TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1039
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.... 2 (Smartworks Coworking Spaces) Mr. Vikram Nankani, Senior Advocate with Mr. Amit Sibal, Mr. Avishkar Singhvi, Mr. Harshvardhan Nankani and Mr. Ishwar Nankani, Advocates i/b Nankani & Associates for the Respondent Nos. 3 (Ghanshyam Sarda). Mr. Chetan Kapadia, Senior Advocate with Mr. Tomu Francis, Mr. Oishik Bagchi, Mr. Arka Saha, Mr. Tarun Toprani, Advocates i/b Khaitan & Co. for the Respondent Nos. 4 (NS Niketan LLP). Mr. Mustafa Doctor, Senior Advocate with Mr. Aman Kacheria, Mr. Neel Kothari, Mr. Aman Arora, Advocates i/b Mr. Rahul Agarwal, Advocate for the Respondent Nos. 5 (SNS Infrarealty LLP). Mr. Janak Dwarkadas, Senior Advocate with Mr. Tomu Francis, Mr. Oishik Bagchi, Mr. Arka Saha, Mr. Tarun Toprani, Advocates i/b Khaitan & Co. for the Respondent Nos. 6 (Neetish Sarda). ORDER Per : Justice P.S. Dinesh Kumar, Presiding Officer Appellant has presented this appeal with following prayers: a. Direct respondent No. 1 to initiate investigation into the affairs of respondent No. 2-6 under the SEBI Act and the Companies Act, 2013; b. Restrain Respondent No. 2 from proceeding with the IPO process pursuant to the RHP Red Herring prospectus d....
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....going against Respondent No. 2 company, its promoters, and directors thereof, including investigations by the Ministry of Corporate Affairs under Sections 110 and 447 of the Companies Act, 2013, the Income Tax Department, the Central Bureau of Investigation, and various complaints and/or FIRs in addition to the alleged offloading of shares by the promoters of Respondent No. 2 company amounting to Rs. 180.85 Crores (Rupees One Hundred and Eight Crores and Eighty- Five Lakhs only) in Respondent Nos. 4 and 5 within a few days of filing the DRHP. (b) That vide its complaint, objections and/ or comments raised on 21st May 2025, the Appellant pointed out and reiterated serious infirmities/shortcomings in the Addendum to DHRP of Respondent No. 2 company and also pointed out fresh alarming facts/documents which inter alia reflected flow of unaccounted money from certain shell and benami companies linked to the promoter groups, with a view to generate capital structure and seek much higher IPO value. (c) SEBI has not considered the comments raised by the appellant on 21st May 2025 at the time of granting the approval of the RHP dated 4th July 2025. This shows that the appr....
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.... in shell/benami and Smartworks' responses were disclosed in the Red Herring Prospectus dated July 04, 2025 ("RHP") at S. No 1 page 78. Specific reference was also made to Appellant's complaints dated January 12, 2025 and March 29, 2025 in the table under Para 33 on page 76and it was clearly mentioned below the table that these complaints were available for inspection at Smartworks' registered office. 10. He further submitted that with regard to the internal Income-Tax reports mentioned in appellant's letter, Smartworks asserted that it had not received any notice or order of demand from the Income Tax authorities. Smartworks has also maintained that except what was disclosed under the head "Outstanding Litigation and Material Developments" in the RHP, there were no outstanding income tax disputes. 11. Shri Rustomjee contended that in its letter dated May 21, 2025, Appellant did not make any request to the SEBI to ensure that income tax reports are disclosed in the RHP. Appellant had only requested SEBI (a) to refer the matter to the Enforcement Directorate and MCA for an investigation into the matter; and (b) to reject the DRHP. In SEBI's view, neither of these requests were....
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....to make one"a person aggrieved" c. This Tribunal in MZ Khan v. SEBI [2009 SCC OnLine SAT 99] observed as follows: "There is yet another ground on which the appellant must fail. An appeal to this Tribunal lies under Section 15T of the Securities and Exchange Board of India Act, 1992. It provides that any person aggrieved by an order of the Board or by an order made by an adjudicating Officer under this Act can prefer an appeal to this Tribunal. It is, therefore, necessary that there has to be an order passed by the Board against which an appeal could lie." d. The present appeal emanates from a family dispute and is motivated and the appellant is merely acting as a front on behalf of estranged family members. e. Following the demise of Mr. Shiwlall Sarda in 2005, his sons, namely Mr. Ghanshyam Sarda (Respondent No. 3), Mr. Govind Kumar Sarda, and Mr. Jagdish Sarda ("Sarda Brothers"), continued the family business together. However, disputes arose amongst them starting from 2007, which led to an arbitration between the Sarda brothers. f. Pursuant to the arbitration award in 2009 only partial partition was done and the award was challenged b....
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....Addendum to the RHP of July 10, 2025. The contents alleged in the said complaint along with the response of the Company was duly disclosed by the Company in the RHP on Page 78. The response provided by the Company at Page 78 was reiterated in the Addendum dated July 10, 2025 and the veracity of such income tax reports were specifically denied by the Company. m. The complaint dated May 21, 2025 enclosed with it two internal reports of the Income Tax Department dated September 05, 2022 and December 26, 2024. It is unclear as to how the Appellant has obtained such an internal document of the Income Tax Department. In any case, the Income Tax Report dated December 26,2024 concludes that the contents of said report are required to be verified by the concerned Adjudicating Officer and that the said findings are indicative in nature and not exhaustive. Further that efforts need to be made during the course of the assessment to ascertain actual quantum of concealed income. n. Further, it is submitted that the Addendum dated July 10, 2025 was also issued by the Company out of abundant caution to disclose complaints received in the present issue and the appeal. The complain....
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....e issue of the Appellant in all segments has been oversubscribed multi fold. Several notable marquee investors have invested in the Company. The details of the same are as below: SR. NO. CATEGORY NO OF SHARES OFFERED/ RESERVED NO OF SHARES BIDFOR NO OF TIMES OF TOTAL MEANT FOR THE CATEGORY 1 Qualified Institutional Buyers ("QIBs") 29,03,910 7,08,75,864 24.41 1(a) Foreign Institutional Investors (FIIs) - 1,35,59,472 - 1(b) Domestic Financial Institutions (Banks/ Financial Institutions (FIs)/ Insurance Companies) - 1,51,92,180 - 1c) Mutual funds - 1,86,51,636 - 1(d) Others - 2,34,72,576 - 2 Non Institutional Investors 22,17,233 5,05,06,848 22.78 2.1 Non Institutional Investors (Bid amount of more than Ten Lakh Rupees) 14,78,156 4,01,12,460 27.14 2.1 (a) Corporates - 5,26,392 - 2.1(b) Individuals (Other than RIIs) - 3,78,27,288 - 2.1(c) Others - 17,58,780 - 2.2 Non Institutional Investors (Bid amount of more than Two Lakh Rupees upto Ten Lakh Rupees) 7,39,077 1,03,94,388 14.06 2.2(a) Corporates - ....
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....ed that she has been misinformed by Govind Sarda (estranged family). d. Appellant has produced PNB letter dated 08.05.2025 - however suppressed subsequent withdrawal letter dated 30.06.2025 by PNB. e. Questioning the antecedents of the Appellant as a watchdog, the Respondent stated that the Hon'ble Supreme Court has taken cognizance of the Appellant's malafide intentions in a Telecom case. 15. The 6th respondent has filed written submissions stating inter alia that: a. The appellant is not only a 'busy body' but is a motivated actor acting at the behest of the estranged family members. The Appeal file by the Appellant is motivated, mala fide, and has been filed at the behest of other motivated persons to settle personal scores and long-standing differences. The appellant is not a genuine 'investor watchdog' and is merely a front and has clearly come forth with unclean hands and for this reason alone, the present appeal ought to be dismissed. b. Such fact is evident as the appellant has annexed to the appeal a show cause notice issued by the Punjab National Bank's Fraud, Risk Management Division ("SCN"). Such SCN, addressed to M/s Sun Biotechno....
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....itted that the bidding/offer period for retail investors opened on July 10, 2025. The Appellant who has failed to disclose any verifiable identity, standing, or material evidence on record, and has suppressed crucial documents, filed the Appeal on such date and a hearing was conducted on July 10, 2025. On July 10, 2025, the Company issued an addendum to the RHP (published on July 11, 2025 on SEBI's website), disclosing the facts of the appeal filed, the allegations therein, as well as the details of the complaint dated May 21, 2025 (received from SEBI on July 8, 2025) along with the response thereto. Following such disclosure, the response from the market, far from being adverse, was overwhelmingly positive. Most notably, the Retail Individual Investor category saw an extraordinary subscription of 13.45 times by the last day of the book-building process, which was on July 14, 2025. g. It is clear from the above submissions that the investors including the marquee investors have not found the issue risk worthy to the extent of deterring participation. Rather, they have validated the issuer's disclosures and prospects by subscribing in large volumes. This Hon'ble Tribunal, i....
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.... the matter to the Enforcement Directorate and MCA for an investigation into the matter; and (b) to reject the DRHP. We note that SEBI having examined the request of the Appellant took the view that neither of these requests were reasonable or appropriate in the context of the IPO process and that there was no request of the Appellant to SEBI to ensure that the said letter/ its contents are disclosed. 20. The Appellant has placed heavy reliance on the internal reports of the income tax department. It is relevant to note that Income Tax authorities have recorded thus in the report. "4.3. It is to be noted that the shares issued to all the entities by the M/s Smartworks Coworking Spaces Pvt. Ltd. from the period F.Y 2017-18 to 2023-24 are required to be verified by the concerned A.O. The findings are indicative in nature and not exhaustive. Details efforts need to be made during the course of assessment to ascertain actual quantum of concealed income." 21. Thus, the Income Tax department has noted in the report that the findings are indicative in nature and detailed efforts need to be made during the course of assessment to ascertain actual quantum of concealed income.....
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....onse has been more positive after the issue of Addendum. Therefore, in the facts of this case, in our considered view, any interference at this stage would adversely affect the investors and accordingly the answer the question formulated by us in the negative. 25. So far as the grounds of maintainability is concerned, having regard to the peculiar facts, we have considered the matter on merits. Therefore, the question of maintainability of an appeal under Section 15T of the SEBI Act, is kept open for consideration in an appropriate case and we make it clear that this decision shall not be treated as a precedent. 26. In the light of our opinion that no interference is called for, we do not find it necessary to record detailed findings with regard to other grounds, namely, the mala-fides of the appellant and its locus. The question of locus by a non-investor is also kept open. Per Dr. Dheeraj Bhatnagar, Technical Member 27. I concur with the order per the Hon'ble Presiding Officer. In continuation of the same, I am adding the following paragraphs. 28. The relevant provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("ICDR Regulations....
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....g issued by the income tax department, based on the information contained in the said internal report/ document, that was not disclosed in the RHP as per the Clause 12(A)(1)(ii) of Part A of ICDR regulations. 32. The case of the appellant is built solely on the basis of certain internal communications within the income tax department in the nature of some documents/reports which came in the hands of appellant, without however, supported by any existing claim of tax demand or show cause notice, that was not disclosed in the RHP. Large number of complaints in tax matters/Tax evasion petitions (TEPs), are received by the tax authorities on a regular basis. Based on internal examination, where the complaints warrant inquiry, statutory notices are issued to the taxpayer. Where regular assessments are time-barred, notices for re-assessment are issued following due process of approval. In case, the findings of inquiry confirm allegations of tax evasion, an order of assessment/re-assessment, as the case may be, is passed resulting in addition to income. A statutory notice for demand under section 156 is also issued. Hence, any information, which may have been subject-matter of a complai....