Textile firm Bombay Rayon Fashions has moved the Supreme Court (SC), challenging the Securities and Exchange Board of India (Sebi)’s decision to reject its plea seeking relaxation of warrant conversion norms.
“The SC has admitted Bombay Rayon’s appeal. It has issued a notice to Sebi. The matter is likely to be heard on January 6,” said R S Loona, the advocate representing Bombay Rayon.
In March 2012, Bombay Rayon and promoter B R Machine Tools had requested Sebi to relax the strict enforcement of requirements under the issue of capital and disclosure requirements (ICDR) regulations. Bombay Rayon had requested Sebi not to forfeit upfront payment of about Rs 49 crore made by a promoter entity while issue of warrants, which weren’t converted into equity shares.
According to Sebi rules, 25 per cent of upfront payment made at the time of issue of warrants stands forfeited, if the warrants are not converted. Sebi had rejected the company’s request for relaxation of norms. Later, the company had moved Securities Appellate Tribunal, which had dismissed its appeal in June 2013. In September 2009, about 10 million warrants of the company were issued to BR Machine. In the stipulated time frame, the promoter entity could convert only two million warrants into equity shares, while 7.5 million warrant couldn't be converted.
Bombay Rayon had sought relaxation of rules as it believed the conversion of warrants was “beyond its control”. According to the company, the remaining warrants couldn’t be converted as the new takeover code, didn’t allow acquisition of shares beyond 75 per cent by promoter entities.
The promoter shareholding in Bombay Rayon had increased from 31.54 per cent to 93.15 per cent during December 2009 and December 2011 on the back of partial conversion of warrants and an open offer made to public shareholders.