Williamson Magor and Co (WMCL), which recently defaulted in repaying a loan of up to Rs 164 crore to various banks and financial institutions, has received another blow--this time, from a shareholder who holds just 0.0001 percent of its total shares.
A complaint from a person, who bought just 10 WMCL shares for not more than Rs 600, has led the company to pay more than 300x that amount in penalty. The name of the shareholder has not been disclosed by the Securities and Exchange Board of India (Sebi).
WMCL is the company that once owned drycell battery maker Eveready Industries and tea company Mcleod Russel.
Also read: Hira Automobiles takes 10 years to follow Sebi directive; fined Rs 14 lakh
What is the case all about?
The complainant, who had bought 10 shares or 0.0001 percent of the total shares of WMCL in 2019, filed a case with Sebi that the company violated the listing agreement it had signed with the Bombay Stock Exchange (BSE) in 1993.
Also read: Hira Automobiles takes 10 years to follow Sebi directive; fined Rs 14 lakh
The shareholder's complaint on Sebi Complaint Redress System (SCORES) led the regulator to investigate the company. The probe was over alleged violations relating to the agreement and the Listing Obligations and Disclosure Requirements (LODR) Regulations. WMCL was finally fined Rs 2 lakh.
The fine must have been at least 333x the shareholder's initial capital.
The Sebi order, dated April 1,0 did not give the shareholder's name but said that he/she had bought the shares in 2019.
The highest price that WMCL had hit in 2019 was Rs 58. Even rounding that of to Rs 60, the shareholder would have spent not more than Rs 600 (60x10) to have a say in the company's matters.
Transaction in question
The complaint involved WMCL's sale of 1,13,360 shares of Woodlands Multispecialty Hospital to the former's associate company Babcock Borsig. The complaint alleged that this related-party transaction (RPT) was done without taking necessary corporate approvals and without making appropriate disclosures under the accounting standards.
The regulator investigated if the RPT was done without the approval of the Audit Committee and whether the RPT was disclosed in the company's annual report, as is required by the accounting standard.
Also read: Bees saal baad: Proprietor responds to Sebi's enquiry letter after decades, fined Rs 25,000
Sebi's directive to take approval from Audit Committees had come into effect from October 1, 2014. This RPT--of the shares being transferred to the associate company--took place in FY15.
The company submitted that it had taken the approval of its board and not the Audit Committee. Therefore, Sebi found the company in violation of provisions under the erstwhile Equity Listing Agreement.
On not disclosing the RPT in its annual report, the company submitted that it had disclosed the details of the transaction under one section of its annual report (Note No. 12) but had inadvertently missed including the details in another section of the report (Note No. 30).
It submitted that this was a "bona fide inadvertent oversight" that happened because of the lack of communication between concerned officials at the time.
The regulator said that the company disclosing it in another part of the annual report can only be a "mitigating factor" when deciding the penalty.
Complaint redressal systems
Manendra Singh, Partner at Economic Laws Practice, said that it is not unusual for people to pick up one or a few shares to gain access to certain kinds of information about a listed entity. Only a shareholder gets access to various kinds of information such as books containing the minutes of the proceedings of any general meeting of a company and any document that is listed on a notice about a shareholders’ meeting, where the document is to be discussed.
He told Moneycontrol that only investors can file a complaint via SCORES.
One can also alert the market regulator about irregularities but these will need to be sent through the market intelligence portal (mi.sebi.gov.in).
“The two reporting routes are treated very differently by the regulatory structure. Complaints registered through SCORES can be tracked on the platform and they must be responded to by listed entities. Market intelligence inputs are investigated further by the regulator in fit cases, however status of such complaints is not disclosed unlike SCORES as SEBI conducts the examination confidentially in a holistic manner,” he added.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
