SAT quashes SEBI's order directing Prabhat Dairy to deposit Rs 1,292 crore

Representative Image live bse live nse live Volume Todays L/H More × The Securities Appellate Tribunal (SAT) on November 9 quashed an order, passed by markets regulator Sebi, asking Prabhat Dairy to deposit over Rs 1,2920000000, and also directed the regulator to process the delisting application of the firm and pass appropriate orders within six weeks. "The direction of the WTM to deposit a sum of Rs 1,292.460000000 is wholly arbitrary and has been passed without any application of mind," the tribunal said. WTM refers to whole-time member of Sebi. In October, Sebi had directed Prabhat Dairy to cooperate with the forensic auditor and deposit over Rs 1,2920000000 in a nationalised bank. Sebi had appointed Grant Thornton Bharat LLP as the forensic auditor in July to ascertain facts and circumstances in relation to financials of the firm with respect to its financial statements for the financial years ending March 31, 2019, and March 31, 2020. In January 2019, Prabhat Dairy told bourses that its board has approved the sale of the firm's shareholding in its wholly-owned step-down subsidiary Sunfresh Agro Industries Private Limited to Tirumala Milk Products Private Limited for a total consideration of nearly Rs 1,2270000000. It also approved the sale and transfer of its dairy product business for about Rs 4730000000. Subsequently, the firm made several regulatory filings and told that the company intends to distribute the net proceeds of the transaction to the members of the firm and that about Rs 1,000-1,2000000000 might be available for distribution to the shareholders. The firm had also set up a transaction committee in this regard. The transactions, as per the firm's regulatory filings, were completed in April 2019. In September 2019, the firm said certain promoters intended to acquire 49.9% stake that were currently being held by the public shareholders, and consequently voluntarily delist the equity shares of the company from the exchanges. Aggrieved by the regulator's interim order, Prabhat Dairy and its two officials appealed to the SAT. Tribunal noted that the sale consideration has to be admittedly distributed to the shareholders after meeting liabilities. The total amount comes to Rs 1,026.440000000 and the balance left for distribution of the shareholders is Rs 854.400000000. Out of this, 50% amount — Rs 4270000000 — will go to the promoters and promoters group and about Rs 4270000000 would go to the minority shareholders comprising 49%. Thus, the direction to deposit the entire sale consideration of Rs 1,2920000000 is "neither appropriate nor beneficial to the survival of the company at this stage", the tribunal said. Accordingly, the tribunal quashed Sebi's order and asked the firm to deposit Rs 5000000000 in a separate escrow account within 10 days and also asked the firm to provide requisite information to the forensic auditor. Among other directions, Sebi has been asked to process the delisting application of Prabhat Dairy and pass order within six weeks.