Regulator fines Raymond ₹7 lakh for JK House lease deal

Our Bureau Mumbai | Updated on November 20, 2020

SEBI has imposed a fine of ₹7 lakh on Raymond Ltd for its failure to obtain prior approval for related party transactions involving the lease of JK House, a prime property in Mumbai’s upmarket Breach Candy area.

Raymond had entered into a lease agreement with its wholly-owned subsidiary Pashmina Holdings Ltd in March 1994, pursuant to which it granted a lease of four duplex flats situated in JK House to Pashmina for nine years. The tenants/sub-lessees included Gautam Hari Singhania, chairman and managing director and Vijaypat Singhania, chairman emeritus of Raymond, SEBI noted from the annual report for the financial year 2014-15.

Besides, the other tenants — Veenadevi Singhania, Akshaypat Singhania and Anant Singhania — were part of Vijaypat Singhania Greater HUF.

Thereafter, Raymond decided to demolish and reconstruct JK House and entered into four separate agreements in November 2007 with Pashmina as the second party and the respective sub-lessees as the third party. As per the tripartite agreements, Raymond offered to provide the sub-lessees with temporary alternate premises during the period of reconstruction or redevelopment of JK House, in consideration of the sub-lessees surrendering/transferring their rights and possession in respect of the existing premises in favour of Raymond.

The payment of rent for the alternate accommodations provided to the sub-lessees — due to the tripartite agreements — was a related party transaction for which approval of the audit committee was required but Raymond failed to do so.

Considering the stature of the firm, SEBI said it is expected “to maintain a higher level of due diligence in its compliance with the provisions related to corporate governance. Besides, Raymond has "failed to adhere to the best practices of Corporate Good Governance,” the regulator further added.

Reportedly, the Singhanias had proposed to buy the JK House from the listed company for about ₹600 crore in 2017. Going by the company's own valuation report, the price of the property then was around ₹7,100 crore.

Published on November 20, 2020

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