Description

SEBI final order under SAST Regulations against Mr. Rajiv R. Kotia and family members for violations related to acquiring shares of Sungold Capital Ltd. in 2007 in breach of open offer thresholds.

Summary

SEBI issued a final order under Sections 11 and 11B of the SEBI Act, 1992 and Regulation 44 of SAST Regulations 1997 against five noticees - Mr. Rajiv R. Kotia, Mrs. Shilpa Amit Kotia, Mrs. Shweta Dhaval Kotia, Mr. Dhaval Ramesh Kotia, and Mr. Ravi Rajiv Kotia - for violations of Regulation 10 and 11(1) of SAST Regulations 1997. The violations relate to acquiring shares of Sungold Capital Limited (a BSE-listed company engaged in media & entertainment, trading and finance) in 2007 in breach of open offer thresholds.

Key Points

  • SEBI passed an order on July 07, 2020 (WTM Order 2020) finding the five noticees in violation of SAST Regulations 1997
  • Noticees were directed to make a public announcement of a combined open offer for acquiring shares of Sungold Capital Ltd. within 45 days
  • Noticees must pay 10% per annum interest for delay in making open offer from the date of violation until payment of consideration
  • Interest payment to be made after adjustment of dividend paid, if any
  • Adjudicating Officer imposed penalties: INR 11 lakh on Mr. Rajiv R. Kotia and INR 10 lakh jointly and severally on the other four noticees (AO Order 2020)
  • Hon’ble SAT dismissed the appeal against both orders on August 24, 2022
  • Review application dismissed by SAT on November 07, 2023
  • Hon’ble Supreme Court vide order dated May 03, 2024 restored the review application before SAT

Regulatory Changes

This order enforces existing SAST Regulations (now repealed SAST Regulations 1997, read with current SAST Regulations 2011). No new regulatory changes introduced.

Compliance Requirements

  • Noticees 1-5 must: Make a public announcement of combined open offer for acquiring shares of Sungold Capital Ltd. under Regulation 10 and 11(1) of SAST Regulations 1997 within 45 days from when the order comes into force
  • Payment obligation: Pay offer price along with 10% per annum interest for the delay period (from date of violation until payment date) to shareholders who held shares on the violation date and whose shares are accepted in the open offer
  • Adjustment: Interest payment to be adjusted for any dividends paid
  • Penalty payment: Comply with penalty orders from Adjudicating Officer

Important Dates

  • Violation date: 2007 (original acquisition in breach of thresholds)
  • WTM Order: July 07, 2020
  • AO Order: May 18, 2020
  • SAT Order dismissing appeal: August 24, 2022
  • SAT Order dismissing review: November 07, 2023
  • Supreme Court Order: May 03, 2024 (restored review application)
  • Compliance deadline: 45 days from when this order comes into force for making public announcement

Impact Assessment

Market Impact: Limited broader market impact as this concerns historical violations by specific individuals related to a single company (Sungold Capital Limited). However, it demonstrates SEBI’s commitment to enforcing takeover regulations even for historical violations.

Company Impact: Sungold Capital Ltd. shareholders from 2007 who still hold shares may benefit from the mandatory open offer with interest compensation for the delay.

Regulatory Significance: Reinforces that SAST violations will be pursued through enforcement actions including mandatory open offers, interest payments, and monetary penalties. The extended litigation timeline (2020-2024) demonstrates the appellate process but ultimate enforcement of regulatory requirements.

Precedent Value: Highlights consequences of breaching open offer thresholds under SAST Regulations including retrospective open offer obligations with interest liability.

Impact Justification

Enforcement order against specific individuals for historical SAST violations. Requires open offer but limited broader market impact. Significant for involved parties and demonstrates regulatory enforcement.