The Securities and Exchange Board of India (SEBI) has rejected Shapoorji Pallonji and Company’s contention that the compliance requirements of the company cannot be held at par with other companies who have listed securities with a wide public base.
Shapoorji Pallonji had contented that, “The entire OTR was being driven by the lenders of SPCPL (including Union Bank – the sole debenture holder). Since Union Bank was at all times involved in the restructuring and had also provided its consent, it is submitted that the LODR compliance requirements of SPCPL cannot be held at par with other companies who have listed securities with a wide public base.”
SEBI adjudicating officer held that it would be relevant to consider this in light of the fact, that firstly, there is no specific exemption as such provided in this regard and, secondly, this ought to be viewed having regard to the spirit of the LODR Regulations which would be evident from plain reading of Regulation 11 of the LODR Regulations which inter alia reads as follows, ‘The listed entity shall ensure that any scheme of arrangement ….. reconstruction /reduction of capital etc. ….. does not in any way violate, override or limit the provisions of securities laws or requirements of the stock exchange(s):…’ .
Accordingly, the contention of the noticee in this regard is devoid of merit and, hence, not acceptable, the SEBI order said.
In this regard, Noticee as reply to the SCN has broadly submitted that, ‘… SPCPL was also severely impacted by the COVID19 pandemic. On account of this, the financial position of SPCPL was extremely precarious and all efforts of SPCPL’s key managerial personnel were directed towards the financial restructuring of SPCPL … the ultimate beneficiary, Union Bank (the sole debenture holder) and all other stakeholders were at all times aware of all the material developments with respect to SPCPL on account of the OTR. The object and purpose of having a debenture trustee is to ensure that the trustee tracks the developments concerning the company, periodically, such that the debenture holder’s interest is protected and kept secure. Now, considering the fact that the sole debenture holder and SPCPL’s stakeholders were fully aware of all relevant facts concerning SPCPL, the fact that there was an inadvertent omission in making the aforesaid disclosures to the Debenture Trustee should be treated as a mere technical violation”, the company had said.
“In this regard, I note that Noticee had inter alia contending ‘ …. SPCPL’s financial health was well known and available in the public domain…, sole debenture holder was fully in the loop on the results…, non-disclosures therefore were inadvertent and attributable to the impact of the pandemic…, technical nature of the breach is evident from the fact that the financial information of SPCPL was available to the sole debenture holder – Union Bank…, Union Bank was fully involved in every step of the conversion of the NCDs into a term loan. Therefore, any purported nondisclosure by SPCPL of the aforesaid regulation has not had any substantive or other impact on Union Bank of India or any other concerned stakeholder…,’ stated that no penalty is warranted on account of the alleged non-disclosure,” the order said.
“In this regard, firstly I note that the submissions of the Noticee are in nature of admission in so far it has inter alia been stated by the Noticee that, ‘ …non-disclosures therefore were inadvertent …’. Further in this regard, I note that while the provisions of Regulation 52 inter alia relate to requirement of submission of information to the recognized stock exchange(s) and /or Debenture Trustee the submission of the Noticee contend about sole debenture holder being in loop etc., and hence out of context,” the SEBI order said.
“In my opinion, the provisions of the Regulation being applicable to entire class of listed entities and there being no exception as such as regards same not being applicable in case there is only one security holder, as being contended by the Noticee, is devoid of merit and cannot be accepted”, the SEBI order said.
Sebi has imposed a penalty of Rs7 lakh on Shapoorji Pallonji and Company for violation of disclosure norms on the grounds that Shapoorji Pallonji and Company did not take prior approval from the stock exchange for converting non-convertible debentures (NCDs) into a term loan in March 2021.
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