sebi:WTM/KMA/CFD/309/10/2010
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Facts / Headnote
Exemption granted
Provisions invoked
- s. 19
Regulations
- Reg. 10
- Reg. 4(4)
- Reg. 11(2)
- Reg. 4(6)
Holding
The Whole Time Member granted Mrs. Sneha Lata Gupta and Mrs. Sonia Gupta exemption from complying with Regulation 11(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 for their proposed acquisition of 5,14,600 equity shares of Rs.10/- each of IEC Education Limited through release of shares pledged with Central Bank of India.
Full text
Page 2 of 6 2. As per the application, the target company had availed a loan of `183.75 lakhs from the Central Bank of India (hereinafter referred to as the said Bank) on December 8, 1998 to meet its fund requirements for the expansion plans and that its promoters namely, Mr. S. L. Gupta (since deceased on April 1, 2001), Mr. R. L. Gupta and some of their family members had pledged an aggregate of 10,22,450 equity shares with the said Bank as security. It was further stated that the accumulated losses in the target company as on March 31, 2004, were to the tune of `9,07,47,601.43/-and that it had failed to make the repayment of the aforesaid loan amount on the due dates. The application further stated that on March 20, 2004, the Bank had served a legal notice on the target company to repay the entire loan amount along with interest @ 17% immediately and that the Bank had invoked the pledge and transferred 10,22,450 equity shares (which were pledged by the promoters) in its own name. As per the application, the target company, thereafter, had assured the Bank that, it would make full and final settlement of its dues to which the Bank had, in turn, assured that although the pledge had been invoked, the properties continue to remain as collateral for the loans extended by it, and that as and when the payments are made to the Bank, the same would be released back in the respective holder’s names. It was further stated that on full settlement of the loan amounts, as per the reques
Page 3 of 6 was further stated that the aforesaid proposed acquisition would collectively increase the voting rights of the promoter group (which includes the acquirers also) from 56.24% to 59.61% and therefore would trigger Regulation 11(2) of the Takeover Regulations. Hence the application is filed by the acquirers seeking exemption from the applicability of the said Regulation inter alia on the following grounds: i. The proposed acquisition is merely a return of the shares pledged by the promoters with the Bank as a security for the term loan availed by the target company. ii. The acquirers shall not pay any consideration for such return of shares as the shares were only transferred to create the security for the loan under Loan and Hypothecation Agreement. iii. The proposed acquisition of shares would not result in change in control as the acquirers belongs to the promoter group of the target company and are already in control over the target company. iv. Even after the invocation of pledge, the shares were retained by Central Bank of India as a security towards the loan amounts and had not sold even a single share in the market. The objective of invoking the pledge was only to enforce the repayment of term loan. v. The entire amount of loan due to the Bank has already been paid off, but the shares transferred in their name are still standing to their credit. vi. The acquisition is not prejudicial to the interest of the investors as even after the acquisition of shares, t
Page 4 of 6 3. The shareholding pattern of the target company (before and after the proposed acquisition) as per the aforesaid application is as under:- Before Proposed Acquisition No. of shares to be Acquired After Proposed Acquisition Particulars Number of registered shareholders as on date of application No. of Shares % No. of Shares % No. of Shares % Promoters Group (A): Acquirers 2 3,11,395 2.04 5,14,600 3.37 8,25,995 5.41 Promoters (other than the acquirers) 15 82,70,333 54.2
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Source: SecMarx — sebi:WTM/KMA/CFD/309/10/2010. 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.