Parsvnath Developers, J Kumar Infra and Prakash Industries moves SAT against Sebi ban

Parsvnath Developers, J Kumar Infraprojects and Prakash Industries, three of the 331 alleged shell companies which were suspended from trading by market regulator Securities and Exchange board of India (Sebi) on Monday evening, have moved the Securities Appellate Tribunal (SAT) on Wednesday against the regulator’s order. SAT heard the appeal by J Kumar Infra on Wednesday and is expected to hear other appeals also on a priority basis. The tribunal sought clarifications from Sebi about the manner in which the circular was issued. J Kumar Infra’s counsel told SAT that the company had very strong credentials as a listed company, and also backed it with financial statements and other records. The company, known for its works in the engineering, procurement and construction (EPC) space in the country, is currently executing projects, among others, for metro rails in Mumbai, Delhi and Ahmedabad. On Monday, Sebi had sent a list of 331 companies to the stock exchanges, instructing them to suspend trading in the stocks of these companies from Tuesday morning. The list was prepared by the ministry of company affairs (MCA) and forwarded to the regulator for action as the government suspected these companies were being used for money laundering and tax evasions. SAT asked Sebi if it had heard J Kumar Infra’s representation on the matter. If not, the regulator should hear it by Thursday morning. It also asked Sebi when it received the list from MCA, the steps taken by its officials and when the list was brought to the notice of the Sebi chairman and its board. SAT will hear the matter again on Thursday. Sebi said that for SAT to pass an order, its directive to the bourses had to be an administrative one. According to the bourses, “Sebi vide its letter... had forwarded the MCA list and had directed the exchanges to identify the companies listed on their trading platform and initiate measures,” one of which is immediate suspension of trading under “stage VI of the Graded Surveillance Measure”, a risk-containment process for the bourses. Sebi had also directed the bourses to start a process of verifying the credentials and fundamentals of these companies. “Exchanges shall appoint an independent auditor to conduct audit of such listed companies and if necessary, even conduct forensic audit of these companies to verify credentials and fundamentals,” Sebi said. After such verification, if bourses do not find appropriate credentials and fundamentals about the existence of the company, exchanges should start the process of compulsory delisting of these companies. Of the 331 companies in MCA’s list, J Kumar Infra had a market capitalization of Rs 2,150 crore, while Prakash Industries, in which billionaire investor Rakesh Jhunjhunwala holds a 1% stake, had a market cap of Rs 2,080 crore and Parsvnath Developers’ market cap was Rs 1,020 crore.