SEBI Imposes Rs10 Lakh Penalty on Promoters of JSG Leasing for Faulty Share Acquisitions
Moneylife Digital Team 31 January 2023
Market regulator Securities and Exchange Board of India (SEBI) has imposed a collective fine of Rs10 lakh on six promoters of JSG Leasing Ltd (JSG).
The investigation by SEBI found that the promoters of JSG Kaminiben Atulbhai Patni, Rakesh Bhailabhai Patel, Riddish Gopal Modi, Nithin K Modi, and Jayesh Shah had not made the open offer before the change of management and control in JSG. 
In the order dated 30 January 2023, Barnali Mukherjee, adjudicating officer (AO) of SEBI says “The available records do not quantify the amount of profits made by the promoters or losses suffered by the investors due to not making the open offer or the public announcement. However, I note that the requirement of making the open offer is to give the exit option to the existing shareholders. The said right to exit is an invaluable right of which the investors should not be deprived. In this case, the investors were denied the option of exiting the company when the promoters acquired the shares.”
The investigation by SEBI also found that Anuj Dhawan, former promoter of JSG, had transferred his equity shares to the six promoters through an off-market transaction route without executing a share purchase agreement. 
SEBI then issued show-cause notices to the six. While Kaminiben Atulbhai Patni did not respond to the notice, the authorised representative for Rakesh Bhailabhai Patel appeared on 6 January 2023 seeking further time to submit a reply. The rest four were given the opportunity of hearing on 13 January 2023. 
The five promoters contended that there is seldom evidence to prove that they have acted deliberately in defiance of the law. They said “individual shareholders and cannot be read to be a person in concert (PAC) as at the time when these shares were acquired there was no common objective of acquiring the shares, gain voting power and control the company.”
They also stated that they are not relatives and nothing was performed by them covertly. Since the shares of the company were suspended during the period of acquiring shares no loss is caused to any investors or public shareholders due to non-disclosure of the transfer. 
After the careful perusal of documents, SEBI found that a share purchase agreement was created between JSG and Skybridge Incap Advisory LLP for the acquisition of 8,73,800 equity shares, constituting 29.13% of the voting share capital of JSG. 
Since they had an acquisition process the company was obliged to make a public announcement of an open offer under substantial acquisition of shares and takeovers (SAST) regulations. 
SEBI’s AO observed that “They (six promoters) have merely stated that they acquired shares individually and hence not considered as PACs. But as per regulation 2(q) of SAST Regulations, persons falling in the category of promoters and members of the promoter group are deemed to be persons acting in concert. It is observed that as per the shareholding pattern published on BSE, the six are identified under the promoters/ promoter group.” 
For the violations of various sections of SAST regulations, a monetary penalty of Rs10 lakh was imposed on all six promoters. The penalty should be remitted within 45 days of the issue of the order. 
(Adjudication Order No. ORDER/BM/JR/2022-23/ 23232 – 23237 Date: 30 January 2023) 
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