SAT refuses to interfere with Sebi’s interim order on Brightcom

Mumbai: The Securities Appellate Tribunal has refused to interfere with the Securities and Exchange Board of India’s interim order dated 22 August in connection with the Brightcom Group’s case. The Sebi order restrained ace investor Shankar Sharma from selling the company’s shares.

Brightcom is a digital marketing firm in Hyderabad.

“I do not find any reason to interfere in the impugned order at this stage. The Misc. application is disposed off. It is made clear that any observation made by this Tribunal in this order is only prima facie and will not be utilized by either of the parties,” the order of Justice Meera Swarup said.

She added that “In the absence of any evidence to the contrary being filed by the appellants before me, I do not find any lacunae in passing of the impugned order.”

This comes after the Brightcom Group, along with its key officials including Suresh Kumar Reddy (managing director) and Narayan Raju (chief financial officer), had filed a miscellaneous application before the SAT seeking a stay on the market regulator’s 22 August order.

Essentially, the Sebi’s order stated that both Reddy and Raju could not continue with their positions until further notice from the regulator. While Reddy was restrained from buying and selling in the securities market, Raju was restrained from selling his shares in the company.

The application by Brightcom stated that the allegations made in the Sebi order were “baseless and completely unfounded”. It added that there was urgency in filing the plea since operations of the company have been hit.

“Because of the ouster of Mr Reddy (former chairman and managing director), the company has been subjected to serious problems including the problem of its very existence,” the 187-page application said.

Shefali Shankar an Associate at MDP & Partners said “The investigation in the matter is ongoing. As per the prima facie findings of Sebi, the treacherous and unfair dealings of Brightcom were apparent. The Managing Director and the CFO were involved in the day-to-day affairs of the Company and therefore, in order to protect the interest of the investors, Sebi had directed the duo to step down.”

On 11 December, the Brightcom Group had first approached the appeals court challenging the market regulator’s order. Justice Tarun Agarwala, the presiding officer of SAT refused to grant any interim relief to the troubled firm after hearing the appeal.

“We have been informed that the appellants filed an application for settlement which is pending consideration. In view of the aforesaid, we are not inclined to consider the stay application at this state,” the order said last week. The tribunal also asked Sebi to file its reply within three weeks and posted the matter for final disposal on 9 February.

The market regulator received complaints on 6 October 2022 and on 12 May regarding preferential allotments made by Brightcom Group in the financial years 2019-20 and 2020-21. The complaints alleged that the company had raised money through preferential issue of shares to entities that were directly or indirectly connected to it and that the money was given as loans and advances to its subsidiaries.