Brightcom Group Ltd has submitted a new application to the Securities Appellate Tribunal (SAT), requesting a stay on the Securities and Exchange Board of India’s (Sebi) order that restricted ace investor Shankar Sharma and others from selling shares in the digital marketing company.
In August, Sebi restrained Brightcom’s then Chairman and Managing Director Suresh Kumar Reddy and Chief Financial Officer Narayan Raju from holding directorial positions, citing an investigation into alleged irregularities in preferential share allotments.
The petition filed by Brightcom contends that the allegations in Sebi’s order are “baseless and completely unfounded.” The company states that its turnover is expected to significantly deteriorate in the September and December quarters due to Sebi’s actions.
“Because of the ouster of Mr. Reddy (former chairman and managing director), the company has been subjected to serious problems, including the problem of its very existence,” the company stated in its 187-page application to SAT.
SAT is scheduled to hear the matter on January 2, according to a counsel familiar with the developments.
On December 11, Brightcom Group initially approached the appeals court, challenging Sebi’s order. Last week, Justice Tarun Agarwala, presiding officer of SAT, declined to grant interim relief to the company. The tribunal instructed Sebi to file its reply within three weeks, setting the matter for final disposal on February 9.
Sebi received complaints on October 6, 2022, and May 12 regarding preferential allotments made by Brightcom Group in the financial years 2019-20 and 2020-21. The complaints alleged that the company raised money through preferential share issues to entities connected to it, and the funds were provided as loans to its subsidiaries. Additionally, it was claimed that the company did not disclose proper details in its annual report regarding the utilization of the proceeds from these preferential issues.
Sebi’s investigation led to an order by whole-time member Ashwani Bhatia, which restrained Reddy and Raju from holding directorial positions until further notice. A total of 25 entities and individuals were affected by Sebi’s order.
Due to Sebi’s August order, Brightcom Group lacks any executive director or whole-time director, leading to challenges for public shareholders, as mentioned by another senior counsel involved in the matter.
Brightcom Group’s shares have experienced a nearly 34% decline this year, closing at ₹19.35 apiece on NSE on Tuesday, down 2.5%.
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