Family arrangements cannot override statutory definitions of 'promoter group' or justify non-compliance with minimum public shareholding norms.

Riddhi Siddhi Gluco Biols Limited (the Company), led by CMD Ganpatraj Chowdhary, proposed delisting from the BSE in 2017

SEBI investigated the scrip between 2016–2018 following investor complaints, leading to the withdrawal of the delisting approval

The investigation revealed that the Company failed to disclose entities—Stuti, Siwana, and Vital—as promoter group entities, thereby misrepresenting promoter shareholding and violating Minimum Public Shareholding (MPS) norms

Furthermore, SEBI found that the appellants engaged in fraudulent trading (circular/group trading) to artificiality project the illiquid scrip as "frequently traded" to facilitate a lower discovery price during the Reverse Book Building (RBB) process

Adjudicating Officer (AO) and Whole Time Member (WTM) orders imposed penalties and debarments, which were challenged in these joined appeals

The court applied Regulation 2(1)(zb) of the SEBI (ICDR) Regulations, 2009, which defines "promoter group" to include immediate relatives (spouses, parents, brothers, sisters) and bodies corporate where a group of individuals holds 20% or more of the equity in both the entity and the issuer

It further applied Rule 19A of the Securities Contracts (Regulation) Rules, 1957, mandated a minimum public shareholding of 25% for listed companies

The court also referred to the SEBI (PFUTP) Regulations, 2003, regarding the prohibition of manipulative and deceptive devices in the securities market

The principle of "preponderance of probability" was used to establish control over entities and the intent behind fund transfers

The court rejected the appellants' defense of a "family arrangement" segregating the family into Group A and B, noting that private arrangements cannot override the statutory definitions of "promoter group" under ICDR Regulations, which explicitly include siblings

Evidence showed that the promoter group held over 20% in Stuti and Siwana while simultaneously controlling the issuer, thus breaching the 75% promoter limit

Regarding 'Vital,' the court found that Ganpatraj’s fund transfer to his sister, followed immediately by her son (Mohit Bagmar) acquiring Vital, was a shim to disguise promoter control

Identifying the fraudulent trading, the court observed that 83% of trades during the period were inter-se among connected parties

Despite these circular trades, the scrip failed to meet the 10% turnover threshold to be truly "frequently traded," proving the appellants' intent to deceptively project liquidity to influence the delisting price

It held that the appellants indulged in illegal trades to project the scrip as "liquid"

Consequently, Appeal No. 543 of 2021 (monetary penalty) was dismissed

However, applying the principle of proportionality—noting that the delisting did not ultimately conclude—the Tribunal reduced the debarment periods: promoters' debarment was reduced to six months (conditioned on MPS compliance), and connected non-promoter entities' debarment was reduced to three months

No costs were awarded