Adjudication Order in respect of 11 entities in the matter of M/s. Andhra Cement Ltd

8/20/2019 Adjudication Order in respect of 11 entities in the matter of M/s. Andhra Cement Ltd.

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Adjudication Order in the matter of M/s. Andhra Cement Limited Page 1 of 52

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. AK/AO-59-69/2015]

______________________________________________________________________________

UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT 1992 READ !ITH RU"E 5

OF SEBI #$ROCEDURE FOR HO"DING IN%UIR& AND I'$OSING $ENA"TIES B& ADJUDICATING OFFICER(

RU"ES 1995

In respect of

'/). ISG T*+,*) ",. (Pan No. AABCI1355C), '/) B, ',+ $*3+ ", (Merged with M/s. I!

"raders #td. with effect fro$ Apri% &1, '&11 prsant to the che$e of A$a%ga$ation approed *+ the

on-*%e igh Cort at o%ata ide its 0rder dated e*rar+ &1, '&13 (Pan No. AABCI1355C), '/).

S4+*4 R* $*,7 ",. and '/). $+8+ E,))8) ',7+* S*37) (Merged with I!"raders #td. with effect fro$ Apri% &1, '&&2 prsant to the che$e of A$a%ga$ation approed *+ the

on-*%e igh Cort at o%ata ide its 0rder dated epte$*er 11, '&&) (Pan No. AABCI1355C), '/)

S:+;, I;3)8;) $*3+ ",. (Pan No. AA4C4), '/) K+3+ '+*4;< $*3+ ",. (Pan No.

AAC'1&3P), '/) O*7=+*, H,;


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were %isted on Bo$*a+ toc 4>change #td. #hereinafter referred to as ?BSE-( and Nationa% toc

4>change of India #td. #hereinafter referred to as >NSE@).

'. 0n persa% of the %etter of offer #=*;+* ***, +) >"OO@), ecrities and 4>change

Board of India (hereinafter referred to as >SEBI@) o*sered that M/s Bo+de%% Media Priate #td.

(hereinafter referred to as >B,@), M/s. I! "raders #td. (hereinafter referred to as >ISG@),

M/s. ewand Inest$ents Priate #td. (hereinafter referred to as >S:+;,@), M/s. aita

Mareting Priate #td. (hereinafter referred to as >K+3+@), M/s. 0rchard o%dings Priate #td.

(hereinafter referred to as ?O*7=+*,@), %ate Ms. Ind !oena and Mr. hriardhan !oena, the

Pro$oters of the Co$pan+ (hereinafter co%%ectie%+ referred to as the >$*8* N7)@) in

the past had io%ated/ not co$p%ied with ;eg%ation 2(1) and 2(') of 4BI (*stantia%

Ac:isition of hares and "aeoers) ;eg%ation, 17 (hereinafter referred to as ?T+43*

R


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*+ Addicating 0fficer) ;%es, 15 (hereinafter referred to as >SEBI R)@) to in:ire into and

addge the a%%eged io%ations co$$itted *+ the Pro$oter Noticees.

5. Conse:ent pon transfer of Ms. Barna%i Mheree, I was appointed as the Addicating 0fficer

ide order dated Agst &2, '&13, nder ection 15SCN)@) ;ef. No. 4A8/A/;P/'7'76/'&13,

4A8/A/;P/'7'7/'&13, 4A8/A/;P/'7'2/'&13, 4A8/A/;P/'7'6/'&13,4A8/A/;P/'7'7/'&13, 4A8/A/;P/'7'23/'&13 and 4A8/A/;P/'673/'&13 dated

0cto*er '6, '&13 were issed to the Pro$oter Noticees nder r%e 6(1) of 4BI ;%es

co$$nicating the a%%eged io%ations of "aeoer ;eg%ations, 17 and/ or "aeoer

;eg%ations, '&11, as app%ica*%e. "he Pro$oter Noticees were a%so ca%%ed pon to show case as

to wh+ an in:ir+ sho%d not *e initiated against it and pena%t+ *e not i$posed nder ection

15A (*) and/ or ection 15 (ii) of the 4BI Act, as app%ica*%e, for the a%%eged io%ations

co$$itted *+ the$. "he copies of the stats of co$p%iance reports receied fro$ the Manager

to the 0ffer were a%so sent a%ong with the respectie CNs.

7. "he detai%s of io%ations co$$itted *+ the Pro$oter Noticees as proided *+ the Manager to

the 0ffer in the stats of co$p%iance doc$ent s*$itted to 4BI at the ti$e of open offer and

incorporated in the CN are shown in the ta*%ar for$ *e%ow

7.1. "he detai%s in respect of io%ation/non


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7.'. "he detai%s in respect of io%ation/non


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a$ended ide circ%ar no. CI;/ 48/1/'&1' dated Ma+ '5, '&1' on *eha%f of the Pro$oter

Noticees and re:ested to eep the Addication Proceedings in a*e+ance.

1&. Mr. 9.. hah, A, ide %etter dated 9anar+ 3&, '&16, on *eha%f of the Pro$oter Noticees

s*$itted its rep%+ to the CNs. It was inter alia co$$nicated therein that the Pro$oter

Noticees proposed to withdraw their consent app%ication and proceed with the Addication

proceedings. ide the aforesaid rep%+, the A on *eha%f of the Pro$oter Noticees inter alia

frther s*$itted as fo%%ows

10.1. Background about the Company/ ACL:

10.1.1. That ACL ever since 19 !as into losses and conse"uentl# in 1990 !as declared

$ic% 'oard for (ndustrial and )inancial *econstruction +hereinafter referred to

as , BIFR- and that the coman# !as ac"uired the .P. oen%a rou in the#ear 1992

10.1.3. That from the ac"uisition of the coman# in the #ear 199 till 30094 the

Promoter 5oticees undertoo% several measures to!ards revival of the coman#4

ho!ever4 the coman# !as not a&le to attain rofits and in 30014 '()* declared

the scheme of reha&ilitation as roosed in the #ear 199 as a failure and the

Monitoring Agenc# !as directed to advertise for change in management of the

coman#2

10.1.6. That !hile the romoter 5oticees !ere contesting against the aforesaid

directions of the '()* &efore the Aellate Authorit# for (ndustrial and )inancial

*econstruction +hereinafter referred to as , AAIFR 4 an Order of !inding u !as

assed '()* in Aril 3004 !hich demanded time and focus of the Promoter

5oticees in ma%ing aeals and aearing &efore the Courts and the AA()*4

alongside their continuous efforts of running and reviving the coman#2

10.1.. That it !as in $etem&er 3007 that AA()* dismissed the '()* Order of !inding

u and referred the matter &ac% to '()* and a modified revival scheme !as

aroved '()* in 3002

10.1.8. That it !as through the continuous efforts of the Promoter 5oticees4 due to

!hich the net!orth of the coman# &ecame ositive and it came out from the

urvie! of '()* in 30092


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Adjudication Order in the matter of M/s. Andhra Cement Limited Page ! of 52

10.1.7. That though the net!orth of the coman# &ecame ositive in the #ear 30094 the

oerations of the coman# could not run smoothl# due to continuous disrution

from la&our and li"uidit# crunch4 and4 that racticall# $etem&er 30104 the

coman# !as not having an# roduction2

10.1.. That the records !ere shifted from cororate office of the coman# to Plant

Office i.e. *egistered Office4 most of the staff left the coman#4 further due to

aucit# of funds4 no rofessional hel could &e hired and no single erson !as

having the accounta&ilit#2

10.1.. That the Promoter 5oticee !ere not in a osition to arrange lot of fund infusion

that !as needed and hence sold the coman# to M/s. :a#ee ;eveloment

Cororation Ltd. +hereinafter referred to as "#$CL and during the said

ac"uisition4 the Merchant 'an%er ointed out the alleged violations.10.3. %ubm&''&on' (&th re'pect to a))eged non*comp)&ance o+ Regu)at&on ,-1. and ,-2. o+

akeo0er Regu)at&on' 1 +or the year 21*3:

10.3.1. That the allegation made under *egulation +1 of the Ta%eover *egulations4

199 is not alica&le to the Promoter 5oticees and should &e set aside as the#

&elong to the Promoter/PAC in the Coman# and a searate rovision under

*egulation +3 is alica&le to them2

10.3.3. That as regards allegation under *egulation +3 of the Ta%eover *egulations4

1994 the Promoter 5oticees had informed the Merchant 'an%er that all the

necessar# re"uirements had &een comlied4 though on &eing as%ed for the roof

of su&missions4 o!ing to non availa&ilit# of the same4 the Merchant 'an%er had

categoricall# ta%en the same as non


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Adjudication Order in the matter of M/s. Andhra Cement Limited Page of 52

10.6. %ubm&''&on' (&th re'pect to a))eged non*comp)&ance o+ Regu)at&on 31-2. and 31-3. o+

akeo0er Regu)at&on' 211 +or the year 211:

10.6.1. That the Promoter 5oticees had made disclosures under *egulation +1A of

Ta%eover *egulations4 1992

10.6.3. That during 5ovem&er 30114 there !as change in romoter holding su&se"uent

to invocation of ledge ledgee on 5ovem&er 064 30114 5ovem&er 184 3011

and 5ovem&er 174 30114 !hich !as dul# intimated the romoters in the

format under *egulation +1A of Ta%eover *egulations4 199 !ithin t!o

!or%ing dates i.e. 5ovem&er 04 30114 5ovem&er 174 3011 and 5ovem&er 14

3011. (n the disclosure so made there !as clear declaration as to change in

holding su&se"uent to invocation of ledge ledgee and hence ade"uate

comliance dul# made210.6.6. That the eriod under consideration !as transitional eriod from old Ta%eover

*egulations4 199 to the ne! Ta%eover *egulations4 3011 and due to lac% of

legal %no!ledge and unavaila&ilit# of rofessional e=ertise and confusion as to

alica&ilit# of rovisions4 disclosure !as made in a different format2

10.6.. That the Promoter 5oticees have dul# made the disclosures4 ho!ever4 in the

!rong format. >ence the same should not &e treated as non


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Adjudication Order in the matter of M/s. Andhra Cement Limited Page , of 52

!ere invo%ed ledgee on reeated defaults in a#ment of loan amount +due

to continued &ad financial osition and aucit# of funds2

10..6. That there !as no actual ac"uisition of shares4 the shares !ere never sold or

transferred4 &ut4 merel# ta%en into custod# on account of invocation of ledge

!ith the o&jective of enforcing the rea#ment of loan and !ere in fact held in

nature of fiduciar# caacit# the ledgee2

10... That even after the invocation of the ledge4 the lenders had not sold off these

shares4 !hich su&stantiates that the mere o&jective of invo%ing the ledge !as

to enforce rea#ment of loan. @on ma%ing good the default4 the shares !ere

returned the ledgee to the ledger +($2

10..8. That under the governing rovisions of section 171 of (ndian Contract Act4 134

the a!nee has the right to retain the goods ledged as a collateral securit# andsection 1 3 rovides for the right to the a!nor to redeem the goods ledged

at an# su&se"uent time &efore the actual sale of them. )urther that the term

,actual sale and collateral securit# as referred in the sections states that the

rights are not transferred merel# on invocation of ledge2

10..7. That4 thus4 there !as no actual ac"uisition of shares ($ and merel# &ecause

the shares invo%ed !ere returned &ac% to the actual o!ner4 it cannot &e said to

&e violation of *egulation 11 of Ta%eover *egulations4 199.

10.8. 789R %B;I%%I7


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Adjudication Order in the matter of M/s. Andhra Cement Limited Page of 52

Para += The Promoters and associate comanies of M/s ACL shall &e e=emted

from the rovisions of $ection 63A relating to comutation of the limit and

e=clusion of the same from the total overall limit and other alica&le rovisions

of the Comanies Act 19874 $B'( Act/*egulations/uidelines4 ;eositories Act4

$ecurities Contract *egulation Act4 Listing guidelines4 for inter alia4 the

investment in ACL.

10.8.3. That in the light of the aforesaid e=emtion and !ithout rejudice to the

su&missions made4 the Promoter 5oticees have &een e=emted from all the

enal rovisions under alica&le la!s including $B'(4 therefore4 no enal

rovision ma# &e imlicated against the Promoter 5oticees.

11.

"he A; of the Pro$oter Noticees ide e$ai% dated Apri% 6, '&16 re:ested for persona% hearingto *e sched%ed on Ma+ &7 or Ma+ &2, '&16. According%+, an opportnit+ of persona% hearing

was granted to the Pro$oter Noticees on Ma+ 7, '&16 ide hearing notice dated Apri% 7, '&16.

Mr. 9. . hah (A) a%ong with Ms. 8eepia ia+ awhne+, Partner, Corporate Professiona%s (A;)

(hereinafter co%%ectie%+ referred to as >AR)@) appeared on *eha%f of the Pro$oter Noticees. At

the hearing, it was c%arified to the A;s that nder para 6 (c) of the CNs, the reg%ations

$entioned as 11(1) has to *e read as 11(') of the "aeoer ;eg%ations, 17. "he A;s inter alia

s*$itted that one of the Pro$oter Noticees i@. Ms. Ind !oena had e>pired and s*$itted a

photo cop+ of the death certificate dring the hearing. rther the A;s reiterated the

s*$issions $ade ide %etter dated 9anar+ 3&, '&16 and s*$itted that the pro$oters *e

e>e$pted fro$ io%ation of ;eg%ation 2(1) D 2(') and io%ation of ;eg%ation 11(') of the

"aeoer ;eg%ations, 17 in ter$s of BI; 0rder dated 9%+ '1, '&&2. 8ring the hearing, the

A;s were adised to proide the detai%s of p%edged shares, inocation of p%edged shares and

s*se:ent ac:isition, as app%ica*%e, a%ong with the spporting doc$ents sch as *an

state$ents, de$at state$ents etc.F the shareho%ding of the Pro$oter Noticees as on March 31,

'&&1, March 31, '&&' and March 31, '&&3F d%+ Notarised cop+ of the death certificate of Ms.

Ind !oena etc.

1'. "he A i@. Mr. 9. . hah, on *eha%f of the Pro$oter Noticees ide %etter dated Ma+ '&, '&16

proided a notari@ed cop+ of the death certificate of Ms. Ind !oena and reiterated the ear%ier

s*$issions $ade ide %etter dated 9anar+ 3&, '&16. A cop+ of the BI; order dated 9%+ '1,


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'&&2, and a cop+ of the BI; 0rder dated 9anar+ '', '&1&, discharging the Co$pan+ fro$ the

priew of ic Indstria% Co$panies Act (hereinafter referred to as >SICA@), was a%so proided.

rther, inter alia the fo%%owing additiona% s*$issions were $ade/ doc$ents proided *+ the

A on *eha%f of the Pro$oter Noticees

13.1. =&th re'pect to Regu)at&on ,-1. > ,-2. o+ akeo0er Regu)at&on' 1 +or the year

21*3:

13.1.1. A co# of one age document sho!ing actual date of su&mission under

*egulation +6 of the Ta%eover *egulations4 199 the coman# to >#dera&ad

$toc% B=change +hereinafter referred to as "8%9 for the #ears 199


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>S4+*4@), M/s. N;C #td. (hereinafter referred to as >NRC@), M/s. Pa%%$a%% 4ds+ste$s D

Medicare erices Pt. #td. (hereinafter referred to as >$+8+@)and M/s. tone India #td.

(hereinafter referred to as >S; I;,+@) (hereinafter co%%ectie%+ referred to as ?$*8*

G*?@), whi%e p%edging AC# shares with the fo%%owing for p%edgees i@. M/s. Associated

Caps%es P. #td., M/s. Pa$ Pac Machines P. #td., M/s. 8etco Po%+sters P. #td and M/s. ewri #and

Co. P. #td. as co%%atera% secrit+ to aai% the %oan faci%ities. Ghen Noticee I! acting in concert

with the other pro$oter Noticees as aforesaid, defa%ted in repa+$ent of the %oans, the p%edges

were inoed *+ the aforesaid p%edgees and the shares were transferred fro$ the de$at

acconts of I! to the de$at acconts of the aforesaid for p%edgees and conse:ent%+ the+

were registered as *eneficia% owners in the records of the depositor+. Ghen the %oan accont

was sett%ed, the p%edgees transferred *ac the shares to I!.

16. It was o*sered that when the for p%edgees had inoed the p%edges pon defa%t co$$itted

in the repa+$ent of the %oans, the shares were transferred fro$ the de$at accont of I! to the

de$at acconts of the for p%edgees. Hpon sch transfer, the shares ac:ired *+ the p%edgees

ceased to *e the secrit+ for the %oans, as the p%edgees *+ irte of inoing the p%edge had

*eco$e the *eneficia% owners. After the entire %oan a$onts to the aforesaid p%edgees were

paid and sett%ed, the shares were retrned *ac to I! *+ the respectie p%edgees. "his res%ted

in transfer of shares *ac fro$ the de$at accont of the for p%edgees to the de$at accont of

I! and conse:ent change of *eneficia% ownership.

15. "he shareho%ding of the pro$oter grop prior to sch ac:isition was 7'.63=. ence, as per

;eg%ation 11(') read with ;eg%ation 16(1) of the "aeoer ;eg%ations, the Pro$oter Noticees

co%d not hae ac:ired an+ additiona% shares entit%ing the Pro$oter Noticees to e>ercise oting

rights therein, n%ess the+ $ade a p*%ic annonce$ent to ac:ire shares in accordance with

the "aeoer ;eg%ations, 17. oweer, no sch p*%ic annonce$ent was $ade. ence,

pp%e$entar+ how Case Notices (hereinafter referred to as ?S??8;+* SCN)@) ;ef 4A8<

/A/A/2&22/'&15/&


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1. "he transaction state$ent of I! for transaction in the e:it+ shares of AC# for the period Ma+

&1, '&&2 to 9ne 3&, '&& as proided *+ N8# ide %etter dated Agst &6, '&16 and as

proided *+ C8# ide e$ai% dated March 1, '&15, showing sch changes of *eneficia%

ownership was sent to the Noticee Pro$oter !rop a%ong with the pp%e$entar+ CN.

i$i%ar%+, the transaction state$ent of M/s. Associated Caps%es Pt. #td., M/s. Pa$pac

Machines Pt. #td. and M/s. ewri #and Co. Pt. #td. for transaction in the e:it+ shares of AC#

for the period Ma+ &1, '&&2 to 9ne 3&, '&& as proided *+ N8# ide %etter dated epte$*er

&6, '&16 and the transaction state$ent of M/s. 8etco Po%+sters Pt. #td. for transaction in the

e:it+ shares of AC# for the period Ma+ &1, '&&2 to 9ne 3&, '&& as proided *+ C8# ide

e$ai% dated March 13, '&15, showing sch transfer of *eneficia% ownership, was a%so proided

a%ong with the pp%e$entar+ CN.

17. "he detai%s of the aforesaid a%%eged io%ations/ non


13/52


12. It was, ths, a%%eged that throgh the aforesaid actions the Noticee Pro$oter !rop i@. I!

a%ong with Bo+de%%, ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena,

+%ar, N;C, Pa%%$a%% and tone India had each inter alia io%ated ;eg%ation 11(') read with

;eg%ation 16(1) of "aeoer ;eg%ations, 17 on seen (7) occasions.

1. Mr. 9.. hah, A, on *eha%f of I!, ide %etter dated Apri% ', '&15, inter alia $ade the fo%%owing

additiona% s*$issions to the spp%e$entar+ CN

19.1 That ACL !as ac"uired the .P. oen%a grou in the #ear 199 and '()* aroved a

scheme under $ection 1 of $(CA for the reha&ilitation of ACL2

19.3 That desite the efforts of the rou +erst!hile romoters of ACL i.e. the 5oticee

Promoter rou4 the coman# !as not a&le to attain rofits4 and there in the #ear

30014 '()* declared the $cheme as failure219.6 That in the #ear 3004 '()* recommended the !inding u of ACL. The erst!hile

romoters of ACL challenged the '()* recommendation and the same !as set aside in

the #ear 30072

19. That in the #ear 3004 '()* modified and aroved the revival scheme for reha&ilitation

of ACL2

19.8 That in 30094 the net!orth of ACL &ecame ositive and it came out of the urvie! of

$(CA in :anuar# 30104 &ut4 soon thereafter due to la&our unrest and li"uidit# crunch4 the

oerations of ACL came to a virtual standstill $etem&er 30102

19.7 That in the rocess of shifting of its registered office4 lot of its vital documents !ere lost/

mislaced2

19. That the coman# !as sold to :;CL and entered into $hare $u&scrition and $hare

Purchase Agreement +$$PA dated 5ovem&er 184 3011 for ac"uisition of controlling

sta%e in the coman# :;CL. On :anuar# 314 30134 a letter of Offer !as issued2

19. That the merchant &an%er ointed out certain discreancies !ith resect to the

rovisions of Ta%eover *egulations2

19.9 That ($ did not violate the rovisions of Ta%eover *egulations4 199 as the# did not

ac"uire an# ,additional shares- and/ or ,additional voting rights- in ACL virtue of the

imugned transaction2


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19.10 That ledge is defined in $ection 13 of the (ndian Contract Act4 13 as The &ailment

of goods as securit# for a#ment of a de&t or erformance of a romise is called a

ledge. The &ailor is in this case called the ,a!nor-. The &ailee is called the ,a!nee-2

19.11 That the transactions &et!een ($ +,a!nor- and M/s. $e!ri Land Co. Pvt. Ltd.4 M/s.

Associated Casules Pvt. Ltd.4 M/s. Pam Pac Machines Pvt. Ltd. and M/s. ;etco

Pol#esters Pvt. Ltd. +collectivel# referred to as ,a!nees- !ere siml# loan transactions

secured !a# of a ledge of its shares in ACL2

19.13 That deosit ($ of the aforesaid shares !ith the Pa!nees !as in furtherance of the

ledge and !as not a transfer. )urther4 that the rovisions of (ndian Contract Act4 13

are a secial la! governing the contractual rights and o&ligations interse arties

thereto. Therefore the rovisions of the (ndian Contract Act4 13 !ould suersede the

rovisions of Ta%eover *egulations in so far as an# issue ertaining to contractual rightsand o&ligations is concerned2

19.16 That it is an essential element of contract of ledge that the a!nor delivers the goods

that are a!ned to the a!nee and $ection 16 of the (ndian Contract Act4 13 entitles

the a!nee to retain the goods as securit# for a#ment of de&t i.e. the loans in the

resent case2

19.1 That in la! a a!nee can ,invo%e- the ledge uon a default in a#ment adoting an#

one of the follo!ing otions? a to &ring a $uit against the a!nor for the de&t and

retain the goods ledged as collateral securit#2 & he ma# sell the thing ledged on giving

the a!nor ,reasona&le notice-. The a!nor !ould4 ho!ever4 have the right to redeem

the goods until the sale after notice2

19.18 That the act of deositing the shares !ith the a!nee did not create an# ,interest- in the

shares in favour of the a!nee and !as onl# done in furtherance of the resective terms

of the loan/ ledge agreements. The act of deositing the shares into the account of the

a!nee onl# comleted the act of &ailment of shares as securit#2

19.17 That a a!n onl# creates in favour of the a!nee a secial right to retain ossession of

the shares as a collateral securit# and/ or to disose of the same !a# of a sale after

reasona&le notice2

19.1 That as er the relevant rovisions of the Comanies Act and the (ndian Contract Act4 the

ledgees did not ac"uire voting rights and/ or an# other rights of an ordinar#

shareholder in the coman# virtue of deosit of shares in ACL2


15/52


19.1 That it has &een held the >on-&le $ureme Court of (ndia in the case of 'ala%rishnan

v. $!adeshi Pol#te= Ltd. that the legal title to the goods ledged !ould not vest !ith the

a!nee. The $ureme Court held that the a!nor of shares continued to &e the mem&er

of the coman# and could e=ercise all rights of a shareholder of the coman#2

19.19 That ($ redeemed the shares ma%ing a#ment of the loan amounts as is admitted in

the notice4 uon !hich shares !ere re


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Adjudication Order in the matter of M/s. Andhra Cement Limited Page 1! of 52

19.37 That for reasons aforementioned the# do not ans!er to the term ,ac"uirer- as defined

under the Ta%eover *egulations4 the# are !ithout rejudice to their rights to ma%ing an

alication under *egulation of Ta%eover *egulations to e=clude the transactions

imugned from the rovisions of Ta%eover *egulations. (n this resect4 it has &een stated

that the rovisions of the Limitation Act al# to $B'( and that the resent matter

ertains to the transitional eriod &et!een the old regulations and the ne! regulations

and there !as no judicial ronouncement either $B'( or $ecurities Aellate Tri&unal

+hereinafter referred to as "%A during the relevant eriod that held that the

transactions of the nature imugned !ere in an# !a# violative of the letter and/ or sirit

of the Ta%eover *egulations2

19.3 That the act of ledging of shares as against the loan and su&se"uent release of ledge

on rea#ment of loan is urel# an indeendent act of ($ !ith no involvement of other romoters in the said transaction. The other romoters had no involvement in the loan

transaction under reference and hence cannot &e said to &e ersons acting in concert2

19.3 )urthermore that the use of term ,invo%ed- is misconceived and fla!ed for the reasons

stated a&ove and the $C5 admits that the shares !ere transferred &ac% !hen the loans

!ere reaid2

19.39 That the shares !ere onl# ta%en into constructive ossession the a!nees to enforce

the rea#ment of loan and !ere in fact held in a fiduciar# caacit# the Pa!nees4

!hich !ere returned &ac% to the legal o!ner i.e. ($ after the rea#ment of the loan.

The transfer of shares into the account of the Pa!nees !as a technicalit# arising out of

secial circumstances surrounding the ledge of dematerialiDed shares4 !hich needed to

&e done siml# to comlete the &ailment rocess in line !ith the rovisions of the (ndian

Contract Act4 134 ho!ever4 the legal o!nershi of the shares never changed hands2

19.60 That the shares !ere onl# transferred for the urose of securit# for rea#ment of loan

and there !as no ac"uisition of shares and/ or voting rights4 and hence4 there !as no

violation of Ta%eover *egulations. ($ did not cease to &e the o!ner of the shares

ledged and at all material times continued to &e the o!ner !ith all conse"uential rights

in resect thereof4 including4 &ut4 not limited to all voting rights aurtenant to the

su&ject shares2

19.61 The $C5 itself ac%no!ledges the fact that the loan !as ,settled- and no!here alleges

that the shares !ere re


17/52


'&. rther, Mr. 9.. hah, A ide indiida% %etters dated Apri% ', '&15 has inter alia $ade the

fo%%owing additiona% s*$issions to the spp%e$entar+ CNs issed on *eha%f of Bo+de%%, +%ar

and Pa%%$a%%

30.1 That $%#lar% and Pallmall stands merged !ith ($ !ith effect from Aril 014 300

ursuant to the $cheme of Amalgamation aroved the >on-&le >igh Court at

Eol%ata vide its Order dated $etem&er 114 30092

30.3 That 'o#dell also stands merged !ith ($ !ith effect from Aril 014 3011 ursuant to the

$cheme of Amalgamation aroved the >on-&le >igh Court at Eol%ata vide its Order

dated )e&ruar# 014 30162

30.6 That the loan cum ledge agreements are indeendent contracts interse ($ and the

Pa!nees230. That under the alleged transactions not a single share has &een ac"uired 'o#dell4

$%#lar% and Pallmall and the# can no !a# &e termed as ,Ac"uirer- under the Ta%eover

*egulations4 1994 further it is erroneous to allege them as ,Persons Acting in Concert-

+hereinafter referred to as , ?AC'-4 !hen the transaction of ledge ($ !ere

indeendent transaction2

30.8 That to &e termed as ,PACs-4 the most imortant ingredient is ,Common O&jective or

Purose of $u&stantial Ac"uisition- and the $C5 has failed to esta&lish the ,Common

O&jective or Purose- &et!een ($ and them2

30.7 That merel# &eing the romoters of the same coman#4 the# cannot &e alleged to &e

PACs for a transaction !herein no ac"uisition of shares or voting rights has &een made

them either directl# or indirectl#2

30. That under no circumstances had the# acted as ersons acting in concert !ith ($4 thus4

the# have not violated *egulation 11+3 of Ta%eover *egulations4 1992

30. That contentions and su&missions as !ell as mitigating circumstances made ($ to &e

considered in their case as !ell.

'1. Mr. 9.. hah, A ide indiida% %etters dated Apri% ', '&15 has inter alia reiterated the

s*$issions $ade as aforesaid *+ Bo+de%%, +%ar and Pa%%$a%% fro$ '&.3 to '&.2 a*oe on

*eha%f of aita and Mr. hriardhan !oena. rther, ide indiida% %etters dated Apri% '/3&,


18/52

Adjudication Order in the matter of M/s. Andhra Cement Limited Page 1, of 52

'&15, N;C, tone India, 0rchard and ewand hae a%so inter alia a%so reiterated the aforesaid

s*$issions $ade *+ Bo+de%%, +%ar and Pa%%$a%% fro$ '&.3 to '&.2 a*oe. "he 8irector of I!

again enc%osed a cop+ of the death certificate of Ms. Ind !oena for reference and record.

''. An opportnit+ of hearing was granted to the Noticee Pro$oter !rop on Ma+ 16, '&15. Mr. 9.

. hah (A) a%ong with Ms. 8eepia ia+ awhne+ and Mr. ;.P !anti (A;) (hereinafter

co%%ectie%+ referred to as >AR)@) appeared on *eha%f of the Noticee Pro$oter !rop and

reiterated the s*$issions $ade in the rep%ies dated Apri% ', '&15 and stated that the+ wo%d

$ae frther s*$ission in the $atter *+ Ma+ ', '&15. "he A;s frther stated that the

Noticees other than I! were not part+ to the %oan agree$ent entered into *+ I!, which was a

part of the nor$a% *siness transaction of I!. "he A;s were inter alia adised to frnish cop+ of

for$ with fi%ed ;oC after the co$p%etion of $erger of Bo+de%%, Pa%%$a%% and +%ar with I!Fcop+ of the %oan agree$ent *etween %ender(s) and I! with respect to the %oan transaction

referred to in the CNF confir$ that other than the ac:isition of shares shown in "a*%e nder

para 1& of pp%e$entar+ CN, no other ac:isition of shares had taen p%ace dring the

:arter ended March '&& and :arter ended 9ne '&&F etc.

'3. ide %etter dated Ma+ '2, '&15, A on *eha%f of I! proided cop+ of the for$s fi%ed with ;oC

after the co$p%etion of the $erger of Bo+de%%, Pa%%$a%% and +%ar with I! and copies of %oan

agree$ents *etween %ender(s) and I!. ide the said %etter, the A on *eha%f of I! inter alia

frther stated/ reiterated as fo%%ows

38.1 that there !as no violation of *egulation 11+3 read !ith *egulation 1+1 of the

Ta%eover *egulations4 1994 for there &eing no ac"uisition at all2

38.3 that for the transactions under consideration4 the act of ($ !as indeendent of and

isolated from the other romoter/ grou entities4 hence for the alleged violation4 the

other romoter/ grou entities should not &e imlicated2

38.6 that ($ &eing an e=isting coman# !ithin the meaning of the Comanies Act4 3016 is a

searate legal entit#4 and the loan transaction under discussion !as underta%en ($

on its name and the same is an indeendent &usiness transaction2

38. that ursuant to the invocation of ledge4 the shares !ere transferred into the demat

account of the lender account4 just &ecause of a technical issue4 as neither the


19/52


;eositories Act4 19974 nor4 the deositor# articiants facilitate an# ar%ing facilit# for

ledged shares in case of invocation of ledge. Thus4 due to a&sence of a secific

rovision in the la!4 the ledged shares haened to &e transferred into the account of

the lenders2

38.8 That to comlete a sale transaction4 the follo!ing oints are %e# ingredients4 and in

a&sence of these essential elements4 the invocation and su&se"uent redemtion

transaction cannot &e said to &e sale or urchase?

The &orro!er does not account for as sale its investment in shares merel# on

invocation4 neither does the lender &oo% such shares as urchases in their accounts/

&alance sheet2

(t is onl# !hen shares get sold the lender4 su&se"uent to invocation4 either to

itself or to an# third art# that the investment is accounted for as sold the&orro!er from its &oo%s2

Also !hen shares actuall# get sold4 it is onl# the amount of loan and interest due

that is adjusted the lender and the differential4 if an#4 is to &e aid or received

the &orro!er2

(n case of the &orro!er too4 it is su&se"uent to the actual sale the lender that the

&orro!er ma%es the re"uired entries and adjustment in its &oo%s of accounts as !ell

as income ta= returns.

38.7 That the loan ledge agreements entered into &et!een t!o arties ursuant to

su&stantive rovisions contained in (ndian Contract Act cannot &e overridden

rocedural rovisions contained under $B'( +;eositories and Particiants *egulations4

1997 and $B'( +$u&stantial Ac"uisition of $hares and Ta%eover *egulations4 1992

38. That shares under consideration continued to remain in &oo%s of ($ and !ere not

&oo%ed into the lender-s &oo%s and that the invocation of ledge rovided the right to

the ledge to sell the shares or to file a suit for recover# of mone#4 &ut4 the amount of

loan !as reaid to the lenders. Thus4 the invocation of ledge !as made just to attain

certain comfort level for recover# of loan the lender and no actual sale of shares

haened2

38. That the !ord ,ledge- is not searatel# defined in Comanies Act4 $B'( Act4 the

;eositories Act or in an# of the regulations of $B'(4 hence4 the definition as set out in

(ndian Contract Act shall revail. Accordingl# invocation of ledged shares the lender


20/52


and conse"uent transfer of the same to his account are siml# comletion of the

,&ailment- rocess as defined in the (ndian Contract Act and not urchase the lender2

38.9 That it is !ell esta&lished and laid rincile of la! that to &e termed as Persons Acting

in Concert +PAC4 the romoters must share a common o&jective or urose of

su&stantial ac"uisition of shares or voting rights. (t has &een stated that the Promoter

rou did not share an# common o&jective for the urose of increasing their

shareholding or voting rights in ACL through the imugned transactions of loan

ledge of shares4 ledge invocation and su&se"uent redemtion. That merel# &ecause

the Promoter 5oticees are of the same romoter grou4 !ith their &eing no common

o&jective or urose4 the# cannot &e alleged to &e in violation of *egulation 11+3 in so

far as the imugned transactions are concerned. (n the matter4 reference has &een made

to the concet of PAC ela&oratel# dealt >on-&le $ureme Court in case of ;aiichi$an%#o Co. Ltd. and the judgement of >on-&le 'om&a# >igh Court in the matter of

E.E.Modi vs. $ecurities Aellate Tri&unal F+3006 116 COM. Cases 1 'om.G. Also4

reference has &een made to the Order of the >on-&le $AT in the matter of *ajesh

Toshni!al vs. $B'( and others dated :une 014 3013. )urther reference has also &een

made to the >on-&le $AT-s Order dated Ma# 114 3013 in the matter of 5i%hil Mansu%hani

vs. $B'(.

'6. ide e$ai% dated 9ne 1&, '&15, the fo%%owing detai%s/ doc$ents were soght

'.1 8etai%s of pro$oters and Board of 8irectors of the co$panies i@. Bo+de%%, 0rchard, I!,

N;C, +%ar, aita, Pa%%$a%%, ewand and tone India at the re%eant point of ti$eF

'.' Cop+ of reso%tion of Board of 8irectors of I! in the $eeting he%d on March &3, '&&2

and an+ other app%ica*%e reso%tions re%ating to the %oan c$ p%edge agree$ent entered

*+ I! with M/s. Associated Caps%es P. #td., M/s. Pa$ Pac Machines P. #td., M/s. 8etco

Po%+sters P. #td and M/s. ewri #and Co. P. #td.F

'.3 "he o*ectie and prpose of the %oan taen *+ I! fro$ M/s. Associated Caps%es P.

#td., M/s. Pa$ Pac Machines P. #td., M/s. 8etco Po%+sters P. #td and M/s. ewri #and Co.

P. #td. a%ong with spporting doc$entsF

'.6 "he acta% ti%i@ation of the %oan a$ont taen *+ I! fro$ M/s. Associated Caps%es P.

#td., M/s. Pa$ Pac Machines P. #td., M/s. 8etco Po%+sters P. #td and M/s. ewri #and Co.


21/52


P. #td. a%ong with spporting cop+ of the re%eant *an state$ents ref%ecting those

entries.

'5. "he A of the Pro$oter !rop ide %etter dated 9%+ &3, '&15 proided the detai%s/ doc$ents

soght. It was inter alia stated ide the said %etter that the %oans were taen *+ I! fro$ the

afore$entioned parties in the ordinar+ corse of *siness and that these *orrowings hae no

association or re%ation with AC#. It was frther stated therein that since the transactions are of

$ch prior period, the e>act detai%s are not tracea*%e and indicatie pattern of %oan ti%i@ation

was proided.

'. It was noted fro$ the copies of reso%tion passed at the $eeting of the Board of 8irectors of

AC# on March &3, '&&2, Apri% &', '&&2 and Apri% 3&, '&&2 and proided ide aforesaid %etterdated 9%+ &3, '&15 that consent was accorded *+ the Board of 8irectors of I! to aai% short

ter$ %oan of ;s. 35 %acs, ;s. 5& %acs, ;s. '5 %acs and ;s. 1 crore fro$ M/s. ewri #and Co. Pt.

#td., M/s. Pa$ Pac Machines Pt. #td., M/s. 8etco Po%+sters Pt. #td and M/s. Associated

Caps%es Pt. #td. respectie%+ inter alia against p%edge of 2&,&&& shares of tone India, 6,6&,&&&

shares of AC#, 55,&&& shares of tone India and ',65,&&& shares of tone India respectie%+ he%d

*+ I!. "he reso%tion where*+ Board of 8irectors of I! accorded approa% for p%edge of AC#

shares in p%ace of tone India shares was not proided. ence, ide e$ai% dated 9%+ 16, '&15,

A of the Pro$oter !rop was adised to proide the reso%tion where*+ Board of 8irectors

had accorded approa% for AC# shares in p%ace of tone India shares. A%so, the reason for

p%edging AC# shares instead of shares of tone India was soght.

'7. ide e$ai% dated 9%+ '6, '&15, A of the Pro$oter !rop forwarded a cop+ of the reso%tion

passed at the $eeting of the Board of 8irectors of the co$pan+ he%d on Ma+ 3&, '&&2, where*+

consent was accorded *+ the Board of 8irectors of I! to p%edge shares of AC#, tar Paper Mi%%s

#td. etc. as $a+ *e re:ired. A ide the said e$ai% dated 9%+ '6, '&15 frther c%arified that the

shares of AC# were re:ired to *e p%edged in order to $aintain the secrit+ coer as per the

p%edge agree$ents, *ecase of considera*%e fa%% in the $aret a%e of shares of tone India

dring the period.


22/52


CONSIDERATION OF ISSUES

'2. I hae caref%%+ persed the written s*$issions of the Pro$oter Noticees/ Pro$oter !rop,

the s*$issions $ade at the hearing and the doc$ents aai%a*%e on record. It is o*sered that

the a%%egation against the Pro$oter Noticees/ Pro$oter !rop is that the+ hae fai%ed to $ae

the re%eant disc%osres nder the proisions of ;eg%ations 2(1) D 2(') of the "aeoer

;eg%ations, 17 and/ or ;eg%ation 31(') read with 31(3) of "aeoer ;eg%ations, '&11 and/

or ;eg%ation 11(') read with ;eg%ation 16(1) of "aeoer ;eg%ations, 17, as app%ica*%e.

'. "he isses that, therefore, arises for consideration in the present case are

'.1. Ghether the Pro$oter Noticees had io%ated the proision of ;eg%ations 2(1) D 2(') of

the "aeoer ;eg%ations, 17 dring the +ear '&&1 to '&&3'.'. Ghether the Pro$oter Noticees had io%ated the proision of reg%ation 31(') read with

31(3) of "aeoer ;eg%ations, '&11 dring the +ear '&11

'.3. Ghether the Pro$oter !rop at the re%eant point of ti$e i@. I! acting in concert with

Bo+de%%, ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena, +%ar,

N;C, Pa%%$a%% and tone India had inter alia io%ated ;eg%ation 11(') read with

;eg%ation 16(1) of "aeoer ;eg%ations, 17 on seen (7) occasions dring the +ear

'&&

'.6. 8oes the io%ation, if an+, as aforesaid, attract $onetar+ pena%t+ nder ection 15 A (*)

and/ or ection 15 (ii) of 4BI Act, as app%ica*%e

'.5. If so, what wo%d *e the $onetar+ pena%t+ that can *e i$posed taing into

consideration the factors $entioned in ection 159 of 4BI Act

FINDINGS

3&. Before $oing forward, it is pertinent to refer to the proisions of ;eg%ations 2(1) D 2(') of the

"aeoer ;eg%ations, 17, ;eg%ation 11(') read with ;eg%ation 16(1) of "aeoer

;eg%ations, 17 and ;eg%ation 31(') read with 31(3) of "aeoer ;eg%ations, '&11 which

reads as nder


23/52


, Cont&nua) d&'c)o'ure'

+1 Bver# erson4 including a erson mentioned in regulation 7 !ho holds more than fifteen er

cent shares or voting rights in an# coman#4 shall4 !ithin 31 da#s from the financial #ear ending

March 614 ma%e #earl# disclosures to the coman#4 in resect of his holdings as on 61st March.

+3 A romoter or ever# erson having control over a coman# shall4 !ithin 31 da#s from the

financial #ear ending March 614 as !ell as the record date of the coman# for the uroses of

declaration of dividend4 disclose the num&er and ercentage of shares or voting rights held

him and ersons acting in concert !ith him4 in that coman# to the coman#.

Con'o)&dat&on o+ ho)d&ng'

11 +1H

+3 5o ac"uirer4 !ho together !ith ersons acting in concert !ith him holds4 fift#


24/52


&m&ng o+ the pub)&c announcement o+ o++er

14+1 The u&lic announcement referred to in regulation 10 or regulation 11 shall &e made

the merchant &an%er not later than four !or%ing da#s of entering into an agreement for

ac"uisition of shares or voting rights or deciding to ac"uire shares or voting rights e=ceeding the

resective ercentage secified therein?

Provided that in case of disinvestment of a Pu&lic $ector @nderta%ing4 the u&lic

announcement shall &e made the merchant &an%er not later than !or%ing da#s of the

ac"uirer e=ecuting the $hare Purchase Agreement or $hareholders Agreement !ith the Central

overnment or the $tate overnment as the case ma# &e4 for the ac"uisition of shares or voting

rights e=ceeding the ercentage of shareholding referred to in regulation 10 or regulation 11 or

the transfer of control over a target Pu&lic $ector @nderta%ing.

Regu)at&on 31-2. read (&th 31-3. o+ takeo0er Regu)at&on 211

$&'c)o'ure o+ encumbered 'hare'

61+1 The romoter of ever# target coman# shall disclose details of shares in such target

coman# encum&ered him or ersons acting in concert !ith him in such form as ma# &e

secified.

+3 The romoter of ever# target coman# shall disclose details of an# invocation of such

encum&rance or release of such encum&rance of shares in such form as ma# &e secified.

+6 The disclosures re"uired under su&


25/52


3'. rther, In !iriandini s. Biendra Narain (AI; 17 C '11&), the on-*%e pre$e Cort, inter<

a%ia o*sered that in case of persona% action, i.e. the actions where the re%ief soght is persona%

to the deceased, the right to se wi%% not srie to or against the representaties, and in sch

cases, the $a>i$ actio persona%is $oritr c$ persona (persona% action dies with the death of

the person) wo%d app%+.

33. In iew of the a*oe, the addication proceedings against %ate Ms. Ind !oena initiated ide

CN dated 0cto*er '6, '&13 and pp%e$entar+ CN dated March '&, '&15 are %ia*%e to *e

a*ated. "he $atter in respect of %ate Ms. Ind !oena is according%+ disposed of.

36. Now, the first isse for consideration is whether the Pro$oter Noticees at the re%eant point of

ti$e i.e. Bo+de%%, I!, ewand, aita, 0rchard, %ate Ms. Ind !oena and Mr. hriardhan

!oena were re:ired to $ae the re%eant disc%osres nder the proisions of ;eg%ations 2(1)

and 2(') of the "aeoer ;eg%ations, 17. I find fro$ the rep%ies of the Pro$oter Noticees that

AC# eer since 122 was into %osses. Conse:ent%+ in 1&, AC# was dec%ared ic *+ BI; and

was ac:ired *+ the !.P. !oena !rop in the +ear 16. "he !.P. !oena !rop ndertoo

seera% $easres towards reia% of the co$pan+, howeer, the co$pan+ was not a*%e to attain

profits and in '&&1, BI; dec%ared the sche$e of reha*i%itation as proposed in the +ear 16 as a

fai%re and the Monitoring Agenc+ was directed to adertise for change in $anage$ent of the

co$pan+. In epte$*er '&&, AAI; dis$issed the BI; 0rder of winding p, referred the

$atter *ac to BI; and a $odified reia% sche$e was approed *+ BI; ide its 0rder dated

9%+ '1, '&&2.

35. I note that nder the $odified reha*i%itation sche$e approed *+ BI; ide its 0rder dated 9%+

'1, '&&2, the Pro$oter Noticees i.e. Bo+de%%, I!, ewand, aita, 0rchard, %ate Ms. Ind

!oena and Mr. hriardhan !oena at the re%eant point of ti$e ('&&1


26/52


the $erits of the a%%egation in the CN dated 0cto*er '6, '&13 and in the s*$issions $ade *+

the Pro$oter Noticees throgh their arios rep%ies and at the ti$e of hearing, I find that the

Pro$oter Noticees i@. Bo+de%%, I!, ewand, aita, 0rchard, %ate Ms. Ind !oena and Mr.

hriardhan !oena at the re%eant point of ti$e ('&&1t isse for consideration is whether the Pro$oter Noticees i.e. Bo+de%%, I!, ewand,aita, 0rchard, %ate Ms. Ind !oena and Mr. hriardhan !oena at the re%eant point of ti$e

('&11) hae io%ated the proisions of ;eg%ation 31(') read with 31(3) of "aeoer ;eg%ations,

'&11. I note that nder ;eg%ation 31(') read with 31(3) of "aeoer ;eg%ation, '&11, the

Pro$oter Noticees were re:ired to disc%ose detai%s of an+ inocation of enc$*ered shares or

re%ease of enc$*rance of shares within seen woring da+s fro$ the inocation or re%ease of

enc$*rance to the stoc e>change where the shares of the co$pan+ were %isted and a%so to

the co$pan+ at its registered office.

37. I note that the Pro$oter Noticees ide their rep%+ dated 9anar+ 3&, '&16 hae inter alia

ad$itted that dring Noe$*er '&11, there was change in pro$oter ho%ding s*se:ent to

inocation of p%edge *+ p%edgee (8C and I8C) on Noe$*er 3, '&11, Noe$*er 15, '&11 and

Noe$*er 1, '&11. It has a%so inter alia *een s*$itted that the sa$e was d%+ inti$ated *+

the Pro$oter Noticees in the for$at nder ;eg%ation 7(1A) of "aeoer ;eg%ations, 17

within ' woring dates i.e. on Noe$*er 6, '&11, Noe$*er 1, '&11 and Noe$*er 17, '&11. I

find fro$ the disc%osres as aai%a*%e on the B4 we*site that the Pro$oter Noticees had

disc%osed nder reg%ation 7(1A) as fo%%ows


27/52


8ate of

transaction

"ransfer of

hares

(Inocation of

p%edge)

Pre


28/52


reporting date, irrespectie of whether the+ are reporting on the date of the eent or not. "hs,

I note that the intent of disc%osre of enc$*ered shares nder ;eg%ation 31(') read with 31(3)

of the "aeoer ;eg%ations, '&11 is to proide a co$p%ete pictre of the shares p%edged *+ the

pro$oter grop, to ena*%e the shareho%ders/ inestors to tae an infor$ed inest$ent decision.

6&. In this conte>t, I wo%d %ie to re%+ on the dg$ent of 8on@b)e %ecur&t&e' Appe))ate r&buna)

-%A. &n ?remchand %hah and 7ther' %9BI -Appea) no 1, o+ 21 dec&ded on February 21

211. wherein it was o*sered that ...... Khen la! rescri&es a manner in !hich a thing is to

&e done4 it must &e done onl# in that manner or not at all. HHH.5on disclosure of the

information in the rescri&ed manner derived the investing u&lic of the information !hich is

re"uired to &e availa&le !ith them !hen the# ta%e an informed decision !hile ma%ing

investments.

61. In this connection, I wo%d a%so %ie to p%ace re%iance on the decision of the 8onb)e %upreme

Court o+ Ind&a &n un(ar ?a) %&ngh 0' %tate o+ ? -2. 5 %upreme Court Ca'e' ,5D wherein

the Cort o*sered that HHH..The rincile is !ell settled that !here an# statutor# rovision

rovides a articular manner for doing a articular act4 then4 that thing or act must &e done in

accordance !ith the manner rescri&ed therefore in the Act. FBmhasis suliedG "he 8onb)e

%upreme Court o+ Ind&a 0&de &t' order dated Apr&) 21 2 &n C&0&) Appea)


29/52


63. I frther note that the Pro$oter Noticees hae inter alia ad$itted to their not $aing the

disc%osre nder the re%eant proisions of ;eg%ations 31(') read with 31(3) of "aeoer

;eg%ations, '&11. "hs, it is esta*%ished withot do*t that the Pro$oter Noticees i@. Bo+de%%,

I!, ewand, aita, 0rchard, %ate Ms. Ind !oena and Mr. hriardhan !oena at the re%eant

point of ti$e had ad$itted%+ io%ated the proisions of ;eg%ations 31(') read with 31(3) of

"aeoer ;eg%ations, '&11 on three (3) occasions.

66. "he third isse for consideration is whether the Pro$oter !rop co$prising Pro$oter Noticee

[email protected]! acting in concert with the other Pro$oter Noticees of AC# at the re%eant point of ti$e

i@. Bo+de%%, ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena, +%ar, N;C,

Pa%%$a%% and tone India, had io%ated the proision of ;eg%ation 11(') read with ;eg%ation16(1) of "aeoer ;eg%ations, 17 on seen (7) occasions dring the +ear '&&.

65. I note that at the re%eant point of ti$e dring the +ear '&&, the Pro$oter !rop ho%ding was

$ore than fift+e$pted inter alia the pro$oters of AC# fro$ the proisions


30/52


app%ica*%e with respect to Co$panies Act, 4BI Act/;eg%ations/!ide%ines, 8epositories Act,

ecrities Contract ;eg%ation Act, #isting gide%ines, etc., as regards their inest$ents in AC#. It

is noted that I8BI ide %etter dated 0cto*er 16, '&& had s*$itted a stats report stating that

the net worth of the co$pan+ had trned positie as on March 31, '&&, hence, the co$pan+

$a+ *e discharged fro$ the priew of ICA/ BI;. BI; at the proceedings he%d on 9anar+ '',

'&1& inter alia noted that the proisions of the sche$e had *een s*stantia%%+ i$p%e$ented and

the nete$pted ide BI; 0rder dated 9%+ '1, '&&2 as regards their inest$ents in AC#. As sch, no

action can *e taen against the Pro$oter !rop co$prising Pro$oter Noticee [email protected]! acting in

concert with the other Pro$oter Noticees of AC# at the re%eant point of ti$e i@. Bo+de%%,

ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena, +%ar, N;C, Pa%%$a%% and

tone India for the io%ation of ;eg%ation 11(') read with 16(1) of the "aeoer ;eg%ation,

17 on two (') ot of the seen (7) occasions i.e. in respect of ac:isition of 2,3',&&& shares on

9anar+ '', '&& and in respect of ac:isition of ,,&&& shares on e*rar+ &7, '&&. rther,

it has a%read+ *een *roght ot a*oe that the addication proceedings against %ate Ms. Ind

!oena initiated ide CN dated 0cto*er '6, '&13 and pp%e$entar+ CN dated March '&,

'&15 are %ia*%e to *e a*ated.

62. Now, the ne>t isse for consideration is whether the Pro$oter !rop co$prising Pro$oter

Noticee [email protected]! acting in concert with the other Pro$oter Noticees of AC# at the re%eant point

of ti$e i@. Bo+de%%, ewand, aita, 0rchard, Ms. Ind !oena, Mr. hriardhan !oena,

+%ar, N;C, Pa%%$a%% and tone India, had io%ated ;eg%ation 11(') read with 16(1) of the


31/52


"aeoer ;eg%ation, 17 de to retrn of inoed shares *+ the concerned p%edgees on the

fo%%owing occasions after the net


32/52


5'. It is pertinent to $ention here that as %ong as the shares re$ained nder p%edge, I! was the

*eneficia% owner and the on%+ effect of the p%edge was that the shares nder p%edge co%d not

*e transferred an+ frther or dea%t with in the $aret withot the concrrence of the p%edgees.

"he p%edge *+ itse%f did not *ring a*ot an+ change in the *eneficia% ownership of the shares

p%edged and there was no :estion of the aforesaid proisions of the "aeoer ;eg%ations,

17 *eing triggered. I, howeer, note that the pawnor/I! had $ade a defa%t in pa+$ent of

the %oan a$ont within the stip%ated ti$e.

53. I note that Paras (7) and (1) of the #oan c$ P%edge Agree$ents entered *+ I! with the

aforesaid Pawnees read as fo%%ows

. (n case of e=ir# of due date or in case of an# other default4 the lender shall have full rights to

sell4 disose of or other!ise deal !ith the said securities on such terms and rice that the lender

ma# thin% fit and al# the net roceeds to!ards satisfaction of the (C; amount outstanding

against the 'orro!er along !ith interest4 charges etc.

17. The Pledger also underta%es to give (rrevoca&le Po!er of Attorne# in favour of the lender to

authoriDe the lender to sell or transfer the said ledged securities for the urose of realiDing

their dues.

56. "hs, I note fro$ the a*oe that the #oan c$ P%edge Agree$ent proided Irreoca*%e Power of

Attorne+ to the p%edgees to transfer the shares in case of defa%t for the prpose of rea%i@ing

their des. Besides, I note here that the Indian Contract Act too entit%es the p%edgee to inoe

the p%edge when a defa%t occrs. rther, if shares are he%d in de$at for$, the 8epositories Act

and the ;eg%ations fra$ed therender proide the $anner in which the p%edge is to *e created

and inoed. Hpon inoing of the p%edge, the procedre on sch inocation is that the

depositor+ cance%s the entr+ of p%edge in its records and registers the p%edgees as *eneficia%

owners of the shares in their records and $aes the necessar+ a$end$ents in its records. "he

p%edgees, ths, *eco$e the *eneficia% owners of the shares. In the e>tant case, I note that as per

its own ad$ission, there was a continos defa%t on the part of I! in repa+$ent of the %oans

that res%ted in the p%edges *eing inoed *+ the aforesaid for p%edgees. "his res%ted in

transfer of shares fro$ the de$at accont of I! to the de$at acconts of the aforesaid for

p%edgees and the p%edgees *eing registered as *eneficia% owners in the records of the


33/52


depositor+. I note frther that nder the 8epositories Act, it is the *eneficia% owner in who$ a%%

the rights ests.

55. A%so, eer+ person ho%ding e:it+ share capita% of co$pan+ and whose na$e is entered as

*eneficia% owner in the records of the depositor+ is dee$ed to *e a ?$e$*er- of the concerned

co$pan+ as per ection 61 of the Co$panies Act and s*ercise a%% the rights of a $e$*er nti% he ceases

to *e a $e$*er. rther, a person ceases to *e a $e$*er *+ transferring his share to another

person.

5. I note here that I! has c%ai$ed that the %ega% tit%e to the goods p%edged wo%d not est with the

pawnee. I! has stated that as per the re%eant proisions of the Co$panies Act and the IndianContract Act, the p%edgees did not ac:ire oting rights and/ or an+ other rights of an ordinar+

shareho%der in the co$pan+ *+ irte of deposit of shares in AC#. In the $atter, I find that I!

has p%aced re%iance on the decision in the case of 'ala%rishnan v. $!adeshi Pol#te= Ltd. wherein

the pre$e Cort has o*sered that the pawnor of shares contined to *e the $e$*er of the

co$pan+ and co%d e>ercise a%% rights of a shareho%der of the co$pan+.

57. I note that the aforesaid decision dated e*rar+ 1', 125 pertains to the $atter where

;eceier was appointed *+ the Co%%ector of anpr in respect of wadeshi Cotton Mi%%s Co$pan+

#td. "he wadeshi Cotton Mi%%s Co$pan+ #td. he%d 1& %ac shares ot of 3 shares of wadeshi

Po%+te> #td. "he receier so appointed sei@ed 1 %ac shares and frther attached %ac shares of

wadeshi Po%+te> #td. he%d *+ wadeshi Cotton Mi%%s Co$pan+ #td. ection 1 (1) of the

Co$panies Act proides that the Board of directors of a co$pan+ sha%%, on the re:isition of

sch n$*er of $e$*ers of the co$pan+ as is specified in s*traordinar+ genera% $eeting of the co$pan+. *


34/52


Co$panies Act re:iring the Board of 8irectors of wadeshi Po%+te> Co$pan+ to consider

and pass certain reso%tions. In this conte>t, the appe%%ants in the said case had contended that

since a ;eceier had *een appointed *+ the Co%%ector in respect of the shares he%d *+ wadeshi

Cotton Mi%%s Co$pan+ and the+ had a%so *een attached, the shares he%d *+ wadeshi Cotton

Mi%%s Co$pan+ co%d not *e taen into consideration for deter$ining the re:ired :a%ification

to isse the notice nder section 1 of the Co$panies Act re:isitioning the e>traordinar+

genera% $eeting, and that if those shares were o$itted fro$ consideration, then the shares he%d

*+ the other re:isitionists wo%d not *e sfficient to isse the said notice. It is in this conte>t,

the on-*%e pre$e Cort he%d that

The rivileges of a mem&er can &e e=ercised onl# that erson !hose name is entered in the

*egister of Mem&ers. A *eceiver !hose name is not entered in the *egister of Mem&ers cannote=ercise an# of those rights unless in a roceeding to !hich the Coman# concerned is a art#

and an order is made thereinHHH.. Bven !here the holder of a share !hose name is entered in

the *egister of Mem&ers hands over his shares !ith &lan% transfer forms dul# signed4 the

transferee !ould not &e a&le to claim the rights of a mem&er as against the coman#

concerned until his name is entered in the *egister of Mem&ers. HHHHHHHHH

An order of attachment cannot4 therefore4 have the effect of deriving the holder of the shares

of his title to the shares. Ke are of the vie! that the attachment of the shares in the Pol#te=

Coman# held the Cotton Mills Coman# had not derived the Cotton Mills Coman# of its

right to vote at the meeting or to issue the notice under section 179 of the Act.

52. In the e>tant case of AC# nder consideration, on inocation of p%edge, the p%edgees were

registered as *eneficia% owners in the records of the depositor+ in who$ a%% the rights ests

nder the 8epositories Act and dee$ed to *e a ,mem&er- of AC# as per ection 61 of the

Co$panies Act and s*


35/52


5. I! has s*$itted that there was no acta% ac:isition of shares/ oting rights *+ I!, as the

transaction referred $ere%+ pertains to the retrn of shares which were inoed *+ the p%edgee

de to nonc%sion frther c%ear%+ confir$s that ac:isition of shares *+ wa+

of inocation of p%edge *+ persons other than *ans and p*%ic financia% instittions is to *e

considered as ac:isition and wo%d trigger the open offer proisions for the prpose of


36/52


"aeoer ;eg%ations, 17, if it e>ceeds the thresho%d %i$it(s) prescri*ed nder the "aeoer

;eg%ations, 17.

1. I note that I! has stated that nder the goerning proisions of section 17 of Indian Contract

Act, 127', the pawnee has the right to retain the goods p%edged as a co%%atera% secrit+ and

section 177 proides for the right to the pawnor to redee$ the goods p%edged at an+

s*se:ent ti$e *efore the acta% sa%e of the$. rther it has *een stated that the ter$ ?acta%

sa%e and co%%atera% secrit+- as referred in the sections states that the rights are not transferred

$ere%+ on inocation of p%edge. It has a%read+ *een e>p%ained in detai% a*oe as to how on

inocation of p%edge, the p%edgees *eca$e the *eneficia% owners of the shares. ence, when

the p%edgees retrned the inoed shares *ac to I! pon repa+$ent of the %oan, it res%ted in

ac:isition *+ I! and persons acting in concert with I!. If we accept the arg$ent $ade *+I! that < there was no acta% ac:isition of shares/ oting rights *+ I! and that $ere%+

*ecase the shares inoed were retrned *ac to the acta% owner it cannot *e said to *e

io%ation of ;eg%ation 11 of "aeoer ;eg%ations, 17, it wo%d nder$ine the intent of the

"aeoer ;eg%ations, as ac:irers wo%d then *e a*%e to ac:ire shares nder the gar* of

p%edge, in e>cess of the thresho%d %i$it(s) prescri*ed nder the "aeoer ;eg%ations.

'. I note frther that in the case of #ry In0e'tment' ?r&0ate L&m&ted 0' $eccan Lea+&ne %er0&ce' Ltd

-Bombay 8&gh Court date o+ dec&'&on 11 ;arch 23. it was he%d that

(t is4 therefore4 clear that the F;eositoriesG Act and the F$B'( +;eositories and ParticiantsG

*egulations contain a !hole and self


37/52


there was transfer of *eneficia% ownership/ oting rights in accordance with the proisions of

the 8epositories Act, 1/ 4BI (8epositories and Participants) ;eg%ations, 1. I o*sere

that ;eg%ation 11(') too ta%s a*ot ac:isition of shares or oting rights. ence, whether or

not there was a a%id sa%e is i$$ateria%, so %ong as there was a transfer of oting rights.

6. I note frther that I! has s*$itted that the shares were redee$ed *+ $aing pa+$ent of the

%oan a$onts, which has *een ad$itted in the CN, pon which shares were re


38/52


and wo%d on%+ res%t in transfer of shares fro$ the p%edgees to I!. "his transfer is a%together

different fro$ the transfer *+ which the shares ca$e to the p%edgees pon inocation of p%edge,

and *+ no process of reasoning can it *e said that the p%edgees contined to ho%d the shares as

co%%atera% secrit+ which was retrned to I! pon the repa+$ent of the %oan. ;eg%ation 52 of

the ecrities and 4>change Board of India (8epositories and Participants) ;eg%ations 1 is

er*ati$ reprodced *e%ow for reference prpose

Regu)at&on 5,

;anner o+ creat&ng p)edge or hypothecat&on

8. +1 (f a &eneficial o!ner intends to create a ledge on a securit# o!ned him4 he shall ma%e

an alication to the deositor# through the articiant !ho has his account in resect of such

securities.

+3 The articiant after satisfaction that the securities are availa&le for ledge shall ma%e anote in its records of the notice of ledge and for!ard the alication to the deositor#.

+6 The deositor# after confirmation from the ledgee that the securities are availa&le for

ledge !ith the ledger shall !ithin fifteen da#s of the receit of the alication create and

record the ledge and send an intimation of the same to the articiants of the ledger and the

ledgee.

+ On receit of the intimation under su&


39/52


+9 After amending its records under su&


40/52


as their names !ere entered in the records of the deositor#. Admittedl#4 the shares !hich the

aellants ac"uired in ;ecem&er 300 !ere in e=cess of the threshold limit+s rescri&ed

*egulation 11+1 of the ta%eover code and4 therefore4 the said regulation got triggered. The

aellants !ere re"uired to come out !ith a u&lic announcement to ac"uire further shares of

the target coman# as envisaged in this *egulation. This !as not done. 5ot onl# this4 the

aellants having ac"uired the shares from the &an%s !ere also re"uired to ma%e the necessar#

disclosures in terms of *egulation of the ta%eover code to the target coman# and the stoc%

e=changes !here the shares !ere listed. This4 too4 !as not done. Ke are4 therefore4 satisfied

that the rovisions of *egulations and 11+1 stood violated and the adjudicating officer !as

right in recording a finding to this effect. 5o fault can4 thus4 &e found !ith the imugned order4

in this regard.

2. In iew of the a*oe, the arg$ent $ade *+ I!/ Pro$oter !rop that the shares were on%+

transferred for the prpose of secrit+ for repa+$ent of %oan and there was no ac:isition of

shares and/ or oting rights does not ho%d an+ $erit. "hs, it is conc%ded that retrn of the

shares *+ the p%edgees to I! a$onts to fresh ac:isition of shares/ oting rights of AC# as per

the "aeoer ;eg%ations, 17. Besides, I note that I! has a%so inter alia ad$itted that

prsant to the inocation of p%edge, the shares were transferred into the de$at accont of the

%ender accont *ecase of technica% isse, as neither the 8epositories Act, 1, nor, the

depositor+ participants faci%itate an+ paring faci%it+ for p%edged shares in case of inocation of

p%edge.

. Now, the ne>t isse for consideration is whether the Pro$oter !rop was acting in concert with

I! with respect to the said ac:isition. I note fro$ the s*$issions $ade that it has *een

c%ai$ed that the Pro$oter !rop did not share an+ co$$on o*ectie for the prpose of

increasing their shareho%ding or oting rights in AC# throgh the i$pgned transactions of %oan

*+ p%edge of shares, p%edge inocation and s*se:ent rede$ption. It has *een s*$itted that

$ere%+ *ecase the Pro$oter Noticees are of the sa$e pro$oter grop, with their *eing no

co$$on o*ectie or prpose, the+ cannot *e a%%eged to *e in io%ation of ;eg%ation 11(') in so

far as the i$pgned transactions are concerned.


41/52


7&. I note fro$ the s*$issions $ade that the Pro$oter !rop *e%onged to one grop i.e. ?!.P.

!oena !rop- and concerted efforts were pt in *+ the grop to reie AC#. "hs, I note that as

per their own s*$issions, the pro$oter entities *e%onged to one grop. It is, ths, not a case

that the Pro$oter !rop was a diided hose as was the case in E.E. Modi . I note here that the

Pro$oter !rop has inter alia stated that the %oan c$ p%edge agree$ents are independent

contracts inter se I! and the Pawnees, with no ino%e$ent of other pro$oters in the said

transaction, hence, the+ cannot *e said to *e persons acting in concert.

71. In the $atter, I note fro$ the detai%s of the pro$oters proided ide %etter dated 9%+ &3, '&15

that $ost of the pro$oter Noticees are n%isted co$panies with e:it+ inter%ins a$ong grop

affi%iates throgh p+ra$ida% strctre and crossectie 8irector of AC# at the re%eant point

of ti$e, was a%so the director in I! as we%% as other pro$oter Noticees i@. +%ar, aita,

Pa%%$a%% and tone India. rther as per the Anna% ;eport of AC# for the period '&&


42/52


throgh re%ation *ased ties. "hs, I conc%de that the Pro$oter !rop acted in concert with I!

for the %oan transactions nder consideration in the CN and that I! did not act indiida%%+ as

c%ai$ed in the s*$issions. 0nce an indiida% *eco$es part of the grop acting in concert with

the intention of ac:iring shares, it %oses its identit+ as an indiida% and taes on the identit+ of

the grop as a who%e. As per sche$e of %aw as enisaged in the erstwhi%e "aeoer ;eg%ations,

17, an indiida% is no %onger regarded as a separate entit+ of the grop, as he *eco$es an

integra% part of the entire nit as one cohesie strctre. "he o*ectie of ac:isition *+ the

Pro$oter !rop was conso%idation and to increase the tota% Pro$oter !rop ho%ding which had

gone down de to inocation of p%edge *+ the p%edgees. Besides, I note that the "aeoer

;eg%ations, 17 does not differentiate ac:isitions throgh independent *siness transactions

fro$ nor$a% transactions, if the ac:isition is in e>cess of the thresho%d %i$it(s) prescri*ed nder

the "aeoer ;eg%ations, 17.

73. As regards the case of ;od& re%ied pon, the shareho%ders were ad$itted%+ a diided hose.

In the present case, fro$ the s*$issions $ade as we%% as fro$ the facts *roght ot as a*oe,

it *eco$es c%ear that the Pro$oter !rop acted in concert with respect to the %oan transaction

and s*se:ent ac:isition of shares. "he decision of the on-*%e pre$e Cort in the $a&&ch&

case re%ied pon $a+ not *e of an+ assistance since it dea%s with a different set of facts re%ating

to co$$on o*ect nder%+ing the ac:isition of shares. 4en so, I a$ of the opinion there is

nothing in the dg$ent that wi%% contradict a finding in the e>tant case that the pro$oters were

acting in concert, or as PACs. As noted ear%ier, conso%idation of the pro$otersO ho%ding, which

had redced s*se:ent to the inocation of p%edge *+ the p%edgee was the co$$on o*ectie.

rther, in the $atter of Rae'h o'hn&(a) 0' %9BI and others dated 9ne &1, '&1' the on-*%e

A" has stated that the pro$oters, as a r%e, *e%ong to a ho$ogenos grop n%ess otherwise

proed *+ attendant circ$stances to *e otherwise. I note that the attendant circ$stances in

the e>tant case c%ear%+ indicate that the entire Pro$oter !rop were into one c%ass. Neither has

the Pro$oter !rop *een a*%e to proe otherwise. Again as regards the 8onb)e %A' 7rder

dated ;ay 11 212 in the $atter of


43/52


shows that o*ectie or prpose of the Pro$oter !rop (other than I!) was dia$etrica%%+

opposite to the o*ectie or prpose of the Pro$oter Noticee i@. I!. In fact, I find that there is

sfficient $ateria% on record inc%ding the s*$issions $ade that *ring ot that the other

Pro$oter Noticees (e>c%ding I!) were acting in concert with I!. "hs, I conc%de that

Pro$oter !rop of AC# was acting in concert with respect to the ac:isitions $ade de to

retrn of inoed shares *+ the respectie p%edgees.

76. Now, the ne>t isse is whether the Pro$oter !rop io%ated ;eg%ation 11(') read with

;eg%ation 16(1) of "aeoer ;eg%ations, 17 as a res%t of sch ac:isitions. As has *een

*roght ot *efore, I note that as at the re%eant point of ti$e dring the +ear '&&, the

Pro$oter !rop ho%ding was $ore than fift+ceeding the respectie percentage

specified therein. ence, I note that on%+ one p*%ic annonce$ent was re:ired for ac:isition

of 1,&&& shares and 12,&&& shares done *+ the Pro$oter !rop de to retrn of inoed shares

*+ the p%edgee on Ma+ &6, '&& in two tranches. ence, I note that the Pro$oter !rop was


44/52


re:ired to co$e ot with a p*%ic annonce$ent as enisaged in the "aeoer ;eg%ations,

17 on for (6) occasions. oweer, the Pro$oter !rop fai%ed to $ae the p*%ic

annonce$ent on each sch occasion. "he addication proceedings against %ate Ms. Ind

!oena initiated ide CN dated 0cto*er '6, '&13 and pp%e$entar+ CN dated March '&,

'&15 are %ia*%e to *e a*ated. oweer, it is esta*%ished withot do*t that the other Pro$oters

of the Pro$oter !rop at the re%eant point of ti$e had io%ated the proisions of ;eg%ation

11(') read with 16(1) of the "aeoer ;eg%ation, 17 on for (6) occasions in '&&.

7. "he 8onb)e %upreme Court o+ Ind&a &n the matter o+ %9BI ' ;r Ram ;utua) Fund 2!D !,

%CL 21!-%C. has he%d that (n our considered oinion4 enalt# is attracted as soon as the

contravention of the statutor# o&ligation as contemlated the Act and the *egulations is

esta&lished and hence the intention of the arties committing such violation &ecomes !holl#irrelevantH. rther in the $atter of Ranan arghe'e 0 %9BI -Appea)


45/52


+iii HHHHH2 or

+iv HHHHH..4

he shall &e lia&le to a enalt# of t!ent#


46/52


2&. As per ection 15A (*) of the 4BI Act, the Pro$oter Noticees are %ia*%e to a pena%t+ of one %ah

rpees for each da+ dring which sch fai%re contines or one crore rpees, whicheer is %ess.

rther, ection 15 (ii) of 4BI Act proides for i$position of $onetar+ pena%t+ of twent+


47/52


23. I frther find that the Pro$oter Noticees hae s*$itted that *+ $aing disc%osre nder

;eg%ation 7(1A) of "aeoer ;eg%ations, 17, instead of nder ;eg%ation 31(') of "aeoer

;eg%ations, '&11, no har$ has *een cased to an+ p*%ic. In the $atter, I note that the 8on@b)e

%ecur&t&e' Appe))ate r&buma) -%A. &n the matter o+ oma)


48/52


25. I find that the Pro$oter Noticees/ Pro$oter !rop hae a%so stated that the show case against

the Pro$oter Noticees/ Pro$oter !rop is *arred *+ %i$itation. I, howeer, find that nder the

4BI Act there is no %i$itation on initiation of addication proceedings for io%ation of arios

proisions of Act and ;eg%ations $ade therender. rther, the proisions of #i$itation Act

app%+ on%+ to proceedings in Corts and hae no app%ication to Easi 9dicia% Bodies,

notwithstanding the fact that sch *odies $a+ *e ested with certain specified powers

conferred on Corts nder the Cii% or Cri$ina% Procedre. rther, In the $atter of

Radhey'hyam Ch&ran&)a) 6oenka ' Adud&cat&ng 7++&cer %9BI the 8on@b)e %A he%d that

H adjudication under section 18( for default under section 18) cannot &e said to &e hit Article

1 of the Limitation act4 as the default identified thereunder &eing a continuing one4 till such

time it is made good. (n the instant case the default !as made good onl# in $etem&er 19994

!hereas the adjudication roceedings had commenced much earlier as !a# &ac% in the #ear199.

i$i%ar%+, in the case at hand too the defa%t is one that contines ti%% date. In sch a case, there

can *e no :estion of the proceedings *eing *arred *+ %i$itation.

2. I frther note that the Pro$oter Noticees/ Pro$oter !rop hae a%so pointed ot their right to

$ae an app%ication nder ;eg%ation 6 of "aeoer ;eg%ations to e>c%de the transactions

i$pgned fro$ the proisions of "aeoer ;eg%ations. I note here that in the case of ;/' %eed

%ecur&t&e' %er0&ce' ?0t Ltd &n the matter o+ ;/' B)ue Coa't 8ote)' and Re'ort' Ltd the

#earned Addicating 0fficer he%d that (n m# vie!4 the roer course of action for the

Promoters4 in the given circumstances4 !ould have &een to ma%e an alication &efore the

Ta%eover Panel under *egulation +34 &efore ac"uiring the shares retransferred the &an%s.

The Promoters having failed to do so have thus4 violated *egulation 11+1 of the $A$T

*egulations failing to ma%e a u&lic announcement to ac"uire shares in accordance !ith the

said *egulations. I a%so note that the cited Addication 0rder was phe%d *+ the onO*%e A".

rther$ore, the facts of the case are a%$ost identica% to the one at hand. i$i%ar%+, in the

present case the Pro$oter Noticees/ Pro$oter !rop fai%ed to app%+ for an e>e$ption nder

;eg%ation 6 of the "aeoer ;eg%ations, 17. Moreoer, I note that the ;eg%ation 6(') of the

"aeoer ;eg%ations, 17 proides that the ac:irer sho%d fi%e an app%ication giing detai%s of

the proposed ac:isition. "he words roosed ac"uisition $ae it a*ndant%+ c%ear that the

e>e$ption has to *e soght prior to the ac:isition. "here is no dispte that sch an e>e$ption


49/52


was neither soght nor granted. In iew of the sa$e, I a$ na*%e to find an+ $erit in this

s*$ission of the Pro$oter Noticee/ Pro$oter !rop.

27. I note that *+ not $aing the p*%ic annonce$ent, the Pro$oter !rop had res%ted in

den+ing the stattor+ right of the shareho%ders of the co$pan+ to e>it throgh open offer

$echanis$ at the respectie point of ti$e. I *e%iee that inestor confidence in the secrities

$aret can *e sstained %arge%+ *+ ensring inestors protection. It, ths, *eco$es i$peratie

to i$pose $onetar+ pena%t+ for io%ation of the proisions of "aeoer ;eg%ations. In this

regard, I note fro$ the B4 we*site that at the re%eant point of ti$e, i.e. as at :arter ended

9ne 3&, '&&, there were a*ot 51,7& p*%ic shareho%ders ho%ding '.2= ot of the tota%

shareho%ding of 13,'5,'3,615 shares, who were depried of an e>it opportnit+ de to fai%re of

the pro$oter Noticees to $ae a p*%ic annonce$ent of the open offer disc%osing theirintention to ac:ire shares of the co$pan+ fro$ the e>isting shareho%ders. It is pertinent to

$ention here that the aerage $aret price at the re%eant point of ti$e i.e. March 31, '&& to

9ne '&&, which was in the price *and of arond ;s. ''


50/52


e>it opportnit+ at the re%eant point of ti$e. "his proiding of an e>it opportnit+ to the

shareho%ders at the re%eant point of ti$e frther ass$es significance in %ight of the

s*$issions that the operations of the co$pan+ co%d not rn s$ooth%+ de to continos

disrption fro$ %a*or and %i:idit+ crnch.

2. I find that Chapter I


51/52


2&.' rther after taing into consideration a%% the facts and circ$stances of the case, I find

that the $atter in respect of io%ation of ;eg%ation 2(1) and 2(') of the "aeoer

;eg%ations, 17 dring the period '&&1on-&le >igh

Court at Eol%ata vide its Order dated $etem&er 114 3009 '/). NRC ",. '/). $+8+

E,))8) ',7+* S*37) $3. ",. +merged !ith ($ M/s. ($ Traders Ltd. !ith


52/52

effect from Aril 014 300 ursuant to the $cheme of Amalgamation aroved the

>on-&le >igh Court at Eol%ata vide its Order dated $etem&er 114 3009 +;, '/). S;

I;,+ ",. ?++ ; +;, )3*+ which wi%% co$$ensrate with the io%ations

co$$itted *+ the Pro$oter !rop for io%ation of ;eg%ation 11(') read with 16(1) of

the "aeoer ;eg%ation, 17 dring '&&.

1. "he Pro$oter Noticees/ Pro$oter !rop sha%% pa+ the said a$ont of pena%t+ *+ wa+ of

de$and draft in faor of J4BI < Pena%ties ;e$itta*%e to !oern$ent of IndiaL, pa+a*%e at

M$*ai, within 65 da+s of receipt of this order. "he said de$and draft sho%d *e forwarded to

Mr. 9a+anta 9ash, Chief !enera% Manager, Corporation inance 8epart$ent, 4BI Bhaan, P%ot

No. C 6 A, J!L B%oc, Bandra r%a Co$p%e>, Bandra (4), M$*ai 6&& &51.

'. In ter$s of r%e of the ;%es, copies of this order are sent to the Noticees and a%so to the

ecrities and 4>change Board of India.

8ate J 1 2015 A;+ K;4+*

P%ace '8+ A,,7+;< O7*

Documents

Adjudication Order in respect of 11 entities in the matter of M/s. Andhra Cement Ltd