The Securities Appellate Tribunal (SAT), Mumbai, on May 08, 2026, granted an interim stay on a SEBI order against the promoters of Setco Automotive Limited, in Appeal No. 120 of 2026 filed by the company's promoters. The stay was granted subject to specific conditions, including the deposit of the full penalty amount within four weeks from the date of the order. The development was disclosed by the company to the stock exchanges under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 on May 09, 2026.

Background of the SEBI Order

The case originates from a SEBI investigation into Setco Automotive Limited's financial statements for FY 2019-20 to FY 2021-22, examining whether they were prepared in accordance with applicable Accounting Standards. Following the investigation, SEBI issued a Show Cause Notice dated October 14, 2024, and subsequently passed an order on February 05, 2026 through its Quasi-Judicial Authority (QJA). The SEBI order directed payment of approximately ₹208.77 Crore, imposed debarment from accessing the securities market, and levied a penalty on the promoters.

The central allegation in the SEBI order was that India Resurgence Fund (IRF) had funded ₹615 Crore to Setco Automotive Limited (SAL) and SASPL (Setco Auto Systems Private Limited), and that a portion of these funds was diverted to the promoters. Specifically, SEBI alleged that ₹107.76 Crore was transferred to Setco Engineering Private Limited (SEPL) as marketing commission, and ₹101 Crore was invested in SEPL to acquire preference shares.

Key Financial Figures in the Dispute

The following table summarises the key financial figures at the centre of the dispute:

Appellants' Submissions Before SAT

The promoters, represented as appellants, argued through Senior Advocate Mr. Pesi Modi that the transactions were fully disclosed to and approved by the company's minority shareholders. Key points raised by the appellants included:

• The IRF funding package was the only viable option for SAL's survival during a period of financial stress in FY 2019-20, when the company was unable to raise finance from banks or Non-Banking Financial Companies (NBFCs).
• All terms of the IRF arrangement, including the marketing commission payment to SEPL, were approved by the Board, Audit Committee, and shareholders.
• The resolutions were passed with a majority of over 99% of public shareholders, with the appellants and SEPL abstaining from voting at the Extraordinary General Meeting (EGM).
• Investments in SEPL's preferential shares were approved by the Audit Committee and disclosed in financial statements in compliance with applicable Accounting Standards, as noted by the QJA itself in the impugned order.
• The appellants pledged their entire promoter shareholding to IRF, gave personal guarantees for full repayment, and mortgaged personal assets to secure the ₹615 Crore.

SEBI's Counter-Arguments

SEBI, represented by Senior Advocate Mr. Pradeep Sancheti, contended that the case represented a classic instance of diversion of company funds by the promoters. SEBI argued that the appellants had strategically transferred the clutch business to SASPL and paid a marketing commission of ₹107.76 Crore to SEPL, which is also owned by the appellants. SEBI further contended that the investment in preferential shares to the tune of ₹101 Crore also inured to the appellants' benefit, and that the prayer for stay of the impugned order was wholly untenable.

SAT's Interim Order and Conditions

The three-member bench of SAT, comprising Justice P.S. Dinesh Kumar (Presiding Officer), Ms. Meera Swarup (Technical Member), and Dr. Dheeraj Bhatnagar (Technical Member), noted that investors' interest is paramount and observed that an adverse order against the promoters could prompt lenders to invoke guarantees and pledges, potentially leading the company into liquidation. The Tribunal found it just and appropriate to stay the operation of the SEBI order at the stage of admission, keeping open the contentions of both parties.

The SAT interim order is subject to the following conditions:

• Penalty Deposit: The appellants must deposit the full penalty amount within four weeks from May 08, 2026; SEBI shall deposit the same in an interest-bearing account.
• Undertaking: The appellants must file an affidavit undertaking not to access the securities market and not to deal with their personal movable and immovable assets, whether free or encumbered, without SEBI's prior approval.
• Asset Disclosure: The appellants must file a list of immovable assets with SEBI within four weeks.
• Liberty to SEBI: The respondent (SEBI) reserves the right to move for an early hearing, if so advised.

Setco Automotive Limited, described in the proceedings as one of the largest suppliers of clutches to truck manufacturers in India, has SASPL as a fully owned subsidiary.

Setco Automotive Limited has announced the successful completion of its Extra-Ordinary General Meeting (EGM) held on April 25, 2026, with all four proposed resolutions receiving overwhelming shareholder approval. The meeting was conducted at the company's registered office at Vadodara Godhra Highway, Kalol, Panchmahal, Gujarat, and concluded at 2:45 p.m.

Meeting Overview and Participation

The EGM witnessed participation from 42 shareholders, comprising 7 promoters and promoter group members and 35 public shareholders who attended in person or through proxy. The company had a total of 29,083 shareholders on the record date of April 17, 2026, with 133767275 total outstanding shares.

Resolution Results and Voting Pattern

All four resolutions were passed with significant majority support from shareholders. The voting was conducted through remote e-voting (April 22-24, 2026) and physical polling during the meeting.

Resolution 1: Transaction Approval (Ordinary Resolution)

The first resolution to approve transaction documents and authorize their finalization received strong support with 11133483 votes in favor and only 705 votes against, representing 99.9937% approval.

Resolution 2: Subsidiary Share Disposal (Special Resolution)

The special resolution for disposal of equity shares in Setco Auto Systems Private Limited, a material subsidiary, was approved with 11133683 votes in favor against 705 votes, achieving 99.9937% approval.

Resolution 3: Memorandum Alteration (Special Resolution)

The resolution to alter the Object Clause of the Memorandum of Association received the highest participation, with promoters fully participating in this resolution. The voting results showed 90390971 votes in favor and 705 against, representing 99.9992% approval.

Resolution 4: Company Name Change (Special Resolution)

The final resolution approving the company name change and consequent alterations to the Memorandum and Articles of Association was passed with 90391071 votes in favor and 605 against, achieving 99.9993% approval.

Voting Process and Compliance

The voting process was overseen by Shravan A. Gupta of Shravan A. Gupta & Associates, who served as the scrutinizer. Remote e-voting was facilitated through Central Depository Services Limited (CDSL) platform from April 22, 2026 at 9:00 a.m. to April 24, 2026 at 5:00 p.m.

Notably, there were 32333970 invalid votes recorded for promoter and promoter group category in the first two resolutions, while no invalid votes were recorded for the third and fourth resolutions where promoters participated fully.

Corporate Governance and Transparency

The company has fulfilled its disclosure obligations under Regulation 44 of the SEBI Listing Regulations by publishing detailed voting results. The results are also available on the company's website ( www.setcoauto.com ) and CDSL's e-voting portal ( www.evotingindia.com ), ensuring transparency for all stakeholders.

The successful passage of all resolutions demonstrates strong shareholder confidence in the company's strategic decisions, including the proposed corporate restructuring and constitutional amendments.