Description

SEBI final order against Rajiv R. Kotia and family members for violating SAST Regulations 1997 by acquiring shares without making mandatory open offer in 2007.

Summary

SEBI 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 takeover regulations. The violations relate to acquiring shares of Sungold Capital Limited (SCL), a BSE-listed company engaged in media & entertainment, trading and finance, in 2007 without making the mandatory open offer.

Key Points

  • Five noticees found guilty of violating Regulations 10 and 11(1) of SAST Regulations 1997
  • Violations occurred in 2007 when shares were acquired breaching open offer thresholds
  • SEBI’s WTM Order dated July 07, 2020 directed noticees to make a combined open offer within 45 days
  • Interest at 10% per annum mandated for delay in making open offer, from violation date till payment
  • Adjudicating Officer imposed penalties: INR 11 lakh on Mr. Rajiv Kotia and INR 10 lakh jointly and severally on the other four noticees
  • Appeals filed by noticees were dismissed by SAT on August 24, 2022
  • Review application dismissed by SAT on November 07, 2023
  • Supreme Court order dated May 03, 2024 restored the review application before SAT

Regulatory Changes

No new regulatory changes. This order enforces existing SAST Regulations 1997 (now repealed but applicable to the 2007 violations).

Compliance Requirements

  • Noticees 1-5 must make a public announcement of a combined open offer for acquiring shares of Sungold Capital Limited under Regulations 10 and 11(1) of SAST Regulations 1997
  • Timeline: Within 45 days from the date the order comes into force
  • Payment requirement: Along with offer price, noticees must pay 10% per annum interest for the delay period
  • Interest calculation: From the date of violation till the date of payment of consideration
  • Interest payable to shareholders who held shares on the date of violation and whose shares are accepted in the open offer
  • Adjustment: Interest payment to be adjusted for any dividends paid
  • Penalties imposed by Adjudicating Officer must be paid as per AO Order 2020

Important Dates

  • 2007: Date of original violation (share acquisition breaching open offer threshold)
  • May 18, 2020: Adjudicating Officer Order imposing penalties
  • July 07, 2020: WTM Order directing open offer
  • August 24, 2022: SAT dismissed appeals against AO and WTM orders
  • November 07, 2023: SAT dismissed review application
  • May 03, 2024: Supreme Court restored review application before SAT
  • 45 days from order effective date: Deadline to make public announcement of open offer

Impact Assessment

Market Impact: Limited direct market impact as the violations occurred in 2007. However, the enforcement action demonstrates SEBI’s continued commitment to pursuing historical takeover violations even after significant time has elapsed.

Company Impact: Sungold Capital Limited shareholders who held shares at the time of 2007 violation will benefit from the mandatory open offer with interest compensation at 10% per annum for the delay.

Regulatory Significance: The order reinforces that violations of substantial acquisition and takeover regulations will be pursued regardless of time elapsed, and that open offer obligations cannot be avoided. The case also highlights the multi-layered enforcement approach including penalties (INR 21 lakh total) and remedial measures (open offer with interest).

Precedent Value: The litigation history through SAT and Supreme Court establishes important precedents regarding enforcement of takeover regulations and review procedures.

Impact Justification

Enforcement action for historical takeover violations. Medium impact as it relates to specific parties and historic 2007 transactions, but demonstrates continued regulatory enforcement of takeover rules.