New Delhi: Markets regulator Sebi on Tuesday directed Hotel Leela Venture Ltd to make additional disclosures to its shareholders on sale of assets.
Besides, the watchdog will initiate adjudication proceedings against JM Financial Asset Reconstruction Company (JMF ARC) for failing to comply with takeover norms.
The ruling has come on complaints received from minority shareholders of Hotel Leela alleging violations in relation to postal ballot notice, dated March 18, wherein the company had sought approvals regarding sale of assets to Brookfield.
At the end of June, JMF ARC owned 26 per cent stake in Hotel Leela.
The regulator had received complaints from ITC and LIC -- minority shareholders in Hotel Leela -- alleging violations by promoters and JMF ARC in respect of asset sale transaction mentioned in the postal ballot notice.
In its order, Sebi said Hotel Leela should provide various additional disclosures in the postal ballot notice, including all relevant details of each of the sale transactions.
Details of valuation of both asset sale transaction and additional IP transaction, including the methods adopted by the company, should also be disclosed.
During the course of the postal ballot, the valuation reports shall be kept for inspection by the shareholders of Hotel Leela, it added.
"Sebi may initiate adjudication proceedings under the Sebi Act against JMF ARC for its failure to ensure compliance with the applicable provisions of the Takeover Regulations, as deemed fit and appropriate," the order said.
The additional Intellectual Property (IP) transaction concerning the related party transaction involving transfer of 'Jamavar' trademark should be separately put to vote before shareholders by the company in case the valuation of the trademark is beyond a threshold.
Separate voting would be required if the valuation in respect of the 'Jamavar' trademark exceeds 10 per cent of the annual consolidated turnover of the company as the last audited financial statements, Sebi said.
"The promoters/ promoter Group of Hotel Leela Venture Ltd shall not participate in the aforementioned voting process," the regulator said. Besides, the company has been asked to make all material disclosures, including the litigation relating to the claim of Airports Authority of India (AAI) with respect to Leela Hotel, Mumbai, in the postal ballot notice and in the financial statements in the annual report.
An IP assignment agreement is to be signed between the company and identified promoters, their affiliates and Brookfield, with respect to registration of 'Jamavar' trademark.
According to Sebi, the proposed asset sale transaction and additional IP transaction do not qualify as 'related party transaction' except for the part proposed by Hotel Leela along with its promoters and affiliates pertaining to transfer of 'Jamavar' trademark to Brookfield.
"As regards the disclosures made in the postal ballot notice... there are serious shortcomings, which are critical to the decisions of the shareholders. The shareholders should have been allowed to inspect all the valuation reports in respect of the proposed transaction for taking an informed decision," the order said.
The watchdog also noted that the company has also failed to disclose the material litigation relating to AAI's claim in respect of the Leela Hotel, Mumbai, in its financial statements.
"As regards the conversion of debt into equity by JMF ARC, it is noted that the same amounts to a technical violation of the Takeover Regulations 2011 by not having sought an exemption from Sebi," it said.
After receiving the complaints, Sebi, on April 23, had issued directions against Hotel Leela not to move ahead with the transactions, pending examination of the matter.