Retail shareholders are seeking compensation from SEBI, the stock exchanges and the investor protection fund claiming losses due to non-listing of two de-merged entities of the erstwhile Varun Shipping Ltd through a court-backed process finalised more than three years ago.

The demand comes in the wake of a decision by a committee of creditors (CoC) of Varun Resources Ltd — one of the de-merged outfits — to liquidate the company to recover dues worth some ₹2,000 crore.

Varun Shipping — once India’s biggest LPG ship operator — was delisted on July 31, 2015, and was to re-list as two companies — Varun Resources Ltd (VRL) and Varun Global Ltd (VGL).

Retail shareholders allege that promoters “deliberately withheld” critical disclosures in the run-up to the de-merger when the company was still listed, and that they bought shares from the open market through 2014 and early 2015 at “distorted prices”.

For instance, VRL’s share capital after the de-merger was to be ₹75 crore and VGL’s ₹15 crore. However, after the de-listing, VRLs balance-sheet showed a share capital of ₹151 crore and that of VGL ₹31.8 crore.

Effectively, the promoters had issued to themselves shares to the tune of 100 per cent of the two outfits’ capital, which has been described by retail shareholders as a “brazen fraud” perpetrated on them.

The massive dilution of the share capital when the company was listed was revealed five months after the de-listing, on December 8, 2015, when the annual report for 2014-15 was emailed to shareholders. This report disclosed share issue to promoters of VRL worth ₹75.86 crore at ₹1 and VGL worth ₹16.8 crore also at ₹1.

Even as Varun Shipping shareholders fretted with no exit option, in a new twist, the Securities and Exchange Board of India gave permission for listing of shares of VRL and VGL on the Bombay Stock Exchange, just days before the CoC decided to liquidate Varun Resources on March 8.

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