INSUBCONTINENT EXCLUSIVE:
The Securities and Exchange Board of India (Sebi) has issued a show-cause notice to textile maker Raymond alleging multiple securities
The allegations include failure to obtain necessary approvals for related party transactions in JK House episode, corporate governance
violation for non-disclosure of material information about litigations and non-compliance of shareholder reclassification norms
ET has reviewed a copy of notice.
The capital market regulator said Raymond did not take necessary approvals for related party transaction
involving lease of JK House to some of promoters for a decade between 2007 and 2017
Raymond had leased four duplex flats in JK House to an entity named Pashmina in 2003.Pashmina subleased flats to tenants including Gautam
In 2015-16, property went for reconstruction and Raymond paid for rental expenses of all sub-tenants, including promoters, for alternative
While promoters were paying Rs 7,500 a month for sub-lease with Pashmina, Raymond paid Rs 12 lakh a month for alternative accommodation of
Such disparity in rent paid by sub-tenants and company indicates unfair economic benefit to promoters at cost of company and its
requirements (LODR) regulations, all related party transactions need a prior approval of audit committee.
The redevelopment agreement of JK
House had a clause which said developer will offer existing tenants apartments of same size in redeveloped building
Singhanias had filed a petition before Bombay High Court against Raymond seeking to exercise their option of purchase of new apartments
However, company did not disclose this litigation to its shareholders.
Sebi rules mandate each company to decide quantitative threshold for
determining whether a transaction is a material development or not
Raymond had decided that any litigation that amounts to 5 per cent of gross turnover of company or 20 per cent of its networth would be
categorised as material development and needed to be disclosed to shareholders
The lack of disclosure of matter despite falling into its definition of a material development was a violation of listing agreement.
Raymond
alleged that, if said four duplex apartments in JK House were sold to sub-tenants as per terms and conditions laid down in tripartite
regulator also alleged that company had excluded Ritwik Ruia from promoter group without following due procedures
As on March 2017, Ruia owned 2,000 shares in company under promoter and promoter group category
However, in exchange filing for quarter ended June 2017, Ruia was excluded from promoter group
company has not followed any procedures specified under Regulation 21A of Listing Regulations, 2015 for reclassification of promoter to
