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8/20/2019 Adjudication Order in respect of 11 entities in the matter of M/s. Andhra Cement Ltd.
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BEFORE THE ADJUDICATING OFFICER
SECURITIES AND EXCHANGE BOARD OF INDIA
[ADJUDICATION ORDER NO. AK/AO-59-69/2015]
______________________________________________________________________________
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT 1992 READ !ITH RU"E 5
OF SEBI #$ROCEDURE FOR HO"DING IN%UIR& AND I'$OSING $ENA"TIES B& ADJUDICATING OFFICER(
RU"ES 1995
In respect of
'/). ISG T*+,*) ",. (Pan No. AABCI1355C), '/) B, ',+ $*3+ ", (Merged with M/s. I!
"raders #td. with effect fro$ Apri% &1, '&11 prsant to the che$e of A$a%ga$ation approed *+ the
on-*%e igh Cort at o%ata ide its 0rder dated e*rar+ &1, '&13 (Pan No. AABCI1355C), '/).
S4+*4 R* $*,7 ",. and '/). $+8+ E,))8) ',7+* S*37) (Merged with I!"raders #td. with effect fro$ Apri% &1, '&&2 prsant to the che$e of A$a%ga$ation approed *+ the
on-*%e igh Cort at o%ata ide its 0rder dated epte$*er 11, '&&) (Pan No. AABCI1355C), '/)
S:+;, I;3)8;) $*3+ ",. (Pan No. AA4C4), '/) K+3+ '+*4;< $*3+ ",. (Pan No.
AAC'1&3P), '/) O*7=+*, H,;
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were %isted on Bo$*a+ toc 4>change #td. #hereinafter referred to as ?BSE-( and Nationa% toc
4>change of India #td. #hereinafter referred to as >NSE@).
'. 0n persa% of the %etter of offer #=*;+* ***, +) >"OO@), ecrities and 4>change
Board of India (hereinafter referred to as >SEBI@) o*sered that M/s Bo+de%% Media Priate #td.
(hereinafter referred to as >B,@), M/s. I! "raders #td. (hereinafter referred to as >ISG@),
M/s. ewand Inest$ents Priate #td. (hereinafter referred to as >S:+;,@), M/s. aita
Mareting Priate #td. (hereinafter referred to as >K+3+@), M/s. 0rchard o%dings Priate #td.
(hereinafter referred to as ?O*7=+*,@), %ate Ms. Ind !oena and Mr. hriardhan !oena, the
Pro$oters of the Co$pan+ (hereinafter co%%ectie%+ referred to as the >$*8* N7)@) in
the past had io%ated/ not co$p%ied with ;eg%ation 2(1) and 2(') of 4BI (*stantia%
Ac:isition of hares and "aeoers) ;eg%ation, 17 (hereinafter referred to as ?T+43*
R
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*+ Addicating 0fficer) ;%es, 15 (hereinafter referred to as >SEBI R)@) to in:ire into and
addge the a%%eged io%ations co$$itted *+ the Pro$oter Noticees.
5. Conse:ent pon transfer of Ms. Barna%i Mheree, I was appointed as the Addicating 0fficer
ide order dated Agst &2, '&13, nder ection 15SCN)@) ;ef. No. 4A8/A/;P/'7'76/'&13,
4A8/A/;P/'7'7/'&13, 4A8/A/;P/'7'2/'&13, 4A8/A/;P/'7'6/'&13,4A8/A/;P/'7'7/'&13, 4A8/A/;P/'7'23/'&13 and 4A8/A/;P/'673/'&13 dated
0cto*er '6, '&13 were issed to the Pro$oter Noticees nder r%e 6(1) of 4BI ;%es
co$$nicating the a%%eged io%ations of "aeoer ;eg%ations, 17 and/ or "aeoer
;eg%ations, '&11, as app%ica*%e. "he Pro$oter Noticees were a%so ca%%ed pon to show case as
to wh+ an in:ir+ sho%d not *e initiated against it and pena%t+ *e not i$posed nder ection
15A (*) and/ or ection 15 (ii) of the 4BI Act, as app%ica*%e, for the a%%eged io%ations
co$$itted *+ the$. "he copies of the stats of co$p%iance reports receied fro$ the Manager
to the 0ffer were a%so sent a%ong with the respectie CNs.
7. "he detai%s of io%ations co$$itted *+ the Pro$oter Noticees as proided *+ the Manager to
the 0ffer in the stats of co$p%iance doc$ent s*$itted to 4BI at the ti$e of open offer and
incorporated in the CN are shown in the ta*%ar for$ *e%ow
7.1. "he detai%s in respect of io%ation/non
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7.'. "he detai%s in respect of io%ation/non
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a$ended ide circ%ar no. CI;/ 48/1/'&1' dated Ma+ '5, '&1' on *eha%f of the Pro$oter
Noticees and re:ested to eep the Addication Proceedings in a*e+ance.
1&. Mr. 9.. hah, A, ide %etter dated 9anar+ 3&, '&16, on *eha%f of the Pro$oter Noticees
s*$itted its rep%+ to the CNs. It was inter alia co$$nicated therein that the Pro$oter
Noticees proposed to withdraw their consent app%ication and proceed with the Addication
proceedings. ide the aforesaid rep%+, the A on *eha%f of the Pro$oter Noticees inter alia
frther s*$itted as fo%%ows
10.1. Background about the Company/ ACL:
10.1.1. That ACL ever since 19 !as into losses and conse"uentl# in 1990 !as declared
$ic% 'oard for (ndustrial and )inancial *econstruction +hereinafter referred to
as , BIFR- and that the coman# !as ac"uired the .P. oen%a rou in the#ear 1992
10.1.3. That from the ac"uisition of the coman# in the #ear 199 till 30094 the
Promoter 5oticees undertoo% several measures to!ards revival of the coman#4
ho!ever4 the coman# !as not a&le to attain rofits and in 30014 '()* declared
the scheme of reha&ilitation as roosed in the #ear 199 as a failure and the
Monitoring Agenc# !as directed to advertise for change in management of the
coman#2
10.1.6. That !hile the romoter 5oticees !ere contesting against the aforesaid
directions of the '()* &efore the Aellate Authorit# for (ndustrial and )inancial
*econstruction +hereinafter referred to as , AAIFR 4 an Order of !inding u !as
assed '()* in Aril 3004 !hich demanded time and focus of the Promoter
5oticees in ma%ing aeals and aearing &efore the Courts and the AA()*4
alongside their continuous efforts of running and reviving the coman#2
10.1.. That it !as in $etem&er 3007 that AA()* dismissed the '()* Order of !inding
u and referred the matter &ac% to '()* and a modified revival scheme !as
aroved '()* in 3002
10.1.8. That it !as through the continuous efforts of the Promoter 5oticees4 due to
!hich the net!orth of the coman# &ecame ositive and it came out from the
urvie! of '()* in 30092
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10.1.7. That though the net!orth of the coman# &ecame ositive in the #ear 30094 the
oerations of the coman# could not run smoothl# due to continuous disrution
from la&our and li"uidit# crunch4 and4 that racticall# $etem&er 30104 the
coman# !as not having an# roduction2
10.1.. That the records !ere shifted from cororate office of the coman# to Plant
Office i.e. *egistered Office4 most of the staff left the coman#4 further due to
aucit# of funds4 no rofessional hel could &e hired and no single erson !as
having the accounta&ilit#2
10.1.. That the Promoter 5oticee !ere not in a osition to arrange lot of fund infusion
that !as needed and hence sold the coman# to M/s. :a#ee ;eveloment
Cororation Ltd. +hereinafter referred to as "#$CL and during the said
ac"uisition4 the Merchant 'an%er ointed out the alleged violations.10.3. %ubm&''&on' (&th re'pect to a))eged non*comp)&ance o+ Regu)at&on ,-1. and ,-2. o+
akeo0er Regu)at&on' 1 +or the year 21*3:
10.3.1. That the allegation made under *egulation +1 of the Ta%eover *egulations4
199 is not alica&le to the Promoter 5oticees and should &e set aside as the#
&elong to the Promoter/PAC in the Coman# and a searate rovision under
*egulation +3 is alica&le to them2
10.3.3. That as regards allegation under *egulation +3 of the Ta%eover *egulations4
1994 the Promoter 5oticees had informed the Merchant 'an%er that all the
necessar# re"uirements had &een comlied4 though on &eing as%ed for the roof
of su&missions4 o!ing to non availa&ilit# of the same4 the Merchant 'an%er had
categoricall# ta%en the same as non
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10.6. %ubm&''&on' (&th re'pect to a))eged non*comp)&ance o+ Regu)at&on 31-2. and 31-3. o+
akeo0er Regu)at&on' 211 +or the year 211:
10.6.1. That the Promoter 5oticees had made disclosures under *egulation +1A of
Ta%eover *egulations4 1992
10.6.3. That during 5ovem&er 30114 there !as change in romoter holding su&se"uent
to invocation of ledge ledgee on 5ovem&er 064 30114 5ovem&er 184 3011
and 5ovem&er 174 30114 !hich !as dul# intimated the romoters in the
format under *egulation +1A of Ta%eover *egulations4 199 !ithin t!o
!or%ing dates i.e. 5ovem&er 04 30114 5ovem&er 174 3011 and 5ovem&er 14
3011. (n the disclosure so made there !as clear declaration as to change in
holding su&se"uent to invocation of ledge ledgee and hence ade"uate
comliance dul# made210.6.6. That the eriod under consideration !as transitional eriod from old Ta%eover
*egulations4 199 to the ne! Ta%eover *egulations4 3011 and due to lac% of
legal %no!ledge and unavaila&ilit# of rofessional e=ertise and confusion as to
alica&ilit# of rovisions4 disclosure !as made in a different format2
10.6.. That the Promoter 5oticees have dul# made the disclosures4 ho!ever4 in the
!rong format. >ence the same should not &e treated as non
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!ere invo%ed ledgee on reeated defaults in a#ment of loan amount +due
to continued &ad financial osition and aucit# of funds2
10..6. That there !as no actual ac"uisition of shares4 the shares !ere never sold or
transferred4 &ut4 merel# ta%en into custod# on account of invocation of ledge
!ith the o&jective of enforcing the rea#ment of loan and !ere in fact held in
nature of fiduciar# caacit# the ledgee2
10... That even after the invocation of the ledge4 the lenders had not sold off these
shares4 !hich su&stantiates that the mere o&jective of invo%ing the ledge !as
to enforce rea#ment of loan. @on ma%ing good the default4 the shares !ere
returned the ledgee to the ledger +($2
10..8. That under the governing rovisions of section 171 of (ndian Contract Act4 134
the a!nee has the right to retain the goods ledged as a collateral securit# andsection 1 3 rovides for the right to the a!nor to redeem the goods ledged
at an# su&se"uent time &efore the actual sale of them. )urther that the term
,actual sale and collateral securit# as referred in the sections states that the
rights are not transferred merel# on invocation of ledge2
10..7. That4 thus4 there !as no actual ac"uisition of shares ($ and merel# &ecause
the shares invo%ed !ere returned &ac% to the actual o!ner4 it cannot &e said to
&e violation of *egulation 11 of Ta%eover *egulations4 199.
10.8. 789R %B;I%%I7
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Para += The Promoters and associate comanies of M/s ACL shall &e e=emted
from the rovisions of $ection 63A relating to comutation of the limit and
e=clusion of the same from the total overall limit and other alica&le rovisions
of the Comanies Act 19874 $B'( Act/*egulations/uidelines4 ;eositories Act4
$ecurities Contract *egulation Act4 Listing guidelines4 for inter alia4 the
investment in ACL.
10.8.3. That in the light of the aforesaid e=emtion and !ithout rejudice to the
su&missions made4 the Promoter 5oticees have &een e=emted from all the
enal rovisions under alica&le la!s including $B'(4 therefore4 no enal
rovision ma# &e imlicated against the Promoter 5oticees.
11.
"he A; of the Pro$oter Noticees ide e$ai% dated Apri% 6, '&16 re:ested for persona% hearingto *e sched%ed on Ma+ &7 or Ma+ &2, '&16. According%+, an opportnit+ of persona% hearing
was granted to the Pro$oter Noticees on Ma+ 7, '&16 ide hearing notice dated Apri% 7, '&16.
Mr. 9. . hah (A) a%ong with Ms. 8eepia ia+ awhne+, Partner, Corporate Professiona%s (A;)
(hereinafter co%%ectie%+ referred to as >AR)@) appeared on *eha%f of the Pro$oter Noticees. At
the hearing, it was c%arified to the A;s that nder para 6 (c) of the CNs, the reg%ations
$entioned as 11(1) has to *e read as 11(') of the "aeoer ;eg%ations, 17. "he A;s inter alia
s*$itted that one of the Pro$oter Noticees i@. Ms. Ind !oena had e>pired and s*$itted a
photo cop+ of the death certificate dring the hearing. rther the A;s reiterated the
s*$issions $ade ide %etter dated 9anar+ 3&, '&16 and s*$itted that the pro$oters *e
e>e$pted fro$ io%ation of ;eg%ation 2(1) D 2(') and io%ation of ;eg%ation 11(') of the
"aeoer ;eg%ations, 17 in ter$s of BI; 0rder dated 9%+ '1, '&&2. 8ring the hearing, the
A;s were adised to proide the detai%s of p%edged shares, inocation of p%edged shares and
s*se:ent ac:isition, as app%ica*%e, a%ong with the spporting doc$ents sch as *an
state$ents, de$at state$ents etc.F the shareho%ding of the Pro$oter Noticees as on March 31,
'&&1, March 31, '&&' and March 31, '&&3F d%+ Notarised cop+ of the death certificate of Ms.
Ind !oena etc.
1'. "he A i@. Mr. 9. . hah, on *eha%f of the Pro$oter Noticees ide %etter dated Ma+ '&, '&16
proided a notari@ed cop+ of the death certificate of Ms. Ind !oena and reiterated the ear%ier
s*$issions $ade ide %etter dated 9anar+ 3&, '&16. A cop+ of the BI; order dated 9%+ '1,
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'&&2, and a cop+ of the BI; 0rder dated 9anar+ '', '&1&, discharging the Co$pan+ fro$ the
priew of ic Indstria% Co$panies Act (hereinafter referred to as >SICA@), was a%so proided.
rther, inter alia the fo%%owing additiona% s*$issions were $ade/ doc$ents proided *+ the
A on *eha%f of the Pro$oter Noticees
13.1. =&th re'pect to Regu)at&on ,-1. > ,-2. o+ akeo0er Regu)at&on' 1 +or the year
21*3:
13.1.1. A co# of one age document sho!ing actual date of su&mission under
*egulation +6 of the Ta%eover *egulations4 199 the coman# to >#dera&ad
$toc% B=change +hereinafter referred to as "8%9 for the #ears 199
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>S4+*4@), M/s. N;C #td. (hereinafter referred to as >NRC@), M/s. Pa%%$a%% 4ds+ste$s D
Medicare erices Pt. #td. (hereinafter referred to as >$+8+@)and M/s. tone India #td.
(hereinafter referred to as >S; I;,+@) (hereinafter co%%ectie%+ referred to as ?$*8*
G*?@), whi%e p%edging AC# shares with the fo%%owing for p%edgees i@. M/s. Associated
Caps%es P. #td., M/s. Pa$ Pac Machines P. #td., M/s. 8etco Po%+sters P. #td and M/s. ewri #and
Co. P. #td. as co%%atera% secrit+ to aai% the %oan faci%ities. Ghen Noticee I! acting in concert
with the other pro$oter Noticees as aforesaid, defa%ted in repa+$ent of the %oans, the p%edges
were inoed *+ the aforesaid p%edgees and the shares were transferred fro$ the de$at
acconts of I! to the de$at acconts of the aforesaid for p%edgees and conse:ent%+ the+
were registered as *eneficia% owners in the records of the depositor+. Ghen the %oan accont
was sett%ed, the p%edgees transferred *ac the shares to I!.
16. It was o*sered that when the for p%edgees had inoed the p%edges pon defa%t co$$itted
in the repa+$ent of the %oans, the shares were transferred fro$ the de$at accont of I! to the
de$at acconts of the for p%edgees. Hpon sch transfer, the shares ac:ired *+ the p%edgees
ceased to *e the secrit+ for the %oans, as the p%edgees *+ irte of inoing the p%edge had
*eco$e the *eneficia% owners. After the entire %oan a$onts to the aforesaid p%edgees were
paid and sett%ed, the shares were retrned *ac to I! *+ the respectie p%edgees. "his res%ted
in transfer of shares *ac fro$ the de$at accont of the for p%edgees to the de$at accont of
I! and conse:ent change of *eneficia% ownership.
15. "he shareho%ding of the pro$oter grop prior to sch ac:isition was 7'.63=. ence, as per
;eg%ation 11(') read with ;eg%ation 16(1) of the "aeoer ;eg%ations, the Pro$oter Noticees
co%d not hae ac:ired an+ additiona% shares entit%ing the Pro$oter Noticees to e>ercise oting
rights therein, n%ess the+ $ade a p*%ic annonce$ent to ac:ire shares in accordance with
the "aeoer ;eg%ations, 17. oweer, no sch p*%ic annonce$ent was $ade. ence,
pp%e$entar+ how Case Notices (hereinafter referred to as ?S??8;+* SCN)@) ;ef 4A8<
/A/A/2&22/'&15/&
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1. "he transaction state$ent of I! for transaction in the e:it+ shares of AC# for the period Ma+
&1, '&&2 to 9ne 3&, '&& as proided *+ N8# ide %etter dated Agst &6, '&16 and as
proided *+ C8# ide e$ai% dated March 1, '&15, showing sch changes of *eneficia%
ownership was sent to the Noticee Pro$oter !rop a%ong with the pp%e$entar+ CN.
i$i%ar%+, the transaction state$ent of M/s. Associated Caps%es Pt. #td., M/s. Pa$pac
Machines Pt. #td. and M/s. ewri #and Co. Pt. #td. for transaction in the e:it+ shares of AC#
for the period Ma+ &1, '&&2 to 9ne 3&, '&& as proided *+ N8# ide %etter dated epte$*er
&6, '&16 and the transaction state$ent of M/s. 8etco Po%+sters Pt. #td. for transaction in the
e:it+ shares of AC# for the period Ma+ &1, '&&2 to 9ne 3&, '&& as proided *+ C8# ide
e$ai% dated March 13, '&15, showing sch transfer of *eneficia% ownership, was a%so proided
a%ong with the pp%e$entar+ CN.
17. "he detai%s of the aforesaid a%%eged io%ations/ non
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12. It was, ths, a%%eged that throgh the aforesaid actions the Noticee Pro$oter !rop i@. I!
a%ong with Bo+de%%, ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena,
+%ar, N;C, Pa%%$a%% and tone India had each inter alia io%ated ;eg%ation 11(') read with
;eg%ation 16(1) of "aeoer ;eg%ations, 17 on seen (7) occasions.
1. Mr. 9.. hah, A, on *eha%f of I!, ide %etter dated Apri% ', '&15, inter alia $ade the fo%%owing
additiona% s*$issions to the spp%e$entar+ CN
19.1 That ACL !as ac"uired the .P. oen%a grou in the #ear 199 and '()* aroved a
scheme under $ection 1 of $(CA for the reha&ilitation of ACL2
19.3 That desite the efforts of the rou +erst!hile romoters of ACL i.e. the 5oticee
Promoter rou4 the coman# !as not a&le to attain rofits4 and there in the #ear
30014 '()* declared the $cheme as failure219.6 That in the #ear 3004 '()* recommended the !inding u of ACL. The erst!hile
romoters of ACL challenged the '()* recommendation and the same !as set aside in
the #ear 30072
19. That in the #ear 3004 '()* modified and aroved the revival scheme for reha&ilitation
of ACL2
19.8 That in 30094 the net!orth of ACL &ecame ositive and it came out of the urvie! of
$(CA in :anuar# 30104 &ut4 soon thereafter due to la&our unrest and li"uidit# crunch4 the
oerations of ACL came to a virtual standstill $etem&er 30102
19.7 That in the rocess of shifting of its registered office4 lot of its vital documents !ere lost/
mislaced2
19. That the coman# !as sold to :;CL and entered into $hare $u&scrition and $hare
Purchase Agreement +$$PA dated 5ovem&er 184 3011 for ac"uisition of controlling
sta%e in the coman# :;CL. On :anuar# 314 30134 a letter of Offer !as issued2
19. That the merchant &an%er ointed out certain discreancies !ith resect to the
rovisions of Ta%eover *egulations2
19.9 That ($ did not violate the rovisions of Ta%eover *egulations4 199 as the# did not
ac"uire an# ,additional shares- and/ or ,additional voting rights- in ACL virtue of the
imugned transaction2
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19.10 That ledge is defined in $ection 13 of the (ndian Contract Act4 13 as The &ailment
of goods as securit# for a#ment of a de&t or erformance of a romise is called a
ledge. The &ailor is in this case called the ,a!nor-. The &ailee is called the ,a!nee-2
19.11 That the transactions &et!een ($ +,a!nor- and M/s. $e!ri Land Co. Pvt. Ltd.4 M/s.
Associated Casules Pvt. Ltd.4 M/s. Pam Pac Machines Pvt. Ltd. and M/s. ;etco
Pol#esters Pvt. Ltd. +collectivel# referred to as ,a!nees- !ere siml# loan transactions
secured !a# of a ledge of its shares in ACL2
19.13 That deosit ($ of the aforesaid shares !ith the Pa!nees !as in furtherance of the
ledge and !as not a transfer. )urther4 that the rovisions of (ndian Contract Act4 13
are a secial la! governing the contractual rights and o&ligations interse arties
thereto. Therefore the rovisions of the (ndian Contract Act4 13 !ould suersede the
rovisions of Ta%eover *egulations in so far as an# issue ertaining to contractual rightsand o&ligations is concerned2
19.16 That it is an essential element of contract of ledge that the a!nor delivers the goods
that are a!ned to the a!nee and $ection 16 of the (ndian Contract Act4 13 entitles
the a!nee to retain the goods as securit# for a#ment of de&t i.e. the loans in the
resent case2
19.1 That in la! a a!nee can ,invo%e- the ledge uon a default in a#ment adoting an#
one of the follo!ing otions? a to &ring a $uit against the a!nor for the de&t and
retain the goods ledged as collateral securit#2 & he ma# sell the thing ledged on giving
the a!nor ,reasona&le notice-. The a!nor !ould4 ho!ever4 have the right to redeem
the goods until the sale after notice2
19.18 That the act of deositing the shares !ith the a!nee did not create an# ,interest- in the
shares in favour of the a!nee and !as onl# done in furtherance of the resective terms
of the loan/ ledge agreements. The act of deositing the shares into the account of the
a!nee onl# comleted the act of &ailment of shares as securit#2
19.17 That a a!n onl# creates in favour of the a!nee a secial right to retain ossession of
the shares as a collateral securit# and/ or to disose of the same !a# of a sale after
reasona&le notice2
19.1 That as er the relevant rovisions of the Comanies Act and the (ndian Contract Act4 the
ledgees did not ac"uire voting rights and/ or an# other rights of an ordinar#
shareholder in the coman# virtue of deosit of shares in ACL2
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19.1 That it has &een held the >on-&le $ureme Court of (ndia in the case of 'ala%rishnan
v. $!adeshi Pol#te= Ltd. that the legal title to the goods ledged !ould not vest !ith the
a!nee. The $ureme Court held that the a!nor of shares continued to &e the mem&er
of the coman# and could e=ercise all rights of a shareholder of the coman#2
19.19 That ($ redeemed the shares ma%ing a#ment of the loan amounts as is admitted in
the notice4 uon !hich shares !ere re
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19.37 That for reasons aforementioned the# do not ans!er to the term ,ac"uirer- as defined
under the Ta%eover *egulations4 the# are !ithout rejudice to their rights to ma%ing an
alication under *egulation of Ta%eover *egulations to e=clude the transactions
imugned from the rovisions of Ta%eover *egulations. (n this resect4 it has &een stated
that the rovisions of the Limitation Act al# to $B'( and that the resent matter
ertains to the transitional eriod &et!een the old regulations and the ne! regulations
and there !as no judicial ronouncement either $B'( or $ecurities Aellate Tri&unal
+hereinafter referred to as "%A during the relevant eriod that held that the
transactions of the nature imugned !ere in an# !a# violative of the letter and/ or sirit
of the Ta%eover *egulations2
19.3 That the act of ledging of shares as against the loan and su&se"uent release of ledge
on rea#ment of loan is urel# an indeendent act of ($ !ith no involvement of other romoters in the said transaction. The other romoters had no involvement in the loan
transaction under reference and hence cannot &e said to &e ersons acting in concert2
19.3 )urthermore that the use of term ,invo%ed- is misconceived and fla!ed for the reasons
stated a&ove and the $C5 admits that the shares !ere transferred &ac% !hen the loans
!ere reaid2
19.39 That the shares !ere onl# ta%en into constructive ossession the a!nees to enforce
the rea#ment of loan and !ere in fact held in a fiduciar# caacit# the Pa!nees4
!hich !ere returned &ac% to the legal o!ner i.e. ($ after the rea#ment of the loan.
The transfer of shares into the account of the Pa!nees !as a technicalit# arising out of
secial circumstances surrounding the ledge of dematerialiDed shares4 !hich needed to
&e done siml# to comlete the &ailment rocess in line !ith the rovisions of the (ndian
Contract Act4 134 ho!ever4 the legal o!nershi of the shares never changed hands2
19.60 That the shares !ere onl# transferred for the urose of securit# for rea#ment of loan
and there !as no ac"uisition of shares and/ or voting rights4 and hence4 there !as no
violation of Ta%eover *egulations. ($ did not cease to &e the o!ner of the shares
ledged and at all material times continued to &e the o!ner !ith all conse"uential rights
in resect thereof4 including4 &ut4 not limited to all voting rights aurtenant to the
su&ject shares2
19.61 The $C5 itself ac%no!ledges the fact that the loan !as ,settled- and no!here alleges
that the shares !ere re
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'&. rther, Mr. 9.. hah, A ide indiida% %etters dated Apri% ', '&15 has inter alia $ade the
fo%%owing additiona% s*$issions to the spp%e$entar+ CNs issed on *eha%f of Bo+de%%, +%ar
and Pa%%$a%%
30.1 That $%#lar% and Pallmall stands merged !ith ($ !ith effect from Aril 014 300
ursuant to the $cheme of Amalgamation aroved the >on-&le >igh Court at
Eol%ata vide its Order dated $etem&er 114 30092
30.3 That 'o#dell also stands merged !ith ($ !ith effect from Aril 014 3011 ursuant to the
$cheme of Amalgamation aroved the >on-&le >igh Court at Eol%ata vide its Order
dated )e&ruar# 014 30162
30.6 That the loan cum ledge agreements are indeendent contracts interse ($ and the
Pa!nees230. That under the alleged transactions not a single share has &een ac"uired 'o#dell4
$%#lar% and Pallmall and the# can no !a# &e termed as ,Ac"uirer- under the Ta%eover
*egulations4 1994 further it is erroneous to allege them as ,Persons Acting in Concert-
+hereinafter referred to as , ?AC'-4 !hen the transaction of ledge ($ !ere
indeendent transaction2
30.8 That to &e termed as ,PACs-4 the most imortant ingredient is ,Common O&jective or
Purose of $u&stantial Ac"uisition- and the $C5 has failed to esta&lish the ,Common
O&jective or Purose- &et!een ($ and them2
30.7 That merel# &eing the romoters of the same coman#4 the# cannot &e alleged to &e
PACs for a transaction !herein no ac"uisition of shares or voting rights has &een made
them either directl# or indirectl#2
30. That under no circumstances had the# acted as ersons acting in concert !ith ($4 thus4
the# have not violated *egulation 11+3 of Ta%eover *egulations4 1992
30. That contentions and su&missions as !ell as mitigating circumstances made ($ to &e
considered in their case as !ell.
'1. Mr. 9.. hah, A ide indiida% %etters dated Apri% ', '&15 has inter alia reiterated the
s*$issions $ade as aforesaid *+ Bo+de%%, +%ar and Pa%%$a%% fro$ '&.3 to '&.2 a*oe on
*eha%f of aita and Mr. hriardhan !oena. rther, ide indiida% %etters dated Apri% '/3&,
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'&15, N;C, tone India, 0rchard and ewand hae a%so inter alia a%so reiterated the aforesaid
s*$issions $ade *+ Bo+de%%, +%ar and Pa%%$a%% fro$ '&.3 to '&.2 a*oe. "he 8irector of I!
again enc%osed a cop+ of the death certificate of Ms. Ind !oena for reference and record.
''. An opportnit+ of hearing was granted to the Noticee Pro$oter !rop on Ma+ 16, '&15. Mr. 9.
. hah (A) a%ong with Ms. 8eepia ia+ awhne+ and Mr. ;.P !anti (A;) (hereinafter
co%%ectie%+ referred to as >AR)@) appeared on *eha%f of the Noticee Pro$oter !rop and
reiterated the s*$issions $ade in the rep%ies dated Apri% ', '&15 and stated that the+ wo%d
$ae frther s*$ission in the $atter *+ Ma+ ', '&15. "he A;s frther stated that the
Noticees other than I! were not part+ to the %oan agree$ent entered into *+ I!, which was a
part of the nor$a% *siness transaction of I!. "he A;s were inter alia adised to frnish cop+ of
for$ with fi%ed ;oC after the co$p%etion of $erger of Bo+de%%, Pa%%$a%% and +%ar with I!Fcop+ of the %oan agree$ent *etween %ender(s) and I! with respect to the %oan transaction
referred to in the CNF confir$ that other than the ac:isition of shares shown in "a*%e nder
para 1& of pp%e$entar+ CN, no other ac:isition of shares had taen p%ace dring the
:arter ended March '&& and :arter ended 9ne '&&F etc.
'3. ide %etter dated Ma+ '2, '&15, A on *eha%f of I! proided cop+ of the for$s fi%ed with ;oC
after the co$p%etion of the $erger of Bo+de%%, Pa%%$a%% and +%ar with I! and copies of %oan
agree$ents *etween %ender(s) and I!. ide the said %etter, the A on *eha%f of I! inter alia
frther stated/ reiterated as fo%%ows
38.1 that there !as no violation of *egulation 11+3 read !ith *egulation 1+1 of the
Ta%eover *egulations4 1994 for there &eing no ac"uisition at all2
38.3 that for the transactions under consideration4 the act of ($ !as indeendent of and
isolated from the other romoter/ grou entities4 hence for the alleged violation4 the
other romoter/ grou entities should not &e imlicated2
38.6 that ($ &eing an e=isting coman# !ithin the meaning of the Comanies Act4 3016 is a
searate legal entit#4 and the loan transaction under discussion !as underta%en ($
on its name and the same is an indeendent &usiness transaction2
38. that ursuant to the invocation of ledge4 the shares !ere transferred into the demat
account of the lender account4 just &ecause of a technical issue4 as neither the
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;eositories Act4 19974 nor4 the deositor# articiants facilitate an# ar%ing facilit# for
ledged shares in case of invocation of ledge. Thus4 due to a&sence of a secific
rovision in the la!4 the ledged shares haened to &e transferred into the account of
the lenders2
38.8 That to comlete a sale transaction4 the follo!ing oints are %e# ingredients4 and in
a&sence of these essential elements4 the invocation and su&se"uent redemtion
transaction cannot &e said to &e sale or urchase?
The &orro!er does not account for as sale its investment in shares merel# on
invocation4 neither does the lender &oo% such shares as urchases in their accounts/
&alance sheet2
(t is onl# !hen shares get sold the lender4 su&se"uent to invocation4 either to
itself or to an# third art# that the investment is accounted for as sold the&orro!er from its &oo%s2
Also !hen shares actuall# get sold4 it is onl# the amount of loan and interest due
that is adjusted the lender and the differential4 if an#4 is to &e aid or received
the &orro!er2
(n case of the &orro!er too4 it is su&se"uent to the actual sale the lender that the
&orro!er ma%es the re"uired entries and adjustment in its &oo%s of accounts as !ell
as income ta= returns.
38.7 That the loan ledge agreements entered into &et!een t!o arties ursuant to
su&stantive rovisions contained in (ndian Contract Act cannot &e overridden
rocedural rovisions contained under $B'( +;eositories and Particiants *egulations4
1997 and $B'( +$u&stantial Ac"uisition of $hares and Ta%eover *egulations4 1992
38. That shares under consideration continued to remain in &oo%s of ($ and !ere not
&oo%ed into the lender-s &oo%s and that the invocation of ledge rovided the right to
the ledge to sell the shares or to file a suit for recover# of mone#4 &ut4 the amount of
loan !as reaid to the lenders. Thus4 the invocation of ledge !as made just to attain
certain comfort level for recover# of loan the lender and no actual sale of shares
haened2
38. That the !ord ,ledge- is not searatel# defined in Comanies Act4 $B'( Act4 the
;eositories Act or in an# of the regulations of $B'(4 hence4 the definition as set out in
(ndian Contract Act shall revail. Accordingl# invocation of ledged shares the lender
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and conse"uent transfer of the same to his account are siml# comletion of the
,&ailment- rocess as defined in the (ndian Contract Act and not urchase the lender2
38.9 That it is !ell esta&lished and laid rincile of la! that to &e termed as Persons Acting
in Concert +PAC4 the romoters must share a common o&jective or urose of
su&stantial ac"uisition of shares or voting rights. (t has &een stated that the Promoter
rou did not share an# common o&jective for the urose of increasing their
shareholding or voting rights in ACL through the imugned transactions of loan
ledge of shares4 ledge invocation and su&se"uent redemtion. That merel# &ecause
the Promoter 5oticees are of the same romoter grou4 !ith their &eing no common
o&jective or urose4 the# cannot &e alleged to &e in violation of *egulation 11+3 in so
far as the imugned transactions are concerned. (n the matter4 reference has &een made
to the concet of PAC ela&oratel# dealt >on-&le $ureme Court in case of ;aiichi$an%#o Co. Ltd. and the judgement of >on-&le 'om&a# >igh Court in the matter of
E.E.Modi vs. $ecurities Aellate Tri&unal F+3006 116 COM. Cases 1 'om.G. Also4
reference has &een made to the Order of the >on-&le $AT in the matter of *ajesh
Toshni!al vs. $B'( and others dated :une 014 3013. )urther reference has also &een
made to the >on-&le $AT-s Order dated Ma# 114 3013 in the matter of 5i%hil Mansu%hani
vs. $B'(.
'6. ide e$ai% dated 9ne 1&, '&15, the fo%%owing detai%s/ doc$ents were soght
'.1 8etai%s of pro$oters and Board of 8irectors of the co$panies i@. Bo+de%%, 0rchard, I!,
N;C, +%ar, aita, Pa%%$a%%, ewand and tone India at the re%eant point of ti$eF
'.' Cop+ of reso%tion of Board of 8irectors of I! in the $eeting he%d on March &3, '&&2
and an+ other app%ica*%e reso%tions re%ating to the %oan c$ p%edge agree$ent entered
*+ I! with M/s. Associated Caps%es P. #td., M/s. Pa$ Pac Machines P. #td., M/s. 8etco
Po%+sters P. #td and M/s. ewri #and Co. P. #td.F
'.3 "he o*ectie and prpose of the %oan taen *+ I! fro$ M/s. Associated Caps%es P.
#td., M/s. Pa$ Pac Machines P. #td., M/s. 8etco Po%+sters P. #td and M/s. ewri #and Co.
P. #td. a%ong with spporting doc$entsF
'.6 "he acta% ti%i@ation of the %oan a$ont taen *+ I! fro$ M/s. Associated Caps%es P.
#td., M/s. Pa$ Pac Machines P. #td., M/s. 8etco Po%+sters P. #td and M/s. ewri #and Co.
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P. #td. a%ong with spporting cop+ of the re%eant *an state$ents ref%ecting those
entries.
'5. "he A of the Pro$oter !rop ide %etter dated 9%+ &3, '&15 proided the detai%s/ doc$ents
soght. It was inter alia stated ide the said %etter that the %oans were taen *+ I! fro$ the
afore$entioned parties in the ordinar+ corse of *siness and that these *orrowings hae no
association or re%ation with AC#. It was frther stated therein that since the transactions are of
$ch prior period, the e>act detai%s are not tracea*%e and indicatie pattern of %oan ti%i@ation
was proided.
'. It was noted fro$ the copies of reso%tion passed at the $eeting of the Board of 8irectors of
AC# on March &3, '&&2, Apri% &', '&&2 and Apri% 3&, '&&2 and proided ide aforesaid %etterdated 9%+ &3, '&15 that consent was accorded *+ the Board of 8irectors of I! to aai% short
ter$ %oan of ;s. 35 %acs, ;s. 5& %acs, ;s. '5 %acs and ;s. 1 crore fro$ M/s. ewri #and Co. Pt.
#td., M/s. Pa$ Pac Machines Pt. #td., M/s. 8etco Po%+sters Pt. #td and M/s. Associated
Caps%es Pt. #td. respectie%+ inter alia against p%edge of 2&,&&& shares of tone India, 6,6&,&&&
shares of AC#, 55,&&& shares of tone India and ',65,&&& shares of tone India respectie%+ he%d
*+ I!. "he reso%tion where*+ Board of 8irectors of I! accorded approa% for p%edge of AC#
shares in p%ace of tone India shares was not proided. ence, ide e$ai% dated 9%+ 16, '&15,
A of the Pro$oter !rop was adised to proide the reso%tion where*+ Board of 8irectors
had accorded approa% for AC# shares in p%ace of tone India shares. A%so, the reason for
p%edging AC# shares instead of shares of tone India was soght.
'7. ide e$ai% dated 9%+ '6, '&15, A of the Pro$oter !rop forwarded a cop+ of the reso%tion
passed at the $eeting of the Board of 8irectors of the co$pan+ he%d on Ma+ 3&, '&&2, where*+
consent was accorded *+ the Board of 8irectors of I! to p%edge shares of AC#, tar Paper Mi%%s
#td. etc. as $a+ *e re:ired. A ide the said e$ai% dated 9%+ '6, '&15 frther c%arified that the
shares of AC# were re:ired to *e p%edged in order to $aintain the secrit+ coer as per the
p%edge agree$ents, *ecase of considera*%e fa%% in the $aret a%e of shares of tone India
dring the period.
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CONSIDERATION OF ISSUES
'2. I hae caref%%+ persed the written s*$issions of the Pro$oter Noticees/ Pro$oter !rop,
the s*$issions $ade at the hearing and the doc$ents aai%a*%e on record. It is o*sered that
the a%%egation against the Pro$oter Noticees/ Pro$oter !rop is that the+ hae fai%ed to $ae
the re%eant disc%osres nder the proisions of ;eg%ations 2(1) D 2(') of the "aeoer
;eg%ations, 17 and/ or ;eg%ation 31(') read with 31(3) of "aeoer ;eg%ations, '&11 and/
or ;eg%ation 11(') read with ;eg%ation 16(1) of "aeoer ;eg%ations, 17, as app%ica*%e.
'. "he isses that, therefore, arises for consideration in the present case are
'.1. Ghether the Pro$oter Noticees had io%ated the proision of ;eg%ations 2(1) D 2(') of
the "aeoer ;eg%ations, 17 dring the +ear '&&1 to '&&3'.'. Ghether the Pro$oter Noticees had io%ated the proision of reg%ation 31(') read with
31(3) of "aeoer ;eg%ations, '&11 dring the +ear '&11
'.3. Ghether the Pro$oter !rop at the re%eant point of ti$e i@. I! acting in concert with
Bo+de%%, ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena, +%ar,
N;C, Pa%%$a%% and tone India had inter alia io%ated ;eg%ation 11(') read with
;eg%ation 16(1) of "aeoer ;eg%ations, 17 on seen (7) occasions dring the +ear
'&&
'.6. 8oes the io%ation, if an+, as aforesaid, attract $onetar+ pena%t+ nder ection 15 A (*)
and/ or ection 15 (ii) of 4BI Act, as app%ica*%e
'.5. If so, what wo%d *e the $onetar+ pena%t+ that can *e i$posed taing into
consideration the factors $entioned in ection 159 of 4BI Act
FINDINGS
3&. Before $oing forward, it is pertinent to refer to the proisions of ;eg%ations 2(1) D 2(') of the
"aeoer ;eg%ations, 17, ;eg%ation 11(') read with ;eg%ation 16(1) of "aeoer
;eg%ations, 17 and ;eg%ation 31(') read with 31(3) of "aeoer ;eg%ations, '&11 which
reads as nder
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, Cont&nua) d&'c)o'ure'
+1 Bver# erson4 including a erson mentioned in regulation 7 !ho holds more than fifteen er
cent shares or voting rights in an# coman#4 shall4 !ithin 31 da#s from the financial #ear ending
March 614 ma%e #earl# disclosures to the coman#4 in resect of his holdings as on 61st March.
+3 A romoter or ever# erson having control over a coman# shall4 !ithin 31 da#s from the
financial #ear ending March 614 as !ell as the record date of the coman# for the uroses of
declaration of dividend4 disclose the num&er and ercentage of shares or voting rights held
him and ersons acting in concert !ith him4 in that coman# to the coman#.
Con'o)&dat&on o+ ho)d&ng'
11 +1H
+3 5o ac"uirer4 !ho together !ith ersons acting in concert !ith him holds4 fift#
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&m&ng o+ the pub)&c announcement o+ o++er
14+1 The u&lic announcement referred to in regulation 10 or regulation 11 shall &e made
the merchant &an%er not later than four !or%ing da#s of entering into an agreement for
ac"uisition of shares or voting rights or deciding to ac"uire shares or voting rights e=ceeding the
resective ercentage secified therein?
Provided that in case of disinvestment of a Pu&lic $ector @nderta%ing4 the u&lic
announcement shall &e made the merchant &an%er not later than !or%ing da#s of the
ac"uirer e=ecuting the $hare Purchase Agreement or $hareholders Agreement !ith the Central
overnment or the $tate overnment as the case ma# &e4 for the ac"uisition of shares or voting
rights e=ceeding the ercentage of shareholding referred to in regulation 10 or regulation 11 or
the transfer of control over a target Pu&lic $ector @nderta%ing.
Regu)at&on 31-2. read (&th 31-3. o+ takeo0er Regu)at&on 211
$&'c)o'ure o+ encumbered 'hare'
61+1 The romoter of ever# target coman# shall disclose details of shares in such target
coman# encum&ered him or ersons acting in concert !ith him in such form as ma# &e
secified.
+3 The romoter of ever# target coman# shall disclose details of an# invocation of such
encum&rance or release of such encum&rance of shares in such form as ma# &e secified.
+6 The disclosures re"uired under su&
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3'. rther, In !iriandini s. Biendra Narain (AI; 17 C '11&), the on-*%e pre$e Cort, inter<
a%ia o*sered that in case of persona% action, i.e. the actions where the re%ief soght is persona%
to the deceased, the right to se wi%% not srie to or against the representaties, and in sch
cases, the $a>i$ actio persona%is $oritr c$ persona (persona% action dies with the death of
the person) wo%d app%+.
33. In iew of the a*oe, the addication proceedings against %ate Ms. Ind !oena initiated ide
CN dated 0cto*er '6, '&13 and pp%e$entar+ CN dated March '&, '&15 are %ia*%e to *e
a*ated. "he $atter in respect of %ate Ms. Ind !oena is according%+ disposed of.
36. Now, the first isse for consideration is whether the Pro$oter Noticees at the re%eant point of
ti$e i.e. Bo+de%%, I!, ewand, aita, 0rchard, %ate Ms. Ind !oena and Mr. hriardhan
!oena were re:ired to $ae the re%eant disc%osres nder the proisions of ;eg%ations 2(1)
and 2(') of the "aeoer ;eg%ations, 17. I find fro$ the rep%ies of the Pro$oter Noticees that
AC# eer since 122 was into %osses. Conse:ent%+ in 1&, AC# was dec%ared ic *+ BI; and
was ac:ired *+ the !.P. !oena !rop in the +ear 16. "he !.P. !oena !rop ndertoo
seera% $easres towards reia% of the co$pan+, howeer, the co$pan+ was not a*%e to attain
profits and in '&&1, BI; dec%ared the sche$e of reha*i%itation as proposed in the +ear 16 as a
fai%re and the Monitoring Agenc+ was directed to adertise for change in $anage$ent of the
co$pan+. In epte$*er '&&, AAI; dis$issed the BI; 0rder of winding p, referred the
$atter *ac to BI; and a $odified reia% sche$e was approed *+ BI; ide its 0rder dated
9%+ '1, '&&2.
35. I note that nder the $odified reha*i%itation sche$e approed *+ BI; ide its 0rder dated 9%+
'1, '&&2, the Pro$oter Noticees i.e. Bo+de%%, I!, ewand, aita, 0rchard, %ate Ms. Ind
!oena and Mr. hriardhan !oena at the re%eant point of ti$e ('&&1
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the $erits of the a%%egation in the CN dated 0cto*er '6, '&13 and in the s*$issions $ade *+
the Pro$oter Noticees throgh their arios rep%ies and at the ti$e of hearing, I find that the
Pro$oter Noticees i@. Bo+de%%, I!, ewand, aita, 0rchard, %ate Ms. Ind !oena and Mr.
hriardhan !oena at the re%eant point of ti$e ('&&1t isse for consideration is whether the Pro$oter Noticees i.e. Bo+de%%, I!, ewand,aita, 0rchard, %ate Ms. Ind !oena and Mr. hriardhan !oena at the re%eant point of ti$e
('&11) hae io%ated the proisions of ;eg%ation 31(') read with 31(3) of "aeoer ;eg%ations,
'&11. I note that nder ;eg%ation 31(') read with 31(3) of "aeoer ;eg%ation, '&11, the
Pro$oter Noticees were re:ired to disc%ose detai%s of an+ inocation of enc$*ered shares or
re%ease of enc$*rance of shares within seen woring da+s fro$ the inocation or re%ease of
enc$*rance to the stoc e>change where the shares of the co$pan+ were %isted and a%so to
the co$pan+ at its registered office.
37. I note that the Pro$oter Noticees ide their rep%+ dated 9anar+ 3&, '&16 hae inter alia
ad$itted that dring Noe$*er '&11, there was change in pro$oter ho%ding s*se:ent to
inocation of p%edge *+ p%edgee (8C and I8C) on Noe$*er 3, '&11, Noe$*er 15, '&11 and
Noe$*er 1, '&11. It has a%so inter alia *een s*$itted that the sa$e was d%+ inti$ated *+
the Pro$oter Noticees in the for$at nder ;eg%ation 7(1A) of "aeoer ;eg%ations, 17
within ' woring dates i.e. on Noe$*er 6, '&11, Noe$*er 1, '&11 and Noe$*er 17, '&11. I
find fro$ the disc%osres as aai%a*%e on the B4 we*site that the Pro$oter Noticees had
disc%osed nder reg%ation 7(1A) as fo%%ows
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8ate of
transaction
"ransfer of
hares
(Inocation of
p%edge)
Pre
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reporting date, irrespectie of whether the+ are reporting on the date of the eent or not. "hs,
I note that the intent of disc%osre of enc$*ered shares nder ;eg%ation 31(') read with 31(3)
of the "aeoer ;eg%ations, '&11 is to proide a co$p%ete pictre of the shares p%edged *+ the
pro$oter grop, to ena*%e the shareho%ders/ inestors to tae an infor$ed inest$ent decision.
6&. In this conte>t, I wo%d %ie to re%+ on the dg$ent of 8on@b)e %ecur&t&e' Appe))ate r&buna)
-%A. &n ?remchand %hah and 7ther' %9BI -Appea) no 1, o+ 21 dec&ded on February 21
211. wherein it was o*sered that ...... Khen la! rescri&es a manner in !hich a thing is to
&e done4 it must &e done onl# in that manner or not at all. HHH.5on disclosure of the
information in the rescri&ed manner derived the investing u&lic of the information !hich is
re"uired to &e availa&le !ith them !hen the# ta%e an informed decision !hile ma%ing
investments.
61. In this connection, I wo%d a%so %ie to p%ace re%iance on the decision of the 8onb)e %upreme
Court o+ Ind&a &n un(ar ?a) %&ngh 0' %tate o+ ? -2. 5 %upreme Court Ca'e' ,5D wherein
the Cort o*sered that HHH..The rincile is !ell settled that !here an# statutor# rovision
rovides a articular manner for doing a articular act4 then4 that thing or act must &e done in
accordance !ith the manner rescri&ed therefore in the Act. FBmhasis suliedG "he 8onb)e
%upreme Court o+ Ind&a 0&de &t' order dated Apr&) 21 2 &n C&0&) Appea)
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63. I frther note that the Pro$oter Noticees hae inter alia ad$itted to their not $aing the
disc%osre nder the re%eant proisions of ;eg%ations 31(') read with 31(3) of "aeoer
;eg%ations, '&11. "hs, it is esta*%ished withot do*t that the Pro$oter Noticees i@. Bo+de%%,
I!, ewand, aita, 0rchard, %ate Ms. Ind !oena and Mr. hriardhan !oena at the re%eant
point of ti$e had ad$itted%+ io%ated the proisions of ;eg%ations 31(') read with 31(3) of
"aeoer ;eg%ations, '&11 on three (3) occasions.
66. "he third isse for consideration is whether the Pro$oter !rop co$prising Pro$oter Noticee
[email protected]! acting in concert with the other Pro$oter Noticees of AC# at the re%eant point of ti$e
i@. Bo+de%%, ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena, +%ar, N;C,
Pa%%$a%% and tone India, had io%ated the proision of ;eg%ation 11(') read with ;eg%ation16(1) of "aeoer ;eg%ations, 17 on seen (7) occasions dring the +ear '&&.
65. I note that at the re%eant point of ti$e dring the +ear '&&, the Pro$oter !rop ho%ding was
$ore than fift+e$pted inter alia the pro$oters of AC# fro$ the proisions
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app%ica*%e with respect to Co$panies Act, 4BI Act/;eg%ations/!ide%ines, 8epositories Act,
ecrities Contract ;eg%ation Act, #isting gide%ines, etc., as regards their inest$ents in AC#. It
is noted that I8BI ide %etter dated 0cto*er 16, '&& had s*$itted a stats report stating that
the net worth of the co$pan+ had trned positie as on March 31, '&&, hence, the co$pan+
$a+ *e discharged fro$ the priew of ICA/ BI;. BI; at the proceedings he%d on 9anar+ '',
'&1& inter alia noted that the proisions of the sche$e had *een s*stantia%%+ i$p%e$ented and
the nete$pted ide BI; 0rder dated 9%+ '1, '&&2 as regards their inest$ents in AC#. As sch, no
action can *e taen against the Pro$oter !rop co$prising Pro$oter Noticee [email protected]! acting in
concert with the other Pro$oter Noticees of AC# at the re%eant point of ti$e i@. Bo+de%%,
ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena, +%ar, N;C, Pa%%$a%% and
tone India for the io%ation of ;eg%ation 11(') read with 16(1) of the "aeoer ;eg%ation,
17 on two (') ot of the seen (7) occasions i.e. in respect of ac:isition of 2,3',&&& shares on
9anar+ '', '&& and in respect of ac:isition of ,,&&& shares on e*rar+ &7, '&&. rther,
it has a%read+ *een *roght ot a*oe that the addication proceedings against %ate Ms. Ind
!oena initiated ide CN dated 0cto*er '6, '&13 and pp%e$entar+ CN dated March '&,
'&15 are %ia*%e to *e a*ated.
62. Now, the ne>t isse for consideration is whether the Pro$oter !rop co$prising Pro$oter
Noticee [email protected]! acting in concert with the other Pro$oter Noticees of AC# at the re%eant point
of ti$e i@. Bo+de%%, ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena,
+%ar, N;C, Pa%%$a%% and tone India, had io%ated ;eg%ation 11(') read with 16(1) of the
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"aeoer ;eg%ation, 17 de to retrn of inoed shares *+ the concerned p%edgees on the
fo%%owing occasions after the net
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5'. It is pertinent to $ention here that as %ong as the shares re$ained nder p%edge, I! was the
*eneficia% owner and the on%+ effect of the p%edge was that the shares nder p%edge co%d not
*e transferred an+ frther or dea%t with in the $aret withot the concrrence of the p%edgees.
"he p%edge *+ itse%f did not *ring a*ot an+ change in the *eneficia% ownership of the shares
p%edged and there was no :estion of the aforesaid proisions of the "aeoer ;eg%ations,
17 *eing triggered. I, howeer, note that the pawnor/I! had $ade a defa%t in pa+$ent of
the %oan a$ont within the stip%ated ti$e.
53. I note that Paras (7) and (1) of the #oan c$ P%edge Agree$ents entered *+ I! with the
aforesaid Pawnees read as fo%%ows
. (n case of e=ir# of due date or in case of an# other default4 the lender shall have full rights to
sell4 disose of or other!ise deal !ith the said securities on such terms and rice that the lender
ma# thin% fit and al# the net roceeds to!ards satisfaction of the (C; amount outstanding
against the 'orro!er along !ith interest4 charges etc.
17. The Pledger also underta%es to give (rrevoca&le Po!er of Attorne# in favour of the lender to
authoriDe the lender to sell or transfer the said ledged securities for the urose of realiDing
their dues.
56. "hs, I note fro$ the a*oe that the #oan c$ P%edge Agree$ent proided Irreoca*%e Power of
Attorne+ to the p%edgees to transfer the shares in case of defa%t for the prpose of rea%i@ing
their des. Besides, I note here that the Indian Contract Act too entit%es the p%edgee to inoe
the p%edge when a defa%t occrs. rther, if shares are he%d in de$at for$, the 8epositories Act
and the ;eg%ations fra$ed therender proide the $anner in which the p%edge is to *e created
and inoed. Hpon inoing of the p%edge, the procedre on sch inocation is that the
depositor+ cance%s the entr+ of p%edge in its records and registers the p%edgees as *eneficia%
owners of the shares in their records and $aes the necessar+ a$end$ents in its records. "he
p%edgees, ths, *eco$e the *eneficia% owners of the shares. In the e>tant case, I note that as per
its own ad$ission, there was a continos defa%t on the part of I! in repa+$ent of the %oans
that res%ted in the p%edges *eing inoed *+ the aforesaid for p%edgees. "his res%ted in
transfer of shares fro$ the de$at accont of I! to the de$at acconts of the aforesaid for
p%edgees and the p%edgees *eing registered as *eneficia% owners in the records of the
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depositor+. I note frther that nder the 8epositories Act, it is the *eneficia% owner in who$ a%%
the rights ests.
55. A%so, eer+ person ho%ding e:it+ share capita% of co$pan+ and whose na$e is entered as
*eneficia% owner in the records of the depositor+ is dee$ed to *e a ?$e$*er- of the concerned
co$pan+ as per ection 61 of the Co$panies Act and s*ercise a%% the rights of a $e$*er nti% he ceases
to *e a $e$*er. rther, a person ceases to *e a $e$*er *+ transferring his share to another
person.
5. I note here that I! has c%ai$ed that the %ega% tit%e to the goods p%edged wo%d not est with the
pawnee. I! has stated that as per the re%eant proisions of the Co$panies Act and the IndianContract Act, the p%edgees did not ac:ire oting rights and/ or an+ other rights of an ordinar+
shareho%der in the co$pan+ *+ irte of deposit of shares in AC#. In the $atter, I find that I!
has p%aced re%iance on the decision in the case of 'ala%rishnan v. $!adeshi Pol#te= Ltd. wherein
the pre$e Cort has o*sered that the pawnor of shares contined to *e the $e$*er of the
co$pan+ and co%d e>ercise a%% rights of a shareho%der of the co$pan+.
57. I note that the aforesaid decision dated e*rar+ 1', 125 pertains to the $atter where
;eceier was appointed *+ the Co%%ector of anpr in respect of wadeshi Cotton Mi%%s Co$pan+
#td. "he wadeshi Cotton Mi%%s Co$pan+ #td. he%d 1& %ac shares ot of 3 shares of wadeshi
Po%+te> #td. "he receier so appointed sei@ed 1 %ac shares and frther attached %ac shares of
wadeshi Po%+te> #td. he%d *+ wadeshi Cotton Mi%%s Co$pan+ #td. ection 1 (1) of the
Co$panies Act proides that the Board of directors of a co$pan+ sha%%, on the re:isition of
sch n$*er of $e$*ers of the co$pan+ as is specified in s*traordinar+ genera% $eeting of the co$pan+. *
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Co$panies Act re:iring the Board of 8irectors of wadeshi Po%+te> Co$pan+ to consider
and pass certain reso%tions. In this conte>t, the appe%%ants in the said case had contended that
since a ;eceier had *een appointed *+ the Co%%ector in respect of the shares he%d *+ wadeshi
Cotton Mi%%s Co$pan+ and the+ had a%so *een attached, the shares he%d *+ wadeshi Cotton
Mi%%s Co$pan+ co%d not *e taen into consideration for deter$ining the re:ired :a%ification
to isse the notice nder section 1 of the Co$panies Act re:isitioning the e>traordinar+
genera% $eeting, and that if those shares were o$itted fro$ consideration, then the shares he%d
*+ the other re:isitionists wo%d not *e sfficient to isse the said notice. It is in this conte>t,
the on-*%e pre$e Cort he%d that
The rivileges of a mem&er can &e e=ercised onl# that erson !hose name is entered in the
*egister of Mem&ers. A *eceiver !hose name is not entered in the *egister of Mem&ers cannote=ercise an# of those rights unless in a roceeding to !hich the Coman# concerned is a art#
and an order is made thereinHHH.. Bven !here the holder of a share !hose name is entered in
the *egister of Mem&ers hands over his shares !ith &lan% transfer forms dul# signed4 the
transferee !ould not &e a&le to claim the rights of a mem&er as against the coman#
concerned until his name is entered in the *egister of Mem&ers. HHHHHHHHH
An order of attachment cannot4 therefore4 have the effect of deriving the holder of the shares
of his title to the shares. Ke are of the vie! that the attachment of the shares in the Pol#te=
Coman# held the Cotton Mills Coman# had not derived the Cotton Mills Coman# of its
right to vote at the meeting or to issue the notice under section 179 of the Act.
52. In the e>tant case of AC# nder consideration, on inocation of p%edge, the p%edgees were
registered as *eneficia% owners in the records of the depositor+ in who$ a%% the rights ests
nder the 8epositories Act and dee$ed to *e a ,mem&er- of AC# as per ection 61 of the
Co$panies Act and s*
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5. I! has s*$itted that there was no acta% ac:isition of shares/ oting rights *+ I!, as the
transaction referred $ere%+ pertains to the retrn of shares which were inoed *+ the p%edgee
de to nonc%sion frther c%ear%+ confir$s that ac:isition of shares *+ wa+
of inocation of p%edge *+ persons other than *ans and p*%ic financia% instittions is to *e
considered as ac:isition and wo%d trigger the open offer proisions for the prpose of
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"aeoer ;eg%ations, 17, if it e>ceeds the thresho%d %i$it(s) prescri*ed nder the "aeoer
;eg%ations, 17.
1. I note that I! has stated that nder the goerning proisions of section 17 of Indian Contract
Act, 127', the pawnee has the right to retain the goods p%edged as a co%%atera% secrit+ and
section 177 proides for the right to the pawnor to redee$ the goods p%edged at an+
s*se:ent ti$e *efore the acta% sa%e of the$. rther it has *een stated that the ter$ ?acta%
sa%e and co%%atera% secrit+- as referred in the sections states that the rights are not transferred
$ere%+ on inocation of p%edge. It has a%read+ *een e>p%ained in detai% a*oe as to how on
inocation of p%edge, the p%edgees *eca$e the *eneficia% owners of the shares. ence, when
the p%edgees retrned the inoed shares *ac to I! pon repa+$ent of the %oan, it res%ted in
ac:isition *+ I! and persons acting in concert with I!. If we accept the arg$ent $ade *+I! that < there was no acta% ac:isition of shares/ oting rights *+ I! and that $ere%+
*ecase the shares inoed were retrned *ac to the acta% owner it cannot *e said to *e
io%ation of ;eg%ation 11 of "aeoer ;eg%ations, 17, it wo%d nder$ine the intent of the
"aeoer ;eg%ations, as ac:irers wo%d then *e a*%e to ac:ire shares nder the gar* of
p%edge, in e>cess of the thresho%d %i$it(s) prescri*ed nder the "aeoer ;eg%ations.
'. I note frther that in the case of #ry In0e'tment' ?r&0ate L&m&ted 0' $eccan Lea+&ne %er0&ce' Ltd
-Bombay 8&gh Court date o+ dec&'&on 11 ;arch 23. it was he%d that
(t is4 therefore4 clear that the F;eositoriesG Act and the F$B'( +;eositories and ParticiantsG
*egulations contain a !hole and self
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there was transfer of *eneficia% ownership/ oting rights in accordance with the proisions of
the 8epositories Act, 1/ 4BI (8epositories and Participants) ;eg%ations, 1. I o*sere
that ;eg%ation 11(') too ta%s a*ot ac:isition of shares or oting rights. ence, whether or
not there was a a%id sa%e is i$$ateria%, so %ong as there was a transfer of oting rights.
6. I note frther that I! has s*$itted that the shares were redee$ed *+ $aing pa+$ent of the
%oan a$onts, which has *een ad$itted in the CN, pon which shares were re
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and wo%d on%+ res%t in transfer of shares fro$ the p%edgees to I!. "his transfer is a%together
different fro$ the transfer *+ which the shares ca$e to the p%edgees pon inocation of p%edge,
and *+ no process of reasoning can it *e said that the p%edgees contined to ho%d the shares as
co%%atera% secrit+ which was retrned to I! pon the repa+$ent of the %oan. ;eg%ation 52 of
the ecrities and 4>change Board of India (8epositories and Participants) ;eg%ations 1 is
er*ati$ reprodced *e%ow for reference prpose
Regu)at&on 5,
;anner o+ creat&ng p)edge or hypothecat&on
8. +1 (f a &eneficial o!ner intends to create a ledge on a securit# o!ned him4 he shall ma%e
an alication to the deositor# through the articiant !ho has his account in resect of such
securities.
+3 The articiant after satisfaction that the securities are availa&le for ledge shall ma%e anote in its records of the notice of ledge and for!ard the alication to the deositor#.
+6 The deositor# after confirmation from the ledgee that the securities are availa&le for
ledge !ith the ledger shall !ithin fifteen da#s of the receit of the alication create and
record the ledge and send an intimation of the same to the articiants of the ledger and the
ledgee.
+ On receit of the intimation under su&
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+9 After amending its records under su&
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as their names !ere entered in the records of the deositor#. Admittedl#4 the shares !hich the
aellants ac"uired in ;ecem&er 300 !ere in e=cess of the threshold limit+s rescri&ed
*egulation 11+1 of the ta%eover code and4 therefore4 the said regulation got triggered. The
aellants !ere re"uired to come out !ith a u&lic announcement to ac"uire further shares of
the target coman# as envisaged in this *egulation. This !as not done. 5ot onl# this4 the
aellants having ac"uired the shares from the &an%s !ere also re"uired to ma%e the necessar#
disclosures in terms of *egulation of the ta%eover code to the target coman# and the stoc%
e=changes !here the shares !ere listed. This4 too4 !as not done. Ke are4 therefore4 satisfied
that the rovisions of *egulations and 11+1 stood violated and the adjudicating officer !as
right in recording a finding to this effect. 5o fault can4 thus4 &e found !ith the imugned order4
in this regard.
2. In iew of the a*oe, the arg$ent $ade *+ I!/ Pro$oter !rop that the shares were on%+
transferred for the prpose of secrit+ for repa+$ent of %oan and there was no ac:isition of
shares and/ or oting rights does not ho%d an+ $erit. "hs, it is conc%ded that retrn of the
shares *+ the p%edgees to I! a$onts to fresh ac:isition of shares/ oting rights of AC# as per
the "aeoer ;eg%ations, 17. Besides, I note that I! has a%so inter alia ad$itted that
prsant to the inocation of p%edge, the shares were transferred into the de$at accont of the
%ender accont *ecase of technica% isse, as neither the 8epositories Act, 1, nor, the
depositor+ participants faci%itate an+ paring faci%it+ for p%edged shares in case of inocation of
p%edge.
. Now, the ne>t isse for consideration is whether the Pro$oter !rop was acting in concert with
I! with respect to the said ac:isition. I note fro$ the s*$issions $ade that it has *een
c%ai$ed that the Pro$oter !rop did not share an+ co$$on o*ectie for the prpose of
increasing their shareho%ding or oting rights in AC# throgh the i$pgned transactions of %oan
*+ p%edge of shares, p%edge inocation and s*se:ent rede$ption. It has *een s*$itted that
$ere%+ *ecase the Pro$oter Noticees are of the sa$e pro$oter grop, with their *eing no
co$$on o*ectie or prpose, the+ cannot *e a%%eged to *e in io%ation of ;eg%ation 11(') in so
far as the i$pgned transactions are concerned.
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7&. I note fro$ the s*$issions $ade that the Pro$oter !rop *e%onged to one grop i.e. ?!.P.
!oena !rop- and concerted efforts were pt in *+ the grop to reie AC#. "hs, I note that as
per their own s*$issions, the pro$oter entities *e%onged to one grop. It is, ths, not a case
that the Pro$oter !rop was a diided hose as was the case in E.E. Modi . I note here that the
Pro$oter !rop has inter alia stated that the %oan c$ p%edge agree$ents are independent
contracts inter se I! and the Pawnees, with no ino%e$ent of other pro$oters in the said
transaction, hence, the+ cannot *e said to *e persons acting in concert.
71. In the $atter, I note fro$ the detai%s of the pro$oters proided ide %etter dated 9%+ &3, '&15
that $ost of the pro$oter Noticees are n%isted co$panies with e:it+ inter%ins a$ong grop
affi%iates throgh p+ra$ida% strctre and crossectie 8irector of AC# at the re%eant point
of ti$e, was a%so the director in I! as we%% as other pro$oter Noticees i@. +%ar, aita,
Pa%%$a%% and tone India. rther as per the Anna% ;eport of AC# for the period '&&
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throgh re%ation *ased ties. "hs, I conc%de that the Pro$oter !rop acted in concert with I!
for the %oan transactions nder consideration in the CN and that I! did not act indiida%%+ as
c%ai$ed in the s*$issions. 0nce an indiida% *eco$es part of the grop acting in concert with
the intention of ac:iring shares, it %oses its identit+ as an indiida% and taes on the identit+ of
the grop as a who%e. As per sche$e of %aw as enisaged in the erstwhi%e "aeoer ;eg%ations,
17, an indiida% is no %onger regarded as a separate entit+ of the grop, as he *eco$es an
integra% part of the entire nit as one cohesie strctre. "he o*ectie of ac:isition *+ the
Pro$oter !rop was conso%idation and to increase the tota% Pro$oter !rop ho%ding which had
gone down de to inocation of p%edge *+ the p%edgees. Besides, I note that the "aeoer
;eg%ations, 17 does not differentiate ac:isitions throgh independent *siness transactions
fro$ nor$a% transactions, if the ac:isition is in e>cess of the thresho%d %i$it(s) prescri*ed nder
the "aeoer ;eg%ations, 17.
73. As regards the case of ;od& re%ied pon, the shareho%ders were ad$itted%+ a diided hose.
In the present case, fro$ the s*$issions $ade as we%% as fro$ the facts *roght ot as a*oe,
it *eco$es c%ear that the Pro$oter !rop acted in concert with respect to the %oan transaction
and s*se:ent ac:isition of shares. "he decision of the on-*%e pre$e Cort in the $a&&ch&
case re%ied pon $a+ not *e of an+ assistance since it dea%s with a different set of facts re%ating
to co$$on o*ect nder%+ing the ac:isition of shares. 4en so, I a$ of the opinion there is
nothing in the dg$ent that wi%% contradict a finding in the e>tant case that the pro$oters were
acting in concert, or as PACs. As noted ear%ier, conso%idation of the pro$otersO ho%ding, which
had redced s*se:ent to the inocation of p%edge *+ the p%edgee was the co$$on o*ectie.
rther, in the $atter of Rae'h o'hn&(a) 0' %9BI and others dated 9ne &1, '&1' the on-*%e
A" has stated that the pro$oters, as a r%e, *e%ong to a ho$ogenos grop n%ess otherwise
proed *+ attendant circ$stances to *e otherwise. I note that the attendant circ$stances in
the e>tant case c%ear%+ indicate that the entire Pro$oter !rop were into one c%ass. Neither has
the Pro$oter !rop *een a*%e to proe otherwise. Again as regards the 8onb)e %A' 7rder
dated ;ay 11 212 in the $atter of
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shows that o*ectie or prpose of the Pro$oter !rop (other than I!) was dia$etrica%%+
opposite to the o*ectie or prpose of the Pro$oter Noticee i@. I!. In fact, I find that there is
sfficient $ateria% on record inc%ding the s*$issions $ade that *ring ot that the other
Pro$oter Noticees (e>c%ding I!) were acting in concert with I!. "hs, I conc%de that
Pro$oter !rop of AC# was acting in concert with respect to the ac:isitions $ade de to
retrn of inoed shares *+ the respectie p%edgees.
76. Now, the ne>t isse is whether the Pro$oter !rop io%ated ;eg%ation 11(') read with
;eg%ation 16(1) of "aeoer ;eg%ations, 17 as a res%t of sch ac:isitions. As has *een
*roght ot *efore, I note that as at the re%eant point of ti$e dring the +ear '&&, the
Pro$oter !rop ho%ding was $ore than fift+ceeding the respectie percentage
specified therein. ence, I note that on%+ one p*%ic annonce$ent was re:ired for ac:isition
of 1,&&& shares and 12,&&& shares done *+ the Pro$oter !rop de to retrn of inoed shares
*+ the p%edgee on Ma+ &6, '&& in two tranches. ence, I note that the Pro$oter !rop was
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re:ired to co$e ot with a p*%ic annonce$ent as enisaged in the "aeoer ;eg%ations,
17 on for (6) occasions. oweer, the Pro$oter !rop fai%ed to $ae the p*%ic
annonce$ent on each sch occasion. "he addication proceedings against %ate Ms. Ind
!oena initiated ide CN dated 0cto*er '6, '&13 and pp%e$entar+ CN dated March '&,
'&15 are %ia*%e to *e a*ated. oweer, it is esta*%ished withot do*t that the other Pro$oters
of the Pro$oter !rop at the re%eant point of ti$e had io%ated the proisions of ;eg%ation
11(') read with 16(1) of the "aeoer ;eg%ation, 17 on for (6) occasions in '&&.
7. "he 8onb)e %upreme Court o+ Ind&a &n the matter o+ %9BI ' ;r Ram ;utua) Fund 2!D !,
%CL 21!-%C. has he%d that (n our considered oinion4 enalt# is attracted as soon as the
contravention of the statutor# o&ligation as contemlated the Act and the *egulations is
esta&lished and hence the intention of the arties committing such violation &ecomes !holl#irrelevantH. rther in the $atter of Ranan arghe'e 0 %9BI -Appea)
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+iii HHHHH2 or
+iv HHHHH..4
he shall &e lia&le to a enalt# of t!ent#
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2&. As per ection 15A (*) of the 4BI Act, the Pro$oter Noticees are %ia*%e to a pena%t+ of one %ah
rpees for each da+ dring which sch fai%re contines or one crore rpees, whicheer is %ess.
rther, ection 15 (ii) of 4BI Act proides for i$position of $onetar+ pena%t+ of twent+
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23. I frther find that the Pro$oter Noticees hae s*$itted that *+ $aing disc%osre nder
;eg%ation 7(1A) of "aeoer ;eg%ations, 17, instead of nder ;eg%ation 31(') of "aeoer
;eg%ations, '&11, no har$ has *een cased to an+ p*%ic. In the $atter, I note that the 8on@b)e
%ecur&t&e' Appe))ate r&buma) -%A. &n the matter o+ oma)
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25. I find that the Pro$oter Noticees/ Pro$oter !rop hae a%so stated that the show case against
the Pro$oter Noticees/ Pro$oter !rop is *arred *+ %i$itation. I, howeer, find that nder the
4BI Act there is no %i$itation on initiation of addication proceedings for io%ation of arios
proisions of Act and ;eg%ations $ade therender. rther, the proisions of #i$itation Act
app%+ on%+ to proceedings in Corts and hae no app%ication to Easi 9dicia% Bodies,
notwithstanding the fact that sch *odies $a+ *e ested with certain specified powers
conferred on Corts nder the Cii% or Cri$ina% Procedre. rther, In the $atter of
Radhey'hyam Ch&ran&)a) 6oenka ' Adud&cat&ng 7++&cer %9BI the 8on@b)e %A he%d that
H adjudication under section 18( for default under section 18) cannot &e said to &e hit Article
1 of the Limitation act4 as the default identified thereunder &eing a continuing one4 till such
time it is made good. (n the instant case the default !as made good onl# in $etem&er 19994
!hereas the adjudication roceedings had commenced much earlier as !a# &ac% in the #ear199.
i$i%ar%+, in the case at hand too the defa%t is one that contines ti%% date. In sch a case, there
can *e no :estion of the proceedings *eing *arred *+ %i$itation.
2. I frther note that the Pro$oter Noticees/ Pro$oter !rop hae a%so pointed ot their right to
$ae an app%ication nder ;eg%ation 6 of "aeoer ;eg%ations to e>c%de the transactions
i$pgned fro$ the proisions of "aeoer ;eg%ations. I note here that in the case of ;/' %eed
%ecur&t&e' %er0&ce' ?0t Ltd &n the matter o+ ;/' B)ue Coa't 8ote)' and Re'ort' Ltd the
#earned Addicating 0fficer he%d that (n m# vie!4 the roer course of action for the
Promoters4 in the given circumstances4 !ould have &een to ma%e an alication &efore the
Ta%eover Panel under *egulation +34 &efore ac"uiring the shares retransferred the &an%s.
The Promoters having failed to do so have thus4 violated *egulation 11+1 of the $A$T
*egulations failing to ma%e a u&lic announcement to ac"uire shares in accordance !ith the
said *egulations. I a%so note that the cited Addication 0rder was phe%d *+ the onO*%e A".
rther$ore, the facts of the case are a%$ost identica% to the one at hand. i$i%ar%+, in the
present case the Pro$oter Noticees/ Pro$oter !rop fai%ed to app%+ for an e>e$ption nder
;eg%ation 6 of the "aeoer ;eg%ations, 17. Moreoer, I note that the ;eg%ation 6(') of the
"aeoer ;eg%ations, 17 proides that the ac:irer sho%d fi%e an app%ication giing detai%s of
the proposed ac:isition. "he words roosed ac"uisition $ae it a*ndant%+ c%ear that the
e>e$ption has to *e soght prior to the ac:isition. "here is no dispte that sch an e>e$ption
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was neither soght nor granted. In iew of the sa$e, I a$ na*%e to find an+ $erit in this
s*$ission of the Pro$oter Noticee/ Pro$oter !rop.
27. I note that *+ not $aing the p*%ic annonce$ent, the Pro$oter !rop had res%ted in
den+ing the stattor+ right of the shareho%ders of the co$pan+ to e>it throgh open offer
$echanis$ at the respectie point of ti$e. I *e%iee that inestor confidence in the secrities
$aret can *e sstained %arge%+ *+ ensring inestors protection. It, ths, *eco$es i$peratie
to i$pose $onetar+ pena%t+ for io%ation of the proisions of "aeoer ;eg%ations. In this
regard, I note fro$ the B4 we*site that at the re%eant point of ti$e, i.e. as at :arter ended
9ne 3&, '&&, there were a*ot 51,7& p*%ic shareho%ders ho%ding '.2= ot of the tota%
shareho%ding of 13,'5,'3,615 shares, who were depried of an e>it opportnit+ de to fai%re of
the pro$oter Noticees to $ae a p*%ic annonce$ent of the open offer disc%osing theirintention to ac:ire shares of the co$pan+ fro$ the e>isting shareho%ders. It is pertinent to
$ention here that the aerage $aret price at the re%eant point of ti$e i.e. March 31, '&& to
9ne '&&, which was in the price *and of arond ;s. ''
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e>it opportnit+ at the re%eant point of ti$e. "his proiding of an e>it opportnit+ to the
shareho%ders at the re%eant point of ti$e frther ass$es significance in %ight of the
s*$issions that the operations of the co$pan+ co%d not rn s$ooth%+ de to continos
disrption fro$ %a*or and %i:idit+ crnch.
2. I find that Chapter I
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2&.' rther after taing into consideration a%% the facts and circ$stances of the case, I find
that the $atter in respect of io%ation of ;eg%ation 2(1) and 2(') of the "aeoer
;eg%ations, 17 dring the period '&&1on-&le >igh
Court at Eol%ata vide its Order dated $etem&er 114 3009 '/). NRC ",. '/). $+8+
E,))8) ',7+* S*37) $3. ",. +merged !ith ($ M/s. ($ Traders Ltd. !ith
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effect from Aril 014 300 ursuant to the $cheme of Amalgamation aroved the
>on-&le >igh Court at Eol%ata vide its Order dated $etem&er 114 3009 +;, '/). S;
I;,+ ",. ?++ ; +;, )3*+ which wi%% co$$ensrate with the io%ations
co$$itted *+ the Pro$oter !rop for io%ation of ;eg%ation 11(') read with 16(1) of
the "aeoer ;eg%ation, 17 dring '&&.
1. "he Pro$oter Noticees/ Pro$oter !rop sha%% pa+ the said a$ont of pena%t+ *+ wa+ of
de$and draft in faor of J4BI < Pena%ties ;e$itta*%e to !oern$ent of IndiaL, pa+a*%e at
M$*ai, within 65 da+s of receipt of this order. "he said de$and draft sho%d *e forwarded to
Mr. 9a+anta 9ash, Chief !enera% Manager, Corporation inance 8epart$ent, 4BI Bhaan, P%ot
No. C 6 A, J!L B%oc, Bandra r%a Co$p%e>, Bandra (4), M$*ai 6&& &51.
'. In ter$s of r%e of the ;%es, copies of this order are sent to the Noticees and a%so to the
ecrities and 4>change Board of India.
8ate J 1 2015 A;+ K;4+*
P%ace '8+ A,,7+;< O7*