Sterling & Wilson Renewable Energy Ltd (S&W) has accused Embassy Office Parks REIT and WeWork India of failing to disclose material information to investors, in separate complaints filed with the Securities and Exchange Board of India (Sebi), according to documents reviewed by Mint.
The allegations made on 22 July stem from a ₹100 crore payment dispute over a solar project involving Embassy Energy Pvt Ltd (EEPL), a unit of Embassy REIT. A complaint had led to a chargesheet filed by the Economic Offences Wing in 2023 against Embassy Group promoters Jitendra and his son Karan Virwani, who also lead WeWork India. S&W now alleges that WeWork India did not disclose this development in the draft red herring prospectus of its initial public offering earlier this year.
Separately, S&W also complained to Sebi on 3 April that considering the ongoing investigation against the Virwanis, they must be removed from Embassy REIT under the ‘fit and proper person’ criteria. Jitendra Virwani is the non-executive chair of Embassy Office Parks REIT. Karan Virwani is a director on the boards of the REIT’s sponsor and manager entities.
Non-disclosure of material information, which could have a significant impact on the company’s securities or investor decisions, could be in violation of SEBI regulations. It could potentially impact the decision-making of unit holders of REITs and potential investors in an IPO.
S&W’s promoters include Reliance New Energy Ltd (holding 32.5%), Shapoorji Pallonji And Co Pvt Ltd (6.94%) and Daruvala family (6.3%).
Genesis of issue
The issue has its genesis in a 100-MW solar plant constructed by S&W in Karnataka, which is currently being operated by Embassy Energy Pvt Ltd (EEPL), a unit of Embassy REIT.
The construction of the plant was contracted to S&W by IL&FS Energy Development Co Ltd as part of an arrangement where the latter would fund and construct the plant. EEPL would repay IL&FS Solar Pvt Ltd, a subsidiary of IL&FS Energy with interest in equated monthly installments.
However, IL&FS Energy faced a financial crunch in 2018 and could not make the payment to S&W. The dues were to the tune of ₹100 crore.
In its complaints, S&W said it discontinued work at the site when the payments stopped. However, when EEPL guaranteed payments to S&W in case IL&FS Energy failed to pay, it resumed work. The IL&FS Group became insolvent later that year.
When EEPL did not pay the dues to S&W, the latter took it to the bankruptcy court. The Bengaluru Bench of the National Company Law Tribunal ruled in the favour of EEPL. Subsequently, S&W challenged the decision in the National Company Law Appellate Tribunal, Chennai. In 2023, the appellate authority ruled in the favour of EEPL. S&W has now moved the Supreme Court.
Allegations denied
The Embassy Group has denied all allegations related to non-payment of dues.
In response to Mint’s queries, a spokesperson for Embassy wrote that EEPL was not contractually obligated to pay S&W. “Embassy Energy was not a party to the agreements between ILFS Solar and ILFS Energy and ILFS Energy and Sterling Wilson. In fact, the agreements clearly stated that the sub-contractor i.e. Sterling Wilson will not have any right to make any claim against Embassy Energy,” wrote the Embassy spokesperson.
S&W also filed a complaint against EEPL and the Virwani kin with the EOW in March 2023. The agency filed a chargesheet in the case against the Virwanis in November 2023 and the Additional Chief Metropolitan Magistrate took cognizance of the offences and summoned the two individuals the same month.
EEPL has filed a petition with the Bombay High Court to quash the FIR that is pending hearing, the Embassy spokesperson said. A revision petition has also been filed with the Bombay High Court against the order of the magistrate taking cognizance of the chargesheet, they said.
The Embassy spokesperson did not comment on the queries related to WeWork India.
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