FACTS OF THE CASE

1. The Securities and Exchange Board of India (hereinafter, referred to as “SEBI”) has initiated adjudication proceedings in respect of fourteen entities for alleged allotment of equity shares to the promoters of Varun Global Limited (hereinafter referred to as “VGL”) and Varun Resources Limited (hereinafter referred to as “VRL”) which were not covered under the scheme of arrangement approved by the Hon’ble Bombay High Court vide order dated May 9, 2014 and for various other acts which have allegedly led to the contravention of various provisions of SEBI Circular No. SEBI/CFD/SCRR/01/2009/03/09 dated September 3, 2009 (hereinafter referred to as “relevant SEBI Circular”).

2. The scheme of arrangement between Varun Shipping Company Limited (“VSCL”), Tarun Shipping and Industries Limited (“TSIL”), Varun Gas Infrastructure Limited, Varun Global Limited, Varun Maritime Limited and Varun Resources Limited was approved by the Hon’ble Bombay High Court on May 9, 2014.

3. The scheme of arrangement, inter alia provides for the following:

a. demerger of ship management and shipping investment business of VSCL into VGL;

b. demerger of offshore shipping and shipping investment business of TSIL into VML;

c. Merger of VGIL, residual VSCL and residual TSIL into VRL.

4. Pursuant to the scheme, VRL and VGL had issued and allotted equity shares to shareholders of VSCL and TSIL. VRL had thereafter applied to BSE for listing of VRL and VGL vide letter dated June 10, 2015. VRL had also been restructured under the Joint Lenders Forum Scheme (“JLF Scheme”) and the same was signed on September 5, 2014.

5. It was prima facie observed by SEBI that subsequent to the scheme of arrangement, VRL had allotted 75,86,00,000 equity shares to their promoters, increasing their stake from 44.82% to 72.57% in VRL and VGL also allotted 16,80,00,000 equity shares to their promoters increasing their stake from 30.89% to 67.40% in VGL pursuant to the scheme of restructuring under the Joint Lending forum. It has been alleged that such allotment of equity shares to their promoters pursuant to JLF on September 10, 2015 which are not covered under the Court approved scheme of the SEBI Circular dated September 3, 2009. It has been further alleged that despite SEBI advising VRL and VGL to either (a) comply with Regulation 76(2) and (3) of the SEBI (ICDR) Regulations, 2009 pertaining to pricing requirements or (b) to give the present non-promoter public shareholders an option to subscribe to additional shares at the same conditions at which they have been allotted to promoter so that they do not get an undue advantage over the shareholders of the said companies, the companies failed to do so. This happened allegedly despite the fact that the SEBI vide letter dated November 23, 2016, had sought the opinion of the Joint Lenders Forum to which the JLF had agreed with the proposal at point (b) mentioned above and vide letter dated December 30, 2016, advised the companies to carry out such issue of shares in order to expedite the resolution of the issue.

6. It was further alleged that the following acts of VGL and VRL had amounted to the contravention of the relevant SEBI Circular:

i. VRL and VGL have not taken steps for listing its equity shares within 30 days of the date of the order of the High Court sanctioning the scheme of arrangement. In this regard it is noted that the certified copy of the order sanctioning the scheme of arrangement was issued by the Bombay High Court on November 20, 2014. The same was filed with the Registrar of Companies (“RoC”) on December 8, 2014. RoC took on record applicable form filed by Varun Shipping Company Limited and other applicable companies for giving effect to the order passed by the Bombay High Court on April 25 and 28, 2015. However, the application for listing was filed on June 10, 2015, i.e., well beyond the period of 30 days from the date of the  order of the Hon’ble High Court, thereby violating paragraph no. 2 of Part A in the annexure to the aforesaid Circular.

ii. VRL and VGL did not commence the formalities for trading within 45 days from May 9, 2014, i.e., the date of the final order of the Hon’ble High Court, thereby violating paragraph no. 5 of Part A in the annexure to the aforesaid Circular.

7. The aforesaid alleged contravention of the provisions of paragraphs no. 1(d), 2 and 5 of Part A in the annexure to the SEBI Circular dated September 3, 2009, were levelled against VRL, VGL and other entities, including Sunbeam Talc Private Limited (“Noticee”), who was one of the Promoters of VGL and VRL at the relevant point in time when the alleged contraventions of the aforesaid SEBI Circular took place, allegedly making the Noticee liable for penalty under Section 15 HB of the SEBI Act.

APPOINTMENT OF ADJUDICATING OFFICER

8. The undersigned was appointed as the Adjudicating Officer (“AO”) by SEBI, vide orders dated January 27, 2020 and February 27, 2020 (conveyed by communiques dated February 13, 2020 and March 9, 2020), under Section 19 read with Section 15-I (1) of the SEBI Act, 1992 (hereinafter, referred to as “SEBI Act”) and Rule 3 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter, referred to as “SEBI Adjudication Rules 1995”) to conduct adjudication proceedings and inter-alia in respect of the Noticee, in the manner specified under Rule 4 of the SEBI Adjudication Rules, 1995 read with Section 15-I (1) and (2) of the SEBI Act, and if satisfied that penalty is liable, to mpose such penalty deemed fit in terms of Rule 5 of the SEBI Adjudication Rules 1995 under section 15HB of the SEBI Act.

SHOW CAUSE NOTICE, HEARING AND REPLY

9.  Show Cause Notice ref. EAD-4/ ADJ/GR/KG/OW/P/1531/1/2021dated January 19, 2021 (hereinafter referred to as 'SCN'), inter alia containing the findings of the investigation as detailed in the preceding paragraphs, was inter alia issued to the Noticee in terms of Rule 4 of the Adjudication Rules requiring the Noticee to show cause as to why an inquiry should not be held against it and why penalty, if any, should not be imposed on the Noticee under the provisions of section 15HBof the SEBI Act.

CONSIDERATION OF ISSUES AND FINDINGS

10. I find that the Show Cause Notice dated January 19, 2021, was received at the address of the Noticee. Thereafter, during the course of the proceeding, the status of the Noticee was ascertained from the Ministry of Corporate Affairs (MCA) website. It was observed that the name of the Noticee has been struck off from the list of companies by the Registrar of Companies, Kolkata (RoC) as on September 11, 2018. As per the Public Notice (Form No. STK-5), which was downloaded from the MCA website, a list of 19045 companies were attached as per the Notification issued by ROC, Mumbai, on July 19, 2018, in terms of sub-section (1) of section 248 of the Companies Act, 2013. I find that the name of the Noticee was mentioned in the said list (at sl.no. 16308 under CIN No U2425MH1982PTC028419). The Notification downloaded from the Ministry of Corporate Affairs (MCA), Government of India, (www.mca.gov.in) website inter alia, mentioned the following: 

“In the matter of striking off of companies under section 248 (1) of the Companies Act, 2013 of following Companies,

The following companies in Table “A” (List of 19045 nos. companies) have not been carrying on any business or operation for a period of two immediately preceding financial years and have not made any application within such period for obtaining the status of dormant company under section 455.

And, therefore, proposes to remove/strike off the names of the above mentioned companies ii-om the register of companies and dissolve them unless a cause is shown to the contrary, within thirty days from the date of this notice.

Any person objecting to the proposed removal/striking off of name of the companies from the register of companies may send &/her objection to the office address mentioned here above within thirty days from the date of publication of this notice.

11. In view of observations made in the STK-7 report, which is discussed above, it is clear that the name of the Noticee has been stuck- off from the ROC list with effect from September 11, 2018 and the Noticee also stands dissolved from the said date.

12. It is an established fact that when a company’s name is struck-off from the RoC list and the company is also dissolved, then it is a non-existing company and the adjudication proceedings against the non-existing company is thus nullity. In this context, I would like to draw reference to a judgment of the Hon’ble Delhi High Court in the matter of Commissioner of Income Tax (CIT) vs Vived Marketing Services (P) Ltd., ITA NO. 273/2009 dated September 17, 2009 in which it was held that - “…When the Assessing Officer passed the order of assessment against the respondent company, it had already been dissolved and struck off the register of the Registrar of companies under Section 560 of the Companies Act. In these circumstances, the Tribunal rightly held that there could not have been any assessment order passed against the company which was not in existence as on that date in the eyes of law it had already been dissolved. We are of the opinion that the view taken by the Tribunal is perfectly valid and in accordance with law.”

13. Further, Black’s Law Dictionary explains ‘dissolution’ as termination or winding up. It further clarifies that the dissolution of a corporation is the termination of its legal existence. Strike off essentially means removing the name of the company from the Register maintained by the Registrar of Companies. It is like closure of the company and the company will not be in existence after being struck-off and cannot perform any operations.

14. I also note that as on the date of issuance of the SCN to the Noticee i.e January 19, 2021, the Noticee’s name has been stuck-off from the ROC list and the company was not in existence. Therefore, in view of the facts and circumstances noted in the preceding paragraphs and also the fact that the Noticee’s name has been struck-off from the RoC list and also ‘dissolved’ as on September 11, 2018 as per the RoC notification, I conclude that the present adjudication proceedings initiated against the Noticee vide SCN dated January 19, 2021, cannot be proceeded with.

ORDER

15. In view of the above observations/findings and in exercise of the powers conferred upon me under section 15I of the SEBI Act read with rule 5 of the Adjudication Rules, I hereby dispose of the Adjudication Proceedings initiated against the Noticee viz. Sunbeam Talc Private Limited vide SCN dated January 19, 2021.

16. In terms of Rule 6 of the Adjudication Rules, copies of this order are sent to the Noticee and also to SEBI.