Plea filed before Bombay High Court against SEBI approval for WeWork IPO

A plea has been filed before the Bombay High Court against the Securities and Exchange Board of India’s (SEBI) approval of WeWork India’s initial public offering (IPO) [Vinay Bansal Vs Securities Exchange Board of India]..The lead petitioner, Vinay Bansal, moved the Court in light of the allegations by investors that the market watchdog overlooked statutory red flags and disclosure lapses, including non-disclosure of pending criminal proceedings under the Prevention of Money Laundering Act.The was came up before a Division Bench of Justices RI Chagla and Farhan Parvez Dubash, which listed the matter for further hearing on October 8..As per the plea, SEBI failed to discharge its statutory duties under Section 11A of the SEBI Act, 1992According to the petitioner, SEBI’s nod to WeWork India’s IPO was unlawful because the company’s draft red herring prospectus (DRHP) filed on January 31 contained the following irregularities:Accumulated losses and negative net worth while projecting an inflated growth trajectory without adequate risk disclosures;Suppression of details of pending complaints and disputes which are material to investor decision-making;Misrepresentation of WeWork India’s relationship with the global WeWork brand, thereby creating a perception of financial backing and stability;Pending complaints and negative reports about the company’s business model and financial practices, some of which were annexed as exhibits.As per the petition, that despite submission of detailed complaints on August 25, SEBI neither decided on the objections nor issued a reasoned order. This non-decision and absence of reasons amounts to a breach of the duty to pass a speaking order, which is a facet of natural justice, the plea alleged..Relying on Section 11A of the SEBI Act, the petitioner contended that SEBI has explicit power to prohibit an issue if necessary for investor protection. As per the petition, by failing to exercise this power despite statutory and factual red flags, SEBI violated its non-discretionary duties..The reliefs in Bansal’s petition include:Quashing SEBI’s approval for the IPO.Restraining WeWork India from proceeding until investor complaints are addressed.Directing SEBI to discharge its statutory duty by passing a speaking order on the complaints..Another petitioner Hemant Kulshrestha asserted that significant criminal proceedings remain undisclosed. It was submitted that while the red herring prospectus mentions civil attachment proceedings initiated by the Enforcement Directorate (ED), it failed to disclose a prosecution complaint (chargesheet) filed by the ED under Sections 3 and 4 of the Prevention of Money Laundering Act (PMLA), which is currently pending trial before the Special CBI Court in Telangana.Kulshrestha’s counsel argued that SEBI’s Issue of Capital and Disclosure Requirements (ICDR) Regulations mandate the disclosure of all criminal proceedings in the offer document. He submitted that it is not the responsibility of investors to unearth and flag omissions. The the duty to ensure full and material disclosure rests solely with the company, its merchant bankers and SEBI, it was argued. Non-disclosure of such significant developments, he argued, poses a serious risk to retail, institutional, and qualified investors alike..The petitioner Vinay Bansal was represented by Senior Advocate Navroz Seervai with advocates Prasad Shenoy and Chinmay Babhulkar instructed by Akash Menon..Petitioner Hemant Kulshrestha was represented by Senior Advocates Amit Desai and Ashish Kamat along with advocates Gopal Krishna Shenoy, Aditya Mithe, Shashwat Rai and Mrinali Dave, instructed by Keystone Partners..SEBI was represented by Senior Advocate Shiraz Rustomjee and advocates Prateek Pai, Ravishekhar Pandey and Ankit Ujjwal instructed by Agama Law Associates..WeWork India was represented by Senior Advocates Darius Khambata and Gaurav Joshi and advocates Shruthi Sabharwal, Avinash Das, Anant Mishra, Ayan Tandon and Prachi Gupta instructed by Shardul Amarchand Mangaldas & Co..Other respondents were represented by Senior Advocates Janak Dwarakadas and Ravi Kadam, instructed by Khaitan & Co. .[Read Order].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.