ESDS faces a pending 660,000-share former employee claim

ESDS faces a pending Bombay High Court civil suit from former employee Rajeev Suryaprakash Papneja seeking 660,000 equity shares or alternative cash payments of ₹18.48 crore. The High Court directed mediation on December 10, 2025, but the parties did not settle and the matter remains pending, according to ESDS’s disclosure.

What does the ESDS former employee claim seek?

The ESDS former employee claim seeks transfer of 510,000 shares linked to an alleged 2015 entitlement and 150,000 shares under an alleged employee stock option plan agreement dated August 30, 2021. Papneja filed the civil suit against ESDS and promoter Piyush Prakashchandra Somani on August 20, 2022.

Papneja alleges that ESDS and Somani offered him a 1% share in ESDS in 2015 and that Somani issued a certificate describing Papneja as the registered proprietor of 51,000 shares. Papneja claims that ESDS’s September 2021 subdivision of each equity share’s face value from ₹10 to ₹1 converted that alleged 51,000-share entitlement into 510,000 shares.

Papneja also claims 150,000 equity shares under the alleged August 2021 employee stock option plan, or ESOP, agreement. An ESOP is an arrangement under which employees may receive or acquire company shares under specified terms; ESDS’s disclosure says the alleged shares were to vest at a future date but does not state whether that date occurred.

How did the ₹18.48 crore ESDS former employee claim arise?

The ₹18.48 crore demand is an alternative remedy to share transfer, not a single cash-only claim. Papneja seeks ₹14.28 crore if Shares Entitlement I is not transferred and ₹4.20 crore if Shares Entitlement II is not transferred.

Papneja alleges that he did not receive Shares Entitlement I, resigned from ESDS as a result, and did not receive either claimed entitlement despite assurances, discussions and a legal notice. ESDS states that it refuted the legal notice, and the disclosure does not report any judicial finding validating either Papneja’s allegations or ESDS’s position.

ESDS disclosed the proceeding as material under a policy approved by its board on March 21, 2025. The policy’s lowest stated monetary threshold was ₹3.17 crore, based on 5% of the average absolute profit or loss after tax for the previous three restated financial years; the ₹18.48 crore alternative claim exceeds that threshold.

The alternative cash amount is also below ESDS’s consolidated trade payables of ₹26.48 crore as of March 31, 2026. That comparison concerns disclosed monetary amounts only and does not establish the value of the disputed shares, a liability for ESDS, or the likely result of the case.

What has happened in the Bombay High Court case?

The Bombay High Court directed Papneja and the defendants on December 10, 2025 to attempt a mediated settlement within three weeks. The dispute was not settled through mediation, was referred back to the High Court and remains pending as of the red herring prospectus date.

ESDS and Somani had previously filed an interim application on April 6, 2023 under Order VII Rule 10 of the Code of Civil Procedure, 1908. That provision permits return of a plaint where a court lacks jurisdiction to try the proceeding, and the defendants argued that the High Court lacked jurisdiction over the suit.

Papneja replied that the defendants’ application was extraneous to the scope of Order VII Rule 10 and should be dismissed. ESDS’s disclosure does not state that the High Court has decided the jurisdiction application, Papneja’s ownership claim, or the requested cash alternatives.

Papneja has also requested interim or ad-interim injunctive relief over the 660,000 claimed shares. The requested restraint would prevent ESDS, Somani and related persons from transferring, encumbering, alienating or creating third-party rights in those shares, but the disclosure does not say that any injunction has been granted.

Has SEBI acted on the ESDS share dispute?

The Securities and Exchange Board of India, or SEBI, acknowledged receiving a communication about the suit but had not communicated specific directions or actions as of the prospectus date. Papneja’s legal counsel informed SEBI through the Securities and Exchange Board of India Complaints Redress System, or SCORES.

SEBI’s acknowledgement does not determine the civil dispute or establish any regulatory finding. ESDS also disclosed that no disciplinary actions, including penalties by SEBI or stock exchanges, had been taken against its promoters during the five fiscal years preceding the prospectus date.

The share suit is the material other proceeding disclosed against ESDS, alongside a pending goods and services tax matter. ESDS reported no pending criminal proceedings and no outstanding actions by statutory or regulatory authorities against it as of the prospectus date, while its subsidiaries had no disclosed material pending proceedings.

What could affect the continuing significance of the claim?

The claim will remain unresolved until the High Court determines the jurisdiction application, any request for interim relief, the merits of the suit, or the parties reach a settlement. The failed mediation ordered in December 2025 means the disclosure reports neither an agreed transfer of 660,000 shares nor an agreed payment of ₹18.48 crore.

The ultimate result may depend on matters that ESDS’s disclosure does not determine, including whether the alleged 2015 certificate created an enforceable entitlement, the legal effect of the September 2021 subdivision, and the terms and vesting conditions of the alleged August 2021 ESOP agreement. The prospectus records Papneja’s allegations and ESDS’s refutation of his legal notice, rather than a court assessment of the underlying documents.

ESDS’s financing arrangements identify another possible consideration if any outcome changes ownership or capital structure. As of June 30, 2026, ESDS reported consolidated borrowings of ₹102.92 crore, including ₹41.90 crore of fund-based facilities and ₹61.01 crore of non-fund-based bank guarantees; certain lender covenants require prior approval for specified changes in ownership, control or capital structure.

Those covenants do not state that the suit has caused a breach or requires lender action. ESDS separately stated that it had obtained necessary financing-document consents for activities related to the issue.

Conclusion

ESDS and Piyush Prakashchandra Somani remain defendants in a material civil suit seeking 660,000 shares, with ₹18.48 crore as the disclosed alternative cash remedy. The claim combines an alleged 2015 entitlement adjusted for ESDS’s 2021 share subdivision and a separate alleged 2021 ESOP entitlement, neither of which has been adjudicated in the disclosed record.

The next disclosed development to watch is the Bombay High Court’s handling of the case after the December 2025 mediation failed. The unresolved issues include the April 2023 jurisdiction application, Papneja’s requested interim restrictions over the claimed shares, and the merits of the alleged certificate and ESOP agreement.