Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs2 lakh on Jhaveri Credits and Capital Ltd (noticee 1) and Rs1 lakh on the associated entities for regulatory violations for 10 years. SEBI investigation revealed incorrect disclosures of shareholding patterns and non-compliance with minimum public shareholding (MPS) requirements, among other breaches by Jhaveri Credits and Capital.
The associated entities are KaranJeet Resources Private Ltd (noticee 2), Jhaveri Hightech Agro Ltd (noticee 3), Jhaveri Infrastructure Pvt Ltd (noticee 4), Maulik Kruti Resources Pvt Ltd (noticee 5) and Yash Bhadresh Jhaveri (noticee 6).
In an order, Amar Navlani, adjudicating officer (AO) of SEBI, says, "I cannot ignore that requirement of provisions of LODR Regulations, SEBI circular and SAST Regulation, as in the instant matter, were obligatory upon the noticees which they failed to comply with, as dealt with and established in the foregoing and which SEBI is duty-bound to enforce compliance of. In view thereof, I am of the view that such violation on the part of the notices needs to be dealt with suitable penalty."
SEBI examined the affairs of Jhaveri Credits and Capital to ascertain violations of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, and the SEBI Listing Obligations and Disclosure Requirements (LORD) Regulations, 2015.
The regulator found that Jhaveri Credits and Capital disclosed inaccurate shareholding patterns from September 2011 to 30 June 2023. The discrepancies included incorrect classification of promoter group entities as public shareholders. These errors persisted despite SEBI's guidelines and corrective measures.
SEBI investigation also revealed that Jhaveri Credits and Capital failed to comply with the MPS requirements outlined in Regulation 38 of the LODR Regulations. After closing an open offer in July 2023, Jhaveri Credits and Capital's public shareholding fell below the mandated 25%, standing at 23.34%. The listed entity had a year to restore compliance but failed to meet the target. SEBI highlighted that promoters are required to follow specific methods and announcements to achieve MPS, which Jhaveri Credits and Capital did not fulfill.
Further, a significant portion of the regulatory violations pertained to the misclassification of entities within the shareholding pattern. SEBI noted that some individuals and entities, including Yash Bhadresh Jhaveri, who held 1.44% of shares, were reclassified under the public category without following the proper reclassification process.
Jhaveri Credits and Capital admitted that these inaccuracies stemmed from a lack of knowledge but failed to refute SEBI's findings, leading to a penalty of Rs2 lakh under Section 15A (b) and Section 15HB of the SEBI Act, 1992.
In addition to Jhaveri Credits and Capital, penalties were levied on Karan Jeet Resources, Jhaveri Hightech Agro, Jhaveri Infrastructure, Maulik Kruti Resources, and Mr Jhaveri. These entities, being part of the promoter group, were found to have tendered a total of 5,13,546 shares in an open offer, constituting approximately two-thirds of all shares tendered. This act violated Regulation 7(6) of the SEBI (SAST) Regulations, 2011, which prohibits promoters, acquirers, and persons acting in concert (PACs) from participating in an open offer.
The noticees 2 to 6 contended that they acted under the belief of being public shareholders. However, SEBI's findings, supported by evidence, confirmed their classification as part of the promoter group and PACs.
The market regulator reiterated that ignorance of the law is not an excuse for non-compliance. Consequently, a penalty of Rs1 lakh was imposed on Karan Jeet Resources, Jhaveri Hightech Agro, Jhaveri Infrastructure, Maulik Kruti Resources, and Mr Jhaveri to be paid jointly and severally.
