In the securities market, Compliance is often decided by details that may appear small at first.
A disclosure made late.
A share transfer recorded outside the exchange.
A payment that does not match the transaction.
Or a trading account that continues to be used after a company has been struck off.
Individually, these may appear to be administrative issues. But when several such events occur around the same listed company, regulators can look at the transactions as part of a much wider pattern.
A recent SEBI show-cause notice concerning trading in the scrip of Cressanda Solutions Limited (CSL) provides an important example of this.
The notice relates to SEBI's investigation into trading by certain entities in the shares of CSL during the period February 18, 2022 to May 19, 2022. The investigation also examined certain transactions outside that period where SEBI considered them relevant to the matter.
The document is a show-cause notice, meaning the allegations are part of regulatory proceedings and should not be treated as a final finding of liability.
However, the issues described in the notice offer useful lessons for listed companies, promoters, investors and entities involved in securities transactions.
How the Cressanda Solutions Matter Came Under SEBI's Investigation
SEBI stated that it investigated whether provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, read with the SEBI Act, 1992, were violated while certain entities traded in the scrip of Cressanda Solutions Limited.
During the investigation, SEBI examined the company's shareholding pattern, off-market transfers, disclosure obligations and trading activity involving several entities.
One of the key areas examined was the movement of shares from the company's promoter, Smart Infraproperties Pvt. Ltd.
According to the notice, the promoter's shareholding declined from 30.12% in the quarter ended September 2021 to 0.10% in the quarter ended March 2022. SEBI noted that 91,116,720 CSL shares were transferred through off-market transactions to eight entities between November 30, 2021 and January 21, 2022.
This became an important part of the regulatory examination.
Why Timely Shareholding Disclosure Matters
Listed companies operate in a market where investors depend heavily on information.
When a significant shareholder acquires or disposes of shares, the information may be important for other market participants.
That is why the SAST Regulations contain disclosure requirements for specified changes in shareholding.
The notice refers to Regulation 29 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, which requires prescribed disclosures when shareholding crosses relevant thresholds and when specified changes occur.
SEBI alleged that disclosures relating to the disposal of CSL shares by Smart Infraproperties were made on the stock exchange only on February 2, 2022, despite the relevant off-market transactions having taken place between November 2021 and January 2022.
The notice therefore alleges delayed compliance with the disclosure requirements.
The lesson for promoters and significant shareholders is straightforward:
A transaction is not necessarily compliant simply because the shares have been transferred correctly. The required regulatory disclosure must also be made within the applicable timeline.
Off-Market Transactions Need More Than a Transfer Entry
Another major issue examined by SEBI was the nature of the off-market share transfers.
Off-market transactions are not automatically prohibited. However, they must comply with the applicable legal and regulatory framework.
The notice examines whether the transactions satisfied the requirements relating to spot delivery contracts under the Securities Contracts (Regulation) Act, 1956.
SEBI examined the transfer of approximately 91.12 million CSL shares from Smart Infraproperties to eight entities and reviewed the corresponding payment records.
The investigation focused, among other things, on whether the consideration mentioned in the delivery instructions had actually been paid and whether the timing of payment was consistent with the applicable requirements.
This is where proper documentation becomes extremely important.
For any substantial securities transaction, parties should be able to establish:
- What was agreed?
- Who purchased the shares?
- Who sold them?
- What was the consideration?
- When was the consideration paid?
- What banking trail supports the payment?
- What regulatory disclosures were required?
- Were those disclosures made within the prescribed time?
When the documents and financial trail do not align, regulatory questions can follow.
Payment Delays Can Become a Compliance Issue
The notice records several observations regarding the consideration paid for the off-market share transfers.
According to SEBI's investigation, three entities had not paid the consideration mentioned in the relevant delivery instructions. Another entity allegedly made partial payment with a delay of approximately 2.6 months, while another made partial payment with a delay of approximately 1.6 months.
SEBI also noted delays in payments by other entities of approximately one to two months.
These observations matter because securities transactions are not evaluated only by looking at the final ownership position.
The timing and movement of money can be just as important as the movement of shares.
If a transaction says that a certain amount is payable for shares, there should be a clear financial trail demonstrating how and when that consideration was actually paid.
The Circular Movement of Funds Drew Attention
The notice also examines fund movements involving Smart Infraproperties Pvt. Ltd., Gittanjali Commosales LLP and Parag Commosales.
SEBI observed that funds were transferred from Smart Infraproperties to Gittanjali Commosales, then from Gittanjali Commosales to Parag Commosales, and subsequently from Parag Commosales back to Smart Infraproperties.
Transactions involving multiple entities are not automatically unlawful.
Businesses regularly use group entities, intermediaries and different banking arrangements for legitimate commercial reasons.
But where money moves through several entities, the underlying purpose should be clear and properly documented.
A strong compliance system should allow an organisation to answer a basic question:
Why did this money move through these particular entities?
If the answer is unclear, the transaction can attract additional scrutiny.
Another Red Flag: Trading After Companies Were Struck Off
One of the more unusual issues in the notice concerns several companies that had already been struck off from the records of the Registrar of Companies.
SEBI examined trading activity involving a number of such entities and found that several had traded in the CSL scrip even after their names had been struck off.
The notice states that nine entities, on a PAN basis, had traded in CSL shares on BSE even after being struck off from the ROC records.
SEBI's observation was that companies struck off from the ROC records should not have continued normal operations, yet their trading accounts were allegedly used to transact in the shares.
The notice consequently examined whether the trading accounts had been misused and whether such activity created a false or misleading appearance of trading in the securities market.
This is a significant compliance lesson for directors and companies.
Corporate status and market activity cannot be treated as completely separate matters.
If a company has ceased to exist in the manner contemplated under corporate law, continuing to use its financial or securities-market infrastructure can create serious questions.
Why Directors Also Need to Pay Attention
The notice refers to Section 248(7) of the Companies Act, 2013, concerning the continuing liability of directors, managers and other officers in specified circumstances even after a company has been dissolved following striking off.
SEBI therefore examined the responsibility of directors associated with the companies that allegedly traded after their names had been struck off.
This reinforces an important point:
Striking off a company does not necessarily erase the responsibilities connected with its past conduct.
Directors should therefore maintain proper oversight of their company's trading, banking and financial accounts and should ensure that accounts are not being used improperly after the company's legal status changes.
What Listed Companies and Investors Can Learn
The Cressanda Solutions notice contains several practical compliance lessons.
1. Make Disclosures on Time
If a transaction triggers a disclosure requirement, filing it late can itself become a regulatory issue.
2. Maintain a Complete Transaction Trail
The share transfer agreement, delivery instruction, payment record, bank statement and regulatory disclosure should tell the same story.
3. Reconcile Securities and Money Movements
Companies and investors should periodically reconcile their demat transactions with corresponding financial transactions.
4. Review Related-Entity Transactions
When several entities are involved in a transaction, the commercial reason for each transfer should be documented.
5. Monitor Corporate Status
If an entity has been struck off or otherwise ceased operations, its trading and financial accounts should be reviewed immediately.
6. Do Not Treat Compliance as a Filing Exercise
Regulatory compliance covers the complete transaction lifecycle—not just the submission of a form.
Shunyatax Global Insight
Facing a SEBI, Disclosure, Audit or Financial Compliance Concern?
At Shunyatax Global, we believe securities-market compliance should be addressed before a regulatory issue becomes a larger problem.
If you are a promoter, listed company, investor, director or business entity dealing with SEBI-related compliance, shareholding disclosures, off-market transactions, financial irregularities, audit concerns or complex transaction structures, a proper review can help identify documentation and compliance gaps at an early stage.
Our focus is on understanding the complete financial and transactional picture—not just checking whether a form has been filed.
If you are facing a SEBI-related problem or have received a regulatory communication, Shunyatax Global can help you review the underlying financial records, understand the compliance concerns and prepare a structured response with appropriate professional support.
The earlier a compliance gap is identified, the easier it can be to address.