sebi:VSS/AO-02/2008

SEBI · SEBI · 2007-06-11 · V S Sundaresan, Adjudicating Officer

Reviewed by Varun Matlani, Advocate — Securities Lawyer practicing in SAT and SEBI

Facts / Headnote

No violation established; no monetary penalty imposed; matter disposed of

Provisions invoked

• s. 15A
• s. 15

Regulations relied on

• SEBI (SAST) Regulations, 1997 — 3(3)

Parties

• S Prasad Reddy

Holding

The Noticees had complied with regulation 3(3) of SAST with regard to the acquisition of 29,81,600 shares representing 13.54% of Sharat Industries Limited, so the alleged violation did not stand established and no monetary penalty was imposed.

Full text

Page 2 of 5 proposed acquisition in terms of regulation 3(3) of SAST. The relevant extract of the provisions of regulation 3(3) of SAST is reproduced as under:-

Page 3 of 5 b. The bankers refused to allow working capital facilities. As a result of all these, there was a complete erosion of the net-worth of the company. c. A reference was made to BIFR and the company was declared as sick. d. Many of my friends and relatives who contributed to the promoter’s capital have been waiting for a return for the last 15 years. They have been pressurizing me to buy their shares for a long time. With great difficulty, I could mobilize funds to buy their shares at Rs.2/- per share. I sent intimation under regulation 3(3) of SAST to the Stock Exchanges at Bombay and Hyderabad on December 6, 2006. e. Subsequently, the sellers changed their mind and demanded a higher price. After a lot of persuasion, they agreed to sell at the originally negotiated price of Rs.2/- per share, signed the transfer deeds and handed them over to me along with the share certificates on December 17, 2006. Thus, the acquisition took place on December 17, 2006 and not on December 11, 2006. f. Therefore, I submit that the intimations given by me under Regulation 3(3) of SAST are well in advance of the actual date of acquisition i.e. December 17, 2006. g. The transfer of shares is only among the promoters. The shares of the company are not at all traded on any Stock Exchange for the last several years. Hence, the market price and the interest of the public share holders are not affected in any way.

Page 4 of 5 said documents were duly certified by Mr. Y. Ratan Kumar, Practicing Company Secretary, (C.P. No.1112). During the hearing, Mr. S Prasad Reddy clarified that the date of acquisition was mentioned as December 11, 2006 in the report filed with SEBI under regulation 3(4) of SAST as they thought that it may not be appropriate to indicate another date in the report as they have already intimated to the stock exchanges the date of the proposed acquisition as December 11, 2006, vide their letter dated December 06, 2006. He also pleaded that it was an honest mistake made without any intention to misguide or mislead SEBI. Mr. S Prasad Reddy also submitted a copy of the PAN cards of the Noticees.

Source: SecMarx — sebi:VSS/AO-02/2008. 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.