Description

SEBI final order directing Mr. Rajiv R. Kotia and family members to make a public open offer for acquiring shares of Sungold Capital Limited for violations of SAST Regulations 1997 relating to share acquisitions in 2007.

Summary

SEBI issued a final order under Sections 11 and 11B of the 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 in breach of open offer thresholds under Regulation 10 and 11(1) of SAST Regulations 1997.

Key Points

  • Five noticees found guilty of violating SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
  • Original WTM Order dated July 07, 2020 directed noticees to make a combined open offer for SCL shares
  • Adjudication Order dated May 18, 2020 imposed penalties: INR 11 lakh on Mr. Rajiv Kotia and INR 10 lakh jointly 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
  • Violations stem from 2007 share acquisitions that breached open offer thresholds

Regulatory Changes

This order enforces the now-repealed SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. No new regulatory changes are introduced; the order implements existing takeover regulations and penalty provisions for historical violations.

Compliance Requirements

  • Mandatory Open Offer: All five noticees must make a public announcement of a combined open offer for acquiring shares of Sungold Capital Limited within 45 days from when the order comes into force
  • Interest Payment: Noticees must pay 10% per annum interest for the delay in making the open offer, calculated from the date of violation until payment of consideration
  • Interest Beneficiaries: Interest payable to shareholders who held shares on the date of violation and whose shares are accepted in the open offer
  • Dividend Adjustment: Interest payment must be adjusted for any dividends paid
  • Regulatory Framework: Open offer must comply with SAST Regulations 1997 requirements

Important Dates

  • 2007: Original share acquisitions that violated takeover regulations occurred
  • May 18, 2020: Adjudicating Officer order imposing penalties
  • July 07, 2020: Whole Time Member order directing open offer
  • August 24, 2022: SAT dismissed appeals against both orders
  • November 07, 2023: SAT dismissed review application
  • May 03, 2024: Supreme Court restored review application before SAT
  • October 09, 2025: BSE circular publication date
  • 45 days from order effectiveness: Deadline for making public announcement of open offer

Impact Assessment

Company Impact: Sungold Capital Limited shareholders who held shares in 2007 during the violation period will have an opportunity to exit through the mandatory open offer, receiving both the offer price and interest compensation for the 18-year delay.

Market Impact: Limited broader market impact as this is a company-specific enforcement action. However, it demonstrates SEBI’s commitment to enforcing takeover regulations even for historical violations, serving as a deterrent for similar violations.

Acquirer Impact: Significant financial burden on the Kotia family members who must now conduct a mandatory open offer with accumulated interest at 10% per annum over approximately 18 years, plus penalties already imposed (total INR 21 lakh in penalties).

Precedent Value: The case illustrates the long-term consequences of takeover regulation violations and SEBI’s willingness to pursue enforcement actions across multiple judicial levels, reinforcing the importance of compliance with substantial acquisition and takeover norms.

Impact Justification

High importance due to enforcement action and mandatory open offer requirement. Medium impact as it affects a specific company and group of individuals rather than broad market participants.