99,100 19.99

Page 7 of 16

2. Manorama Trading Ltd

50,00,000 5 50,00,000 5

3. Others 2,02,000 0.21 2,02,000 0.21

Total 2,52,01,100 25.20 2,52,01,100 25.20

Non-promoter Holding

4. Canara Bank 15,00,000 1.5 15,00,000 1.5

Others 6,65,000 0.67 6,65,000 0.67

Total 21,65,000 2.17 21,65,000 2.17

NRI/OCB’s 600000 0.60 6000000 0.60

Private Corporate Bodies

7. Kalbadevi Finance Ltd

15,00,000 1.5 15,00,000 1.5

8. Moreearn Finvest P. Ltd

30,00,000 3.0 30,00,000 3.0

9. Million Investrade P. Ltd

50,00,000 5 50,00,000 5

10. Exclusive Impex Ltd

14,19,000 1.4 14,19,000 1.4

11. Balwan Exports P. Ltd

30,00,000 3.0 30,00,000 3.0

Total 1,39,19,000 13.92 1,39,19,000 13.92

Indian Public

12. Anita Patil 29,46,000 2.9 29,46,000 2.9

13. Brijesh Merchant 38,17,000 3.8 38,17,000 3.8

14. Hemlata Patil 18,72,000 1.8 18,72,000 1.8

15. Hina Shah 33,97,000 3.3 33,97,000 3.3

16. Jabna Chowgle 35,31,000 3.5 35,31,000 3.5

17. Rahul Merchant 34,36,000 3.4 34,36,000 3.4

18. Sanjay Pujari 30,54,000 2.5 25,54,000 2.5

19. Shantabai Chowgle

35,61,000 3.5 35,61,000 3.5

20. Shilap Shah 26,72,000 2.6 26,72,000 2.6

21. Tejwant Singh 34,36,000 3.4 34,36,000 3.4

22. Dr. Umesh Khariwala

11,20,000 1.2 12,64,899 1.2

Total 5,81,14,900 58.11 2,81,14,900 58.11

Total no. of shares

10,00,00,000 100 10,00,00,000 100

13. From the above, it is observed that the company was widely held company with

only 25% of the total capital with the promoters and rest with the private

corporate bodies and Indian Public. It was observed that the companies

appearing under the heading Private Corporate Bodies were the companies

Page 8 of 16

owned by Shri. Raj Kumar Basantani, either directly or indirectly. It was observed

that the Noticee was holding 11,20,000 shares of KBL for the quarter ended

September 30, 2003 and 12,64,900 shares for the quarter ended December 31,

2003. During the investigation, it was observed that the Noticee was the Director

of KBL and ACL. Further, it was even observed that certain individuals who

appeared under the head Indian Public were also related to Shri Raj Kumar

Basantani. The connection relation of various entities / companies with Raj

Kumar Basantani or otherwise has been tabulated on page nos. 14 to 19 of the

SCN dated April 25, 2008.

14. It was observed that the following entities, which appeared as major selling

clients, were all connected with KBL / Raj Kumar Basantani:

Sr. No

Name of the entity Name of the Directors

Shares Value of the shares sold

Remarks

1. Adsul Trading P. Ltd (Client ID : A028)

1. Mahesh Adsul

2. Vithal Patil

52,92,437 74,21,386 Off-market transfers

2. Sangam Infotech P. Ltd (Client ID : S015)

1. Mahesh Adsul

2. Vithal Patil


3. Adam Comsof Ltd (Client ID: A031)

1. Vinod Hingorani

2. Vikas Sheth

3. Umesh Khariwala

87,79,913 1,43,67,890 Off-market transfers

4. Structure Housing and Finance P. Ltd (Client ID: S100)

1. Nitin Sawant

2. Hiralal Jadav

98,07,477 1,20,86,459 Off-market transfers

5. Million Investarde Ltd (Client ID: M086)

1. Nitin Sawant

2. Rajesh Sakharle


6. Master Mind Mercantile Ltd (Client ID: M087)

1. Vilas Chowgle

2. Vithal Patil


7. Jugnu Securities Ltd (Client ID: J020)

1. Nitin Sawant

2. Hiralal Jadav


Page 9 of 16

8. Albeli Trading P. Ltd (Climet ID: A032)

1. Jabna Chowgle

2. Mrs. Shantabai Chowgle


9. Vinod Hingorani (Client ID: V003)

Chairmen of KBL

2,02,000 2,27,435

Total 4,42,82,883 6,65,96,063

15. The details of the off-market transfers by various individuals / entities to Shri

Giridharbhai Karu are as under:

Name of the source client Name of the target company

Number of shares

No. of shares net sold in the market

Adam Comsof Ltd Girdharbhai Karu 51,61,650

Million Investrade Girdharbhai Karu 10,00,000 1,38,44,591

SangamInfotech Girdharbhai Karu 2,84,000

JugnuInfotech Girdharbhai Karu 9,20,000

Albeli Trading P. Ltd Girdharbhai Karu 12,47,690

AravaliHsg and Finance Ltd Girdharbhai Karu 19,30,000

Structure Hsg and Finance Girdharbhai Karu 9,50,279

Mastermind Mercantile Ltd Girdharbhai Karu 12,00,000

Kalbadevi Finance P. Ltd Girdharbhai Karu 3,50,000

Adsul Trading P. Ltd Girdharbhai Karu 5,35,975

Janba Krishna Chowgle Girdharbhai Karu 2,50,000

Total 1,38,29,594

16. The off-market transfer of KBL shares by various individuals / entities to Shri

Mahesh Mistry are as under:

Date of off market transfer

Name of the source client

Name of the Target client

Number of shares

No. of shares sold in the market

August 06, 2004

Pool account of KolarSharex P. Ltd

Mahesh Mistry

33,00,000 75,15,401

August 07, 2004

Adam Comsof Ltd

Mahesh Mistry

19,90,000

August 17, 2004

Adsul Trading P. Ltd

Mahesh

Mistry

10,58,700

August 23, 2004

Kalbadevi Finance

Mahesh

Mistry

9,00,000

Page 10 of 16

August 25, 2004

Kalbadevi Finance

Mahesh

Mistry

1,05,000

August 25, 2004

Adsul Trading P. Ltd

Mahesh

Mistry

46,701

August 25, 2004

Janba Krishna Chowgle

Mahesh

Mistry

1,15,000

Total 75,15,401

17. From the above off-market transfers, it was alleged in the SCN that the entities

related /connected/ associated to/ with KBL/ Shri Raj Kumar Basantani, including

Adam Comsof P. Ltd, were transferring shares of KBL through off-market

transactions to the demat accounts of Shri Giridharbhai Karu and Shri Mahesh

Mistry for off-loading in the market. It was alleged that Adam Comsof had dealt

through Kolar Sharex P. Ltd, member of BSE and transferred shares to the above

mentioned entities who in turn had off-loaded the shares in the market. Thus,

along with the other connected / related entities, the Noticee, being the director of

ACL, was alleged to have violated the provisions of Regulation 3, 4(1) and 4(2)(a)

and (d) of the PFUTP Regulations.

18. Vide letter dated January 27, 2016, the Noticee submitted his reply to the SCN.

The Noticee submitted that he was appointed as an Industrial Medical Officer by

SIL on July 11, 1997. It was told by the Chairman, Shri Raj Kumar Basantani,

somewhere in 2003 that there were two Biotech Companies under the same

group viz. Adam Comsof Limited and Kolar Biotech Limited and since, the

Noticee is a Doctor by profession, the Board of Directors will look good if he

becomes an Additional Director in the said two companies. Therefore, the

Noticee accepted the said request and became the director in both the said

companies. The Noticee further submits that his term of directorship in Adam

Comsof Limited was from October 08, 2003 to June 02, 2004 and in Kolar

Biotech Ltd it was from October 10, 2003 to June 2, 2004. As a director his job

was only to look after the Medical aspects of the both the companies. Further, he

stated that he has never been invited or attended any Board of Directors meeting

for the said companies. He was not looking after the day to day conduct and

Page 11 of 16

business of the two companies. Further, the Noticee submitted that he has never

been the signatory of the Bank Accounts of the said companies. He has neither

worked in the Finance Department or the Share Department of the said

companies nor has he been a part of the splitting of shares of Adam Comsof Ltd

or Kolar Biotech or issued any announcements about Bonus issue of the shares

of the said companies. The Noticee submitted that he had resigned from the post

of Additional Director of both Adam Comsof Limited and Kolar Biotech Limited on

June 02, 2004 i.e. before the period of investigation and therefore, he is not liable

for the alleged manipulation in the scrip of KBL.

19. Vide letter dated July 04, 2017, the Noticee submitted all the documentary

evidence in support of his submission with respect to resignation from the two

companies. The Noticee has submitted certified copies of the following

documents:

(a) Resignation letter dated June 02, 2004 forwarded to the The Chairman /

Board of Directors, Kolar Biotech Limited along with registered post receipt

dated June 05, 2004 of The Indian Post.

(b) Letter to the Registrar of Companies (R.O.C), Marine Lines Mumbai intimating

about the Noticee’s resignation as a director of Kolar Biotech Limited along

with registered post receipt dated June 11, 2004 of the Indian Post and a copy

of the acknowledgment from ROC, Mumbai.

(c) Letter to the Registrar of Companies (R.O.C), C.G.O, Belapur intimating about

the Noticee’s resignation as a director of Kolar Biotech Limited along with

registered post receipt dated June 11, 2004 of the Indian Post and a copy of

the acknowledgment from ROC, Navi Mumbai.

(d) Public Notice of the resignation as Director of Kolar Biotech Limited in

Business Standard dated February 01, 2005.

(e) Articles of Association of Kolar Biotech Limited highlighting the clause on

resignation.

(f) Public Notice of resignation as Director of Kolar Biotech Limited in Tarun

Bharat Newspaper dated February 01, 2005.

Page 12 of 16

(g) Resignation letter dated June 02, 2004 forwarded to the The Chairman, Adam

Comsof Limited along with registered post receipt dated June 05, 2004 of The

Indian Post.

(h) Letter to the Registrar of Companies (R.O.C), Marine Lines Mumbai intimating

about the Noticee’s resignation as a director of Adam Comsof Limited along


of the acknowledgment from ROC, Mumbai..

(i) Letter to the Registrar of Companies (R.O.C), C.G.O, Belapur intimating

about the Noticee’s resignation as a director of Adam Comsof Limited along


of the acknowledgment from ROC, Navi Mumbai.

(j) Public Notice of the resignation as Director of Adam Comsof Limited in

Business Standard dated February 01, 2005.

(k) Public Notice of resignation as Director of Adam Comsof Limited in Tarun

Bharat Newspaper dated February 01, 2005.

20. I have carefully perused the documents submitted by the Noticee in support of his

contentions. I note that Section 284 of the Companies Act, 1956 specifies the

manner in which a director can be removed from his post before expiry of his

term. Further, Section 283 of the Companies Act, 1956 provides certain grounds

on which the office of director ceases. However, I find that the Companies Act,

1956 does not specify any provision relating to cessation of Director from

directorship with their own wish and thus, the only exit way available to a director

is to tender a resignation.

21. I find that in the case of T. Murari Vs. The State of Tamil Nadu (1976) 46 Com

Cases 613 (Mad), the Hon’ble Madras High Court had held that “In the absence

of a provision in respect of resignation under the Act or under the articles of

association of the company, the resignation tendered by a director or Managing

Director unequivocally in writing will take effect from the time when such

resignation is tendered.”I also find in the case of Dushyant D Anjaria v Wall

Street Finance Ltd. (2001) Comp Case 655 (Bom)the Hon’ble Bombay High

Court had held that the resignation of a Director would be effective from the date

it was submitted, for the reason that the letter brings out clearly the intention of

Page 13 of 16

the person to resign. Even in the case of SS Lakshmana Pillai Vs. Registrar of

Companies (1977) 47 Com. Cases 652 the Hon’ble Madras High Court has

relied on the Ramaiya's Guide to the Companies Act, 7th edition, page 481 and

has reproduced it which is as under:

"There is no provision in the Act relating to the resignation of his office by a

director, as in the case of a managing agent (Section 342). If there is any

provision in the articles giving the right to a director to resign at any time, the

resignation will take effect without any need for its acceptance by the board or the

company in general meeting. Where a director is elected or has contracted to act

for a fixed period, his resignation, before the expiration of the period, may make

him liable for damages for breach of his contract, unless the articles permit such

resignation, or unless there is good cause.

In the absence of any provision in the articles the ordinary rule of common law as

regards resignation by an officer or agent must be followed, namely, intimation by

notice given either to the company or the board and acceptance of the same by

them. See Glossop v. Glossop [1907] 2 Ch 370 (Ch D), Latchford Premier

Cinema Ltd. v. Ennion [1931] 2 Ch 409; [1932] 2 Comp Cas 106 (Ch D). In the

latter case, even resignation orally tendered at a general meeting and accepted

by the meeting was held to be effective. See also State of Bihar v. Sitaram

Jhunjhunwala and Mohan Chandra v. Institute of Chartered Accountants .

Where a resignation states that it is to take effect on acceptance, or the articles

so require, acceptance is necessary to end the tenure of office. Where, however,

the resignation says that it is to take effect immediately, acceptance is not

necessary unless the articles or any provision of law makes it necessary. Any

form of resignation, whether oral or written, is sufficient provided the intention to

resign is clear. It is, however, advisable that the resignation is in writing and also

indicates the time when it is to take effect, so that it may serve as a record of

reference in case of controversy. In the absence of any indication otherwise, a

resignation takes effect immediately. Resignation will not, however, relieve him

from any accountable or other liability which he may have incurred while in office.

https://indiankanoon.org/doc/1353758/





Page 14 of 16

A resignation once made cannot be withdrawn except with the consent of the

company or the board. See R. v. Mayor and Town Council of Wigan [1885] 14

QBD 908 (QB), Glossop v. Glossop [1907] 2 Ch 370 (Ch D) and Shivlal Motilal v.

Tricumdas Mills Co. Ltd. [1912] ILR 36 Bom 564."

22. I find that so far as the formalities like filling up of Form-32 and sending it to the

Registrar of Companies are concerned, it is for the company to comply with them

in conformity with the provisions of Section 302(2) or Section 303(2) of the

Companies Act, 1956. Further, in cases where there is a delay or negligence on

the part of the company in intimating the Registrar about the date of resignation,

the Director who had resigned cannot be burdened with the responsibility and

liability for such delay. Section 302(2) and 303(2) of the Companies Act, 1956

read as under:

Section 302. Disclosure to members of director's interest in contract

appointing manager, managing director, managing agent or secretaries and

treasurers.

(2) Where a company enters into a contract for the appointment of a managing

director of the company, or varies any such contract which is already in

existence, the company shall send an abstract of the terms of the contract or

variation to every member of the company within the time specified in sub-

section (1); and if any other director of the company is concerned or interested in

the contract or variation, a memorandum clearly specifying the nature of the

concern or interest of such other director in the contract or variation shall also be

sent to every member of the company with the abstract aforesaid.

Section 303. Register of directors, managing agents, secretaries and

treasurers, etc.

(2) The company shall, within the periods respectively mentioned in this sub-

section, send to the Registrar a return in duplicate in the prescribed form

containing the particulars specified in the said register and a notification in

duplicate in the prescribed form of any change among its directors, managing

directors, managing agents, secretaries and treasurers, managers or secretaries

specifying the date of the change. The period within which the said return is to be

sent shall be a period of thirty days from the appointment of the first directors of



Page 15 of 16

the company and the period within which the said notification of a change is to be

sent shall be thirty days from the happening thereof:

23. In the case of Saumil Dilip MitraVs. State of Maharashtra (2002) 48 CLA 21,

the Hon’ble Bombay High Court held that “A director of a company can tender his

resignation unilaterally and without filling in Form 32 and without sending a notice

to the Registrar of Companies. Filling in Form 32 and giving of intimation to the

Registrar is the duty of the company secretary and not of the resigning director. A

director who intends to resign has to send in writing a letter informing either to the

Chairman or the Secretary, his intention to resign from the post of the director.” In

the case of Registrar of Companies Vs. Bihar Investment Trust

Limited(1978) 48 Comp Cas 579 (Pat) the Hon’ble Patna High Court has also

observed that the responsibility to file Form 32 with the Registrar of Companies is

that of the Company and not the resigning Director.

24. In view of the above, I find that the two letters of resignation, both dated June 02,

2004,produced by the Noticee in the present case along with the registered post

receipt dated June 05, 2004 indicate that the Noticee had tendered his

resignation from the position of Director of Kolar Biotech Limited and Adam

Comsof Limited with immediate effect i.e. June 02, 2004 which was before the

investigation period in the matter. Further, I even find that the Noticee had even

sent letters to the Registrar of Companies Marine Lines, Mumbai and Navi

Mumbai and both the said letters bear the stamps of the Registrar office showing

that the same were received by the respective ROCs. I also find on perusal of the

Articles of Association of Kolar Biotech Limited that the clause on resignation

reads as “Subject to the provisions of the Act, a Director may resign his office at

any time by notice in writing addressed to the Company or to the Board of

Directors.” Thus, I note that by tendering his resignation by way of letter dated

June 02, 2004, the Noticee had adhered to the provisions of resignation as

mentioned in the Articles of Association of Kolar Biotech Limited. Further, I note

that in the absence of the Articles of Association of Adam Comsof Limited, the

common law needs to be followed which clearly states that the letter intending

resignation from the post of Director in itself is to be considered as resignation of

the Director.

Page 16 of 16

25. Further, as mentioned above, the responsibility of filing Form 32 with the ROC is

that of the respective company and therefore, even in the absence of Form 32 on

record, I conclude that the Noticee did actually tender his resignation to the said

companies and had resigned from the Board of Directors of Adam Comsof

Limited and Kolar Biotech Limited on June 02, 2004 itself which was much before

the period under investigation in the present case. Thus, I find that the Noticee

cannot be held responsible for the manipulation in the scrip of KBL during the

investigation period. Therefore, I conclude that the violations of Regulation 3,

4(1) and 4(2)(a) and (d) of the PFUTP Regulations are not established against

the Noticee.

ORDER

26. Considering the fact and circumstances of the case, the evidence made available

on recordand exercising the powers conferred upon me under Section 15-I (2) of

the SEBI Act, 1992 read with Rule 5 of the Adjudication Rules, I conclude that the

allegations levelled against the Noticee namely Shri Umesh Khariwala do not

stand established and accordingly the present adjudication proceedings stand

disposed of.

27. In terms of the Rule 6 of the Adjudication Rules, copy of this order is sent to the

Noticee and also to Securities and Exchange Board of India.

Date: July 17, 2017 D.SURA REDDY

Place: Mumbai GENERAL MANAGER &

ADJUDICATING OFFICER

Documents

before the adjudicating officer - SEBI