Description

SEBI order addressing complaints regarding collusion, pledge invocation, and scheme of arrangement involving Katalyst Software Services Limited and Karvy Capital Limited.

Summary

SEBI has issued an order under Sections 11(1), 11(4), 11A and 11B of the SEBI Act, 1992 in the matter of Katalyst Software Services Limited (KSSL) and eight associated individuals. The order addresses complaints regarding alleged collusion between Karvy Capital Limited and majority shareholders, improper pledge invocation, and issues related to a composite scheme of arrangement.

Key Points

  • Complaint filed by promoter Rahul Dilip Shah in August 2023 alleging collusion between Karvy Capital Limited and majority shareholder group
  • Karvy declared event of default in January 2022 and invoked pledge of shares due to non-payment of NCD EMIs
  • Debenture Trust Deed was restructured with interest rate reduced from 15% to 12%
  • Proposed composite scheme of arrangement between KSSL, Nova Techset Limited (NTL) and Panacea Infotech Private Limited involving transfer of debenture liability
  • Scheme involves demerger of e-business solution division from KSSL to NTL, followed by amalgamation of Panacea into NTL
  • Disputes over status of pledged shares and refusal to return shares despite loan restructuring

Regulatory Changes

No specific regulatory changes announced in this order.

Compliance Requirements

The order addresses compliance issues related to:

  • Proper handling of pledge invocations
  • Disclosure requirements regarding scheme of arrangements
  • Corporate governance standards for debenture trustees
  • Management control and board interference issues

Important Dates

  • January 2022: Event of default declared by Karvy
  • August 29, 2023: Complaint filed with SEBI
  • August 2023: Awareness of proposed composite scheme of arrangement

Impact Assessment

The order impacts KSSL shareholders, debenture holders, and involves corporate restructuring activities. The enforcement action addresses governance concerns and pledge management practices, with potential implications for similar corporate arrangements and debenture trustee operations.

Impact Justification

Enforcement order involving corporate governance issues and scheme of arrangement affecting specific company and stakeholders