Order in the matter of Sungold Capital Limited

Description

SEBI final order under SAST Regulations directing Kotia family members to make public announcement of combined open offer for acquiring shares of Sungold Capital Limited with interest for delayed compliance.

Summary

SEBI issued a final order under Sections 11 and 11B of the SEBI Act, 1992 and Regulation 44 of SAST Regulations 1997 in the matter of Sungold Capital Limited. The order concerns five members of the Kotia family who violated takeover regulations by acquiring shares of Sungold Capital Ltd. in 2007 without making the required open offer. The noticees are directed to make a combined public announcement for an open offer and pay 10% per annum interest for the delay.

Key Points

• Five noticees found to have violated Regulation 10 and 11(1) of SAST Regulations 1997
• Noticees: Mr. Rajiv R. Kotia, Mrs. Shilpa Amit Kotia, Mrs. Shweta Dhaval Kotia, Mr. Dhaval Ramesh Kotia, and Mr. Ravi Rajiv Kotia
• Violations relate to share acquisitions in Sungold Capital Limited in 2007
• Original WTM Order passed on July 07, 2020
• Adjudicating Officer imposed penalties: INR 11 lakh on Noticee 1 and INR 10 lakh jointly and severally on Noticees 2-5
• Appeals to SAT dismissed on August 24, 2022
• Review application dismissed by SAT on November 07, 2023
• Supreme Court order dated May 03, 2024 restored review application before SAT
• Sungold Capital Ltd. is listed on BSE and engaged in media & entertainment, trading and finance

Regulatory Changes

This order enforces existing SAST Regulations 1997 (now repealed) requiring compliance with open offer thresholds. The case illustrates SEBI’s continued enforcement of historical violations even after regulatory framework changes. The order references both the repealed SAST Regulations 1997 and current SAST Regulations 2011.

Compliance Requirements

• Noticees 1-5 must make public announcement of combined open offer for acquiring shares of Sungold Capital Limited within 45 days from when the order comes into force
• Open offer must be in accordance with SAST Regulations 1997
• Noticees must pay interest at 10% per annum for delay in making open offer
• Interest period: from the date when liability was incurred until 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
• Interest to be calculated after adjustment of dividend paid, if any
• Penalties already imposed: INR 11 lakh on Mr. Rajiv R. Kotia and INR 10 lakh jointly and severally on the other four noticees

Important Dates

• 2007: Date of alleged share acquisitions and violations
• May 18, 2020: Adjudicating Officer Order imposing penalties
• July 07, 2020: WTM Order 2020 directing open offer
• August 24, 2022: SAT Order dismissing appeal
• July 11, 2022: Supreme Court decision in SEBI vs. Sunil Krishna Khaitan case
• November 07, 2023: SAT Order dismissing review application
• May 03, 2024: Supreme Court Order restoring review application
• 45 days from order coming into force: Deadline for making public announcement of open offer

Impact Assessment

Market Impact: High - This order will trigger a mandatory open offer for Sungold Capital Limited shares, potentially affecting all existing shareholders who held shares in 2007 and continue to hold them. The open offer mechanism may impact stock price and liquidity.

Shareholder Impact: Significant - Shareholders who held shares on the date of violation (2007) and whose shares are accepted in the open offer will receive interest at 10% per annum in addition to the offer price, providing substantial compensation for the multi-year delay.

Regulatory Impact: Demonstrates SEBI’s commitment to enforcing takeover regulations retrospectively, sending a strong deterrent message about SAST compliance. The case underwent multiple levels of judicial review (AO, WTM, SAT, Supreme Court) spanning over four years, highlighting the thoroughness of regulatory enforcement.

Precedent Value: The matter involved consideration of the Supreme Court’s decision in SEBI vs. Sunil Krishna Khaitan, establishing important jurisprudence on takeover regulation enforcement and review applications before SAT.

Impact Justification

High-profile enforcement action requiring mandatory open offer with interest penalties following Supreme Court proceedings for SAST violations dating back to 2007