SEBI slaps Rs 6-lakh penalty on Capital First for disclosure lapses

In its order, SEBI found that Capital First did not make requisite disclosures about the encumbrances on shares of DCHL held by them to the stock exchanges and DCHL. Capital First in October 2011 entered into a security net agreement (SNA) with the promoters of DCHL for 6.04 crore shares, which was 28.93 percent share capital of the company. Thereafter, in November 2011, it entered into non-disposal undertakings (NDUs) with the promoters for 3.30 crore shares, amounting to a 15.79 percent stake. It was observed that as and when the NDUs/SNAs were expiring they were replaced by entering into fresh NDUs/SNAs between the parties.

These NDUs or SNAs were in the nature of encumbrance as they entail the risk of shares held by the promoters being appropriated or sold by the lenders. Through these NDUs, Capital First, in the event of default, was entitled to create a pledge in its favour for 15.79 percent to 28.93 percent of the paid-up capital of the company and hence these shares were encumbered at the time of entering into the NDU agreement itself, SEBI noted. Hence, necessary disclosures were required to be made by Capital First to the stock exchange and DCHL under SAST (Substantial Acquisition of Shares and Takeover) Regulations. However, it had failed to make necessary disclosures, it added.

“The transactions carried out by the noticee (Capital First) as through NDUs/ SNAs were in the nature of encumbrance as they entail the risk of shares held by the promoters being appropriated or sold by the lenders… The noticee by not making requisite disclosures of the said encumbrances on shares of DCHL held by them to the stock exchanges and DCHL, the noticee has violated the provisions of … (SAST) Regulations, 2011,” SEBI said. The order came after SEBI investigated the scrip of DCHL to ascertain whether the promoters of DCHL have made any fraudulent pledging of shares of the company and whether adequate disclosures had been made under the SAST rules during the period October 2011 to December 2012.

In a separate order, SEBI levied a fine of Rs 3 lakh on Way2wealth Brokers for mis-utilisation of the client’s funds or securities. The order followed a multi-theme inspection of the broker conducted by SEBI from April 2018 to August 2019.

Through a separate order, SEBI imposed a penalty of Rs 3 lakh on Blue Blends (India) Limited for flouting various provisions of Listing Obligations and Disclosure Requirement rules. In three separate orders, SEBI levied a fine of Rs 1 lakh each on Mukesh Singh Madansingh Jagarvaal, Sneha Natvarbhai Parghee and Vimal Budheshbhai Shah for violating insider trading rules in the matter of Kushal Limited.

These individuals had traded in the scrip of Kushal in the calendar year 2016-2017 and in respect of share transactions carried out by them, they had failed to make requisite disclosures in terms of PIT (Prohibition of Insider Trading) norms.