Bombay HC dismisses pleas against WeWork India IPO, says SEBI acted lawfully

Bombay High Court Dismisses Writ Petitions Against WeWork India IPO

The Bombay High Court has dismissed two writ petitions challenging the disclosures in WeWork India Management Pvt. Ltd.'s initial public offering (IPO), holding that the allegations of inadequate and misleading disclosures were "without merit" and that the Securities and Exchange Board of India (SEBI) had acted lawfully.

Key Points

• The court imposed a cost of ₹1 lakh on one petitioner for "deliberate suppression" of material facts.
• The Bench held that SEBI had exercised due care and caution and complied with the legal requirements, including those prescribed under the ICDR Regulations, in connection with the WeWork India IPO.
• The court rejected the petitioners' claims, observing that the IPO complied with Regulation 6(2) of ICDR Regulations.
• The IPO, which opened on October 1 and closed on October 7, had already raised ₹1,348 crore from marquee investors.

Background

The two petitions, filed by Hemant Kulshrestha and Vinay Bansal, sought directions to SEBI to halt or amend the IPO, alleging that the Draft Red Herring Prospectus (DRHP) and Red Herring Prospectus (RHP) failed to disclose serious criminal proceedings against WeWork India's promoters and risks to its brand license.

Arguments

• Senior Advocate Venkatesh Dhond: "There is gross and deliberate suppression of information, though the chargesheet filed by CBI mentions Sections 409 and 477A of IPC and provisions of the Prevention of Corruption Act, these have been conveniently omitted from the disclosures."
• Senior Advocate Amit Desai: "The disclosures in the DRHP and RHP are materially incomplete and misleading, they ought to have set out the fact that grave offences under Section 409 and 477A of IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act have been drawn."
• Senior Advocate Navroz Seervai: "WeWork India could never have been permitted by SEBI to come out with an IPO, SEBI ought to have rejected the DRHP and RHP under its General Order No.01 of 2012."

SEBI's Response

Senior Advocate Shiraz Rustomjee, for SEBI, countered that the primary obligation for ensuring accuracy and correctness of disclosures lies on the Lead Managers, and that SEBI had discharged its obligations by ensuring compliance with ICDR Regulations.

Orders

The court noted that the petition filed by Hemant Kulshrestha was dismissed with no order as to costs, while the petition filed by Vinay Bansal was dismissed with costs of ₹1 lakh payable by him to the Maharashtra State Legal Services Authority within a period of two weeks.