sebi:WTM/PS/59/CFD/NOV/2013
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Facts / Headnote
Interim order directions revoked; case referred for adjudication under Section 23I of SCRA, 1956 for imposition of penalty under Section 23H against the Company and its promoters
Provisions invoked
- s. 19
- s. 23H
- s. 23I
- s. 12A
Parties
- Brady & Morris Engineering Company Limited
- its directors
- promoters
- promoter group
Holding
The Company failed to comply with the Minimum Public Shareholding (MPS) requirement by adopting any of the prescribed methods, and the case is referred for adjudication to levy a monetary penalty against the Company and its promoters. The directions issued in the interim order dated June 04, 2013 are revoked with immediate effect.
Full text
Page 2 of 3 d. The Company also requested SEBI to withdraw the directions issued in paragraph 17 of the interim order. 4. I have considered the reply of the Company and the submissions made during the personal hearing. The company has submitted that it had complied with the MPS requirements within the stipulated period. According to the Company, its scrip is very thinly traded and due to carry forward losses and market/ financial conditions, it was not favourable for the company to come out either with a bonus issue or a rights issue. I note that the promoters of the Company had sold 1,60,000 equity shares representing 7.11% of the paid up share capital of the Company on May 20, 2013 in open market to Transparent Agro Private Limited and others. Pursuant to the same, the promoters' holding was reduced to 73.75%.
Page 3 of 3 7. I am not convinced with the reasons submitted by the Company for not adopting methods mentioned in the circulars for bringing the shareholding of the public shareholders in the Company at the stipulated minimum level of 25%. Considering the facts and circumstances of the case, it is quite clear that the Company had the primary responsibility to comply with the MPS requirement by adopting the methods available to it as discussed in paragraph 6 above. In case the Company was experiencing any difficulty it should have approached SEBI with its proposed method for approval, which the Company has clearly failed to do. Therefore, I find it necessary to refer the present case for adjudication in order to levy suitable monetary penalty against the Company and its promoters for not adopting the methods available for complying with the MPS requirements as stipulated in the circulars discussed above. Accordingly, this case is being referred for adjudication under Section 23I of the Securities Contracts (Regulation) Act, 1956 read with the Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties By Adjudicating Officer) Rules, 2005 for imposition of suitable penalty against the Company and its promoters under Section 23H of the Securities Contracts (Regulation) Act, 1956. For this purpose, an adjudicating officer shall be appointed by SEBI and he/she shall conduct the inquiry in accordance with the law.
5. SEBI had issued circulars dated December 16, 2010, February 08, 2012 and August 29, 2012, in order to align the requirements in the Listing Agreement to specify the manner in which public shareholding may be raised to the prescribed minimum level. These circulars inter alia provided the following methods for complying with the MPS requirements: a. Issuance of shares to the public through prospectus, b. Offer for sale of shares held by promoters to public through prospectus, c. Sale of shares held by promoters through the secondary market i.e. OFS through Stock Exchange, d. Institutional Placement Programme, e. Rights Issues to public shareholders, with promoters/ promoter group shareholders forgoing their rights entitlement, f. Bonus Issues to public shareholders, with promoters/ promoter group shareholders forgoing their bonus entitlement, g. Any other method as may be approved by SEBI, on a case to case basis.
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Source: SecMarx — sebi:WTM/PS/59/CFD/NOV/2013. 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.