Rv Lifestyle Ltd. & Ors. vs Sebi

Date of Decision : 25.04.2023

Misc. Application No. 480 of 2023 And Misc. Application No. 481 of 2023 And Appeal No. 354 of 2023 1.

RV Lifestyle Ltd.

(Erstwhile, Vasparr Shelter Ltd.) Flat No. G-002, Ground Floor, Pushpvinod-2, A-wing, S. V. Road, Borivali (West), Mumbai - 400 092.

2. Vas Educomp Private Limited (Erstwhile, Vasparr Trading Private Ltd.) 401, Court Chambers, 4th Floor, S. V. Road, Borivali (West), Mumbai - 400 092.

3. Pushpanjali Drums Private Limited 402, Court Chambers, 4th Floor, S. V. Road, Borivali (West), Mumbai - 400 092.

4. Yashraj Containeurs Limited Madhav Niwas CHSL, Flat No. B-1A, 1st Floor, Natakwala Lane, Opp. S. V. Road Court Chambers, Borivali (West), Mumbai - 400 092.

5. Raj J. Valia B-1701, Pushpvinod-1, S. V. Road, Borivali (West), Mumbai - 400 092.

6. Madhav J. Valia B-1701, Pushpvinod-1, 2

S. V. Road, Borivali (West), Mumbai - 400 092.

7. Jayesh V. Valia B-1701, Pushpvinod-1, S. V. Road, Borivali (West), Mumbai - 400 092.

8. Jayesh V. Valia (HUF) B-1701, Pushpvinod-1, S. V. Road, Borivali (West), Mumbai - 400 092. ....Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondent

M/s. RHP Partners for the Appellants.

Mr. Abhiraj Arora, Advocate with Mr. Deepanshu Agarwal, Ms. Misbah Dada, Mr. Shourya Tanay, Advocates i/b ELP for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1. The present appeal has been filed challenging the order dated

March 16, 2023 passed by the Whole Time Member (hereinafter

referred to as 'WTM') of Securities and Exchange Board of India

(hereinafter referred to as 'SEBI') directing the appellants to sell the 3

shares in the target company which were acquired in violation of

Regulation 11(1) of the Securities and Exchange Board of India

(Substantial Acquisition of Shares and Takeovers) Regulations, 1997

which was in excess of 5% and further directed the appellants to

deposit the proceeds of such sale in the Investors Protection Fund.

The appellants by the same impugned order were further restrained

from accessing the securities market for a period of one year.

2. The facts leading to the filing of the present appeal is, that the

appellants and its promoters and promoter groups were holding

41.82% of the total shareholding of the company. The company

issued warrants convertible into equity shares in favour of the

promoter and promoter groups. Based on the resolution, warrants

were issued and subsequently, it was converted into equity shares.

As a result of the conversion of the warrants into equity shares, there

was as increase in the capital of the company and accordingly a show

cause notice was issued alleging violation of the SAST Regulations.

Show cause notice alleged that the acquirer had increased its

shareholding by more than 5% in the financial year which was in

violation of Regulation 11(1) of the SAST Regulations. The WTM

after considering the matter passed an order dated September 30,

2019 finding the appellants to be guilty of violating the provisions of

the SAST Regulations and accordingly directed the appellants to 4

make an open offer. The said order was challenged by the appellants

by filing an Appeal No. 576 of 2019 which was allowed and

impugned order was quashed. This Tribunal held that considering

the long lapse of time in culminating the proceedings, the direction to

make an open offer was inappropriate in the circumstances of the

case and accordingly remitted the matter to the WTM to issue an

appropriate direction as provided under Regulation 44 of the SAST

Regulations other than the direction to make an open offer.

3. SEBI, being aggrieved by the order of this Tribunal filed a

Civil Appeal No. 1331 of 2022 before the Hon'ble Supreme Court of

India which was dismissed by an order dated September 15, 2022.

4. Pursuant to the order of this Tribunal, the impugned order has

been passed issuing directions under Regulation 44 of the SAST

Regulations.

5. We have heard the learned counsel from M/s. RHP Partners

for the appellants and Mr. Abhiraj Arora, the learned counsel with

Mr. Deepanshu Agarwal, Ms. Misbah Dada, Mr. Shourya Tanay, the

learned counsel for the respondent.

6. The learned counsel for the appellants contended that they are

only aggrieved by the order of the WTM debarring them from 5

accessing the securities market for a period of one year. It was

contended that the matter is an old dispute where the warrants were

converted into shares in 2009. Much water has flown since then and

no useful purpose would be served in restraining the appellants from

accessing the securities market for a period of one year.

7. We find that this Tribunal in its earlier order dated November

23, 2021 had remitted the matter to the WTM to issue an appropriate

direction as provided under Regulation 44 of the SAST Regulations

other than the direction to make an open offer. Regulation 44 of the

SAST Regulations reads as under :-

""44. Without prejudice to its right to initiate action under Chapter VIA and section 24 of the Act, the Board may, in the interest of securities market or for protection of interest of investors, issue such directions as it deems fit including:--

(a) directing appointment of a merchant banker for the purpose of causing disinvestment of shares acquired in breach of regulation 10, 11 or 12 either through public auction or market mechanism, in its entirety or in small lots or through offer for sale;

(b) directing transfer of any proceeds or securities to the Investors Protection Fund of a recognised stock exchange;

(c) directing the target company or depository to cancel the shares where an acquisition of shares pursuant to an allotment is in breach of regulation 10, 11 or 12;

6 (d) directing the target company or the depository not to give effect to transfer or further freeze the transfer of any such shares and not to permit the acquirer or any nominee or any proxy of the acquirer to exercise any voting or other rights attached to such shares acquired in violation of regulation 10, 11 or 12;

(e) debarring any person concerned from accessing the capital market or dealing in securities for such period as may be determined by the Board;

(f) directing the person concerned to make public offer to the shareholders of the target company to acquire such number of shares at such offer price as determined by the Board;

(g) directing disinvestment of such shares as are in excess of the percentage of the shareholding or voting rights specified for disclosure requirement under regulation 6, 7 or 8;

(h) directing the person concerned not to dispose of assets of the target company contrary to the undertaking given in the letter of offer;

(i) directing the person concerned, who has failed to make a public offer or delayed the making of a public offer in terms of these regulations, to pay to the shareholders, whose shares have been accepted in the public offer made after the delay, the consideration amount along with interest at the rate not less than the applicable rate of interest payable by banks on fixed deposits."

8. Clause (e) of the Regulation 44 gives discretion to the

authority to debar any person from accessing the capital market or

dealing in securities for such period as may be determined by the

board.

7

9. Admittedly, the appellants had violated Regulation 11(1) of

the SAST Regulations. The direction to make an open offer has now

been substituted by a direction to sell the shares in excess of 5% and

deposit the proceeds of such sales in the investor protection fund.

The appellants in the given circumstances considering the facts have

also been debarred for a period of one year.

10. In our opinion, the direction given by the WTM is neither

arbitrary nor harsh and is in accordance with Regulation 44 of the

SAST Regulations. We do not find any infirmity in the directions so

issued by the WTM.

11. The appeal fails and is dismissed.

12. This order will be digitally signed by the Private Secretary

on behalf of the bench and all concerned parties are directed to act on

the digitally signed copy of this order. Certified copy of this order is

also available from the Registry on payment of usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup Technical Member 25.04.2023 PRAMILA Digitally signed by PRAMILA TANAJI

PTM TANAJI MISAL Date: 2023.04.25 MISAL 17:38:19 +05'30'