sebi:AP/AO-25/2006-07

SEBI · SEBI · 2005-07-06 · Amit Pradhan, Adjudicating Officer

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Facts / Headnote

Consolidated penalty of Rs. 5,00,000 imposed jointly on the two noticees for violation of Regulation 11(2) of SEBI (SAST) Regulations, 1997.

Provisions invoked

• s. 15
• s. 15H
• s. 15J

Regulations

• Reg. 14(1)
• Reg. 3(4)
• Reg. 3(1)
• Reg. 21(1)
• Reg. 20
• Reg. 11(2)
• Reg. 199
• Reg. 3(1)(c)(i)
• Reg. 3(1)(c)

Parties

• M/s K.G Fabriks Ltd
• M/s Crocodile (India) Pvt Ltd

Holding

The noticees violated Regulation 11(2) of the SAST Regulations by acquiring 1,000,000 shares on a preferential basis without making a public announcement, as they were ineligible for the exemption under Regulation 3(1)(c) due to non-compliance with its disclosure requirements. A consolidated penalty of Rs. 5,00,000 was imposed jointly on the two noticees.

Full text

1. Sri Kannapiran Mills Ltd. (hereinafter referred as ‘SKML’ or ‘Target Company) has its registered office at Coimbatore and its shares are listed in Coimbatore Stock Exchange (CSE) and Madras Stock Exchange (MSE). The authorized share capital of the SKML as on March 31, 1995 was 60.00 lakhs equity shares of Rs. 10/-each amounting to Rs.6,00,00,000/- and the paid up capital was 26,82,880 equity shares of Rs.10/- each amounting to Rs. 2,68,28,800/-. As per the report under Regulation 3(4) of SEBI (Substantial Acquisition of Shares and Takeovers), Regulations 1997(hereinafter referred to as SAST or said Regulations) submitted on behalf of acquirers who are the promoters of the Target Company vide their letter dated 06.07.2005, the promoters holding stood at 83.03%. The Target Company made a preferential allotment and allotted five lakh equity shares each on 27.12.2000 to M/s K.G Fabriks Ltd. and M/s Crocodile (India) Pvt Ltd( hereinafter referred to as acquirer). Pursuant to the said allotment promoters collectively held 32,27,714 equity shares constituting 87.64% of the post preferential issue share capital. Consequently the collective share capital of the promoters had gone up by 4.61% viz, from 83.03% to 87.64%. In terms of Regulation 3(1)(c)(i) of the said regulations the Board resolution dated 21.11.2000 was not sent to CSE and MSE. The disclosures in terms of Regulation 3(1)( c)(ii) were also not mentioned in the notice of EGM dated 21.11.2000. In view of the non complian

August 28, 2006 to inquire into and adjudge under section 15H (ii) of the SEBI Act, 1992, the aforesaid alleged violation of Regulation 11(2) of SAST by the below mentioned promoters/acquirers and PACs (hereinafter referred to as ‘Noticees’):

shareholders of SKML in terms of Regulation 11(2) of SEBI (SAST) Regulations, 1997{then existing at the time of allotment}. It is also alleged that the acquirers did not complied with Regulation 3(1)(c) of the said Regulations , thereby rendering them ineligible from getting exemption from the applicability of Regulation 11(2) of the said Regulation. The said public announcement had to be made within 4 days of deciding to acquire shares of SKML, in terms of Regulation 14(1) of the said Regulations. It was alleged that non compliance with the aforesaid attracts penalty under Section 15H (ii) of SEBI Act, 1992.

Source: SecMarx — sebi:AP/AO-25/2006-07. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.