Bombay HC ruling throws light on misuse of petitions to stall IPOs

Experts call for frameworks to identify, deter vexatious legal challenges

- SAMIE MODAK

A recent Bombay High Court ruling upholding market regulator Securities and Exchange Board of India’s (Sebi’s) nod for the initial public offering (IPO) of WeWork India Management has brought to focus the misuse of petitions that often lead to vexatious legal challenges.

A slew of initial public offering (IPO)-bound companies this year have got into legal trouble during the launch of their share sale.

In July, an NGO moved the Securities Appellate Tribunal (SAT) seeking to restrain the IPO of Smartworks Coworking. The tribunal dismissed the plea, observing that no valid ground had been made to stall the issue.

BlueStone Jewellery and Lifestyle, too, faced legal hurdles during its IPO process and the most recent example is that of WeWork.

‘The grounds cited in such petitions range from alleged disclosure lapses and disputed legal interpretations to questions around shareholder classification. While not all complaints are frivolous, experts say petitions timed close to an IPO or listing often raise concerns about mala fide intent.