Description

SEBI final order under SAST Regulations against Rajiv R. Kotia and family members for acquiring shares of Sungold Capital Ltd. in 2007 in breach of open offer thresholds, directing mandatory open offer with 10% interest.

Summary

SEBI has issued a final order under Sections 11 and 11B of SEBI Act, 1992 and Regulation 44 of SAST Regulations 1997 against Mr. Rajiv R. Kotia and four family members (Mrs. Shilpa Amit Kotia, Mrs. Shweta Dhaval Kotia, Mr. Dhaval Ramesh Kotia, and Mr. Ravi Rajiv Kotia) for violating regulations 10 and 11(1) of SAST Regulations 1997 by acquiring shares of Sungold Capital Limited in 2007 without making mandatory open offer. The order directs the noticees to make a combined open offer and pay 10% interest per annum for the delay.

Key Points

  • Five family members found guilty of violating SAST Regulations 1997 for share acquisitions in Sungold Capital Limited in 2007
  • Original WTM Order passed on July 07, 2020 directing mandatory open offer
  • Adjudication Order dated May 18, 2020 imposed penalty of INR 11 lakh on Rajiv Kotia and INR 10 lakh jointly on other four noticees
  • Appeals to SAT dismissed on August 24, 2022; review application dismissed on November 07, 2023
  • Supreme Court order dated May 03, 2024 restored review application before SAT
  • Sungold Capital Limited is listed on BSE and engaged in media & entertainment, trading and finance

Regulatory Changes

This order enforces compliance with now-repealed SAST Regulations 1997, specifically regulations 10 and 11(1) concerning mandatory open offer requirements upon crossing substantial acquisition thresholds. The case establishes precedent for retrospective enforcement of takeover regulations even after regulatory framework has been superseded by SAST Regulations 2011.

Compliance Requirements

  • Noticees must make public announcement of combined open offer for acquiring shares of Sungold Capital Limited within 45 days from date order comes into force
  • Open offer must be in accordance with SAST Regulations 1997
  • Noticees must pay 10% per annum interest on offer price for delay period from date of original violation until payment date
  • Interest payment applies to shareholders who held shares on date of violation and whose shares are accepted in open offer
  • Interest must be adjusted for any dividends paid during the period
  • Penalties imposed: INR 11 lakh on Mr. Rajiv R. Kotia and INR 10 lakh jointly and severally on other four noticees

Important Dates

  • Original violation: 2007 (share acquisitions in Sungold Capital Limited)
  • Adjudication Order: May 18, 2020
  • WTM Order: July 07, 2020
  • SAT Order dismissing appeal: August 24, 2022
  • SAT Order dismissing review: November 07, 2023
  • Supreme Court Order: May 03, 2024
  • Open offer deadline: Within 45 days from date this order comes into force

Impact Assessment

Market Impact: Limited direct market impact as violations date back to 2007, but the order will require shareholders of Sungold Capital Limited to receive open offer with interest compensation. The extended legal proceedings spanning multiple years demonstrates regulatory persistence in enforcement.

Regulatory Impact: Reinforces SEBI’s commitment to enforcing takeover regulations retrospectively and ensuring acquirers comply with open offer obligations even years after violations. Sets precedent that regulatory changes (SAST 1997 to SAST 2011) do not absolve violators of historical non-compliance.

Compliance Impact: Serves as warning to promoters and acquirers that failure to make mandatory open offers will result in enforcement action with interest liability, regardless of time elapsed. The case demonstrates multi-level enforcement through adjudication orders, WTM orders, and appellate proceedings.

Impact Justification

High severity enforcement action involving mandatory open offer requirement with interest for historical SAST violations. Medium impact as it relates to past acquisitions in 2007 but sets precedent for takeover compliance.