Issue Raised: Whether issuance of OFCDs to more than 1.98 crore investors constituted a public offer under Section 67 of the Companies Act, 1956 attracting regulatory jurisdiction.

Tribunal’s Decision: The Tribunal dismissed the appeals and upheld the regulator’s findings, holding that the OFCD issuance clearly constituted a public offer. It observed that under the proviso to Section 67(3) of the Companies Act, 1956, an offer made to more than fifty persons is deemed to be a public issue. Once this statutory threshold is crossed, the issuer must comply with requirements applicable to public issues, including obtaining permission from a recognised stock exchange under Section 73. In the present case, funds had been mobilised from approximately 1.98 crore investors, far exceeding the statutory limit, yet the company had neither obtained stock exchange approval nor complied with regulatory disclosure requirements.

The Tribunal also rejected the contention that the amounts had already been refunded, noting that the appellants relied largely on a Chartered Accountant’s certificate without producing documentary evidence establishing actual repayment to investors. It further held that the delay in investigation was reasonable given that the issue surfaced during examination of other group entities and involved voluminous records. However, the Tribunal accepted the appeals filed by certain managers, observing that they were merely employees and could not be held liable for the acts of the company and its directors. Consequently, the regulator’s order was upheld against the company and its directors while being set aside in respect of the managers.