Relief to WeWork as Bombay High Court dismisses petitions challenging SEBI approval to IPO

The Bombay High Court on Monday dismissed the plea challenging the Securities and Exchange Board of India’s (SEBI) approval to WeWork India’s initial public offering (IPO) [Vinay Bansal v. Securities Exchange Board of India]..The petitioner, Vinay Bansal, filed the plea relying on allegations by investors that the capital market regulator had overlooked disclosure lapses, including non-disclosure of pending criminal proceedings under the Prevention of Money Laundering Act.However, a division bench of Justices RI Chagla and Farhan Parvez Dubash found no merit in the petition and dismissed it while also imposing costs of ₹1 lakh on the petitioner, payable to the Maharashtra Legal Services Authority..Bansal had claimed in the petition that SEBI's approval to WeWork India’s IPO was unlawful because the company’s draft red herring prospectus (DRHP) filed on January 31 contained the irregularities. He claimed that it showed an accumulated losses and negative net worth while projecting an inflated growth trajectory without adequate risk disclosures. The DRHP also suppressed details of pending complaints and disputes, he said, arguing that the same is material to investor decision-making. Finally, he argued that there was a misrepresentation of WeWork India’s relationship with the global WeWork brand, creating a perception of financial backing and stability. Bansal claimed that despite submissions of repeated complaints on August 25, SEBI neither decided on the objections nor issued a reasoned order.As per the petition, by failing to exercise this power despite statutory and factual red flags, SEBI violated its non-discretionary duties. .SEBI opposed the petition, highlighting the petitioners had not satisfactorily explained the delay in approaching the court. It also claimed that the petitions filed seemed to indicate that the petitioners were aware of the company's disclosed risks and thus, could not claim to have been misled. SEBI also submitted that it had properly vetted the IPO documents through a detailed 17-page review letter, moving critical risk disclosures about enforcement proceedings to the top of the offer document to ensure public visibility..WeWork India argued that its IPO was in conformity with the SEBI regulations. The company also argued that its promoters are not exiting from the company as sought to be erroneouslyurged. It emphasised that the promoters were merely reducing their shareholding to enable the listing of its shares on the stock exchange for which 25% of the company’s shareholding is mandatorily required to be held by the public. After considering the arguments, the High Court dismissed the petition..It also dismissed an accompanying petition filed by Hemant Kulshrestha who claimed that significant criminal proceedings remained undisclosed.He had argued that it is not the responsibility of the investors to unearth and flag omissions.The High Court dismissed his petition but did not impose any costs. .Senior advocates Amit Desai, Venkatesh Dhond and Ashish Kamat with advocates Gopal Krishna Shenoy, Aditya Mithe, Shashwat Rai and Mrinali Dave instructed by Keystone Partners appeared for Kulshrestha. Senior advocate Navroz Seervai with advocates Prasad Shenoy, Chinmay Babhulkar and Akash Menon appeared for Bansal. Senior advocate Shiraz Rustomjee with advocates Prateek Pai, Ravishekhar Pandey and Ankit Ujjwal briefed by Agama Law Associates appeared for Sebi. Senior advocates Darius Khambata and Gaurav Joshi with advocates Shruthi Sabharwal, Avinash Das, Anant Mishra, Ayan Tandon and Prachi Gupta briefed by Shardul Amarchand Mangaldas & Co. appeared for WeWork India.Senior Advocates Janak Dwarkadas and Ravi Kadam with advocates Ravitej Chilumuri, Aishwarya Singh, Sanya Gandhi briefed by Khaitan & Co appeared for the book running lead managers..Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.