The Securities Appellate Tribunal (SAT) on Monday quashed an order, passed by markets regulator Sebi, asking Prabhat Dairy to deposit over Rs 1,292 crore, 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 1,292.46 crore 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 1,292 crore 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 Pvt Ltd to Tirumala Milk Products Pvt Ltd for a total consideration of nearly Rs 1,227 crore.
It also approved the sale and transfer of its dairy product business for about Rs 473 crore.
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 1,000-1,200 crore 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 per cent 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 1,026.44 crore and the balance left for distribution of the shareholders is Rs 854.40 crore. Out of this, 50 per cent amount -- Rs 427 crore -- will go to the promoters and promoters group and about Rs 427 crore would go to the minority shareholders comprising 49 per cent.
Thus, the direction to deposit the entire sale consideration of Rs 1,292 crore 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 500 crore 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.