The Securities and Exchange Board of India (SEBI) has levied a penalty of Rs15 lakh on Family Care Hospitals Ltd (FCHL) for failing to comply with the requirements of the Listing Obligations and Disclosure Requirements (LODR) Regulations and circulars, including non-disclosure of debt and giving blanket approval for related party transactions (RPTs) of up to Rs100 crore.
In an order, Shashi Kumar Valsakumar, adjudicating officer (AO) of SEBI, says FCHL was under a statutory obligation to abide by the provisions, which it failed to do during the examination period. “The violations by FCHL attract a monetary penalty."
Stating that FCHL's submission that non-disclosure of details of the debt materially not affected the company is devoid of any merit, the AO noted that the allegation was that the disclosure of assignment of debt was not done by FCHL and non-disclosure of the material information was not in the interests of the shareholders of the company, especially, in the interests of its non-promoter shareholders.
SEBI underscored that the purpose of disclosure of any material information is to provide the adequate, complete and timely information to all the shareholders of the company and thus to protect their interest and not the company's interest, as stated by FCHL.
The market regulator also rejected FCHL's contention that the names of the related parties were shared with the audit committee with the proposed transaction value involved and approval was not sought for the transactions but for the threshold limit only, which was accordingly given by the board of directors and the shareholders.
SEBI observed that "the names of the related parties and transaction value involved were shared only with the audit committee and not with the board of directors and the shareholders and board of directors and shareholders gave the blanket approval to RPTs with unnamed related parties up to an aggregate of Rs100 crore."
Noting that provisions of Regulation 23(9) of the LODR Regulations were prevailing before the sixth amendment and hence applicable to the related party transactions of the Company for the half years ended in March 2022 and September 2021, SEBI says FCHL was under obligation to make the correct and timely disclosures of its related party transactions for the half years ending March 2022 and September 2021 as per the prevailing Regulation 23(9) of the LODR Regulations at that time.
The SEBI AO also pointed out that no disclosures were made by FCHL in its disclosure of related party transactions for half year ending September 2022 where loans or advances have been given to or taken from two entities. "I note that FCHL has not furnished any submission, which indicates that it has nothing to submit in this regard and hence, it is presumed that the above charges alleged against the Company have been admitted by it," SEBI says.
