sebi:CO/263/TO/10/2002

SEBI · SEBI · 2002-08-05 · G. N. Bajpai, Chairman

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Facts / Headnote

Application for exemption from making public announcement under regulation 10 rejected

Regulations

• Reg. 4
• Reg. 3
• Reg. 9
• Reg. 10
• Reg. 3(1)
• Reg. 3(1)(f)
• Reg. 3(1)(l)

Holding

SEBI rejected the Acquirer's application seeking exemption from making a public announcement under regulation 10 for the proposed repurchase of 38,58,565 pledged equity shares (26.31%) from ICICI, holding that such repurchase constitutes a fresh acquisition of shares triggering the open offer requirement.

Full text

Acquirer will have to make an open offer to the public shareholders of the Target company in terms of regulation 10 of SEBI (Substantial Acquisition of Shares and Takeovers ) Regulations ,1997(hereinafter referred to as "the Regulations" ). 2.0The Target company is a public company duly incorporated under the Companies Act, 1956, in July 1984. The Target company is engaged in the manufacture and sale of air-conditioners and other products. The Lalbhai Group consisting inter alia, of the Acquirer, Arvind Mills Ltd. and Arvind Products Ltd., has been in effective control of the Target company since its inception. The shares of the Target company are listed at The Stock Exchange, Mumbai, Ahmedabad Stock Exchange and National Stock Exchange. 3.0The Acquirer made an application dated 05.08.2002 under sub- regulation (2) of regulation 4 of the Regulations to the Securities and Exchange Board of India (hereinafter referred to as SEBI) seeking exemption from making of public announcement under regulation 10 of the Regulations for the proposed acquisition / repurchase of the 26.31% equity shares of the Target company from ICICI. 4.0 In the aforesaid application, the Acquirer, inter alia , submitted the following: 4.1In or about the beginning of January 1999, the Lalbhai Group represented by Arvind Mills Ltd., and the Target Company

would have 35.2% shares. Lalbhai Group would have the same percentage of shares, namely 35.2% while the shareholding of the public would be reduced to 29.6%. Thus, Hitachi and Lalbhai Group were to have equal stake in the share capital of the Target company and Hitachi came in as the foreign collaborator of the Lalbhai Group and became a Co-promoter. The Management Agreement also provided in Clause 3.3.2 that the name of the Target company be changed from Amtrex Appliances Ltd. to the current name. Clause 16.1 of the Management Agreement provided that neither Hitachi nor Lalbhai Group would be entitled to pledge or otherwise encumber the shares of the Target company without proper written consent of the other and for a period of three years from the date of completion of the process, neither shareholder would be entitled to sell, assign, pledge, hypothecate, transfer or exchange any shares owned by it in the Target company . Clause 16.2 of the Management Agreement also provided the procedure to be followed if either shareholder desired to sell, assign or otherwise transfer any or all of the shares in the Target company held by it, after the aforesaid period of three years. This procedure provided for giving a right of first refusal to the other shareholder. The Management agreement also contained provision for joint management of the Target company by each of the two shareholders having three Directors on the Board and Lalbhai Group having the right to nominate the Chairman o

"(4)AND WHEREAS as one of the conditions for entering into this Pledge agreement, the Pledgor and Pledgee have executed Buyback Agreement. In the event ICICI invokes the Pledge of the Target company Shares to enforce the underlying security, the same would be subject to terms of the said Buyback Agreement." Clause 9 of the Share Pledge Agreement provide for enforcement for the pledge. Sub-Clause (a) of Clause 9 stated that upon the occurrence of an event of default ICICI may by giving one day’s prior notice enforce the pledge by transferring the pledged shares in its name and Sub-Clause (b) of Clause 9 provided that such enforcement of the pledge by ICICI would be subject to Clause 16 of the Management Agreement. Sub-Clause (c) of Clause 9 again referred to the Buyback Agreement in the following words : "(c)The Pledgor and the Pledgee agree that upon enforcement of the pledge in respect of the Pledged Shares under this Agreement, the terms of the Buyback Agreement dated September 2000 executed by and between the Pledgor and Pledgee shall apply, notwithstanding anything to the contrary contained herein." <!--[if !supportLists]-->(ii)<!--[endif]-->It is seen from the fourth recital as also from Sub-Clause (c) of clause 9 that it was one of the conditions of the pledge of the shares that the Acquirer and ICICI executed a buyback Agreement providing that in the event of ICICI invoking the pledge of the shares to enforce the underlying security, such enforcement of the security cr

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