HOW COULD A COMPANY’S MARKET CAPITALIZATION JUMP FROM ₹3 CRORES TO ₹ 4925 CRORES WHILE ITS ACTUAL BUSINESS REMAINS VERY SMALL?

 HOW COULD A COMPANY’S MARKET CAPITALIZATION JUMP FROM ₹3 CRORES TO ₹ 4925 CRORES WHILE ITS ACTUAL BUSINESS REMAINS VERY SMALL?

₹25.05 CRORE ALLEGEDLY ROUTED BY DHENU BUILDCON INFRA — BUT ₹1,000 CRORE SHOWN AS LOAN INFLOWS?

SEBI’S INTERIM ORDER

SEBI’s Interim Order dated 19 August 2026 in the matter of Dhenu Buildcon Infra Limited reveals an alleged fund-rotation mechanism that raises serious questions about how financial transactions can create the appearance of substantial funding.

SEBI’S PRIMA FACIE FINDINGS

According to SEBI’s prima facie findings, approximately ₹25.05 crore was allegedly circulated repeatedly through connected entities and ultimately reflected through cumulative loan inflows of around ₹1,000 crore.

SEBI identified 28 distinct routing patterns across 46 transaction cycles.

REPEATED CIRCULATION OF THE SAME FUNDS

The apparent mechanism was not necessarily about generating ₹1,000 crore of fresh economic funding. Rather, the allegation centers on repeated circulation of substantially the same funds, creating progressively larger cumulative transaction values.

MARKET CAPITALISATION  ROSE FROM APPROXIMATELY ₹3 CRORE TO ₹4,925 CRORE

This becomes particularly significant because, during the relevant period, Dhenu Buildcon’s market capitalisation reportedly rose from approximately ₹3 crore to ₹4,925 crore, despite its limited underlying business and negligible revenues.

THE KEY QUESTION

CAN REPEATED CIRCULATION OF THE SAME MONEY CREATE THE APPEARANCE OF MASSIVE FINANCIAL STRENGTH?

SEBI's prima facie findings suggest that this alleged mechanism may have been used to create an impression of substantial loan funding and financial activity.

₹25.05 CRORE → REPEATED ROUTING → ₹1,000 CRORE CUMULATIVE LOAN INFLOWS → ₹4,925 CRORE MARKET CAP

That is the extraordinary chain that makes the Dhenu Buildcon matter particularly important for investors, auditors, company secretaries, regulators and corporate-governance professionals.

RED FLAGS TO WATCH FOR

·     Large loans from obscure or unknown sources

·     Frequent fund movement between related parties

·     Round tripping of funds

·     Sudden spike in valuation without business growth

·     Preferential allotment to connected entities

WHAT INVESTORS AND PROFESSIONALS SHOULD ALWAYS ASK FOR?

·     Who funded the transactions?

·     Where did the money actually come from?

·     Did the money circulate?

·     Are the parties connected?

·     Does the company’s business performance justify its valuation ?

IMPORTANT:

These are SEBI's prima facie findings/allegations in an interim order, not a final adjudication of liability.

Don't just follow the share price.

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HOW VINDHYA TELELINKS APPOINTS INDEPENDENT DIRECTORS WITH JUST 64.33% VOTES IN FAVOR AS AGAINST 75%

 HOW VINDHYA TELELINKS APPOINTS

 INDEPENDENT DIRECTORS WITH JUST 64.33%

 VOTES IN FAVOR AS AGAINST 75%      

Two independent directors did not get the 75% of votes a special resolution needs. The company used a proviso to Regulation 25(2A) of LoDR to appoint them. The provision lets an appointment stand if more shareholders voted for it than against, and more public shareholders voted for it than against.

The proviso was introduced for situations where more than one promoter group exists but disagreed over an ID appointment resolution. At Vindhya, 32.69% of the promoter votes went against both candidates.

ROC KARNATAKA IMPOSES ₹10 LAKH PENALTY ON SDU AGRITECH DIRECTORS FOR RELATED-PARTY RENT PAYMENT WITHOUT BOARD APPROVAL

 ROC KARNATAKA IMPOSES ₹10 LAKH PENALTY ON SDU AGRITECH DIRECTORS FOR RELATED-PARTY RENT PAYMENT WITHOUT BOARD APPROVAL

CASE FOCUS:

Section 188(1) of the Companies Act, 2013 — Rent paid to a related party without prior Board approval

KEY TAKEAWAY

Related-party transactions involving payment of rent require strict compliance with Section 188. Failure to obtain the prescribed Board approval can attract significant penalties on the company and its directors

THE KEY COMPLIANCE POINT

The key compliance point is that Section 188(1) does not merely regulate the commercial terms of a related-party transaction; it requires prior approval of the Board of Directors for specified transactions, including leasing of property. Where a company pays rent to a related party without obtaining the required Board approval, the transaction can constitute a statutory default.

KEY COMPLIANCE LESSONS

·     Identify the related party before entering into the transaction.

·     Determine whether the proposed lease/rent arrangement falls within Section 188(1).

·     Obtain the requisite Board approval before entering into the transaction.

·     Ensure proper disclosure of the transaction and the related party in the relevant records and financial disclosures.

·     Directors should not assume that an existing commercial arrangement automatically satisfies the Companies Act.

·     Procedural non-compliance can itself attract monetary consequences, even where there is no allegation of diversion of funds or commercial loss to the company.

CONCLUSION

“Commercially valid” does not necessarily mean “Companies Act compliant.”

For every related-party lease or rental arrangement, the compliance team should maintain a clear audit trail covering identification → disclosure of interest → Board approval → execution → accounting → statutory disclosure.

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NCLAT DELHI VOIDS SHARE TRANSFERS MADE CONTRARY TO ARTICLES OF ASSOCIATION ANUP KUMAR KHEMANI VS BALENDRA CHOUDHURY

 NCLAT DELHI VOIDS SHARE TRANSFERS MADE CONTRARY TO ARTICLES OF ASSOCIATION

 ANUP KUMAR KHEMANI VS BALENDRA

 CHOUDHURY

FACTS OF THE CASE

COMPANY:	Assam Medical Corporation Pvt. Ltd
CORE ISSUE:	Whether shares could be transferred to outsiders without following the pre-emption procedure under Article 15 of the AOA.
NCLAT'S FINDING:	The procedure under Article 15 was not followed in toto; therefore, the transfers were contrary to the Articles and ultra vires.
IMPORTANT PRINCIPLE:	A transfer of shares made in complete violation of the Articles of Association is void.

KEY TAKEAWAY

NCLAT held that a share transfer made contrary to the Articles of Association is void and cannot be sustained merely because the Board approved it.

In this case, Article 15 of the Articles of Association contained a pre-emptive mechanism governing transfer of shares. The prescribed procedure was not followed, and objections were raised by existing shareholders. NCLAT found that the Board could not bypass the Articles and validate the transfers through its resolutions.

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USE OF INNOVATIVE FINANCIAL PRODUCT BY SIYARAM SILK MILLS TO ISSUE BONUS PREFERENCE SHARES, FUNDED ENTIRELY FROM GENERAL RESERVES, TO ITS EQUITY SHAREHOLDERS

 USE OF INNOVATIVE FINANCIAL PRODUCT BY SIYARAM SILK MILLS TO ISSUE BONUS PREFERENCE SHARES, FUNDED ENTIRELY FROM GENERAL RESERVES, TO ITS EQUITY SHAREHOLDERS

FOR THE ATTENTION OF CFO’S ABOUT NEW FINANCIAL PRODUCT

FACTS

Siyaram Silk Mills has secured NCLT Mumbai’s approval under Section 230 of the Companies Act, 2013 for a unique Scheme of Arrangement that issues bonus preference shares to equity shareholders, funded entirely from general reserves. The scheme became effective on 30 July 2026, with a record date fixed as 22 August 2026.

KEY HIGHLIGHTS OF THE SCHEME

TRIBUNAL APPROVAL:

·     Sanctioned by NCLT Mumbai Bench on 21 July 2026.

·     Filed with RoC via Form INC-28, effective from 30 July 2026.

FUNDING SOURCE:

Entirely from general reserves (no cash outflow).

ENTITLEMENT STRUCTURE:

For every 1 equity share of ₹2 face value, shareholders receive:

·     Series I: 4 cumulative non-convertible redeemable preference shares (NCRPS), ₹10 face value, 9% dividend, redeemable within 3 years.

·     Series II: 3 cumulative NCRPS, ₹10 face value, 9% dividend, redeemable within 5 years.

LEGAL & REGULATORY CONTEXT

SECTION 230, COMPANIES ACT, 2013:

·     Provides for compromises/arrangements between a company and its shareholders/creditors.

·     Typically used for mergers, demergers, or restructuring; here innovatively applied for issuing bonus preference shares.

ADVANTAGES OF BONUS PREFERENCE SHARES

This approach is particularly advantageous because:

1. No cash is removed from the company at issuance; it is a book entry, not a payout. The “release of assets” occurs only at redemption.

2. Shareholders receive a listed, tradeable instrument. If they require liquidity, they can sell in the market. If not, they hold a preference share with its own rights.

3. This method directs surplus reserves to shareholders while preserving the company’s cash cushion for lenders and operations. The Tribunal specifically noted that this was not detrimental to other stakeholders.

4. It underwent the full Section 230 process, including shareholder and creditor meetings, Regional Director scrutiny, SEBI and stock exchange observation letters, making it a fully sanctioned and low-risk structure.

The significant takeaway for corporate lawyers and CFOs is that Section 230 is no longer limited to mergers, demergers and restructurings. It is increasingly being utilised as a strategic tool for capital allocation, functioning as a hybrid between a dividend and a buyback that provides companies greater control over timing and cash impact.

It is worth observing whether more financially robust listed companies begin to adopt this approach.

GOVERNANCE INSIGHT

This scheme demonstrates creative use of Section 230 beyond mergers/demergers, showing how companies can restructure reserves to reward shareholders.

 It also highlights NCLT’s willingness to sanction innovative capital structuring, provided statutory safeguards are met.

 

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CALCUTTA HC ENDORSES RELEASE OF CHARTERED ACCOUNTANT IN COMPANY LAW CASE DUE TO LACK OF MENS REA & LIMITATION BAR REGISTRAR OF COMPANIES VS RANJAN MEGHANI (CALCUTTA HIGH COURT)

 CALCUTTA HC ENDORSES RELEASE OF CHARTERED ACCOUNTANT IN COMPANY LAW CASE DUE TO LACK OF MENS REA & LIMITATION BAR

REGISTRAR OF COMPANIES VS RANJAN MEGHANI (CALCUTTA HIGH COURT)  

FACTS OF THE CASE

The Calcutta High Court (Justice Uday Kumar, judgment dated 1 August 2026) upheld the discharge of Chartered Accountant Ranjan Meghani in Registrar of Companies v. Ranjan Meghani, ruling that prosecution failed due to absence of mens rea (criminal intent) and being barred by limitation.

The Court clarified that while CAs can be prosecuted if active complicity is shown, mere certification of statutory forms without evidence of knowing falsification does not attract liability.

KEY FACTS

The case arose from ROC’s investigation into Adorable Agrotech Ltd., which allegedly raised funds through preference shares treated as disguised public deposits.

Meghani’s role was limited to certifying statutory e-Forms (Form 2, Form 5) filed on the MCA portal.

ROC’s ALLEGATION

The ROC alleged defects in filings (missing shareholder names, mismatched allotment dates).

Complaint filed in March 2020, years after the alleged filings (2011–2013).

KEY FACTS

The case arose from ROC’s investigation into Adorable Agrotech Ltd., which allegedly raised funds through preference shares treated as disguised public deposits.

Meghani’s role was limited to certifying statutory e-Forms (Form 2, Form 5) filed on the MCA portal.

The ROC alleged defects in filings (missing shareholder names, mismatched allotment dates).

Complaint filed in March 2020, years after the alleged filings (2011–2013).

COURT’S FINDINGS

MENS REA REQUIREMENT

A CA certifying false returns can be prosecuted under Section 628 of the 1956 Act if active complicity or knowledge is proven.

In this case, no specific allegations showed Meghani knowingly connived with management.

LIMITATION BAR

The alleged offences dated back to 2011–2013.

Complaint filed in 2020 was time-barred under CrPC limitation provisions.

PROFESSIONAL INDEPENDENCE

Court emphasized that independent professionals (like CAs) are not automatically liable for company frauds unless direct involvement is established.

KEY TAKEAWAYS

CLARIFICATION OF LIABILITY:

 CAs are not immune, but liability requires proof of mens rea.

PROTECTION AGAINST OVERREACH:

Prevents ROC from using retrospective prosecutions without timely action.

CORPORATE GOVERNANCE IMPACT:

Reinforces distinction between company officers and external professionals.

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NCLT HOLDS 25.42% SHAREHOLDER ELIGIBLE TO MAINTAIN OPPRESSION-MISMANAGEMENT PETITION IN MOHAMMED SHAFI VS DR. HYDERALI KALLIYATH (NCLT KOCHI)

 NCLT HOLDS 25.42% SHAREHOLDER ELIGIBLE TO MAINTAIN OPPRESSION-MISMANAGEMENT PETITION IN

MOHAMMED SHAFI VS DR. HYDERALI KALLIYATH (NCLT KOCHI)

FACTS OF THE CASE

The NCLT Kochi Bench has held that a shareholder holding 25.42% of a company’s share capital is fully eligible to maintain an oppression and mismanagement petition under Sections 241–242 of the Companies Act, 2013.

 Attempts to dismiss the petition at the threshold were rejected, and costs were imposed on the applicants.

OPPRESSION AND MISMANAGEMENT PETITION

An oppression and mismanagement petition under Sections 241–242 of the Companies Act, 2013 is a statutory remedy available to shareholders when the company’s affairs are being conducted in a manner that is:

·      Oppressive to certain members (e.g., unfair dilution of shares, exclusion from management, denial of rights).

·      Prejudicial to the interests of the company or public interest.

·      Mismanaged (e.g., siphoning of funds, violation of statutory requirements, fraudulent conduct).

WHAT SECTION 241 , 242 & 244 OF COMPANY ACT 2013 SAYS

SECTION 241:

·      Allows members to apply to the NCLT if the company’s conduct is oppressive or prejudicial.

·      Covers both shareholder rights and broader governance failures.

SECTION 242:

Empowers the NCLT to grant reliefs, including:

·      Regulation of conduct of affairs.

·      Setting aside share allotments.

·      Removal of directors.

·      Recovery of misapplied funds.

·      Even winding up if no other remedy is sufficient.

SECTION 244 (ELIGIBILITY):

MINIMUM THRESHOLD:

·      10% of shareholding or 100 members.

·      NCLT can waive this requirement in appropriate cases.

PRACTICAL EXAMPLES

OPPRESSION:

Majority shareholders issue new shares to dilute minority stake without bona fide necessity.

MISMANAGEMENT:

Directors divert company funds for personal use, or fail to file statutory returns.

PUBLIC INTEREST:

 Company engages in fraudulent practices affecting creditors or the market.

LEADING PRECEDENTS

NEEDLE INDUSTRIES (1981):	Even technically valid allotments can be struck down if oppressive.
DALE & CARRINGTON (2005)	Share allotment solely to gain control amounts to oppression.
TCS V. CYRUS (2021):	Relief under Section 242 is discretionary; must show lack of probity and fairness.

TRIBUNAL REASONING IN THE MOHAMMED SHAFI VS DR. HYDERALI KALLIYATH (NCLT KOCHI)

Eligibility under Section 244(1):

·      Statutory threshold is 10% of shareholding.

·      Petitioner’s 25.42% stake clearly exceeds this.

·      Even shareholders below 10% may apply with NCLT’s waiver.

Maintainability Challenge (Interlocutory Applications):

·      Applicants argued the dispute was purely about directorial issues (appointments, proposed EGM for removal).

·      Alleged suppression of facts, non-joinder of parties, and infructuous reliefs.

·      Tribunal rejected these objections, noting oppression/mismanagement involves mixed questions of fact and law.

WHAT IS DIRECTORIAL ISSUES UNDER SECTION 241 & 242?

 “Directorial issues” in the context of oppression and mismanagement petitions under Sections 241–242 of the Companies Act, 2013, it is referring to disputes that arise around the composition, functioning, and powers of the Board of Directors.

 These often overlap with shareholder rights and can form the basis of an oppression claim if they unfairly prejudice minority shareholders.

TRIBUNAL FINDINGS

The Applicants have filed these applications for nothing but to misuse the process of law and are liable to be dismissed with heavy cost. Taking a lenient view, a nominal cost of Rs. 10,000/- is being imposed on individual IA to be deposited with the National Defence Fund.

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