sebi:DSR/AO-17/2008
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Facts / Headnote
Violation of Regulation 11(1) of SAST established; monetary penalty of Rs. Five Lakhs imposed under Section 15H(ii)
Provisions invoked
- s. 15
- s. 81
- s. 15H
- s. 15J
Regulations
- Reg. 11
- Reg. 3
- Reg. 2(1)
- Reg. 10
- Reg. 14(1)
- Reg. 11(1)
- Reg. 3(1)
- Reg. 21(1)
- Reg. 20
- Reg. 3(1)(c)(i)
- Reg. 3(1)(c)
Parties
- M/s Shingar Limited
Holding
The acquirer M/s Shingar Limited violated Regulation 11(1) of SAST by acquiring 30,00,000 shares of PCIL by preferential allotment on 28.06.2000 without making a public announcement, as it was ineligible for exemption under Regulation 3 due to non-compliance with Regulation 3(1)(c)(i) and (ii). A monetary penalty of Rs. Five Lakhs under Section 15H(ii) of SEBI Act, 1992 (as existed then) was imposed.
Full text
Page 2 of 8 and 12 of SAST were not applicable to it. In terms of Regulation 3(1) (c) (i) of SAST, the copy of the Board resolution passed in the Board meeting held on April 29, 2000, which had to be sent to the respective stock Exchanges, was not sent. The disclosures in terms of Regulation 3(1) (c) (ii) which should have been disclosed in the notice of AGM were not disclosed. In view of the non compliance of Regulation 3(1) (c) (i) and Regulation 3(1) (c) (ii), it was alleged that the acquirer was not eligible for exemption from the applicability of Regulation 11(1) of SAST.
Page 3 of 8 4. It was alleged that prior to the said acquisition by way of preferential allotment, the aggregate share holding of the promoter group (including the holdings of the acquirer) was more than 15% of PCIL’s equity. Hence, the acquirer (belonging to the promoter group) was prohibited from acquiring shares/voting rights of PCIL in excess of 5% in any period of 12 months, without making a public announcement. As the acquirer (belonging to the promoter group) did not, allegedly, comply with the requirements of Regulation 3(1) (c) (i) and Regulation 3(1) (c) (ii) of SAST, thus, the acquirer allegedly violated the provisions of Regulation 11(1) {as existing at the time of allotment} and the acquisition of 30,00,000 shares through preferential allotment was not exempt from making a Pubic Announcement (PA) in terms of SAST. The said PA, in terms of Regulation 14(1) of SAST, was to be made within 4 days of deciding to acquire shares of PCIL.
Page 4 of 8 covering letter dated 21.6.2004 received by SEBI on 22.6.2004) filed by the Acquirer itself and also from the extract of the Minutes of the meeting of Board of Directors of the target company held on 29.4. 2000. The acquirer along with other promoters held 33.93% (more than 15%) of equity capital of PCIL prior to the preferential allotment. The acquirer further acquired 30,00,000 (61.77%) equity shares by way of preferential allotment on 28.6.2000. The acquirer did not comply with Regulation 3(1)(c) of SAST, thereby rendering it ineligible from getting exemption from the applicability of Regulation 11(1) of SAST. Accordingly, the acquirer triggered Regulation 11(1) of SAST, which prohibits the acquirer from acquiring shares in excess of 5% in any period of 12 months unless the acquirer makes a public announcement to acquire further shares from the shareholders of PCIL. The acquirer acquired 30,00,000 shares @ Rs. 40 per share. By doing so, it has committed breach of a cardinal principle of SAST, namely, “Equality of treatment and opportunity to all shareholders” inasmuch as it failed to make public announcement as required under law.
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Source: SecMarx — sebi:DSR/AO-17/2008. 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.