City Gold Credit Capital Case: SEBI Slaps Rs15 Lakh Penalty on 7, Including 4 Directors

Moneylife Digital Team 27 June 2025

Investor Interest

Market Regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs15 lakh on seven individuals for violating key provisions of the SEBI Substantial Acquisition of Shares and Takeovers Regulations, 2011, in connection with City Gold Credit Capital Ltd. This action follows SEBI’s review of the draft letter of offer (DLOF) dated 1 June 2023, submitted as part of an open offer to acquire shares of the company.

The seven penalised individuals are Madan Lal, Joginder Singh, Sahil Puri, Sakshi Puri, Satnam Singh, Sanjeev Kumar Puri, and Shiv Kumar Puri. Four of them, Joginder Singh, Sahil Puri, Satnam Singh and Shiv Kumar Puri, are directors of the company.

In his order, SEBI adjudicating officer Amar Navlani noted that while the noticees argued that a subsequent open offer had been made and therefore no adverse inference should be drawn, they still failed to comply with the SAST Regulations applicable at the time.

SEBI found that between 2016 and 2018, the promoters and persons acting in concert (PACs) acquired shares in City Gold Credit Capital on four occasions. These acquisitions caused their collective shareholding to cross the 2% threshold, which requires disclosure under Regulation 29(2) within two working days. However, no disclosures were made to the Metropolitan Stock Exchange of India (MSEI) during this period.

The group’s shareholding rose from 14.92% to 17.10% in August 2016, from 17.10% to 19.99% in December 2016, from 20.01% to 22.03% in September 2017 and from 22.03% to 26.47% in November 2018. The noticees admitted their failure to disclose but called it a technical and unintentional lapse. SEBI rejected this argument, asserting that non-disclosure is a clear breach of regulatory norms.

Further, during FY18–19, the increase in shareholding from 22.03% to 26.47% triggered an obligation to make a public open offer under Regulation 3(1). The noticees did not comply with this requirement.

They claimed some shares were acquired through inter se transfers within the family, which they argued were exempt under Regulation 10(1)(a). However, SEBI clarified that such exemptions apply only when specific conditions are met, including compliance with pricing norms and prior disclosures under Regulations 10(5), 10(6), and 10(7).

Since the noticees failed to meet these conditions, SEBI ruled that the exemption did not apply. The regulator emphasised that adherence to these rules is crucial for market transparency and protecting investor interests.

SEBI also cited legal precedents underscoring the importance of public announcements in takeover cases. Given the failure to make the required open offer and comply with exemption conditions, SEBI concluded that the group had violated Regulation 3(1) of the SAST Regulations.

Consequently, SEBI imposed a total penalty of Rs15 lakh on the seven noticees, holding them jointly and severally liable.

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