Sebi disposes case against Hubtown after settlement

Real estate firm Hubtown Ltd, formerly known as Ackruti City, has paid Rs 2 lakh to settle a Sebi probe into alleged irregularities with regard to correct disclosure of promoter shareholing in the company.
Investigations conducted by Sebi had found that the company had publicly disclosed a total promoter shareholding of 82.83 per cent as per the details received from the company's Registrar and Share Transfer Agent (RTA).
While the company earlier sought to justify this difference in promoter shareholding, it later applied for a settlement under Sebi's consent mechanism, under which proceedings can be withdrawn after payment of certain charges without admission or denial of guilt.

"In terms of the proposal of the noticee (Hubtown) for the sole purpose of settling the matter on hand and without admission or denial of guilt on the part of the noticee to the finding of fact or conclusion of law, the noticee has remitted a sum of Rs 2,00,000 favouring Securities and Exchange Board of India (Sebi)...," the regulator said in its consent order.
The case relates to Sebi probe against fraudulent dealings by Sanjay Dangi, his associates and promoter entities of five companies including Hubtown.
As part of its detailed investigation into the case, Sebi had looked into the shares dealings of Hubtown and observed that the total promoter shareholding shown by the entity was 89.96 per cent as against 82.83 per cent as on March 31, 2009.

During the probe, Hubtown submitted to Sebi that it had availed loans for its business operations by pledging shares held by persons in its promoter group in favour of IDBI Trusteeship Services.

Sebi observed that as the shares of Hubtown moved to demat account of IDBI Trusteeship due to invocation of the pledge, the entity became a beneficial owner and obtained the corresponding voting rights irrespective of its intention to exercise such rights.
"Therefore, it was alleged that Hubtown's act of revising the shareholding pattern by showing such shares under promoter shareholding presented an incorrect picture to the public," the order said.

The regulator had accordingly began proceedings against Hubtown during which the entity applied for settlement.
The consent terms were placed before Sebi's High Powered Advisory Committee which after deliberations recommended the case for settlement. These recommendations were also approved by Sebi's panel of whole time members.
According to Sebi, enforcement actions, including commencing or reopening of the proceedings, could be initiated if any representation made by Hubtown is found to be untrue.