One97, Vijay Shekhar Sharma pay Rs 2.22 crore to settle allegations of violation of public-issue regulations

The settlement order, issued on May 8, also says that One97 Communications will cancel 2.1 crore ESOPs granted/vested and non-exercised by Vijay Shekhar Sharma

One97 Communications Ltd (OCL) and Vijay Shekhar Sharma pay more than Rs 2.22 crore to settle allegations of violating public-issue regulations and employee-benefit regulations. OCL, promoted by Vijay Shekhar Sharma, operates the brand Paytm.

The settlement order, issued on May 8 by the Securities and Exchange Board of India (SEBI), also says that One97 Communications will cancel 2.1 crore ESOPs granted/vested and non-exercised by Vijay Shekhar Sharma and over 2.22 lakh ESOPs granted but not exercised by Ajay Shekhar Sharma. Ajay Shekhar Sharma will also pay Rs 57.11 lakh as settlement amount and disgorge over Rs 35.86 lakh from sale of shares obtained via ESOPs.

Vijay Shekhar Sharma will also not accept any fresh ESOPs from any listed company for a period of 3 years from the date of the settlement order.

Sebi had examined OCL's granting of 2.1 crore ESOPs to Vijay Shekhar Sharma in October 2021 and of 2,26,582 ESOPs to Ajay Shekhar Sharma in May 2022. A showcause notice dated February 9, 2024, was then issued which alleged the following:

1.Vijay Shekhar Sharma was disclosed as the Promoter of One97 Communications Private Limited in the Annual Returns of the company filed with Registrar of Companies prior to the FY 2020-21.

2.There was no material change in his rights/influence over the management of the company but Vijay Shekhar Sharma declassified himself as Non-Promoter on July 12, 2021 just prior to filing of Offer documents for the IPO by OCL on July 15, 2021.

3.Further, Vijay Shekhar Sharma created such a scheme through arrangement of transfer of a portion of his equity in OCL to a family trust (created a few days prior to filing of offer documents for IPO by OCL) controlled by him so that Vijay Shekhar Sharma could continue to exercise control over more than 10% equity of OCL directly and indirectly and circumvent the provisions of Regulation 2(1)(i)(iii) of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (‘the SBEB Regulations’) for getting arbitrarily huge number of ESOPs to himself to the detriment of public shareholders. OCL allowed such actions by Vijay Shekhar Sharma to circumvent the provisions of SEBI Regulations for grant of ESOPs to Vijay Shekhar Sharma and Ajay Shekhar Sharma.

4.Also, Vijay Shekhar Sharma had special rights by virtue of his position as founder of OCL and he was also the Managing Director of OCL. Hence, it is alleged that he was in a position to influence the decision making of Nomination and Remuneration Committee (‘NRC’) while approving grant of ESOPs to himself and his brother Ajay Shekhar Sharma. It is further alleged that ESOPs granted to Ajay Shekhar Sharma were under the influence of Vijay Shekhar Sharma as just 10 months ago, the ESOPs granted to Mr. Ajay Shekhar Sharma were cancelled citing, inter alia, that Companies Act prohibits issuance of ESOPs to promoter Group and SEBI’s definition of promoter group includes family members.

5.OCL and Vijay Shekhar Sharma made incorrect disclosures in the offer documents by disclosing Vijay Shekhar Sharma as a non-promoter public shareholder.

6.Vijay Shekhar Sharma had not provided the necessary disclosures required to be given by the Promoter of a company including Promoters’ contribution and lockin period, profile of the promoter and declarations to be submitted to the stock exchanges, details of payment or benefit to promoter, etc.