sebi:Order/PM/SM/2020-21/10148-10149

SEBI · SEBI · 2020-07-23 · Prasanta Mahapatra, Adjudicating Officer

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Facts / Headnote

Alleged violations of regulations 77(1) and 77(3) of ICDR Regulations, 2009 not established against Noticee 1 (Winsome Yarns Limited); violations established against Noticee 2 (Shell Business Private Limited), which was imposed a penalty of Rs. 5,00,000/-

Provisions invoked

• s. 15
• s. 19
• s. 81
• s. 15H
• s. 15J

Regulations

• Reg. 200
• Reg. 77(2)
• Reg. 76
• Reg. 77(1)

Parties

• Winsome Yarns Limited (Noticee 1)
• Shell Business Private Limited (Noticee 2)

Holding

The alleged violation of regulations 77(1) and 77(3) of the ICDR Regulations, 2009 against the issuer company (Noticee 1 - Winsome Yarns Limited) was not established, as those regulations impose payment obligations only on allottees, not on the issuer. The violation against Noticee 2 (Shell Business Private Limited) was established for failing to pay full consideration for the preferential allotment of shares, and a penalty of Rs. 5,00,000/- was imposed on Noticee 2 under section 15HB of the SEBI Act, 1992.

Full text

Adjudication Order in respect of Winsome Yarns Limited and Shell Business Private Limited in the matter of Winsome Yarns Limited Page 2 of 28 Winsome Yarns Limited (hereinafter referred to as Winsome/Noticee 1) , as available on the website of BSE, that Shell Business Private Limited (hereinafter referred to as SBPL/ Noticee 2) was one of the promoters of Winsome. Winsome and SBPL are hereinafter collectively referred to as Noticees. It is alleged on the basis of investigation that Winsome had issued shares to SBPL upon conversion of warrants without receiving full consideration from SBPL for the shares and SBPL received those shares from Winsome without payment of full consideration for the shares to winsome. Therefore, it is alleged that the Noticees have together violated the provisions of regulations 77(1) and 77(3) of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (hereinafter referred to as ICDR Regulations, 2009).

Adjudication Order in respect of Winsome Yarns Limited and Shell Business Private Limited in the matter of Winsome Yarns Limited Page 3 of 28

Adjudication Order in respect of Winsome Yarns Limited and Shell Business Private Limited in the matter of Winsome Yarns Limited Page 4 of 28 was allotted 7,50,00,000 shares upon conversion of equal number of warrants. (d) Thereafter, vide shareholder resolution dated July 18, 2011, Winsome consolidated 10 equity shares of Face Value Rs. 1/- each to 1 equity share of face value of Rs. 10 each. Subsequently, vide Board resolution dated August 17, 2011, Winsome converted and allotted 1,20,67,500 warrants of face value of Rs. 10/- each (equivalent to 12,06,75,000 warrants of face value of Rs. 1/- each) into equal number of equity shares to the warrant-holders. Consequently, SBPL was allotted 50,00,000 shares upon conversion of equal number of warrants. (e) In this regard, SEBI conducted investigation into funding of preferential allottees, including SBPL, by the company, if any. It was observed that the following fund transfers had taken place from SBPL to Winsome for the abovmentioned allotment of 12,50,00,000 warrants and their subsequent conversion into shares: Table 1: Fund Transfers from SBPL to Winsome Date Bank Account no. of SBPL Bank Account no. of Winsome Amount Transferred 28/11/2008 565011000435 (ING Vyasa Bank- now Kotak Mahindra Bank) 00358600000025 (HDFC Bank) 27,00,000 15/06/2009 565011000435 (ING Vyasa Bank- now Kotak Mahindra Bank) 00358600000025 (HDFC Bank) 25,00,000 20/08/2009 565011000435 (ING Vyasa Bank- now Kotak Mahindra Bank) 00358600000025 (HDFC Bank) 2

Source: SecMarx — sebi:Order/PM/SM/2020-21/10148-10149. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.