sebi:WTM/PS/25/CFD/JULY/2014
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Facts / Headnote
Interim order dated June 04, 2013 confirmed against the company, its directors, promoters and promoter group; directions to remain in force till further directions.
Provisions invoked
- s. 19
- s. 21
- s. 391
- s. 12A
- s. 100
Regulations
- Reg. 14(1)
Parties
- Khoday India Limited
- Directors of Khoday India Limited
- Promoters and promoter group of Khoday India Limited
Holding
SEBI confirmed the directions issued in the interim order dated June 04, 2013 against Khoday India Limited, its directors, promoters and promoter group for continuous non-compliance with the minimum public shareholding (MPS) requirement of 25% under rule 19A of the SCRR and Clause 40A of the Listing Agreement read with section 21 of the SCRA.
Full text
Page 2 of 6 (b) The Company has around 15,000 public shareholders widely distributed all over India as well as outside India. (c) Though the shares are listed on the MSE and BgSE, they have not been traded during the past 5 years. Even in the BSE, the volume of trading of the Company's shares is extremely low. (d) The Company could not declare dividend in the absence of any distributable profits during the past six financial years i.e., 2007-08 to 2012-13. (e) With a view to provide liquidity to the investors at a fair price and provide an exit opportunity to the public shareholders, the Company had on May 03, 2013, submitted to BSE the draft of a proposed Scheme of Arrangement ("the Scheme") under sections 391 to 393 read with sections 100 to 104 in compliance with the SEBI Circular dated February 04, 2013 and also submitted further documents in compliance with a subsequent SEBI Circular dated May 21, 2013. (f) The Scheme provides for reduction of Company's paid-up capital to the extent of the public shareholding i.e., ₹ 3,93,10,420/- subject to compliance with the procedures laid down under the aforesaid SEBI Circulars as well as the provisions of sections 100-104 and 391-393 of the Companies Act, 1956 and payment of ₹ 75/- per share to the public shareholders (paid-up capital of ₹ 10/- and a premium of ₹ 65/-). The proposed price is 139% more than the fair value of ₹ 31.39/- as per the Share Valuation Report dated March 28, 2013 issued by an independent Chartered Accountan
Page 3 of 6 Scheme, the Company would apply for consequential delisting from the stock exchanges and continue existence as a public limited company and that the proposed Scheme appears to be defective and not in conformity with the Delisting Regulations. In response to the letters from the stock exchanges, SEBI vide letter dated August 30, 2013, while making the following observations, advised them not to grant 'no-objection' certificate and to intimate the Company to include the observations of stock exchanges in its filings made to the Hon'ble High Court : (a) Quasi-judicial proceedings are pending against the Company as the interim order is passed against it for non-compliance with the MPS requirement. (b) The Scheme provides for reduction of capital and consequential delisting from the stock exchanges after implementation. (c) Any company desirous of delisting its equity shares has to obtain prior approval of its shareholders by a special resolution passed through postal ballot after disclosure of all material facts. However, similar approval is not necessary in case of reduction of capital. Therefore, the shareholders would be forced to exit without their consent. (d) As per regulation 14(1) of the Delisting Regulations, all the public shareholders are entitled to participate in the book building process which leads to fair price discovery. However, the price to be paid to the public shareholders under the reduction of capital scheme may not be fair as there is no provis
Page 4 of 6 company before filing petition before the Hon'ble High Court for reduction of capital. Further, any scheme for reduction involves alteration of Articles of Association of the company which requires passing of a resolution by the shareholders through postal ballot as mandated by the Companies (Passing of Resolution by Postal Ballot) Rules, 2011. Therefore, a petition seeking sanction for its proposed Scheme will be filed before the Hon'ble High Court of Karnataka only after obtaining the consent of the requisite majority of the public shareholders.
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Source: SecMarx — sebi:WTM/PS/25/CFD/JULY/2014. 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.