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WTM/RKA/EFD/150/2016

SECURITIES AND EXCHANGE BOARD OF INDIA


ORDER
Under sections 11 (1), 11(4), 11A and 11B of the Securities and Exchange Board of India Act,
1992, in respect of:
1.
2.
3.
4.
5.
6.
7.
8.

United Cosmetics Manufacturing (I) Limited


Mr. Samir Chattopadhyay Kumar
Mr. Nirapada Maiti
Mr. Amal Patra
Mr. Kartik Jana
Mr. Balwant Kumar Singh
Ms. Debashree Bhowmik and
Mr. Rajib Bhattacharya

In the matter of issuance of redeemable preference shares by United Cosmetics


Manufacturing (I) Limited.
1.

Securities and Exchange Board of India (hereinafter referred to as SEBI), conducted a


preliminary examination into the issuance of Redeemable Preference Shares (hereinafter
referred to as RPS) by United Cosmetics Manufacturing (I) Limited {hereinafter referred to
as the company or UCM(I)L} with a view to ascertain the possible violations of the public
issue norms stipulated under the Companies Act, 1956 and other applicable laws pertaining to
the SEBI (Issue and Listing of Non-convertible Redeemable Preference Shares) Regulations,
2013 (NPRS Regulations).

2. Pursuant to the examination, SEBI passed an interim order dated November 20, 2015
(hereinafter referred to as interim order) against the company and its directors, Mr. Samir
Chattopadhyay Kumar, Mr. Nirapada Maiti, Mr. Amal Patra, Mr. Kartik Jana, Mr. Balwant
Kumar Singh, Ms. Debashree Bhowmik and Mr. Rajib Bhattacharya {collectively referred to
as noticees}, in view of the following:
(i) Under the Offer of Redeemable Preference Shares, it is observed that during the Financial Years
2006-07, 2008-09 and 2013-14, UCM(I)L allotted Redeemable preference shares to at least
2,955 individuals/investors and mobilized funds amounting to approximately 3.84 Cr. The
number of investors to whom allotments were made under the Offer of Redeemable Preference Shares
along with the amount mobilized therein, during the Financial Year 2006-07, 2008-09 and

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(ii)

(iii)

(iv)

(v)

2013-14 .. would prima facie indicate that such Offer was a public issue of securities, as
prescribed under the first proviso to Section 67(3) of the Companies Act, 1956.
.. the number of allottees and amount raised under the Offer of Redeemable Preference Shares
for the Financial Years 2006-07, 2008-09 and 2013-14, have only been taken from the
documents obtained from MCA21 Portal and also the information/documents furnished by the
company. Also, the details regarding the offer of redeemable preference shares of Rs. 500 Lakhs
issued on January 08, 2010 (as observed from the copy of the brochure furnished by the company)
has not been provided by the company. It is therefore possible that the actual number of allottees
and amount mobilized by UCM(I)L could be much more than the figures indicated ..
..the Offer of Redeemable Preference Shares by UCM(I)L during the Financial Year 200607, 2008-09 and 2013-14, will prima facie qualify as a public issue under the first proviso to
Section 67(3) of the Companies Act, 1956.
UCM(I)L is prima facie engaged in fund mobilizing activity from the public, through the Offer
of Redeemable Preference Shares and as a result of the aforesaid activity has violated the
aforementioned provisions of the Companies Act, 1956 (Section 56, Section 60 read with Section
2(36), Section 73), and SEBI NRPS Regulations.
. Mr. Samir Chattopadhyay Kumar, Mr. Nirapada Maiti and Mr. Amal Patra are the
present Directors of UCM(I)L and Mr.Kartik Jana, Mr.Balwant Kumar Singh, Ms.Debashree
Bhowmik and Mr.Rajib Bhattacharya are the past Directors. It is alleged that the aforementioned
Directors being the persons in-charge of and responsible to the Company for the conduct of business,
are responsible under Section 27(2) of the SEBI Act, for the prima facie contraventions committed
by UCM(I)L through the Offer of Redeemable Preference Shares.

3. In view of the alleged contraventions and for the reasons stated in the interim order, the
following directions were issued therein:
i. UCM(I)L (United Cosmetics Manufacturing (I) Limited) (PAN: AAACU7914N) shall not
mobilize any fresh funds from investors through the Offer of Redeemable Preference Shares or through
the issuance of equity shares or any other securities, to the public and/or invite subscription, in any
manner whatsoever, either directly or indirectly till further directions;
ii. UCM(I)L and its Directors, viz., Mr. Samir Chattopadhyay Kumar (PAN: ABVPK0643D),
Mr. Nirapada Maiti (PAN: AIHPM6556G), Mr. Amal Patra (PAN: AUZPP0701A),
Mr.Kartik Jana (PAN: AHQPJ8186K), Mr.Balwant Kumar Singh (PAN: BREPS6947N),
Ms. Debashree Bhowmik (PAN: AJIPB7361C), and Mr.Rajib Bhattacharya (PAN:
AMGPB0981P) are prohibited from issuing prospectus or any offer document or issue advertisement
for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly
or indirectly, till further orders;

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iii. UCM(I)L and its abovementioned Directors, are restrained from accessing the securities market and
further prohibited from buying, selling or otherwise dealing in the securities market, either directly or
indirectly, till further directions;
iv. UCM(I)L shall provide a full inventory of all its assets and properties;
v. UCM(I)L 's abovementioned Directors shall provide a full inventory of all their assets and properties;
vi. UCM(I)L and its abovementioned Directors shall not dispose of any of the properties or alienate or
encumber any of the assets owned/acquired by that company through the Offer of Redeemable
Preference Shares, without prior permission from SEBI;
vii. UCM(I)L and its abovementioned Directors shall not divert any funds raised from public at large
through the Offer of Redeemable Preference Shares, which are kept in bank account(s) and/or in the
custody of UCM(I)L;
viii. UCM(I)L and its abovementioned Directors shall furnish complete and relevant information in respect
of the Offer of Redeemable Preference Shares (as sought by SEBI letter dated December 17, 2014),
within 14 days from the date of receipt of this Order, including,

Details of the offer of redeemable preference shares of Rs. 500 Lakhs issued on January 08,
2010 (as mentioned in Paragraph No. 6(iii) above),

Details of the "Secured Redeemable Debentures" issued by the company (as mentioned in
Paragraph No. 4 and 6(v) above).

4. The interim order advised the noticees to show cause as to why suitable directions/prohibitions
under sections 11(1), 11(4), 11A and 11B of the SEBI Act read with section 73(2) of the
Companies Act, 1956, including the following, should not be taken/imposed against them:
i. Directing them jointly and severally to refund money collected through the Offer of
Redeemable Preference Shares along with interest, if any, promised to investors therein;
ii. Directing them not to issue prospectus or any offer document or issue advertisement for
soliciting money from the public for the issue of securities, in any manner whatsoever,
either directly or indirectly, for an appropriate period;
iii. Directing them to refrain from accessing the securities market and prohibiting them from
buying, selling or otherwise dealing in securities for an appropriate period.
5. The noticees were afforded opportunity to file their reply within 21 days of receipt of the
interim order and to seek a personal hearing, if they desired. The interim order was forwarded to
the noticees vide SEBI letters dated November 23, 2015. Mr. Rajib Bhattacharya filed his reply
vide letter dated December 07, 2015 and inter alia submitted the following:
(a) He worked as a director in the company for two and a half years i.e. from September
2009 to February 2012. During his tenure, he was working as a marketing executive

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only and looked after the insurance development division. He used to report to Mr.
Nirapada Maiti, Managing Director and Head of the company. Mr. Nirapada Maiti was
the key person in respect of legal, financial and administrative functions of the
company and took all major decisions related to the company.
(b) He may have been given the designation of a Director. However, he never received
any privilege or benefits of any standard like a director and was treated as an employee
of a company.
Mr. Rajib Bhattacharya had attached copies of his Income Tax Returns for AYs 2015-16, 201415 and 2013-14 along with the above reply.
6. On noticing that the Permanent Account Number (PAN) of Mr. Samir Chattopadhyay
Kumar was erroneously mentioned in the interim order, SEBI, vide Corrigendum dated
December 30, 2015, corrected the same. Thereafter, SEBI, vide hearing notices dated August
31, 2016, informed the noticees that the personal hearing in the matter is afforded on
September 29, 2016. As the interim order could not be delivered to some of the noticees at their
last known address, SEBI made a public notice in the newspapers (in Times of India-Kolkata
Edition on August 28, 2016 and in Anand Bazaar Patrika on August 29, 2016) intimating the
noticees about the interim order and the personal hearing fixed on September 29, 2016. They
were also advised to file their replies before the date of personal hearing. Despite the above
steps, the noticees failed to appear in the personal hearing. Accordingly, the proceedings of
personal hearing was concluded.
7. I have considered the interim order, the reply of Mr. Rajib Bhattacharya and material available
on record. The company is alleged to have made a public offer and issued RPS without
complying with the public issue norms mandated under the Companies Act, 1956 and the
NPRS Regulations. In this regard, I note the following:
(a) The company issued RPS as per the details below:
Year

Date of allotment

No. of persons to Total amount raised (`)


whom allotted
2006-07
30.03.2007
295
58,15,000/2008-09
04.12.2008
933
85,73,100/2009-10
08.01.2010
Details not provided by company till date
2013-14
1,727
2,40,33,900/Total
2,955*
3,84,22,000/-*
*the number of allottees and amount mobilized would therefore be higher than the indicated figures.

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(b) The interim order has noted that the Brochure of the company (as submitted by it to
SEBI) pertained to the issue of RPS of `500 lakhs on January 08, 2010. However,
the details of issue/allotment done on January 08, 2010 was not provided by the
company. Accordingly, the interim order had directed the company and its directors
to provide complete information pertaining to the offer of RPS and issue of the
same on January 08, 2010. However, the company failed to provide the information
till date.
(c) From the above facts, it becomes clear that the company issued RPS to atleast 2,955
persons and mobilized atleast `3.84 crore. These details have been taken from the
information available from the MCA-21 portal and information submitted by the
company. Therefore, I agree with the observation made in the interim order that ..It
is therefore possible that the actual number of allottees and amount mobilized by UCM(I)L could
be much more than the figures indicated .
(d) Considering the number of persons to whom the RPS was offered/issued by the
company and the deliberate concealment of information regarding the issue of RPS
on January 08, 2010, it can be definitely held that the issue of RPS was nothing but
a public issue in terms of the first proviso to section 67(3) of the Companies Act,
1956. In terms of the aforesaid provision, an issue of securities becomes a public
issue if the offer to subscribe to shares or debentures is made to 50 persons or more.
8. The interim order had also observed It is further observed from the documents received by SEBI along
with the complaint (mentioned in Paragraph No. 4 above), that the company had issued "Secured Redeemable
Debentures" (of face value Rs.1000 each). The said complaint was filed by a group of 28 investors and as
per the list forwarded by the complainants, the company has collected an amount of Rs.1.41 Cr. from the
complainants. The interim order had therefore advised the company and its directors to provide
details regarding the offer and issue of secured redeemable debentures. However, the
company failed to comply with the same. SEBI is therefore advised to take appropriate action
in this regard.
9. As the issuance of RPS by the company was a public issue, it ought to have complied with the
provisions of sections 56(1), 56(3), 60 read with section 2(36), and 73 of the Companies Act,
1956 and regulations 4(2)(a), (b), (c), (d), (e), 4(3), 4(5), 5, 6, 7, 8, 9, 13, 15, 16 and 22 of the
NPRS Regulations, as alleged in the interim order. In the present case, there is no record to
show that the company complied with requirements of the above provisions of law in respect
of its offer and issuance of RPS. The company is therefore held guilty of contravening the

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aforesaid provisions of the Companies Act, 1956 and the NPRS Regulations and thus liable
for the consequences of such default.
10. The interim order has alleged that the directors, Mr. Samir Chattopadhyay Kumar, Mr. Nirapada
Maiti, Mr. Amal Patra, Mr. Kartik Jana, Mr. Balwant Kumar Singh, Ms. Debashree Bhowmik
and Mr. Rajib Bhattacharya are liable for the violations committed by the company and advised
them to show cause as to why directions contemplated in the interim order should not be issued
against them. The details regarding the date of appointment and resignation, if any, of the
aforesaid directors is mentioned below:
Name
Date of appointment
Mr. Samir Chattopadhyay Kumar
28.04.2014

Date of resignation
Continuing as director

Mr. Nirapada Maiti


Mr. Amal Patra
Mr. Kartik Jana

Continuing as director
04.12.2015
18.02.2011
Continuing as director
10.05.2014
07.01.2010
09.02.2012

Mr. Balwant Kumar Singh


Ms. Debashree Bhowmik
Mr. Rajib Bhattacharya

01.04.2005
21.01.2012
01.04.2005
04.03.2016
07.01.2010
01.04.2005
07.09.2009

11. It is held above in this Order that the company made a public issue of RPS during FY 200607, 2008-09, 2009-10 and 2013-14 and mobilized atleast `3.84 crore from atleast 2955 persons
in violation of the public issue norms. The aforesaid directors (except for Mr. Samir Chattopadhyay
Kumar) were present (either during the substantial part of or whole of the period when RPS was offered and
issued) in the companys Board during the period when the company made offer and issued
the RPS in a public issue. It is noted that Mr. Samir Chattopadhyay Kumar was appointed a
director of the company on April 28, 2014.
12. In terms of section 291 of the Companies Act, 1956, the Board of Directors of a company
shall be entitled to exercise all such powers and do all such acts and things as the company is
authorized to exercise and do. Therefore, the Board of Directors being responsible for the
conduct of the business of a company will be liable for any non-compliance of law and such
liability shall be upon the individual directors also. Section 56(1) and 56(3) read with section
56(4) imposes the liability for the non-compliance of the said provisions, on the company,
every director, and other persons responsible for the issuance of the prospectus. The liability
for non-compliance of section 60 of the Companies Act is on the Company, and every person
who is a party to the non-compliance of issuing the prospectus as per the said section. Further,
the directors of a company shall be liable for action in case of contravention of the NPRS
Regulations.

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13. The liability of the company and directors to repay under section 73(2) of the Companies Act,
1956 would remain until the whole of the subscription amount along with interest is refunded
to the allottees/investors. Therefore, the directors (irrespective of whether they continue or resign) who
were present during the period when the company made the offer and allotted securities shall
be liable for violation of sections 56, 60 and 73 of the Companies Act, 1956 and the NPRS
Regulations. Further, the persons who join the companys Board as directors pursuant to the
offer and allotment of securities shall also be liable if the company/concerned directors fail to
make refunds as mandated under sections 73(2) of the Companies Act, 1956. With respect to
the breach of law and duty by a director of a company, I refer to and rely on the following
observations made by the Honble High Court of Madras in Madhavan Nambiar vs Registrar of
Companies (2002 108 Comp Cas 1 Mad):
13. . A director either full time or part time, either elected or appointed or nominated is bound to
discharge the functions of a director and should have taken all the diligent steps and taken care in the
affairs of the company.
14. In the matter of proceedings for negligence, default, breach of duty, misfeasance or breach of trust
or violation of the statutory provisions of the Act and the rules, there is no difference or distinction
between the whole-time or part time director or nominated or co-opted director and the liability for such
acts or commission or omission is equal. So also the treatment for such violations as stipulated in the
Companies Act, 1956.

14. As mentioned above, except for Mr. Rajib Bhattacharya, the other noticees did not file their
response to the interim order. Mr. Rajib Bhattacharya has admitted that he worked as a director
in the company from September 2009 to February 2012. As per records, he was a director in
the company from September 07, 2009 to February 09, 2012. This noticee has contended that
he was hired to look after the insurance development division. He used to report to
Mr. Nirapada Maiti, who was wholly in-charge of the legal, financial and administrative
functions of the company. He submitted that he never received the benefits or privileges like
a director. While producing copies of Income Tax Returns, he has not provided supporting
evidence for his above submissions. Having been aware that he was appointed as a director,
this noticee cannot plead ignorance. He should be aware of the duties and responsibilities that
are cast upon a director under law. Considering the observations made above and in the
previous paragraphs and the admission by Mr. Rajib Bhattacharya that he was a director in the
company during the period September 2009 to February 2012, I find that his submissions
are without merit. He would therefore be liable, along with the other noticees, for the
violations committed by the company.

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15. In view of the foregoing observations, I hereby find Mr. Nirapada Maiti, Mr. Amal Patra,
Mr. Kartik Jana, Mr. Balwant Kumar Singh, Ms. Debashree Bhowmik and Mr. Rajib
Bhattacharya liable for the contravention of sections 56, 60 and 73 of the Companies Act,
1956 and the NPRS Regulations committed by the company. Mr. Samir Chattopadhyay Kumar
shall be liable for default in making refunds in compliance with section 73(2) of the Companies
Act, 1956. All the aforesaid persons are officers in default in terms of section 5 of the Companies
Act, 1956. Therefore, the company and the aforesaid persons are liable for action and
consequences including making refund of the subscription money to the allottees along with
interest at 15% p.a. as mandated under section 73(2) of the Companies Act, 1956 read with
rule 3(c) of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
16. In view of the foregoing, I, in exercise of the powers conferred under sections 11(1), 11(4),
11A and 11B read with section 19 of the Securities and Exchange Board of India Act, 1992,
hereby issue the following directions:
(i)

United Cosmetics Manufacturing (I) Limited (PAN:AAACU7914N), Mr. Samir


Chattopadhyay Kumar (PAN: AQRPC9091N), Mr. Nirapada Maiti (PAN:
AIHPM6556G), Mr. Amal Patra (PAN: AUZPP0701A), Mr. Kartik Jana (PAN:
AHQPJ8186K), Mr. Balwant Kumar Singh (PAN: BREPS6947N), Ms. Debashree
Bhowmik (PAN: AJIPB7361C) and Mr. Rajib Bhattacharya (PAN: AMGPB0981P)
shall within a period of three months from the date of this order, jointly and severally
refund the money collected through the issue of redeemable preference shares to the
allottees with interest at the rate of 15% per annum from the date of receipt of money
till the date of such refund.

(ii)

Such refund shall be made only in cash through a Demand Draft or Pay Order.

(iii)

United Cosmetics Manufacturing (I) Limited and its directors shall within fifteen days
from the date of this Order submit to SEBI complete details of their assets
(along with proofs thereof) certified by a peer reviewed Chartered Accountant.

(iv) United Cosmetics Manufacturing (I) Limited and its directors are permitted to sell
assets of the company and deposit the sale proceeds in an Escrow Account opened
with a nationalized bank. Such proceeds shall be utilized for the sole purpose of
making refund/ repayment to the allottees till the full refund/ repayment as directed
above is made.

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(v)

United Cosmetics Manufacturing (I) Limited and its directors shall issue a public
notice, in all editions of one English national daily and one vernacular daily with
wide circulation, detailing the modalities for refund, including details of contact
persons including names, addresses and contact details, within fifteen days of this
order.

(vi) Within seven days of completion of refund/ repayment as directed hereinabove,


United Cosmetics Manufacturing (I) Limited and its directors shall file a certificate of
such completion with SEBI from two independent peer reviewed Chartered
Accountants who are in the panel of any public authority or public institution. Such
certificate shall be issued by the Chartered Accountants after verifying the relevant
documents including bank accounts of the noticees and satisfying themselves that the
refund has actually been made.
(vii) For the purpose of this order, a peer reviewed Chartered Accountant shall mean a
Chartered Accountant, who has been categorized so by the Institute of Chartered
Accountants of India.
(viii) United Cosmetics Manufacturing (I) Limited, Mr. Samir Chattopadhyay Kumar,
Mr. Nirapada Maiti, Mr. Amal Patra, Mr. Kartik Jana, Mr. Balwant Kumar Singh, Ms.
Debashree Bhowmik and Mr. Rajib Bhattacharya are restrained from, directly or
indirectly, accessing the capital market by issuing prospectus, any offer document or
advertisement soliciting money from the public and are further prohibited from
buying, selling or otherwise dealing in the securities market, directly or indirectly, in
whatsoever manner for a period of four years or till the date of refund of money to
the allottees, whichever is later.
(ix)

Mr. Samir Chattopadhyay Kumar, Mr. Nirapada Maiti, Mr. Amal Patra, Mr. Kartik
Jana, Mr. Balwant Kumar Singh, Ms. Debashree Bhowmik and Mr. Rajib
Bhattacharya are also restrained from associating themselves, with any listed public
company and any public company which intends to raise money from the public, for
a period of four years or till the date of refund of money to the allottees, whichever
is later.

(x)

For the purposes of sub-paragraphs (viii) and (ix) above, the period of restraint shall
be counted from the date of the interim order.

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17. The interim order dated November 20, 2015 read with Corrigendum dated December 30, 2015
is disposed off accordingly. The above directions are without prejudice to the right of SEBI
to take any other appropriate action for the violations found in this case or to initiate any
action in case of failure to comply with the above directions, in accordance with the provisions
of applicable laws including the proceedings under the provisions of section 28A of the SEBI
Act.
18. The order shall come into force with immediate effect. A copy of the order shall be served on
the noticees to ensure compliance with the above directions. A copy of this Order shall also
be forwarded to the recognized stock exchanges and depositories for information and
necessary action.
19. A copy of this Order shall also be forwarded to the Ministry of Corporate Affairs/ concerned
Registrar of Companies, for their information and necessary action.

Date: October 21st, 2016


Place: Mumbai

RAJEEV KUMAR AGARWAL


WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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