The Securities Appellate Tribunal (SAT), Mumbai, has dismissed an appeal by four directors of Pyramid Saimira Theatre against the order of Securities and Exchange Board of India (Sebi) restricting their market access and imposing penalities for violation of Sebi laws.
The appeal was filed by N Narayanan, K Natarajan, K S Kashiraman and G Ramakrishanan, who were directors of Pyramid Saimira Theatre, which engaged in the business of film distribution and running of cinema theatres.
Sebi said the parties were found guilty of violating regulations three and four of the Sebi(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
It was alleged the annual financial results of the company for 2007-08 reported to the stock exchanges contained inflated figures of revenue, profits, security deposits and receivables, all relied upon by investors for making investment decisions.
While the appellants argued they were either providing their expertise in one field, or were independent directors, SAT said: “With the changing scenario in the corporate world, the concept of corporate responsibilities is also rapidly changing. The director of a company cannot confine himself to lending his name to the company but taking light responsibility for its day-to-day management.”
It added, “While functions may be delegated to professionals, the duty of care, diligence, verification of critical points by directors cannot be abdicated. The directors are expected to have a hands-on approach in the running of the company, and take up responsibility not only for the achievements of the company but also the failings thereto.”
Commenting the appellants have employed a device to defraud investors dealing in securities, and have also perpetrated fraud, the SAT order said: “In view of the discussion above, we uphold the impugned orders by which restraint orders have been passed against the appellants, and also monetary penalty has been imposed. Appeals dismissed. No costs.”
Earlier, Sebi had restrained N Narayanan and V Natarajan for two years and three years, respectively, from buying, selling or dealing in securities, or accessing the securities market directly or indirectly, and from being a director of any listed company. K Natarahjan, KS Kashiraman and G Ramakrishanan were restrained from being an independent director or member of an audit committee of any listed company for two years from the date of the order.
Monetary penalties were also imposed on them by the regulator.