BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
SETTLEMENT ORDER No. SO/AK/2024-25/7952 In respect of:
| Name of the applicant | Application No. | PAN of the applicant |
| Megastar Foods Limited | 7952/2024 | AAHCM9649M |
In the matter of Megastar Foods Limited
1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') initiated adjudication proceedings under SEBI Act, 1992 (hereinafter referred to as "SEBI Act") against the applicant for alleged violation of Regulation 23(1) and 23(4) of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as "LODR Regulations")
2. SEBI appointed Mr. Shashi Kumar Valsakumar as the Adjudicating Officer (AO), vide communique dated April 01, 2024 under Section 19 of the SEBI Act r/w Sub- section (1) of Section 15-I of SEBI Act and Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 (hereinafter referred to as 'SEBI Adjudication Rules') to inquire into and adjudge u/s 15HB of SEBI Act for violations of aforementioned provisions of LODR Regulations. Pursuant to transfer of Mr. Shashi Kumar Valsakumar, Ms. Asha Shetty was appointed by SEBI as the AO in the matter, vide communique dated July 29, 2024. Subsequently, vide communique dated December 27, 2024, undersigned was appointed as AO in the instant matter.
3. A Show Cause Notice dated May 13, 2024 (hereafter referred to as "SCN") was issued to the Applicant by the erstwhile AO in terms of the provisions of Rule 4(1) of the SEBI Adjudication Rules r/w Section 15-I of SEBI Act calling upon the Applicant to show cause why an inquiry should not be held and penalty not
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imposed u/s 15HB of the SEBI Act against the Applicant for the alleged violation of the aforesaid provisions. The said SCN was issued to the Applicant as the Applicant failed to ensure the following compliances-
a) Applicant failed to take prior approval of its Shareholders for the Related Party transactions (RPT) entered between Applicant and M/s Ganesh Flour Mills (GFM) wherein revised prior approval for increasing the limit from Rs 15 crores (approved by the Audit Committee on May 30, 2023) to Rs 25 crores for the transaction with GFM from the audit committee was taken on November 11, 2022 and post facto approval from shareholders through postal ballot was taken on July 07, 2023, after the same was pointed out in its Annual Secretarial Report for FY 2022-23.
b) Applicant's RPT policy was devoid of prior approval of shareholders for material RPTs rather it provided for ex-post facto approval or ratification of the RPTs despite Regulation 23(4) of the LODR Regulations providing for the prior approval of the shareholders for material RPTs w.e.f April 01, 2022 and failure on the part of applicant to update its RPT policy.
4. Pending Adjudication Proceedings, the Applicant proposed to settle the instant proceedings initiated against it, without admitting or denying the facts and conclusions of law, through a settlement order and filed a settlement application with SEBI, bearing Application No. 7952/2024 dated July 10, 2024, in terms of the provisions of SEBI (Settlement Proceedings) Regulations, 2018 (hereinafter referred to as "Settlement Regulations").
5. After attending meeting with the Internal Committee of SEBI on August 27, 2024 in terms of the Settlement Regulations, applicant, vide an email dated September 07, 2024 proposed revised settlement terms. The High Powered Advisory Committee (hereinafter referred to as 'HPAC') in its meeting held on October 28, 2024, considered the settlement terms proposed and recommended that the case may be settled upon payment of INR 20,15,000/- (Rupees Twenty Lakhs and
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Fifteen Thousand Only) by the applicant as settlement amount towards the settlement terms.
6. The Panel of Whole Time Members of SEBI approved the said recommendation of the HPAC on December 03, 2024 and Notice of demand was issued to the applicant, vide email dated December 05, 2024. Authorized Representative (AR) of the Applicant, vide email dated December 27, 2024, informed about the remittance of the settlement amount, the receipt of which is confirmed.
7. Therefore, in view of the acceptance of the settlement terms and the receipt of settlement amount as above by SEBI, the adjudication proceedings initiated against Applicant, vide SCN dated May 13, 2024 is disposed of in terms of section 15JB of the SEBI Act read with Regulation 23(1) of the Settlement Regulations.
8. This order is without prejudice to the right of SEBI to take enforcement actions, in terms of Regulation 28 of the Settlement Regulations, including restoring or initiating the proceedings in respect of which the settlement order is passed against the applicant, if:
i. It comes to the notice of the Board that the applicant has not made full and true disclosure;
ii. Applicant has violated the undertakings or waivers:
9. This settlement order is passed on this day of 2nd January, 2025 and shall come into force with immediate effect.
10. In terms of Regulation 25 of the Settlement Regulations, copies of this order are being sent to the Applicant viz. Megastar Foods Limited and also to SEBI.
Date: January 02, 2025 AMIT KAPOOR Place: Mumbai ADJUDICATING OFFICER
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