WTM/PS/128/CFD/JAN/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
ORDER
Under Sections 11(1), 11(2)(j), 11(4) and 11B of the Securities and Exchange Board of
India Act, 1992 read with Section 12A of the Securities Contracts (Regulation) Act, 1956
in the matter of non-compliance with the requirement of minimum public
shareholding by listed companies
In respect of Andhra Pradesh Tanneries Limited
Date of Hearing:

July 08, 2015

Appearances:
For Noticee:

Ms. Arati Saran, Director

Mr. Ajay Kumar, PCS, Parikh and Associates

For SEBI:

Dr. Anitha Anoop, Deputy General Manager,

Mr. Pradeep Kumar, Assistant General Manager,
Mr. Rohan Vijay, Assistant Manager.

1.

Securities and Exchange Board of India (hereinafter referred to as SEBI) had passed
an interim order dated June 04, 2013 (hereinafter referred to as the interim order) with
respect to 105 listed companies who did not comply with the Minimum Public
Shareholding (MPS) norms as stipulated under Rules 19(2)(b) and 19A of the
Securities Contracts (Regulation) Rules, 1957 (hereinafter referred to as SCRR) within
the due date i.e., June 03, 2013. In terms of the said rule, listed companies are statutorily
mandated to have a minimum of 25% shareholding by the public. The interim order
was passed without prejudice to the right of SEBI to take any other action, against the
non-compliant companies, their promoters and/ or directors or issuing such directions
in accordance with law. The interim order was to be treated as a show cause notice by
those companies for action contemplated in paragraph 18 thereof.

2.

Andhra Pradesh Tanneries Limited (hereinafter referred to as the Company) is

one such company against whom the interim order was passed. The equity shares of

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the Company are listed on the Bombay Stock Exchange Limited (hereinafter referred
to as BSE) and erstwhile Hyderabad Stock Exchange Limited. The scrip of the
Company is suspended for trading at BSE.
3.

The Company did not file any reply to the interim order. In the interest of justice, the
Company was afforded an opportunity of personal hearing on July 04, 2014. On the
date fixed Ms. Aarti Saran, Director and Mr. Ajay Kumar from Parikh and Associates
appeared for the Company and made oral submissions. The representatives also
requested liberty to file written submissions. The Company submitted the written
submissions vide its letter dated July 14, 2014 and submitted as under:
a. The present promoters of the Company, viz. Bambolli Holdings Private Limited and
their associates had acquired 3,13,422 fully paid equity shares of the Company,
representing 54.61% of the subscribed and paid up capital of the Company during the
year 2003-04 and had made an open offer under the erstwhile SEBI (Substantial
Acquisition and Takeover) Regulations, 1997. The shareholding pattern of the
Company, post the takeover and open offer was as under:
Category
Promoters holding
Public
Total

No. of shares held

3,15,872
2,58,028
5,73,900

%age of shareholding
55.04%
44.96%
100%

b. At the time of takeover, there were no operations in the Company and the plant of
the Company was not functional. For reviving the business operation of the Company
and investing in new machinery, the promoters had decided to infuse additional funds
as capital contribution. Thereafter, the Company had issued and allotted 16,26,100
equity shares to the promoters on preferential basis in the year 2004-2005, after
obtaining exemption under the SEBI (Substantial Acquisition and Takeover)
Regulations, 1997 from SEBI. The shareholding pattern of the Company, post
preferential issue was as under:
Category
Promoters holding
Public
Total

No. of shares held

19,41,972
2,58,028
22,00,000

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%age of shareholding
88.27%
11.73%
100%

c. In January 2005, the Company had made the application to the BSE for in-principle
listing of shares issued on preferential basis within the prescribed time limit. One of
the pre-conditions of listing of shares was that the shares of the Company be available
in demat form. However, as the net worth of the Company was negative, NSDL and
CDSL rejected the Companys application to admit its securities for demat. As a result
the shares issued on preferential basis are yet to be listed on the stock exchanges.
d. The shares of the Company were suspended from trading, long before June 04, 2010
when the amended Rule 19(2)(b) and the Rule 19(A) of the SCRR were introduced.
The remedies prescribed by SEBI under the aforesaid circular could only be exercised
through the platform of the stock exchange.
e. The Company could not avail of the three year time given by SEBI to increase public
shareholding to at least 25%, since the securities of the Company had been suspended
by BSE. The Company could not meet the requirement of MPS, since, considering the
circumstances of the Company, no mechanism existed through which the public
shareholding could be increased. It could not avail of any of the modes for compliance
as it had no reserves available for issuing the bonus shares to its shareholders; or to
make a rights offer to its shareholders on account of the suspension of the securities
of the Company from trading by BSE; further the promoters also could not divest
their stake to the general public.
f. Despite the efforts made by the promoters and management to revive the operations
of the Company, the Company continued to remain un-operational and it is unlikely
that the operations of the Company will be revived, any time soon.
The Company vide this letter requested for permission to delist the shares of the
Company from the stock exchanges.
4.

Further, in the personal hearing held on July 08, 2015, Ms. Aarti Saran, Director and
Mr. Ajay Kumar of Parikh and Associates appeared and made oral submissions on
behalf of the Company. The Company vide its letter dated July 20, 2015, while
reiterating the earlier submissions, proposed to make an Offer for Sale in order to
bring the promoters shareholding to the level stipulated by SEBI. Vide the said letter,
the Company also requested for an advice to BSE for listing the equity shares of the
Company, so that it can proceed with the Offer for Sale.

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The Company along with its letter dated July 20, 2015, has also submitted the copy of
the letters of BSE dated February 01, 2005, addressed to SEBI. BSE in the said letter
had sought guidance of SEBI with respect to the listing of the shares of the Company,
in view of the refusal by the depositories to admit the equity shares of the Company
due to negative net worth.
5.

While proceeding further, I have considered the interim order passed in the matter
against the Company, its promoters and directors; the submissions of the Company
and the material available on record. The interim order was issued against the Company
as it was non-compliant with the provisions of Rule 19A of the SCRR and Clause 40A
of the Listing Agreement read with Section 21 of the Securities Contract (Regulation)
Act, 1956 (SCRA), by not maintaining atleast the minimum level (of 25%) of public
shareholding as of June 03, 2013. I note from the shareholding pattern of the Company
for the period ended September 30, 2015, that the promoters held 88.27% and the
public shareholders were holding 11.73%. The Company is therefore in violation of
the MPS requirements.

6.

The Company has argued that as the net-worth of the Company was negative, NSDL
and CDSL had rejected its application for admitting its securities for demat. It has also
been said that as a result of the same, the shares issued on preferential basis are yet to
be listed on the stock exchanges.

7.

With regard to the same, I note the submissions of NSDL made vide e-mail dated
December 16, 2015, that the net-worth criteria for companies seeking to admit their
securities in NSDL, has been relaxed since November 2011. NSDL has also submitted
that the Company has not approached NSDL for admitting its securities after the year
2005. CDSL also vide e-mail dated December 16, 2015, has made submissions on
similar lines. In view of the same, I note that the Company has not approached NSDL
and CDSL after the relaxation of the net-worth criteria and has not taken positive
steps to remove the suspension imposed on the trading of its shares in the year 2002.

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8.

Further, I note that the Company vide its letter dated July 14, 2014, had requested for
permission to delist the shares of the Company. Vide another letter dated July 20,
2015, the Company has proposed to make an Offer for Sale to the existing
shareholders of the Company, in order to bring the promoter holding in compliance
with the MPS norms.

9.

Considering the facts and circumstances of the case, it is clear that the Company has
not complied with the MPS requirements till date in breach of Rule 19A of the SCRR
and Clause 40 A of the Listing Agreement read with Section 21 of the SCRA, and such
non-compliance being continuous in nature, it becomes necessary for SEBI, to
confirm the directions issued vide the interim order against the Company, its directors
and promoters/ promoter group. Further, for proper regulation of the securities
market and in view of the continuing nature of the violations committed by the
Company, SEBI may also initiate other action, as appropriate in law, against the
Company, its directors and promoters.

10.

Accordingly, I, in exercise of the powers conferred upon me under Section 19 of the

Securities and Exchange Board of India Act, 1992 read with Sections 11(1), 11(2)(j),
11(4) and 11B thereof and Section 12A of the Securities Contracts (Regulation) Act,
1956, hereby confirm the directions issued vide the interim order dated June 04, 2013
against the Company, Andhra Pradesh Tanneries Limited, its directors, promoters
and promoter group.

11.

This Order shall remain in force till further directions.

12.

Copy of this Order shall be served on the Stock Exchanges and Depositories for their
information and necessary action.

Date: January 07, 2016

Place: Mumbai

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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