Regulator Sebi has ordered Micro Finance Ltd's former director Jugal Kishor Satapathy to jointly refund the money that the company had collected illegally from investors, along with other directors.
Further, he has been barred from dealing in the securities market "till the expiry of four years from the date of completion of refunds to investors".
According to Sebi, the firm had raised an amount of over Rs 88 crore by issuing cumulative convertible preference shares (CCPS) to more than 1.21 lakh investors during financial years 2005-06 to 2012-13.
The Securities and Exchange Board of India (Sebi), through a final order passed in October 2015, had asked Micro Finance, its present and former directors including Satapathy, to "jointly and severally" refund the money collected by the company, during their respective period of directorship.
Following this, Satapathy had appealed to Securities Appellate Tribunal (SAT) on the ground that the final order was passed without giving an opportunity of personal hearing to him.
Thereafter, SAT had set aside the final order issued against Satapathy and had directed Sebi to pass fresh order after hearing him.
Accordingly, in a fresh order dated June 5, Sebi said Satapathy was a director at the time of the issuance of CCPS. Since, he was acting as a director during the period of issuance of CCPS, he was an officer in default under the Companies Act.
He was the the company's director between October 2005 and May 2013.
Noting that a director who is part of a company's board is responsible and liable for all acts carried out by a firm, Sebi said Satapathy cannot "wriggle out from liability".
"Merely contending that he was an honorary director without a say in the daily management of the company does not absolve him of his duty as a director of the company," it added.
"Therefore, I find that Satapathy jointly and severally, along with MFL and its other directors, is liable to refund the amounts collected from the investors with interest at the rate of 15 per cent per annum," Sebi whole time member Madhabi Puri Buch said.
Accordingly, Sebi said "Satapathy, jointly and severally with MFL and other directors as mentioned in order dated October 27, 2015 shall forthwith refund the money collected by the company, during their respective period of directorship through the issuance of CCPS ....with an interest of 15 per cent per annum".
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