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Legal Update
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LEGAL
UPDATES
SAT order in the matter of M/s. Gulab Impex Enterprises Limited
Facts:The present appeal is filed by M/s.GulabImpex
Enterprises Limited (Appellant) against the initiation
of Adjudication proceeding by SEBI and imposed a
penalty of Rs. 9,00,000 for violation of Regulation
8(3) of SEBI (SAST) Regulations, 1997 instead of
favorably considering the consent application for an
amicable resolution of the issue.
therefore
reduced
the
Appellant had failed to file the disclosures as required under Regulation 8(3) of SEBI
(SAST) Regulations, 1997 for the year 1998 to 2011. Accordingly SEBI imposed the
penalty of 9,00,000 for the aforesaid violations on the Appellant. Being aggrieved by the
direction of SEBI, the appellant has filed the appeal before Honble Tribunal and
contended the following:
The two stock exchanges, where the shares of the companyare listed, namely,
Delhi Stock Exchange and UP Stock Exchange, are nonfunctionaland no trading is
being carried on by the investors or shareholders in the scrip of theappellant
company since last many years.
They had been disclosing regularly the shareholdings under Regulation 8(3) of
SEBI (SAST) Regulations, 1997. However, in respect of 2001 there was an
inadvertent noncompliance. It was revealed to them by the company secretary and
they tookimmediate steps to approach SEBI by disclosing the violation. SEBI
instead offavorably considering the consent application for an amicable resolution
of the issue, conducted adjudication proceedings and passed the impugned order
in question.
Decision:After taking into considerations all the facts and circumstances of the case, the
Honble Tribunal (SAT) observed that the appellant on his own approached SEBI on
becoming aware of the technical violation in question and asked for consent proceedings
which, somehow, could not materialize. SAT further observed that the conduct of appellant
in approaching SEBI on its own and thereby bringing the violation in question to the notice of
SEBI.
As against the above order passed by SEBI, after considering all mitigating factors, SAT
held that ends of justice would be met with by disposing of this appeal and directed
Appellant to make disclosure as per Regulation 8(3) of SEBI (SAST) Regulation, 1997 on or
before November 17, 2014 and after the required disclosure is made by the Appellant, the
penalty of Rs. 9 lacs imposed on the appellant shall stand modified to Rs. 5 lacs. In case the
appellant does not make appropriate disclosure by November 17, 2014, the original penalty
against the company shall revive.
Investments
Limited
to
Target
shareholding
(hereinafter
29(2)
of
of
Parichay
referred
SEBI
(SAST)
as
Regulations,
2011
Sale of shares effected by the appellant on May 2, 2013 werereported on Bombay Stock
Exchange (BSE)s website in the bulkdeal data and therefore failure on part of the
Target Company had also made shareholding patternrelated disclosures under the
Listing Agreement to BSE which was also publicly available on BSE website.
Appellant being a lay investor was not aware of the obligationto make disclosures.
No loss, harm or injury was caused to any investor on accountof nondisclosure on part
of appellant.
Issues: Whether the penalty of Rs.5 lacs imposed on the appellant for violation of
Regulation 29(2) of SEBI (SAST) Regulations, 2011 and violation of Regulation 13(3) of
SEBI (PIT) Regulations, 1992 is justified?
Decision:After considering the facts and circumstances of the case,The Honble Tribunal
observed that the sale of shares in question were reported on BSEs website in bulk deal
data, does not absolve the appellant from making disclosures under the respective
regulations. Similarly, fact that the company had made disclosures under the Listing
Agreement to BSE would also not absolve the appellant from making disclosures under the
respective regulations. Therefore, the appeal is, accordingly, dismissed.
On May 02, 2013, Appellant had disposed off 64,770 shares representing 5.4% of the
total shareholding of Parichay Investments Limited (hereinafter referred to as Target
Company). However no disclosures has been filed to the Stock Exchange as required
under Regulation 29(2) of SEBI (SAST) Regulations, 2011 andRegulations 13(3) of SEBI
aforesaid violations on the Appellant. Being aggrieved by the direction of SEBI, the
appellant has filed the appeal before Honble Tribunal and contended the following:
2013
werereported
Bombay
Stock
makedisclosures
on
being
technical
violation,
Appellant being a lay investor was not aware of the obligation to make disclosures.
No loss, harm or injury was caused to any investor on accountof nondisclosure on part
of appellant.
Issues:Whether the penalty of Rs.5 lacs imposed on the appellant for violation of Regulation
29(2) of SEBI (SAST) Regulations, 2011 and violation of Regulation 13(1) of SEBI(PIT)
Regulations, 1992 is justified?
Decision:After considering the facts and circumstances of the case, The Honble Tribunal
observed that the sale of shares in question were reported on BSEs website in bulk deal
data, does not absolve the appellant from making disclosures under the respective
regulations. Though, as per the contentions that AO ought to have taken a lenient view as
the Appellant is a blind person is unjustified because though being a blind person, Appellant
was dealing in shares of various companies and his investments in the shares of Target
Company was about Rs. 50 lacs. Similarly, fact that the company had made disclosures
under the Listing Agreement to BSE would also not absolve the appellant from making
disclosures under the respective regulations. Therefore, the appeal is, accordingly,
dismissed.
its
obligation
to
made
disclosures
i. In the absence of any show cause notice issued to the appellant, liability arising
from the show cause notices issued to the 20 entities could not be fastened upon
the appellant merely because the appellant represented those entities before the
Adjudicating Officer.
ii. 19 promoter/promoter group entities were not required to make disclosures under
the PIT Regulations, because on September 7, 2012/September 21, 2012 when
shares of SRS Limited were transferred, all the 19 entities stood dissolved, on
account of the effective date of merger being prior to the date of transfer of shares.
Similarly, effective date of merger of SRS Holding India Limited with BTL
Investments and Securities Limited is September 18, 2013, whereas show cause
notice is issued to SRS Holding Limited on January 3, 2014 i.e., after SRS Holding
India Limited stood dissolved on account of merger. Therefore, proceedings initiated
against a dissolved entity being bad in law, the impugned order is liable to be
quashed and set aside.
iii. Pursuant to the order passed by the Delhi High Court On July 18, 2013 approving
merger of SRS Holding India Limited with BTL Investments and Securities Limited,
only proceedings pending by or against SRS Holding India Limited as on the
effective date could be continued by or against BTL Investments and Securities
Limited/appellant. In the present case, the show cause notice is issued after the
effective date and therefore, the proceedings are vitiated.
Issues: Whether the penalty imposed by the SEBI is justified?
Decision:SAT observed that by operation of the first order passed by Delhi High Court on
March 16, 2012 rights and obligations of 19 promoter/promoter group entities were liable to
be discharged by SRS Holding India Limited and pursuant to the second order of Delhi High
Court dated July 18, 2013 rights and obligations of SRS Holding India Limited were liable to
be discharged by BTL Investments and Securities Limited and only due to change of name
by the appellant, the appellant cannot escape liability to discharge the penalty imposed on
19 promoter/promoter group entities and SRS Holding India Limited. Further If the shares of
SRS Limited held by 19 merged entities could be transferred after the effective date of
merger, there is no reason as to why disclosure obligations arising on account of transfer of
shares of SRS Limited held by 19 merged entities could not be discharged by SRS Holding
India Limited. Further, Once SRS Holding India Limited has accepted its obligation to make
disclosure and has in fact, made disclosures belatedly it is not open to the appellant being
the merged entity of SRS Holding India Limited to deny obligation to discharge the penal
liability imposed on SRS Holding India Limited for the delayed disclosures. Therefore, The
appeal is, accordingly, dismissed.
Accordingly, The applicant proposed to settle the above non-compliances of 8(3) on the
payment of Rs. 6,45,000 towards settlement charges. The terms as proposed by the
applicant were placed before High Power Advisory Committee (HPAC) and on the
recommendation of HPAC, SEBI settle the above non compliances.
Pending the adjudicating proceedings, the Applicant has filed the consent application for the
settlement of above violations and proposed to pay a sum of Rs. 2,00,000 towards
settlement charges. The terms as proposed by the Applicant were placed before High
Powered Advisory Committee (HPAC) and on the recommendation of HPAC, SEBI settle the
above non compliances and disposes of said proceedings against the Applicant.
10
Regulation 29(3) of the SEBI (SAST), 2011for the year 2011 and also for violation of
Regulation 13(4A) read with Regulation 13(5) of SEBI (PIT) Regulations, 1992 as observed
from the draft letter of offer filed with SEBI by M/s. Omkam Pharmaceuticals Limited
(Acquirer) to acquire upto24,31,884equity shares of face value of Rs. 10/- each
representing 26% of the paid-up equity share capital of ALL.
Pending the adjudicating proceedings, the Applicant 1 and Applicant 2 has filed the consent
application for the settlement of above violations and proposed to pay a sum of Rs
2,47,190.65 and Rs. 2,61,731.25 towards settlement charges. The terms as proposed by the
Applicant were placed before High Powered Advisory Committee (HPAC) and on the
recommendation of HPAC, SEBI settle the above non compliances and disposes of said
proceedings against the Applicant.
11
Pending the adjudicating proceedings, the Applicant has filed the consent application for the
settlement of above violations and proposed to pay a sum of Rs 6,63,000 towards settlement
charges. The terms as proposed by the Applicant were placed before High Powered
Advisory Committee (HPAC) and on the recommendation of HPAC, SEBI settle the above
non compliances and disposes of said proceedings against the Applicant.
Consent order in the matter of M/s. AAR KAY Steel Products Limited
SEBI had initiated adjudication proceedings against M/s. AAR KAY Steel Products Limited
(hereinafter referred to as Applicant) and alleged that the applicant had delayed in
complying with Regulation 8(3) of SEBI (SAST), 2011 by 4058 days, 3693 days, 3327 days,
2962 days, 2597 days, 2232 days, 1866 days, 1501 days, 1136 days, 771 days, 405 days,
1081 days, 716 days and 351 days during the year 1998 to 2011 respectively.
Pending the adjudicating proceedings, the Applicant has filed the consent application to
settle the above noncompliance on the payment of Rs. 6,92,750 towards settlement
charges. Theterm as proposed by the Applicant were placed before High Powered Advisory
Committee (HPAC) andHPAC recommended that the case may be settled on payment of
Rs. 6,92,750/-, accordingly SEBI settle the above non compliances and disposes of said
proceedings against the Applicant.
12
13
Adjudicating/WTM orders
Target Company
Noticee
Regulations
Penalty
Imposed/
Decision
Taken
M/s.Turbotech
Case disposed
Engineering Limited
Limited
off
M/s.Turbotech
Engineering Limited
Rs. 3,00,000
M/s.Turbotech
Engineering Limited
Private Limited
Rs. 3,00,000
M/s.Turbotech
Case disposed
Engineering Limited
Capital Limited
off
M/s.Turbotech
Case disposed
Engineering Limited
Private Limited
off
14
M/s.Turbotech
Case disposed
Engineering Limited
Private Limited
off
M/s.Turbotech
Case disposed
Engineering Limited
off
Rs. 4,00,000 on
Limited
M/s. Mapro
KrishanSomani,
Industries
GopalKrishanSomani
2,00,000 on
each of the
Ms. ShrutiSomani,
other Noticees.
Education Limited
Education Limited
Regulations, 1997
M/s. Apte
Mr. VamanMadhavApte,
Amalgamations Limited
Rs. 12,00,000
Rs. 25,00,000
M. ApteKantilal Private
Amalgamations Limited
Limited
Rs. 2,00,000
Amalgamations Limited
Limited
Rs. 7,00,000
Agricultural Implement
Gangaram Agarwal
Limited
15
Rs. 2,00,000
Pharmaceuticals
Limited
M/s.AhlconParenterals
(India)
14(1) of
Limited
Software &
Infrastructure Limited
Limited
Limited
Services Limited
Limited
Limited
Regulations, 2011
Rs. 25,00,000
Rs. 20,00,000
Rs. 3,00,000
Entertainment Limited
Rs. 4,50,000
Rs. 20,00,000
Rs. 5,00,000
16
Latest Open
Offers
Target Company
M/s.
Skyweb
Limited
Infotech
Triggering Event: Preferential allotment of 3,00,000 Equity
Registered Office
Delhi
Net worth of TC
Rs. 2.68 Cr.
(31.03.2014)
Listed At
DSE
Industry of TC
Telecommunication
Target Company
M/s. Inland
Limited
AcquirerMr.
Neetesh
Gupta
(Acquirer) along with Mr.
Ashok Gupta and Mrs.
Renu Gupta (PACs)
Triggering
Event:
Share
Printers
Registered Office
Mumbai
Net worth of TC
Rs. 13.98 Lacs
(31.03.2014)
Purchase
Agreement
Listed At
BSE, DSE and ASE
Industry of TC
Commercial
Printing/Stationery
AcquirerMr.
Kiran
Kumar
Rameshbhai Patel and
Mr. BhaveshRamanlal
Patel
payable in cash.
17
Target Company
M/s. Fortune Financial
Services (India) Limited
Registered Office
Mumbai
Triggering
Event:
Framework
Agreement
Net worth of TC
10,213.71
(31.03.2014)
Lacs
Listed At
BSE
payable in cash.
Industry of TC
Finance (Including NBFCs)
Acquirer
Neostar Developers LLP,
Aditya Infotech Private
Limited, and Mr. Chintan
Vijay Valia (Acquirers)
along with Mr. Sudhir V.
Valia, Ms. Raksha S. Valia,
Mr. Vijay M. Parekh and
Mr. Paresh M. Parekh
(PACs).
Target Company
M/s. Neil
Limited
Industries
Registered Office
Kolkata
Net worth of TC
49.82 Cr.
(31.03.2014)
Triggering
Event:Memorandum
of
Understanding
Listed At
CSE and UPSE
Industry of TC
NA
18
Target Company
M/s Splash Media and
Infra Limited
Registered Office
Mumbai
Triggering
Event:
Share
Purchase
Agreement
Net worth of TC
NA (30.06.2014)
ListedAt
BSE Limited
Industry of TC
Realty
Acquirers and PACs
Anil Agarwal (HUF)
Target Company
M/s. PAN Electronics
(India) Limited
Registered Office
Bangalore
Triggering
Event:Share
Purchase
Agreement
Net worth of TC
Rs.
(892.90)
(30.06.2014)
lacs
Listed At
BSE and BgSE
Industry of TC
Electronic Components
AcquirerMr.
GulluGellaramTalreja
19
Target Company
M/s
International
Pumps and Projects
Limited.
Registered Office
New Delhi
Triggering
Event:
Share
Purchase
Agreement
Net worth of TC
Rs.
211.54
(30.06.2014)
ListedAt
Lacs
Target Company
M/s. BCB
Limited
Finance
Triggering
Event:
Share
Purchase
Agreement
lacs
Listed At
SME Exchange of BSE
Limited
20
Industry of TC
Finance
NBFCs)
(Including
AcquirerM/s. Centrum
Limited
Direct
Voluntary Open Offer means Open Offer given by the acquirer voluntarily without
triggering the mandatory Open Offer obligations as envisaged under SEBI (SAST)
Regulations, 2011. Generally, the purpose of giving Voluntary Open Offer is to consolidate
the shareholding.
Regulation 6 of SEBI (SAST) Regulations, 2011 deals with the concept of Voluntary Open
Offer and provides the eligibility, conditions and restrictions with respect to the same that are
detailed below:
Acquisition of Shares
without attracting
obligation to make PA
Gap of 52 weeks
Voluntary Open
Offer
21
Existing no. of
shares
Note:
Maximum
non-public
Maximum Permissible
non-public
shareholding
shareholdingmeans
such
percentage
shareholding in the target company excluding the minimum public shareholding required
under the listing agreement
No acquisition during the offer period except under the Voluntary Open Offer.
Restrictions
The acquirer becomes ineligible to acquire further shares for a period of six months after the
completion of Open Offer except by way of:
Another Voluntary Open Offer;
Acquisitions by making a competing offer.
For Instance:
SwarajAutomotives Limited (Target Company)
Mahindra and Mahindra Limited (Acquirer) forms part of the promoter
group of the Target Company and holds 10,59,543 Equity Shares
constituting 44.19% of the Voting Share Capital of Target Company.
For the purpose of consolidation of shareholding, the Acquirer had
made the Voluntary Open Offer to acquire upto 27% of the voting
share capital of the Target Company. Pursuant to the Offer, the total
shareholding of the Acquirer increased to 71.19% of the Voting Share
Capital of the Target Company.
22
Market Updates
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Manoj Kumar
E: divya@indiacp.com
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Disclaimer:
This paper is a copyright of Corporate Professionals (India) Pvt. Ltd. The entire contents of this
paper have been developed on the basis of SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997 and latest prevailing SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011 in India. The author and the company expressly disclaim all and any
liability to any person who has read this paper, or otherwise, in respect of anything, and of
consequences of anything done, or omitted to be done by any such person in reliance upon the
contents of this paper.
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