Description

SEBI settlement order for Swaraj Green Power and Fuel Limited for non-compliance with Companies Act provisions regarding deemed public issue of NCRPS to more than 200 persons during FY 2014-15.

Summary

SEBI issued a settlement order against Swaraj Green Power and Fuel Limited (PAN: AAOCS8733R) for violations of Section 42(11) of the Companies Act, 2013 read with Rule 14(2) of the Share Capital & Debentures Companies Rules, 2014. The company issued 14,102,329 Non-Convertible Redeemable Preference Shares (NCRPS) through private placement during FY 2014-15, which were allotted to 267 persons due to renunciation of rights by existing shareholders. This triggered the deemed public issue classification as the allotment exceeded 200 persons. The High Powered Advisory Committee (HPAC) recommended settlement upon payment of Rs 6,20,000.

Key Points

  • Swaraj Green Power and Fuel Limited filed a suo-motu settlement application under SEBI (Settlement Proceedings) Regulations, 2018
  • Company issued 14,102,329 NCRPS in two Rights Issues during FY 2014-15:
    • First issue: 10,014,700 shares allotted on January 3, 2015 to 221 persons
    • Second issue: 4,087,629 shares allotted on March 31, 2015 to 46 persons
  • Total allotment to 267 persons triggered deemed public issue classification under Section 42(11) of Companies Act, 2013
  • Allotment occurred due to renunciation of rights by existing equity shareholders in favor of third parties
  • All NCRPS were redeemed by May 16, 2022 as part of capital structure optimization
  • Violation period: January 3, 2015 to May 16, 2022
  • Settlement amount: Rs 6,20,000 (Rupees Six Lakhs Twenty Thousand only)
  • Settlement on ’neither admit nor deny’ basis

Regulatory Changes

No new regulatory changes introduced. This order addresses historical non-compliance with existing provisions of Section 42(11) of the Companies Act, 2013 read with Rule 14(2) of the Share Capital & Debentures Companies (Prospectus and Allotment of Securities) Rules, 2014.

Compliance Requirements

  • Companies must ensure private placement issuances do not exceed 200 persons to avoid deemed public issue classification
  • When issuing securities through rights issues with renunciation rights, companies must monitor total allottee count
  • If allotment exceeds 200 persons, companies must comply with public issue requirements including filing of prospectus and other regulatory obligations
  • Settlement applicant must pay the settlement amount of Rs 6,20,000 as recommended by HPAC

Important Dates

  • December 2014: First Rights Issue approved
  • January 3, 2015: Allotment of 10,014,700 NCRPS (first issue)
  • February 2015: Second Rights Issue approved
  • March 31, 2015: Allotment of 4,087,629 NCRPS (second issue)
  • May 16, 2022: Complete redemption of all 14,102,329 NCRPS
  • June 11, 2025: Meeting with SEBI Internal Committee
  • June 13, 2025: Revised settlement terms filed
  • July 3, 2025: HPAC meeting recommending settlement

Impact Assessment

Market Impact: Minimal to none. The violation relates to historical issuances from 2015, and all NCRPS have been fully redeemed since May 2022. No ongoing securities are affected.

Company Impact: The company has resolved the non-compliance through settlement payment of Rs 6.20 lakhs and has already optimized its capital structure by redeeming the preference shares.

Precedential Value: This order reinforces that private placements resulting in allotment to more than 200 persons (including through rights renunciation) trigger deemed public issue requirements under the Companies Act, 2013, requiring full prospectus compliance.

Impact Justification

Historical violation from 2015 already remedied, settlement concluded with payment of Rs 6.20 lakhs, no ongoing market impact as NCRPS redeemed in 2022