BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. AK/AO/2-5/2016]
_____________________________________________________________________
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
M/s. Sun-Plant Agro Ltd. (PAN No. AADCS8447H)
Mr. Awdesh Kumar Singh (PAN No. AKQPS6527G)
Mr. Girija Shankar Kumar (PAN No. AKAPK2774R)
Mr. Sant Kumar (PAN No. BBXPK3112N)

In the matter of Sun-Plant Agro Ltd.

1. Securities and Exchange Board of India (hereinafter referred to as SEBI) vide Order dated May
03, 2011 had inter-alia directed M/s. Sun-Plant Agro Ltd. (hereinafter referred to as 'SPAL/the
Company) to wind up its existing collective scheme(s) and refund the money collected by it
under the scheme(s) with returns which are due to the investors as per the terms of the offer in
the manner specified in Regulation 73 of the SEBI (Collective Investment Schemes) Regulations,
1999 (hereinafter referred to as the CIS Regulations) within three months from the date of the
Order.

2. The Company failed to confirm compliance with the aforesaid Order dated May 03, 2011. As per
Section 27 (1) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as
SEBI Act), if an offence under the Act has been committed by a company, every person who at
the time when the offence was committed was in charge of and was responsible to the company
for the conduct of business of the company, as well as the company, shall be deemed to be
guilty of the offence and shall be liable to be proceeded against and punished accordingly. Since
the company failed to confirm compliance of the directions issued to it vide Order dated May

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03, 2011, SEBI issued a Show Cause Notice dated January 03, 2013 under Section 11 and 11B of
the SEBI Act to the Company and its directors viz. Mr. Awdesh Kumar Singh, Managing Director,
Mr. Girija Shankar Kumar, Director and Mr. Sant Kumar, Director (hereinafter collectively
referred to as 'the Noticees') calling them to show cause as to why appropriate actions including
actions referred in Order dated May 03, 2011 under the provisions of Section 11B of SEBI Act
read with Regulation 65 of the CIS Regulations should not be taken against the Noticees for
failure to comply with the Order dated May 03, 2011. The Noticees filed replies/ submissions
dated January 22, 2013, June 08, 2013, July 08, 2013, July 09, 2013, July 19, 2013 and December
09, 2013. After examining the replies/ submissions of the Noticees and other relevant material
available on record, SEBI passed an Order dated December 30, 2013 against the Noticees viz.
SPAL/ the Company and the Directors viz. Mr. Awdesh Kumar Singh, Mr. Girija Shankar Kumar
and Mr. Sant Kumar restraining and debarring the Noticees from accessing the securities market
and further prohibiting them from buying, selling or dealing in securities market, directly or
indirectly, in any manner, whatsoever for a period of five years for non-compliance of the
directions issued vide Order dated May 03, 2011. Various other directions were also issued in
the Order dated December 30, 2013, including the initiation of the adjudication proceeding.

APPOINTMENT OF ADJUDICATING OFFICER

3. In view of the above, the undersigned was appointed as the Adjudicating Officer vide Order
dated April 07, 2014 under Section 15 I of the SEBI Act read with Rule 3 of SEBI (Procedure
for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 (hereinafter
referred to as the Rules) to enquire into the alleged non-compliance with SEBI Order dated
May 03, 2011 and adjudge under Section 15 HB of the SEBI Act for the alleged violation
committed by the Noticees.

SHOW CAUSE NOTICE, HEARING AND REPLY

4. Show Cause Notices dated August 26, 2014 (hereinafter referred to as 'SCNs') were issued
to the Noticees under rule 4(1) of the Rules to show cause as to why an inquiry should not

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be held against the Noticees and penalty be not imposed on them under section 15HB of
SEBI Act for the alleged violation specified in the said SCN.

5. SPAL/ the Company replied to the SCN vide letter dated September 07, 2014 stating that it
was not in possession of the material relied upon while passing the Order dated May 03,
2011, hence, they were not in a position to effectively reply to the correspondences or
Orders passed. The company further requested for an opportunity for personal hearing and
to be provided with all materials relied upon, in order to enable it to effectively represent
itself.

6. Hence, vide hearing Notice dated September 22, 2014, the Noticees were granted an
opportunity for personal hearing on October 17, 2014. The Noticees were also informed
that all the relevant documents relied upon while framing the charges in the SCN had
already been provided to them as annexure to the SCN. The Noticees were, therefore,
advised to file their reply by October 6, 2014.

7. Thereafter, on the scheduled date of hearing, Mr. Debesh Panda, Ms. Amrita Panda and Mr.
Girija Shankar Kumar, Authorized Representatives (hereinafter referred to as the ARs)
appeared on behalf of the Noticees and made submissions. During the hearing, it was noted
that no written submission/ reply to the SCN was filed before the personal hearing.
However, the ARs stated that they would like to be heard on the question of maintainability,
before making written submissions on the merits of the case. The ARs made submissions on
the question of maintainability of the adjudication proceeding, inter alia on the ground that
they are premature, and are founded on an Order that is without jurisdiction. The ARs
stated that the present proceeding would not be maintainable, especially when the
Noticees are bonafide pursuing the writ petition before the Honble High Court of Calcutta.
The ARs requested that the material which SEBI relies upon to allege that the Order dated
May 03, 2011 has attained finality, and, thus, has to be complied with, ought to be handed
over to them, since SEBI has to discharge the burden of proof initially while making the
allegation in the SCN. The ARs further submitted that the proceeding for imposition of

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penalty under Section 15HB stand on a completely different footing as per the judgment of
Bharjatiya Steel (2008 SC) which after taking into consideration the judgment in Chairman,
SEBI Vs. Shriram Mutual Fund (2006 SC) holds that when there is a discretion to not award
any penalty at all, the question of mens rea becomes relevant, which has not been alleged
at all in the SCN. The ARs inter alia sought to make all the submissions by November 03,
2014, after which they desired another opportunity of personal hearing to make submission
on merits, if it is found that the proceedings are maintainable and they are called upon to
make submissions on Order dated May 03, 2011 being without jurisdiction, as per the DLF
judgment of the Honble Supreme Court (Harshad Chiman Lal Modi Vs. DLF Universal Ltd.
(2005)7SCC791).

8. Subsequently, vide letter received on November 17, 2014, the Noticees filed a reply inter
alia stating as under:
a. That the Noticees have been in the business of sale and purchase/ trading of trees much
before February 23, 2000, the date with effect from which Section 11AA was introduced by
way of SEBI (Amendment) Act, 1999. Further that the Noticees are assessed to Income Tax
and Sales Tax. The business of trading is also corroborated by several other documents,
which form part of the Writ Petition filed before the Honble High Court of Calcutta. The
Noticees also submitted copies of the same;
b. That SEBI admittedly was aware of the existence of trees and the business of trading in
trees in 2002. Further, even when SEBI began corresponding with the Noticees in 2010,
the existence of trees and business of trading of trees could not be said to have escaped its
attention because of passage of time, since in SEBIs letter dated April 13, 2010 the same
was referred to. Hence, when the Noticees realized that the ex parte ad-interim Order
dated October 21, 2010 did not acknowledge these facts, and had arrived at a conclusion
without any physical inspection or investigation, they prayed for a post decisional hearing.
At the time of the hearing, these materials were presented, and it was prayed that a
physical examination/ inspection of the affairs of the company be conducted before
passing any Order. However, the Order dated May 3, 2011 did not consider these
submissions;

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c. That the trees are identifiable. If the same is established, the ingredients specified in
Section 11AA of the SEBI Act would no longer be fulfilled and the business could no longer
be termed a Collective Investment Scheme (CIS);
d. That the Order dated May 03, 2011 was thus, challenged before the Honble High Court of
Calcutta as being without jurisdiction and having been passed in gross violation of
principles of natural justice;
e. That SEBI must produce the evidence that it relies upon to allege that the Order dated May
03, 2011 has attained finality, non- compliance of which is the foundation of the SCN;
f.

That the Honble High Court of Calcutta has heard the matter on several dates when SEBI
appeared on caveat;

g. That the counsel had submitted that SEBI and the Noticees could jointly approach the
Honble High Court of Calcutta in respect of the Writ Petition filed by the company. These
contentions were not considered before passing of the Order dated December 30, 2013.
The Noticees also provided a copy of the written submissions filed before passing of the
Order dated December 30, 2013;
h. That SEBI had made an oral statement through its Counsel that it would not act in
pursuance of the show cause notice (11B) while the Honble High Court examines the
question of maintainability;
i.

That the Noticees have referred to the judgment of the Honble High Court of Madras in
the matter of All India Trade Union Congress Vs. Neyveli Lignite Corporation Ltd. and
contended that any action in pursuance of the SCN, despite there being no stay order could
still amount to over reaching the Honble High Court;

j.

That the Noticees also submitted that they had been regularly repaying their customers in
accordance with their contractual obligations undertaken by them upon signing the Tree
Sale Agreement with their customers, whereas the Order dated December 30, 2013
recorded that the Noticees had wound up the schemes and were repaying the investors.
The Noticees have stated that what was sought to be illustrated was simply that the
Noticees were duly repaying the customers as per their contractual obligations;

k. That the SCN is vague and does not even allege existence of mens rea. The Noticees have
contended that Section 15HB of the SEBI Act stands on a completely different footing from

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the other provisions of Chapter VIA of the SEBI Act, because it admits discretion. Given the
in-built discretion, the authority issuing the SCN must disclose the amount of penalty
proposed to be imposed and the reasons on the basis of which the amount is sought to be
justified, so as to give the Noticees an opportunity to respond thereto;
l.

That the judgment of the Honble Supreme court in the case of Surath Chandra
Chakrabarty Vs. State of West Bengal (1970) holds that if a person is not clearly and
definitely told what the allegations are on which the charges preferred are founded, he
cannot possibly by projecting his own imagination, discover all the facts and circumstances
that may be in contemplation of the authorities to be established against him. The
Noticees have contended that the SCN is vague as it does not disclose how much penalty is
proposed to be imposed under Section 15HB and the reasons for arriving at this amount.
The Noticees have also cited the judgment of the Honble Supreme Court in the case of
Bharjatiya Steel Industries V. Commissioner, Sales Tax, UP (2008) wherein it was held
that since the assessing authority has been conferred with discretion to levy penalty, it also
may not levy penalty. If it has the discretion not to levy penalty, existence of mens rea
becomes a relevant factor;

m. That an Order passed by a Court without jurisdiction is a nullity. The Order dated May 03,
2011, which is the foundation for the present SCN has been challenged in the Honble High
Court of Calcutta for want of jurisdiction. In view of the same, the maintainability of the
present proceedings ought to be determined by a reasoned order. The Noticees stated that
they could be called to make submissions on the merit of the case, only when the present
proceedings are found to be maintainable.

9. Thereafter, with respect to submission of the Noticees that the Order dated May 03, 2011
had not attained finality, the Noticees vide letter dated February 10, 2015 were informed
that the same issue had already been discussed in the Order of the Hon'ble Whole Time
Member, SEBI dated December 30, 2013. The Noticees were informed that the undersigned
concurred with the views expressed by the Hon'ble Whole Time Member, SEBI in the
matter. In view of the same, the Noticees were advised to submit documentary evidence, if
any, regarding their submissions, and also in respect of the stay/ quashing of SEBI's Order

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dated May 03, 2011. However, no reply was received from the Noticees. Thereafter, a
hearing Notice dated March 13, 2015 was issued to the Noticees, once again enclosing the
aforesaid letter dated February 10, 2015. The Noticees were again advised to submit
documentary evidence, if any, regarding their submissions, and also in respect of the stay/
quashing of SEBI's Order dated May 03, 2011. The Noticees were further granted an
opportunity for personal hearing on April 28, 2015 in the matter.

10. Vide letter dated April 28, 2015, the Noticees requested that the hearing be adjourned for a
period of six weeks. The request of the Noticees was acceded to and vide email dated May
06, 2015, they were granted another opportunity for personal hearing on May 19, 2015.
The Noticees were once again advised to submit documentary evidence, if any, regarding
their submissions, and also in respect of the stay/ quashing of SEBI's Order dated May 03,
2011.

11. The Noticees replied to the aforesaid email vide their letter dated May 15, 2015 and stated
that the company had already conveyed its inability to produce the above mentioned
documents in view of the Managing Director of the Company being indisposed. The
Noticees also requested that the hearing scheduled on May 19, 2015 be postponed to June
29 or June 30, 2015.

12. Accordingly, a personal hearing was held on June 29, 2015. Mr. Debesh Panda and Mr. Girija
Shankar Kumar (AR) appeared on behalf of the Noticees. During the hearing, the ARs were
given an opportunity to make submissions on merit in reply to the SCN. The ARs refused to
make any submission on merit in reply to the SCN. The ARs inter alia stated that till an
Order in respect of the maintainability with regard to the above points is passed, the matter
cannot be proceeded with, and that the Noticees reserve their right make arguments on
merit only after such an Order has been passed.

13. In view of the above, letters dated July 28, 2015 were issued to the Noticees. Vide the said
letter, the Noticees were given a final opportunity to file submissions on preliminary issues
and on merits by August 14, 2015, failing which it was informed that it would be presumed

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that the Noticees had no further reply to submit on preliminary issues and on merits, and
the matter would be further proceeded with on the basis of the evidence available on
record. A last and final opportunity for personal hearing was also scheduled on September
04, 2015 to make submissions on both preliminary issues and on merits in the matter.
However, these letters were returned undelivered from the Noticees address. Thereafter,
vide letter dated October 07, 2015, the Noticees were given an opportunity to file
submissions on preliminary issues and on merits by October 26, 2015. An opportunity for
personal hearing was also scheduled on November 04, 2015 to make submissions on both
preliminary issues and on merits in the matter. The Noticees were also informed that if no
reply was received by the aforesaid date, or, if they failed to appear for the hearing, it would
be presumed that they had no further reply to submit on preliminary issues and on merits,
and the matter would be further proceeded with on the basis of the evidence available on
record. The said letter dated October 07, 2015 was also emailed to Ms. Amrita Panda and
Mr. Debesh Panda, ARs and Advocates of the Noticee, as well as to the email address
ed@inventsoft-tech.com, from which e-mail correspondence had been received on behalf
of the Noticees in the matter. Vide email dated October 23, 2015, Shri Debesh Panda
requested that no correspondence in the matter be addressed to him directly, and that the
Noticees should be contacted directly.

14. Subsequently, a scanned copy of a letter from the Noticees dated November 02, 2015, was
received from the email address ed@inventsoft-tech.com requesting for an adjournment of
the personal hearing scheduled on November 04, 2015 to December citing Bihar Assembly
elections, Diwali and Chath. The request of the Noticees was acceded to, and vide hearing
Notice dated December 02, 2015, the Noticees were once again given an opportunity to file
submissions on preliminary issues and on merits by December 15, 2015. As per the Noticees
request, the Noticees were also granted an opportunity for personal hearing on December
21, 2015 to make submissions on both preliminary issues and on merits in the matter. The
Noticees were again informed that if no reply was received by the aforesaid date, or, if they
failed to appear for the hearing, it would be presumed that they had no further reply to

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submit on preliminary issues and on merits, and that the matter would be further
proceeded with on the basis of the evidence available on record.

15. However, vide email dated December 16, 2015, the Noticees forwarded a letter stating that
the company was filing its Balance Sheet for the years 2012-13, 2013-14 and 2014-15 within
the month of December, 2015. Thereafter, the company shall proceed with the matter in
the Honble High Court of Calcutta. The Noticees requested that the current proceedings be
kept on hold, pending disposal of the Writ Petition before the Honble High Court of
Calcutta.

16. In view of the above repeated opportunities granted to the Noticees, every time taking into
consideration the requests made by them / their ARs, I am of the considered opinion that
sufficient and adequate opportunities were provided to the Noticees to make their
submissions in the matter, both preliminary and on merit. However, at every stage, the
Noticees have sought to delay the matter and have refused to file any submissions on merit.
In view of the same, I am constrained to proceed in the matter on the basis of the material
available on record, including the replies that have been filed by the Noticees and the
submissions made by them in the personal hearings granted to them. Despite several
opportunities, since the Noticees and their ARs have failed to make submissions on merit in
the matter, it is presumed that they have no further submissions to make in the matter.
CONSIDERATION OF ISSUES AND FINDINGS

17. I have carefully examined the SCN, the submissions made by the Noticees and the
documents available on record. The allegation against the Noticees is that the company
failed to comply with the aforesaid Order dated May 03, 2011. Further, as per Section 27 (1)
of the SEBI Act, 1992, if an offence under the Act has been committed by a company, every
person who at the time when the offence was committed was in charge of and was
responsible to the company for the conduct of business of the company, as well as the
company, shall be deemed to be guilty of the offence and shall be liable to be proceeded

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against and punished accordingly. In view of the above, it was alleged that the Noticees had
not complied with SEBI Order and are liable to be penalized under section 15HB of SEBI Act.

18. The issues that, therefore, arise for consideration in the present case are:
a) Whether the Noticees failed to comply with SEBI Order dated May 03, 2011?
b) Does the non-compliance, if any, on the part of the Noticees attract monetary penalty
under section 15 HB of SEBI Act?
c) If so, what would be the monetary penalty that can be imposed taking into
consideration the factors mentioned in section 15J of SEBI Act?

19. At the outset, I note that the Noticees have repeatedly emphasized that they would make
their submissions on the merits of the case, only after the preliminary objections raised by
them on the issue of maintainability were decided by a reasoned order. I note that similar
issues were raised and discussed in the matter of Praveen Mohnot Vs. SEBI before the
Honble Securities Appellate Tribunal (SAT) (date of Order- February 05, 2015). In the
matter, a show cause notice issued to the appellants in the said case on December 18, 2008
was decided against the appellants by an Order passed by the Whole Time Member
(hereinafter referred to as WTM) of SEBI on September 22, 2009. The Honble SAT had vide
an earlier Order dated October 21, 2010, set aside SEBIs Order dated September 22, 2009 in
the matter and remanded the matters back to SEBI for fresh decision. Accordingly, a fresh
show cause notice was issued on December 27, 2012. In the reply to the show cause notice,
the appellants had sought clarification as to whether the show cause notice dated
December 27, 2012 was a supplementary show cause notice to the earlier show cause
notice dated December 18, 2008, or, it was a fresh show cause notice. The Appellants had
also contended that issuing fresh show cause notice without withdrawing the earlier show
cause notice would be barred by the principle of res judicata. It was further contended that
the show cause notice was contrary to the order of the Honble SAT dated October 21, 2010
and amounted to double jeopardy in the eyes of law. The appellants had requested SEBI to
decide the above issue as preliminary issue. The appellants also stated that they were
reserving their right to file detailed reply after obtaining copy of the investigation report,

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inspection of documents, and cross examination of the witnesses whose statement were
relied upon in the show cause notice, in case the preliminary issue is decided against the
appellants. In the notice given by SEBI fixing personal hearing on August 13, 2013, nothing
was stated that the appellants were called upon to make submissions on the preliminary
issue as also on merits. According to the appellants, the arguments advanced by them at the
personal hearing on August 13, 2013 were only with reference to the preliminary issue.
Since the Appellants were under the impression that fresh hearing would be given to them
in case the preliminary issue is decided against the appellants, the Honble SAT remanded
the matter, stating as follows:
While making it clear that it is open to SEBI to hear on preliminary issue as well as merits
together and pass one composite order, in the facts of present case, in our opinion, SEBI was
not justified in passing impugned order on merits, without making it clear to the appellants
that at the personal hearing, appellants would be heard both on the preliminary issue and on
merits. (emphasis supplied)

20. In the case at hand, I find that the Noticees were granted innumerable opportunities to
make their submissions both on preliminary issues as well on merits. As noted above, they
were specifically advised to file any further submissions that they had to make on
preliminary issues and also on merits of the case. It was communicated to the Noticees that
failing the same, it would be presumed that the Noticees had no further submissions to
make on preliminary issues and on merits, and the matter would be proceeded with based
on evidence available on record. However, despite the same, the Noticees chose not to avail
of the several opportunities granted to them. Hence, I am of the view that the matter can be
proceeded with both on preliminary issues as well as on merit of the case, in view of the
above stated Order of the Honble SAT.

21. I note here that while refusing to make submissions on merits, the AR of the Noticees during
the personal hearing conducted on June 29, 2015, emphasized on three issues with regard
to the maintainability of the present proceedings, which are as follows:

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a.

That the Authority issuing the SCN has to produce material to show that the Order
dated May 03, 2011 has attained finality, including any order of the Calcutta High Court
that the Writ Petition is no longer pending;

b.

That the SCN is vague, as it does not disclose the exact amount of penalty proposed to
be imposed and the reasons for proposing such an amount, for the alleged non
compliance with SEBIs Order dated May 03, 2011. The Noticees are, thus, precluded
from effectively replying and defending themselves;

c.

That the SCN does not allege mens rea and is not a valid SCN under Section 15HB of the
SEBI Act.

22. We will first look at the submission of the Noticees that the Authority issuing the SCN has to
produce material to show that the Order dated May 03, 2011 has attained finality. I note
from the Order dated December 30, 2013 passed by the Whole Time Member, SEBI that
similar submissions were made by the Noticees in those proceedings as well. The aforesaid
Order dated December 30, 2013 states that:
8. In my view, present proceedings commenced vide the SCN dated January 03, 2013 are
limited for determination of the issue as to whether the noticees have complied with
directions issued vide order dated May 03, 2011 or not. The Order dated May 03, 2011 is in
operation and force as it has yet not been set aside, quashed or modified by any court/
Tribunal to date. The documents relied upon in support of the charge in the SCN dated
January 03, 2013 are the order dated May 03, 2011 and demand/reminder letters
subsequent thereto and those documents have been served upon and received by the
noticees. I, therefore, do not find any infirmity in the present proceedings on this count. I
further find that the noticees have made extraneous claims in this regard.

9. From the reply and written submissions of the noticees, I note that the arguments of the
noticees relevant to the present proceedings are twofold. First, that the matter is sub-judice
and SEBI should not take any action till the disposal of the writ petition filed by them before
the Hon'ble High Court of Calcutta and also that SEBI had undertaken not to act further in
the matter while the proceedings are pending before the Court. In this regard, I note that the

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writ petition filed by the noticees is yet not admitted by the Hon'ble High Court and as on
date, there is no stay on the operation of the SEBI order dated May 03, 2011 by any order of
Hon'ble High Court Calcutta in the said writ petition. Further, from a perusal of the material
available on record, I note that no undertaking was given by SEBI before the Hon'ble High
Court as stated by the noticees, nor have the noticees furnished any document to
substantiate this claim, I therefore, find that the above argument of the noticees does not
hold any ground.

23. I note that the same was also brought to the attention of the Noticees vide letter dated
February 10, 2015. The Noticees were informed vide the said letter that the undersigned
was in concurrence with the aforesaid views of the Learned Whole Time Member, SEBI. The
Noticees were further advised to submit documentary evidence, if any, with respect to stay/
quashing of SEBIs Order dated May 03, 2011. However, I note that the Noticees have not
produced any evidence to support their claim. I note that in the proceedings at hand, the
limited question for consideration before me is whether the Company and its directors have
complied with the directions issued vide the Order dated May 03, 2011. I find that there is
no contention made by the Noticees to support a finding that the directions have indeed
been complied with. Neither have the Noticees been able to produce even a shred of
evidence that there has been a stay on the Order, or, that the same has been quashed.
Thus, I agree with the finding of learned Whole Time Member, SEBI that Order dated May
03, 2011 is in operation and force as it has yet not been set aside, quashed or modified by
any court/ Tribunal to date. And the present proceedings before me are limited for
determination of the issue as to whether the Noticees have complied with the directions
issued vide Order dated May 03, 2011 or not.

24. In this regard, I find that the Noticees have cited the judgment of the Honble High Court of
Madras in the matter of All India Trade Union Congress Vs. Neyveli Lignite Corporation
Ltd. and contended that any action in pursuance of the SCN, despite there being no stay
order could amount to over reaching the Honble High Court. However, I note that the cited
case does not deal with the issue of stay. The facts in the aforesaid matter relate to a

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dispute between two factions of a Trade Union. Due to dispute, the Estate Officer/ Sub
Divisional Magistrate feared clashes between the two factions, which may hinder public
peace. Hence, exercising powers under Section 144 of the Code of Criminal Procedure
(CrPC), he directed the Tahsildar to put a seal on the building. The Order of the Sub
Divisional Magistrate was challenged before the Madras High Court, which noted that any
Order passed under Section 144 of CrPC remains in force for not more than 2 months, and
that the possession should be handed over to the Petitioner, who was in possession of the
premises immediately prior to the said seal. However, by then, the company, Nevyeli Lignite
Corporation Ltd had taken possession of the disputed premises. It was in this regard that the
Honble High Court had stated that especially when the High Court had taken notice in the
writ petition and the matter was pending further Orders, the action of the Estate Officer in
possessing the property by putting their own lock and their taking possession, would
amount to overreaching the jurisdiction of the High Court. However, in the matter at hand
the Noticees have not brought anything on record to show that the writ petition filed by
them has even been admitted by the Calcutta High Court. Further, nothing is brought on
record to show that facts in the so referred case are similar to the facts in the extant case.

25. Also, if this argument of the Noticees is accepted, it would imply that once a matter is
appealed, there is de facto stay on the Order against which the appeal is filed. This,
however, is not the correct stance, as is evident from the judgment of the Honble Supreme
Court in the matter of Vishnu Dutt Vs. State of Rajasthan (Date of Order- December 15,
2005), wherein it has been held that O. XLI R. 5 of the Code of Civil Procedure which clearly lays down that mere filling of an
appeal does not operate as stay of proceedings in execution, but the appellate court has the
power stay of execution. Obviously when the appellate court orders the stay of execution the
order can have affect only when it is made known to the executing courtwhere a stay order
is passed, execution still stands and can go on unless the court executing the decree has
knowledge of the stay order. It is only when the executing court has knowledge of the stay
order that the court must stay its hands and anything it does thereafter would be a nullity so
long as the stay order is in force.

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Thus, since there is no Order staying the operation of SEBIs Order dated May 03, 2011
brought on record, I am of the opinion that the current proceedings can rightfully continue.

26. Furthermore, I note that the same contentions i.e. the matter being sub judice are being
adopted by the Noticees ever since the Show Cause Notice dated January 03, 2013 under
Section 11 and 11B of the SEBI Act was issued to them. More than two years have lapsed
since the Order dated December 30, 2013 was passed by the Learned Whole Time Member.
Despite the same, the Noticees have not been able to produce any documentary evidence/
stay order with respect to the Order dated May 03, 2011 even as on date, however, the
same assertions continued to be made even two years later in the present proceedings. In
light of the same, I am convinced that the same is nothing but a dilatory tactic by the
Noticees. Hence, I am unable to find any merit in the aforesaid submission of the Noticees in
light of the facts of the case at hand.

27. I note that the Noticees have also contended that the SCN is vague. In the matter, I note
that the show cause notice dated August 26, 2014 has clearly brought out the charges
against the Noticees. In fact, the show cause notice provides details of the charges against
the Noticees. The Noticees were also given ample opportunity to present their case as has
been brought out in the earlier paras of the Order. Thus, there was no breach of natural
justice either. I find here that the Noticees have stated that the authority issuing the SCN
must disclose the amount of penalty proposed to be imposed and the reasons on the basis
of which the amount is sought to be justified, so as to give the Noticees an opportunity to
respond thereto. The SCN clearly brought out that the Noticees shall be liable to a penalty
which may extend to one crore rupees under Section 15HB of the SEBI Act. However, the
exact amount of penalty can be arrived at only after considering the submissions of the
Noticees. Further, the reasons for arriving at such amount have to be recorded in Order
passed. In fact, the SCN that quantifies the exact amount of penalty that would be levied,
takes away the in-built discretion available under Section 15HB of the SEBI Act that the
Noticees have so emphatically through their submissions stressed upon, as it would preempt the extent of liability if guilt is established.

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28. Further, I note that the Noticees have cited the judgment of the Honble Supreme Court in
the matter of Surath Chandra Chakrabarty Vs. State of West Bengal (1970) in this regard to
argue that if a person is not clearly and definitely told what the allegations are on which the
charges preferred are founded, he cannot possibly by projecting his own imagination
discover all the facts and circumstances that may be in contemplation of the authorities to
be established against him. The Noticees have contended that the SCN is vague as it does
not disclose how much penalty is proposed to be imposed under Section 15HB and the
reasons for arriving at this amount. However, I am of the view that the case cited by the
Noticees does not at all apply to their contention. The charge of non-compliance with SEBIs
Order dated May 03, 2015 has been plainly and prominently set out in the SCN. The same
can be referred to at Para 2, 3 and 4 of the SCN. The charge has been stated lucidly and can
be simply understood. Further as has been stated earlier, the Section under which the
penalty will be levied has been clearly laid out. The same, i.e. Section 15HB of the SEBI Act
prescribes a maximum of one crore rupees and has been provided to the Noticees as part of
the SCN. However, as has been explained in the preceding para, the exact quantum of
penalty that will be levied cannot be said to be part of the charge.

29. Further, the Noticees firstly were given an opportunity to contest the charges levied against
them and prove that conditions prescribed for levy of the penalty have not been fulfilled
and therefore penalty is not leviable. In addition to the above, the Noticees also had the
opportunity whereby they can put forth why the quantum of penalty should not be the
maximum penalty, etc. Thus, the opportunities given for making submissions and of hearing
provided the Noticees with much latitude to argue their case from dropping of the
proceedings to reducing the levy of penalty from the maximum leviable.

30. I find further that the Noticees have inter alia also stated that the SCN is vague and does not
even allege existence of mens rea. The Noticees have contended that Section 15HB of the
SEBI Act stands on a completely different footing from the other provisions of Chapter VIA
of the SEBI Act, because it admits discretion. The Noticees have cited the judgment of

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Bharjatiya Steel (2008 SC), which after taking into consideration the judgment in
Chairman, SEBI Vs. Shriram Mutual Fund (2006 SC) holds that when there is a discretion to
not award any penalty at all, the question of mens rea becomes relevant, which has not
been alleged at all in the SCN. However, after having perused the Order of the Honble
Supreme Court in both the above cases, I am of the view that the judgment of Bharjatiya
Steel does not state anything contrary to the finding in Chairman, SEBI Vs. Shriram Mutual
Fund. I find that in M/s. Bharjatiya Steel Industries vs. Commissioner, Sales Tax, U.P. on
March 05, 2008, the Honble Supreme Court had observed as thus:
Furthermore, the question as to whether mens rea is an essential ingredient or not will
depend upon the nature of the right of the parties and the purpose for which penalty is
sought to be imposed.
18. A distinction must also be borne in mind between a statute where no discretion is
conferred upon the adjudicatory authority and where such a discretion is conferred.
Whereas in the former case the principle of mens rea will be held to be imperative, in the
latter, having regard to the purport and object thereof, it may not be held to be so.

31. In Chairman, SEBI vs. Shriram Mutual Fund, referred above, the Honble Supreme Court
while interpreting the provisions of the SEBI Act has held that:
In our considered opinion, penalty is attracted as soon as the contravention of the
statutory obligation as contemplated by the Act and the Regulation is established and hence
the intention of the parties committing such violation becomes wholly irrelevant. A breach
of civil obligation which attracts penalty in the nature of fine under the provisions of the Act
and the Regulations would immediately attract the levy of penalty irrespective of the fact
whether contravention must made by the defaulter with guilty intention or not. We also
further held that unless the language of the statute indicates the need to establish the
presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was
intentional or not. On a careful perusal of Section 15(D)(b) and Section 15-E of the Act, there
is nothing which requires that mens rea must be proved before penalty can be imposed
under these provisions. Hence once the contravention is established then the penalty is to
follow. (emphasis supplied)

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32. In abovementioned matter of Bharjatiya Steel Industries vs. Commissioner, Sales Tax that
the Noticees have cited, I note that the Honble Supreme Court after quoting the above
cited lines from the Chairman, SEBI Vs. Shriram Mutual Fund judgment has further stated as
follows:
It is, therefore difficult to accede to the contention that under no circumstances absence
of mens rea would not be a plea for levy of penalty. An assessing authority has been
conferred with a discretionary jurisdiction to levy penalty. By necessary implication, the
authority may not levy penalty. If it has discretion not to levy penalty, existence of mens rea
becomes a relevant factor.

33. From the above, it becomes apparent that the judgment in Bharjatiya Steel Industries vs.
Commissioner, Sales Tax was re-emphasizing the ruling in Chairman, SEBI vs. Shriram Mutual
Fund. I note that the Honble Supreme Court made it clear in Chairman, SEBI vs. Shriram
Mutual Fund that penalty was attracted as soon as contravention of the SEBI Act was
established, hence, the intention of the parties becomes immaterial. Thus, the Honble
Supreme Court in Chairman, SEBI Vs. Shriram Mutual Fund had made it clear that the
adjudicating officer does not have the discretion under SEBI Act not to levy penalty, if the
contravention of SEBI Act is established. Also that statutory obligation under the SEBI Act
did not require proof of mens rea. On the other hand, the judgment in Bharjatiya Steel
Industries vs. Commissioner, Sales Tax talks about a situation where the statute allows
discretion and hence mens rea becomes a relevant factor.

34. It, thus, becomes clear from the above that the Honble Supreme Court in Bharjatiya Steel
Industries vs. Commissioner, Sales Tax cited Chairman, SEBI vs. Shriram Mutual Fund, not to
overrule it, but, to show that the necessity to prove mens rea depends on the wording on
the statute, and whether it allows discretion. Hence, after perusing both the Orders of the
Honble Supreme Court, it is clear that the later judgment in Bharjatiya Steel Industries vs.
Commissioner, Sales Tax, does not overrule the former judgment in Chairman, SEBI Vs.
Shriram Mutual Fund.

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35. In Chairman, SEBI vs. Shriram Mutual Fund, the Supreme Court further observed therein
that The impugned Order sets the stage for various market players to violate statutory
regulations with impunity and subsequently plead ignorance of law or lack of mens rea to
escape the imposition of penalty. The imputing mens rea into the provisions of Chapter VIA
is against the plain language of the statute and frustrates entire purpose and object of
introducing Chapter VIA to give teeth to the SEBI to secure strict compliance of the Act and
the Regulations.

36. Further, the Supreme Court in Chairman, SEBI vs. Shriram Mutual Fund has also observed
that In the provisions and scheme of penalty under Chapter VI A of the SEBI Act, there is no
element of any criminal offence or punishment as contemplated under criminal proceedings.
Therefore, there is no question of proof of intention or any mens rea by the appellants and it
is not essential element for imposing penalty under SEBI Act and the Regulations.

In view of the same, I am of the view that mens rea is not an essential element for imposing
penalty under Chapter VI A of the SEBI Act. Though I note that the Noticees have contended
that Section 15HB stands on a different footing from any other provision of Chapter VIA of
the SEBI Act, from the above judgment it is clear that the Supreme Court has not made any
such distinction. The Supreme Court has unambiguously stated that imputing mens rea into
the provisions of Chapter VIA is against the plain language of the statute and frustrates
entire purpose and object of introducing Chapter VIA to give teeth to the SEBI to secure strict
compliance of the Act and the Regulations.

37. The aforesaid gets further strengthened by the fact that subsequent to the judgement in
Bharjatiya Steel Industries vs. Commissioner, Sales Tax, the Honble Supreme Court on
September 29, 2008 in Union of India & Ors vs. M/s. Dharamendra Textile has cited the
judgment in Chairman, SEBI v. Shriram Mutual Fund with respect to in built discretion, and
has stated that the judgment has analyzed the legal position in the correct perspective.

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38. Reliance is also placed on decision of Bombay High Court reported in (2004) 51 SCL 307
(BOM.) (SEBI vs. Cabot International Capital Corporation), wherein the Honble High Court
of Judicature at Bombay in The Securities and Exchange Board of India V/s. Cabot
International Capital Corporation has held as follows:
The SEBI Act and the Regulations, are intended to regulate the Security Market and the
related aspects, the imposition of penalty, in the given facts and circumstances of the case,
cannot be tested on the ground of no mens rea, no penalty. For breaches of provisions of
SEBI Act and Regulations, according to us, which are civil in nature, mens rea is not essential.
On particular facts and circumstances of the case, proper exercise of judicial discretion is a
must, but not on a foundation that mens rea is an essential to impose penalty in each and
every breach of provisions of the SEBI Act.

Thus, I note that motive or mens rea is not essential to establish the charge in a proceeding
of this nature. In view of all of the above, the contention of the Noticees that the SCN is not
maintainable as it does not allege mens rea, is not tenable.

39. Hence, in view of the above, I do not find any merit in the preliminary submissions made by
the Noticees on the maintainability of the present proceedings. Further, from the evidence
available on record, I note that the Noticees have failed to comply with the directions issued
to the company under Order Dated May 03, 2011 to wind up its existing collective
investment scheme(s) and refund the money collected by it under the scheme(s) with
returns which are due to the investors. In fact, in their reply received on November 17,
2014, the Noticees have stated that whereas the Order dated December 30, 2013 recorded
that the Noticees had wound up the scheme and were repaying the investors, what was
sought to be illustrated by the Noticees in their replies during those proceedings was simply
that the Noticees were duly repaying the customers as per their contractual obligations.
Thus, the Noticees themselves have clearly and unambiguously stated that they have not
complied with the Order dated May 03, 2011.

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40. I also note that the Noticees have made several submissions such as, SEBI was aware of the
existence of trees and the business of trading in trees in 2002, that the trees are identifiable,
which being the case the ingredients specified in Section 11AA of the SEBI Act would no
longer be fulfilled and the business could no longer be termed a CIS. However, I once again
note that the present proceedings are limited to determination of the issue as to whether
the Noticees have complied with directions issued vide order dated May 03, 2011 or not.
Hence, I am of the view that these submissions are not relevant with respect to the issue at
hand, as the present proceedings are not in the nature of an appeal against SEBIs Order
dated May 03, 2011.

41. In view of the foregoing, I am convinced that it is a fit case to impose monetary penalty
under Section 15HB of the SEBI Act, which reads as under:

15HB:- Penalty for contravention where no separate penalty has been provided.
Whoever fails to comply with any provision of this Act, the rules or the regulations
made or directions issued by the Board there under for which no separate penalty has been
provided, shall be liable to a penalty which may extend to one crore rupees.

42. In view of the above, I am of the view that the present case is a fit case for imposition of
penalty under Section 15HB of the SEBI Act. While determining the quantum of monetary
penalty under section 15HB, I have considered the factors stipulated in section 15J of SEBI
Act, which reads as under:
15J - Factors to be taken into account by the adjudicating officer
While adjudging quantum of penalty under section 15-I, the adjudicating officer shall
have due regard to the following factors, namely:(a) The amount of disproportionate gain or unfair advantage, wherever quantifiable,
made as a result of the default;
(b) The amount of loss caused to an investor or group of investors as a result of the
default;
(c) The repetitive nature of the default.

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43. I notice from the Order dated May 03, 2011 that the company had between 2003-04 to
2008-09 collected a total sum of approximated Rs. 69.34 crore from investors. Further, the
said Order states that the collection for 2009-10 is not known. Thus, the exact amount
collected by the company from investors under the scheme is not known. This entire
amount has, however, been illegally raised without obtaining a registration from SEBI.
Further, the Order noted that the activity of raising funds in the name of sale of plants,
selling plants to a purchaser, maintaining the plants, and thereafter providing return on the
amount invested at the end of the scheme in the form of wood or cash, without any identity
or ear-marking of the particular plant which is sold, clearly made it a CIS, defined under
Section 11AA of SEBI Act and Regulation 3 of CIS Regulations. Hence vide Order dated May
03, 2011, the Learned Whole Time Member, SEBI had confirmed the ex-parte interim Order
dated October 21, 2010 and inter alia directed the company to wind up its existing collective
scheme(s) and refund the money collected by it under the scheme(s) due to the investors as
per the terms of offer in the manner specified in Regulation 73 of CIS Regulations within
three months from the date of the Order. However, I find that even after a passage of
almost five years from the date of the Order, the Noticees have failed to refund the
collected amount. I further note that the aforesaid default by the Noticees is despite the
Order dated December 30, 2013. Further I note that the Order dated December 30, 2013
inter alia states that though as per the Noticees own submission, the Noticees had claimed
that they had repaid 60% of the investors, however, the Noticees failed to substantiate their
claim along with proof/ evidence of repayment. No such proof/ evidences have been
provided in the present proceeding before me either.

44. An unregulated, unregistered scheme that collects and pools in resources from lay investors
poses a serious threat to the confidence that investors place in the securities markets. In the
recent past there have been several cases where a multitude of investors have suffered at
the hands of unscrupulous persons who seek to exploit the market. In the matter at hand,
despite having ample opportunity, the Noticees failed to comply with the directions set out

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in the Order dated May 03, 2011 and instead sought to hide behind dilatory tactics. Such
cases of non compliance would have to viewed seriously.

ORDER

45. After taking into consideration all the facts and circumstances of the case, for the failure of
the Noticees to comply with SEBI Order dated May 03, 2011, I impose a penalty of Rs.
1,00,00,000/- (Rupees One Crore only) under section 15HB of the SEBI Act on the Noticees
namely, M/s. Sun-Plant Agro Ltd., Mr. Awdesh Kumar Singh, Mr. Girija Shankar Kumar and
Mr. Sant Kumar (payable jointly and severally), which will be commensurate with the
violations committed by them.

46. The Noticees shall pay the said amount of penalty by way of demand draft in favour of SEBI
- Penalties Remittable to Government of India, payable at Kolkata, within 45 days of receipt
of this order. The said demand draft should be forwarded to S. Madhusudhanan, CIS
Department, SEBI Eastern Regional Office, L&T Chambers, 3rd Floor, 16 Camac Street,
Kolkata 700 017.

47. In terms of Rule 6 of the Rules, copy of this order is sent to the Noticees also to the
Securities and Exchange Board of India.

Date: March 15, 2016

Place: Mumbai

Adjudication Order in the matter of M/s. Sun-Plant Agro Ltd.

Anita Kenkare
Adjudicating Officer

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