Three firms move SAT against Sebi’s ‘shell’ tag

MUMBAI: J Kumar Infraprojects Ltd, Parsvnath Developers Ltd, Prakash Industries Ltd, three of the 331 firms facing action on allegations of being a shell company, moved the Securities and Appellate Tribunal (SAT) against Securities and Exchange Board of India or Sebi on Wednesday.

SAT heard the pleas filed by J Kumar and Prakash Industries but the plea filed by Parsvnath Developers did not come up for hearing. SAT would continue hearing the matter on Thursday.

SAT in initial observations told Sebi that it should clarify the provisions used to pass these directions and that it should accord hearing to the companies making representations to the regulator.

“We have filed an appeal in SAT against the Sebi directive,” said Pradeep Jain, chairman, Parsvnath Developers, without going into details.

An email sent to a Sebi spokesperson and a phone call was not answered.

Sebi on Monday had directed stock exchanges to initiate action against 331 listed entities suspected of being shell companies. Of them, 162 were actively traded; 169 had already been suspended.

J Kumar Infra a company with a market cap of ₹2,146 crore, Parsvnath Developers with a market cap ₹1,020.5 crore and Prakash Industries with a market cap of ₹2,119.86 crore are some of larger companies who are a part of the Sebi action.

During arguments, Janak Dwarkadas arguing for J Kumar said that Sebi’s direction is arbitrary and unreasonable. Senior advocate, Pradeep Sancheti, appeared on behalf of Prakash Industries.

The companies argued that Sebi, Ministry of Corporate Affairs and exchanges did not verify whether they are shell firms or not and principal of natural justice was not followed. They added that it is not clear what provisions of Sebi Act have been used to pass this directive. The companies also said that in the name of a circular and administrative function it is an interim order.