TaxTMI 
TaxTMI 
2025 (12) TMI 377
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....r the Respondent Nos. 3 and 7 in WPL/31373/2025: Mr. Janak Dwarkadas, Senior Advocate a/w Mr. Ravitej Chilumuri, Ms. Aishwarya Singh and Ms. Sanya Gandhi i/b Khaitan & Co.. For the Respondent Nos. 4, 5 and 6 in WPL/31373/2025: Mr. Ravi Kadam, Senior Advocate a/w Mr. Ravitej Chilumuri, Ms. Aishwarya Singh and Ms. Sanya Gandhi i/b Khaitan & Co. JUDGMENT (PER FARHAN P. DUBASH J.) : INTRODUCTION 1. One of the main risks that a company coming out with an IPO faces is whether such offering would find favour with the public and be fully subscribed. However, in recent years, an additional risk has surfaced and some IPO's are put to active judicial scrutiny of courts, like in the case before us, where two Petitioners have come forward and raised somewhat similar grievances to the IPO taken out by WeWork India. This order considers whether their grievances are well founded and merit intervention from the Court. 2. A perusal of the reliefs sought in both these Writ Petitions filed on 30th September 2025 would reveal that, essentially, they seek to make a complaint against the lack of proper disclosure in the Draft Red Herring Prospectus (DRHP) and Red Herring Prospectus ....
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....tion (L) No. 31373 of 2025, whilst Mr. Navroz Seervai appeared on behalf of Vinay Bansal, the Petitioner in Writ Petition (L) No. 31301 of 2025. On the other hand, Mr. Shiraz Rustomjee, appeared on behalf of Respondent No. 1 - SEBI whilst Mr. Darius Khambata and Mr. Gaurav Joshi appeared on behalf of Respondent No. 2 - WeWork India. In Writ Petition (L) No. 31373 of 2025, the Petitioner has also impleaded the Book Running Leading Managers (BRLMs) of WeWork India's IPO, as Respondent Nos. 3 to 7 therein. These BRLMs have not been impleaded in the other Writ Petition (L) No. 31301 of 2025. Accordingly, Mr. Janak Dwarkadas appeared on behalf of two of the said BRLMs viz. Respondent Nos. 3 and 7 therein, whilst Mr. Ravi Kadam appeared on behalf of the other three BRLMs viz. Respondent Nos. 4 to 6 therein. BRIEF BACKGROUND 6. In order to properly appreciate the issues that arise for consideration in both these Writ Petitions, it would be necessary to refer in brief, to the factual backdrop, the details whereof are enumerated hereinbelow: 7. On or about 31st January 2025, WeWork India filed a DRHP with SEBI for launching its IPO which was reported by various media agencies. Ther....
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....TITIONER IN WRIT PETITION (L) NO. 31373 OF 2025 11. Mr. Dhond has invited our attention to the DRHP and the RHP, and in particular to Section VI thereof, which is stated to contain, "Legal and Other Information". He submits that under Clause V thereunder, which relates to, 'Litigation involving the Promoters' and in particular, sub-clause (A) thereof, which provides 'Details of the Litigation against the Promoters', not only is there misrepresentation of proper facts and details of the pending litigation against the Promoters of WeWork India made therein but there is also gross and deliberate suppression of information therefrom. Mr. Dhond has painstakingly taken us through the said disclosures and submits that though the same mention the filing of a chargesheet by the Central Bureau of Investigation (CBI) against the Promoters of WeWork India, there is a deliberate and selective mention therein, only to offenses under Sections 120(b) and 420 of the Indian Penal Code, 1860 (IPC), whilst the other and more serious offenses, under Sections 409 and 477A of the IPC, which were also made in the same chargesheet, have been conveniently omitted therefrom. Mr. Dhond further submits that....
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....e addressed his client's grievances and ensured that true and correct disclosures are made in the DRHP and RHP) have satisfactorily dealt with the said complaint. 14. He submits that there is no delay on his client's part in approaching this Court and points out that even though the DRHP was published as far back as on 31st January 2025, it was kept in abeyance by SEBI from February 2025 till July 2025, and it is only thereafter that his client properly scrutinized the (voluminous) document, which culminated in his complaint dated 27th September 2025 being made and which has been summarily disregarded, given the stereotype response received from the BRLMs and WeWork India of even date. He submits that his clients' subsequent letter dated 29th September 2025 has not been responded to and hence, the present Writ Petition came to be filed on 30th September 2025. Mr. Dhond also points out that given the present Writ Petition, which highlights grievances against the inaction on the part of SEBI (who is the Market Regulator and who is duty bound to protect the interest of all depositors in the country), mere delay by itself, can never be made an issue and disentitle the petitioner to ....
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....e said Promoter/s which includes charges under Section 3 and 4 of PMLA and there are also no details provided, of the offenses that initiated the said investigation. Thus, Mr. Desai joins Mr. Dhond in submitting that the DRHP and the RHP contain gross mis-statements and lack full and complete disclosures and particulars containing the true and correct facts, and as a result, there is a necessity for this Court to interfere in the matter by granting the interim reliefs sought in the present Writ Petition. SUBMISSIONS OF THE PETITIONER IN WRIT PETITION (L) NO. 31301 OF 2025 19. To a large extent, the arguments advanced by Mr. Seervai endorse those, made by Mr. Dhond and Mr. Desai (in the companion Writ Petition). However, in addition, Mr. Seervai makes a more fundamental submission, which is discussed hereunder. 20. Mr. Seervai submits that WeWork India could never have been permitted by SEBI to come out with an IPO. In support, he relies on the contents of General Order No.01 of 2012 issued by SEBI on 9th November 2012 under section 11A of the SEBI Act 1992 relating to SEBI (Framework For Rejection of Draft Offer Documents) Order, 2012. He has taken us through various Secti....
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....d the CBI and also by the ED, Mr. Seervai argues that SEBI ought to have applied the 'fit and proper' criteria which it rigorously applies to its registered intermediaries including their Directors and Key Managerial Personnel who are required to meet the 'fit and proper' standards, as prescribed under Schedule II of the SEBI (Intermediaries) Regulations, 2008 and in particular, Clause 3(ii) thereof, which provides that if a chargesheet has been filed by any Enforcement Agency (like EOW, CBI, ED, etc) in cases involving economic offences and is pending against a Director, such individual shall be deemed not to meet the 'fit and proper' criteria and would be ineligible to be appointed or continued as a Director of the Intermediary. Mr. Seervai submits that the same principles, or at least similar rigorous standards, ought to apply in the context of Promoters and Directors of companies seeking to raise public funds through an IPO and submits that, in such circumstances, since Mr. Jitendra Virwani and Mr. Karan Virwani, the Promoters of WeWork India are facing grave and serious allegations which are the subject matter of multiple chargesheets filed against them, they should not be per....
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....laint. RESPONSE OF RESPONDENT NO. 1 - SEBI 25. Per contra, Mr. Shiraz Rustomjee opposes the reliefs sought by the Petitioners on the ground that neither of them have satisfactorily explained the delay in approaching this Court. In the case of the Writ Petition filed by Hemant Kulshrestha, Mr. Rustomjee points out that the Petitioner has not satisfactorily explained the delay in making his complaint on 25th September 2025, for the first time, when the DRHP was published as long back as on 31st January 2025. He argues that even if his contention were to be accepted that the DRHP was kept in abeyance between February 2025 and July 2025, there is no plausible reason afforded by him that explains the delay between July 2025 and 25th September 2025, the day on which he complained to SEBI as regards the contents of the DRHP. Insofar as, Vinay Bansal's Writ Petition is concerned, Mr. Rustomjee points out that he too has failed to justify the delay in making his complaint on 25th August 2025 for the first time. He thus cites delay, as the first ground which disentitles the Petitioners to the interim reliefs sought by them. 26. Next, Mr. Rustomjee points out that neither (of the two....
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.... would be occupied only in preparing/vetting the contents of the voluminous offer documents of these IPOs. 28. In this regard, Mr. Rustomjee invites our attention to the letter dated 8th July 2025 addressed by SEBI, to one of the BRLMs of the IPO viz. JM Financial Limited - Respondent No. 3 in Writ Petition (L) No. 31373 of 2025, and submits that by this detailed letter which runs into seventeen pages, SEBI had applied its mind to the contents of the DRHP by pointing out and suggesting various modifications, changes and explanations that were required to be made or included in the DRHP, and which has since also been acted upon and made/incorporated in the RHP. To corroborate this assertion, our attention is invited to Section II of the RHP containing the 'Risk Factors' and in particular, to the item listed at Serial No. 1 under the heading 'Internal Risks' which discloses the proceedings initiated by the ED against the Promoters and Chairman of WeWork India under the PMLA and the possible effect of any adverse outcome therein to the business and reputation of WeWork India. He submits that this item had initially appeared under 'Section VI' of the DRHP which discloses various out....
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....ubmits that in the case of an expert regulatory body (such as SEBI, in the present case), various judicial precedents expressly stipulate that there should be minimum interference from courts. In support of this assertion, he relies on the decisions in (i) Ashok Kumar Saxena V/s SEBI and Ors. Order dated 29th October 2021 passed by the Delhi High Court in Writ Petition (C) No. 12429 of 2021. (ii) Vishal Tiwari V/s. Union of India and Ors. (2024) 4 SCC 115. (iii) Infrastructure Watchdog Out V/s. SEBI and Ors. Order dated 28th August 2025 passed by the Supreme Court in Civil Appeal (Diary) No. 38576 of 2025 and (iv) Infrastructure Watchdog Out V/s. SEBI and Ors. Order dated 16th July 2025 passed by the Securities Appellate Tribunal (SAT), Mumbai in Appeal No. 111 of 2025. 31. Mr. Rustomjee also invites our attention to the letter dated 17th September 2025 addressed by the 5 BRLMs to SEBI, in response to the complaint dated 25th August 2025 which was made by Vinay Bansal and thereafter forwarded by SEBI to the said BRLMs and WeWork India for their response. He submits that by this letter, SEBI was informed by the BRLMs that the said complaint was....
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....itioners, together with the response/s given to such complaints by WeWork India and the said BRLMs. Moreover, Mr. Khambata points out that these complaints/replies are also included in Section IX of the RHP which relates to 'Material Contracts and Documents for Inspection' wherein full disclosures of both complaints and the responses thereto has been made and the public at large is also invited to inspect such correspondence, if they so desire. 33. Mr. Khambata tenders a copy of an online report issued by the Press Trust of India dated 2nd October 2025 which records that since the opening of the WeWork India IPO to Anchor Investors/QIBs on 1st October 2025, the IPO has already collected a huge sum of Rs. 1348 Crores from Mutual Funds such as ICICI Prudential Mutual Fund, HDFC Mutual Fund, Motilal Oswal Mutual Fund, Aditya Birla Sun Life Mutual Fund, Axis Mutual Fund, Canara Robeco Mutual Fund as well as from Insurance Firms such as Canara HSBC Life Insurance, SBI General Insurance, Kotak Mahindra Life Insurance and Bajaj Allianz Life Insurance. The said report also records that Global Investors such as Goldman Sachs Funds, AI Mehwar Commercial Investments LLC (Wanda) and Allianz....
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....hat the said WeWork IPO is in compliance with all the requirements stipulated in the ICDR Regulations and that the Offer Documents contain all the requisite details and information, as required by law. Accordingly, they submit that no interference is merited in the matter. They also raise a grievance that Vinay Bansal has deliberately avoided impleading the BRLMs in his Writ Petition which instead, proceeds on a false premise that his complaint has not been adequately responded to, which is now shown to be false and on this ground, no reliefs ought to be granted in his favour. ANALYSIS AND FINDINGS 37. We have considered the submissions made by all the parties and also gone through the voluminous record with their assistance. We first, deal with the submission that the WeWork India IPO ought not to have been permitted by SEBI on account of the same being impermissible under the provisions of the General Order No.01 of 2012. 38. A perusal of the said General Order would reveal that the same has been issued by SEBI inter alia laying down general criteria, subject to which, draft Offer Documents filed for issue of securities may be rejected by it. This includes a case where S....
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.... 6 of the said ICDR Regulations. For the sake of convenience and ready reference, it would be advantageous to reproduce the relevant regulation(s) hereunder :- 6(1) An issuer shall be eligible to make an initial public offer only if : a) it has net tangible assets of at least three crore rupees, calculated on a restated and consolidated basis, in each of the preceding three full years (of twelve months each), of which not more than fifty per cent are held in monetary assets : Provided that if more than fifty per cent of the net tangible assets are held in monetary assets, the issuer has utilised or made firm commitments to utilise such excess monetary assets in its business or project; Provided further that the limit of fifty per cent. on monetary assets shall not be applicable in case the initial public offer is made entirely through an offer for sale. b) it has an average operating profit of at least fifteen crore rupees, calculated on a restated and consolidated basis, during the preceding three years (of twelve months each), with operating profit in each of these preceding three years; c) it has a net worth of at least one c....
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....rch 2024, is disentitled from coming out with the said IPO. 41. Section 28 of the Companies Act, 2013 expressly permits the offer of sale of shares of a company by its members, provided that, such offer is in consultation with the company's Board of Directors and in accordance with the provisions of law. The section further provides that the document through which the offer of sale to the public is made is deemed to be a prospectus issued by the company, and that all laws and rules made thereunder, governing the contents of the prospectus, would apply as if it is a prospectus issued by the company. In the present case, through the WeWork India IPO, its Promoters are offering (part of) their shares to the public. This offer is in consultation with its Board of Directors and made through the offer documents, DRHP and RHP which are deemed to be a prospectus and are therefore, in compliance with the ICDR Regulations. We also find that by this IPO, the Promoters of WeWork India do not seek to exit, as erroneously sought to be contended but are merely reducing their shareholding in the company to facilitate its listing on the stock exchange, for which twenty-five percent of its shareh....
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....is section, there are a number of 'Internal Risks' which have been enumerated for the general public which they can consider before they subscribe to the shares of WeWork India. One of the risks which has been disclosed gives details of the proceedings which had been initiated by the ED against the Promoter and Chairman of WeWork India - Mr. Jitendra Virwani in 2014 under the PMLA, 2002 and the risks involved in if there is any adverse outcome in the same.[ WeWork India, Red Herring Prospectus, Serial No. 1 of 'Internal Risks', p. 46.]. (iii) The "Legal and Other Information" as enumerated under Section VI of the RHP gives details of all outstanding litigation proceedings involving the company, subsidiaries and directors. The additional details of the criminal proceedings initiated against the promoters of WeWork India are disclosed therein. [WeWork India, Red Herring Prospectus, p. 491]. (iv) The 'Forward-Looking Statement' enumerated under Section I of the RHP lists certain significant factors that could cause WeWork India's actual results to differ materially. [WeWork India, Red Herring Prospectus, 'Forward-Looking Statement', p. 43] Serial No. 1 thereof expres....
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....ven thereto by WeWork India/BRLMs, as the case may be. [WeWork India, Red Herring Prospectus, pp. 68-75]. At Serial No. 5 of this table, there is a disclosure of the complaint dated 20th August 2025 made by Mr. Vinay Bansal, whereas Serial No. 6 discloses the complaint dated 25th September 2025 made by Mr. Hemant Kulshrestha. We have perused the details and particulars set out in this table and we are of the view that adequate disclosures have been made therein. Not only that, but as more particularly set out at end of the said table [WeWork India, Red Herring Prospectus, p. 75], all the complaints and corresponding responses by WeWork India and/or the BRMLs are also included in the "Material Contracts Documents for Inspection", for public inspection. [WeWork India, Red Herring Prospectus, p. 617]. 47. Moreover, in the ordinary course, one would expect that any investor who is alarmed to note that chargesheets have been filed against Promoter/(s) of a company issuing an IPO, would then proceed to examine the entire contents of the RHP. Upon going through the RHP, the investor would also note that several complaints have also been made by other persons (including the Petitioners ....
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....o the contrary, made by both the Petitioners have no merit and are accordingly, not accepted by this Court. 50. With this, we now consider the role of SEBI, as prescribed under the ICDR Regulations. Part V of the said ICDR Regulations deal with the issue of appointment of Lead Manager/s, other Intermediaries and Compliance Officer, whereas Part VI deals with regulations relating to 'Disclosures in and Filing of Offer Documents'. Regulation 24 prescribes that the DRHP and RHP are required to contain all material disclosures that are true and adequate to enable an applicant/investor to take an informed investment decision. The said Regulation further prescribes that the Lead Manager/s to the issue (appointed by the issuer) are required to exercise due diligence and satisfy themselves about all the aspects of the issue including the veracity and adequacy of the disclosures made in the Offer Documents. For the sake of convenience, the said Regulation 24 is reproduced hereunder : "Disclosures in the draft offer document and offer document 24 - (1) The draft offer document and offer document shall contain all material disclosures which are true and adequate to enable....
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....ad manager(s) associated with the issue. (2) The issuer shall, within two [working] days of filing the draft offer document with the Board, make a public announcement in one English national daily newspaper with wide circulation, one Hindi national daily newspaper with wide circulation and one regional language newspaper with wide circulation at the place where the registered office of the issuer is situated, disclosing the fact of filing of the draft offer document with the Board and inviting the public to provide their comments to the Board, the issuer or the lead manager(s) in respect of the disclosures made in the draft offer document. (3) The lead manager(s) shall, after expiry of the period stipulated in sub-regulation (1), file with the Board, details of the comments received by them or the issuer from the public, on the draft offer document, during that period and the consequential changes, if any, that are required to be made in the draft offer document. (4) The issuer and the lead manager(s) shall ensure that the offer documents are hosted on the websites as required under these regulations and its contents are the same as the versions as filed ....
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....ilarly (and illustratively) at Observation 9.11, SEBI has (applied its mind and) directed the BRLMs to disclose the risk mentioned under Serial No. 45 of the 'Internal Risks' under the DRHP as a negative qualifying statement. [WeWork India, Draft Red Herring Prospectus, p. 74]. 55. In the circumstances, we are satisfied that SEBI has indeed exercised due care and caution and complied with the legal requirements, including those prescribed under the ICDR Regulations, in connection with the WeWork India IPO and the submissions to the contrary made by the Petitioners have no merit. 56. Our finding is also fortified by the decision of the Delhi High Court in Ashok Kumar Saxena (supra) which holds that the RHP is required to contain only a summary of the allegations (and not each and every allegation) so as to enable a potential investor to be aware of the material risks which the issuer/company faces. 57. As more particularly held by the Full Bench of the Supreme Court in Vishal Tiwari (supra), when technical questions arise, particularly in the financial or economic realm and experts with domain knowledge in the said field have expressed their views and such views are duly co....
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....e required to be made in the Offer Documents is overseen by the Lead Manager/(s). 61. The decision of SEBI in respect of Trafiksol (supra) cited by Mr. Seervai is of no assistance and can easily be distinguished on its peculiar facts. In any event, as already mentioned hereinabove, the Petitioners are not pressing the said relief. 62. Insofar as the issue of delay is concerned, it is well settled that delay or laches is one of the factors that is to be born in mind by the Court especially whilst exercising discretionary powers under Article 226 of the Constitution of India and no relief ought to be given to a Petitioner who approaches the Court without a reasonable explanation for the inordinate delay, which would otherwise disentitle him to the reliefs sought by him. The aforesaid proposition is also reiterated in the two decisions of the Supreme Court in Karnataka Power (supra) and Chennai Metropolitan (supra) cited by Mr. Khambata. In the present case, admittedly, the RHP was published only on 27th September 2025 and filed before SEBI before the very next day, whilst the issue opened for Anchor Investors on 1st October 2025 and subsequently, to RIIs, on 3rd October 2025. B....
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....re are several assertions and allegations found in the body of the Writ Petition which do not find place in the said article/news report. Neither Petitioner has disclosed the exact nature of inquiry undertaken by him and/or the source of such other assertions and allegations. This casts some doubt on the bona fides of the Petitioners. 64. Lastly, let us deal with the point of suppression raised by the Respondents in the case of Vinay Bansal. During rejoinder arguments, when confronted with the letters dated 11th September 2025 addressed by WeWork India [addressed by WeWork India to Vinay Bansal] and 16th September 2025 addressed by the 5 BRLMs [addressed by the 5 BRLMs to Vinal Bansal], Mr. Seervai, on instructions, confirms that the said letters were infact received by his client. However, he is at pains to point out that this fact was not disclosed either to him or to the instructing Attorney by Vinay Bansal and therefore, the same is neither disclosed in the Writ Petition filed by him nor argued by him. Immediately on this disclosure being made in court, Mr. Seervai, has profusely apologized to this Court for the same and whilst this Court has no hesitation in believing him a....