ORDER

UNDER RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES, 1995 READ WITH REGULATION 53A of SEBI (DEPOSITORIES AND PARTICIPANTS) REGULATIONS, 1996 AND SECTION 15HB OF THE SEBI ACT, 1992.

AGAINST

M/s RUSHABH PRECISION BEARINGS LIMITED

BACKGROUND:

1. I was appointed as the Adjudicating Officer by the Chairman, SEBI, vide order dated September 30, 2004 to enquire into and adjudge the alleged contravention of Regulation 53A of the SEBI (Depositories and Participants) Regulations, 1996 (for brevity�s sake referred to as the Regulations) read with Section 15HB� of the SEBI Act, 1992 (hereinafter referred to as the Act) by M/s Rushabh Precision Bearings Ltd (hereinafter referred to as RPBL) in the matter of their failure to appoint a common share agency for handling share registry work both for the dematerialised� and physical securities.

� �� SHOW CAUSE NOTICE/ REPLY/ PERSONAL HEARING:

2. In view of the above, adjudicating proceedings were initiated in the first instance against RPBL by the issuance of a show cause notice dated January 12, 2004 in terms of Rule 4 of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995 where under RPBL was asked to show cause as to why enquiry proceedings should not be held against them for the alleged violation of the provisions of Regulation 53A of the Regulations and as to why penalty should not be imposed upon them under section 15HB of the� Act. RPBL was advised to make their submissions, if any, along with supporting documents that they wished to rely upon, within 14 days from the date of the receipt of the notice and the same was acknowledged by RPBL.

3. In response to the same, RPBL vide their letter date February 5, 2004 informed that they had preferred an application under SICA to BIFR to be declared as a Sick Industrial Unit and that they were not in a sound financial position to appoint a common agency but that they were in any case negotiating with M/s. Sharex India Pvt Ltd for the said purpose.

4. Thereafter, a notice of hearing dated February 16, 2004 was sent to RPBL in terms of Rule 5(1) of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995 (Rules) and vide the said notice, RPBL was advised to attend the hearing proceedings to be held on March 12, 2004. �However, the said notice was returned undelivered. Therefore another notice of hearing was sent to RPBL on October 14, 2004 which also was returned undelivered with a remark �not claimed�. Subsequently when contacted over phone, RPBL stated that due to some construction activity in the building where their office was located, the correspondences had been returned and hence requested for another date of hearing. �Keeping in mind, the principles of natural justice, another opportunity was offered to RPBL vide notice of hearing dated November 22, 2004 wherein RPBL was advised to attend the hearing proceedings to be held on November 30, 2004. Vide the said notice, RPBL was advised to submit the documentary proof if any in support of their contentions at the time of the hearing and it was also made clear that in case they failed to appear for the said proceedings, the matter would be decided solely on the basis of the material available on record.�

5. On the said date, Shri Minoo F Tittina, CEO � Corporate Affairs , RPBL alongwith Shri Krishna Kumar Sharma of Sharma Menon & Associates appeared before me and made the following submissions:

a. RPBL had been involved in a series of litigations due to labour problems till the middle of 2004 and was hence not operational till the middle of 2004. Further they had appealed to AAIFR against the order of BIFR dismissing their reference for considering RPBL as a �Sick Industrial Unit�. (Documentary evidence to that effect was submitted for reference).

b. RPBL had with a lot of difficulty revived their operations and were presently in a position to take stock of the various issues relating to their operations.

c. They had no desire to violate any of the rules and regulations of SEBI and undertook to appoint a common share agency in terms of Regulation 53A.

d. Presently all their shares were in the physical form but they would initiate steps to get them dematerialized.

CONSIDERATION OF ISSUES:

6. I have taken into consideration, the facts and circumstances of the case, the material available on record, as also the relevant regulatory provisions.

7. Regulation 53A of the Regulations which came into force on September 02, 2003 reads as under:

�All matters relating to the transfer of securities, maintenance of records of holders of securities, handling of physical securities and establishing connectivity with the depositories shall be handled and maintained at a single point i.e. either in-house by the issuer or by a Share Transfer Agent registered with the Board.�

8. In view of the above, it is imperative for all issuer companies to appoint a common agency to handle the share registry work relating to both the physical and demat shares of the company either in house or through a SEBI registered RTA.

9. The object of the appointment of the common share agency as is evident from the SEBI Circular No. D&CC/FITTC/CIR-15/2002 dated December 27, 2002, which required all issuer companies to appoint a common agency for handling all share registry work was to avoid:

a) �� any delay in dematerialization, and

b)�� Non-reconciliation of the share holding due to lack of proper co-ordination among the concerned agencies or departments, which was adversely affecting the interest of the investors.�

10.�� Thus the provisions of Regulation 53A of the Regulations would be applicable only to that company whose shares have been dematerialized or to those companies whose shares are both in the physical and demat mode.

11.�� In such a case, before the admission of any security into the depository system, it would be necessary for the issuer company to establish electronic connectivity with both the depositories either directly or through a Registrar and Transfer Agent (RTA).

12.�� Regulation 53A of the Regulations in this regard is thus an important investor protection measure introduced by SEBI.

13. I have also perused the circular issued by SEBI bearing no.FITTC/DC/Policy-Cir-01/2001 dated August 03, 2001 which advises all companies to establish connectivity with both the depositories on or before September 30, 2001 so as to facilitate compulsory trading in rolling settlement effective from January 2, 2002. In terms therein all stock exchanges have been advised to submit a compliance report to SEBI by October 15, 2001.

14. Subsequently SEBI circular no.D&CC/FITTC/ Cir-05/2001 dated December 26, 2001 has brought out the list of all the scrips that have established connectivity with the depositories. In terms of the said circular, the shares of the companies which have not established connectivity with the both depositories as on October 31, 2001 are to be traded on the �Trade for Trade� settlement mode and not on the normal rolling settlement.

15. Thus on date, there are companies that have not yet dematerialized their shares and instead have continued to retain their shares in a physical mode and the transfers, maintenance of record of the holders of securities and handling of the said physical securities in such case is continued to be done in-house.

16. From the facts earlier mentioned, it is noted that the shares of RPBL have not been dematerialized but continue to remain in the physical mode only. The same is also evident from their non-registration with both the depositories (NSDL & CDSL) which aspect has been verified from the respective websites.

17. In the absence of the shares of RPBL being dematerialized, the provisions of Regulation 53A of the Regulations would have no applicability to RPBL whose shares continue to remain in the physical mode and consequently RPBL cannot be held liable for their failure to appoint a common share agency to handle the share registry work relating to the shares of the company in terms therein.

18. Hence on a judicious exercise of the discretion conferred upon me, bearing in mind the issues enumerated above as well as after analysing all the material available on record and taking into consideration the facts and circumstances of the present case, �I am of the considered opinion that the imposition of any penalty is not necessitated.

�� ORDER:

19.�� Accordingly, in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, the proceedings against M/s. Rushabh Precision Bearings Ltd are hereby dropped.�

PLACE: MUMBAI�� G. BABITA RAYUDU

DATE: DECEMBER 13, 2004�� ADJUDICATING OFFICER

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ORDER UNDER RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES, 1995 READ WITH REGULATION 53A of SEBI (DEPOSITORIES AND PARTICIPANTS) REGULATIONS, 1996 AND SECTION 15HB OF THE SEBI ACT, 1992. AGAINST M/s RUSHABH PRECISION BEARINGS LIMITED BACKGROUND: 1. I was appointed as the Adjudicating Officer by the Chairman, SEBI, vide order dated September 30, 2004 to enquire into and adjudge the alleged contravention of Regulation 53A of the SEBI (Depositories and Participants) Regulations, 1996 (for brevity�s sake referred to as the Regulations) read with Section 15HB� of the SEBI Act, 1992 (hereinafter referred to as the Act) by M/s Rushabh Precision Bearings Ltd (hereinafter referred to as RPBL) in the matter of their failure to appoint a common share agency for handling share registry work both for the dematerialised� and physical securities. � �� SHOW CAUSE NOTICE/ REPLY/ PERSONAL HEARING: 2. In view of the above, adjudicating proceedings were initiated in the first instance against RPBL by the issuance of a show cause notice dated January 12, 2004 in terms of Rule 4 of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995 where under RPBL was asked to show cause as to why enquiry proceedings should not be held against them for the alleged violation of the provisions of Regulation 53A of the Regulations and as to why penalty should not be imposed upon them under section 15HB of the� Act. RPBL was advised to make their submissions, if any, along with supporting documents that they wished to rely upon, within 14 days from the date of the receipt of the notice and the same was acknowledged by RPBL. 3. In response to the same, RPBL vide their letter date February 5, 2004 informed that they had preferred an application under SICA to BIFR to be declared as a Sick Industrial Unit and that they were not in a sound financial position to appoint a common agency but that they were in any case negotiating with M/s. Sharex India Pvt Ltd for the said purpose. 4. Thereafter, a notice of hearing dated February 16, 2004 was sent to RPBL in terms of Rule 5(1) of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995 (Rules) and vide the said notice, RPBL was advised to attend the hearing proceedings to be held on March 12, 2004. �However, the said notice was returned undelivered. Therefore another notice of hearing was sent to RPBL on October 14, 2004 which also was returned undelivered with a remark �not claimed�. Subsequently when contacted over phone, RPBL stated that due to some construction activity in the building where their office was located, the correspondences had been returned and hence requested for another date of hearing. �Keeping in mind, the principles of natural justice, another opportunity was offered to RPBL vide notice of hearing dated November 22, 2004 wherein RPBL was advised to attend the hearing proceedings to be held on November 30, 2004. Vide the said notice, RPBL was advised to submit the documentary proof if any in support of their contentions at the time of the hearing and it was also made clear that in case they failed to appear for the said proceedings, the matter would be decided solely on the basis of the material available on record.� 5. On the said date, Shri Minoo F Tittina, CEO � Corporate Affairs , RPBL alongwith Shri Krishna Kumar Sharma of Sharma Menon & Associates appeared before me and made the following submissions: a. RPBL had been involved in a series of litigations due to labour problems till the middle of 2004 and was hence not operational till the middle of 2004. Further they had appealed to AAIFR against the order of BIFR dismissing their reference for considering RPBL as a �Sick Industrial Unit�. (Documentary evidence to that effect was submitted for reference). b. RPBL had with a lot of difficulty revived their operations and were presently in a position to take stock of the various issues relating to their operations. c. They had no desire to violate any of the rules and regulations of SEBI and undertook to appoint a common share agency in terms of Regulation 53A. d. Presently all their shares were in the physical form but they would initiate steps to get them dematerialized. CONSIDERATION OF ISSUES: 6. I have taken into consideration, the facts and circumstances of the case, the material available on record, as also the relevant regulatory provisions. 7. Regulation 53A of the Regulations which came into force on September 02, 2003 reads as under: �All matters relating to the transfer of securities, maintenance of records of holders of securities, handling of physical securities and establishing connectivity with the depositories shall be handled and maintained at a single point i.e. either in-house by the issuer or by a Share Transfer Agent registered with the Board.� 8. In view of the above, it is imperative for all issuer companies to appoint a common agency to handle the share registry work relating to both the physical and demat shares of the company either in house or through a SEBI registered RTA. 9. The object of the appointment of the common share agency as is evident from the SEBI Circular No. D&CC/FITTC/CIR-15/2002 dated December 27, 2002, which required all issuer companies to appoint a common agency for handling all share registry work was to avoid: a) �� any delay in dematerialization, and b)�� Non-reconciliation of the share holding due to lack of proper co-ordination among the concerned agencies or departments, which was adversely affecting the interest of the investors.� 10.�� Thus the provisions of Regulation 53A of the Regulations would be applicable only to that company whose shares have been dematerialized or to those companies whose shares are both in the physical and demat mode. 11.�� In such a case, before the admission of any security into the depository system, it would be necessary for the issuer company to establish electronic connectivity with both the depositories either directly or through a Registrar and Transfer Agent (RTA). 12.�� Regulation 53A of the Regulations in this regard is thus an important investor protection measure introduced by SEBI. 13. I have also perused the circular issued by SEBI bearing no.FITTC/DC/Policy-Cir-01/2001 dated August 03, 2001 which advises all companies to establish connectivity with both the depositories on or before September 30, 2001 so as to facilitate compulsory trading in rolling settlement effective from January 2, 2002. In terms therein all stock exchanges have been advised to submit a compliance report to SEBI by October 15, 2001. 14. Subsequently SEBI circular no.D&CC/FITTC/ Cir-05/2001 dated December 26, 2001 has brought out the list of all the scrips that have established connectivity with the depositories. In terms of the said circular, the shares of the companies which have not established connectivity with the both depositories as on October 31, 2001 are to be traded on the �Trade for Trade� settlement mode and not on the normal rolling settlement. 15. Thus on date, there are companies that have not yet dematerialized their shares and instead have continued to retain their shares in a physical mode and the transfers, maintenance of record of the holders of securities and handling of the said physical securities in such case is continued to be done in-house. 16. From the facts earlier mentioned, it is noted that the shares of RPBL have not been dematerialized but continue to remain in the physical mode only. The same is also evident from their non-registration with both the depositories (NSDL & CDSL) which aspect has been verified from the respective websites. 17. In the absence of the shares of RPBL being dematerialized, the provisions of Regulation 53A of the Regulations would have no applicability to RPBL whose shares continue to remain in the physical mode and consequently RPBL cannot be held liable for their failure to appoint a common share agency to handle the share registry work relating to the shares of the company in terms therein. 18. Hence on a judicious exercise of the discretion conferred upon me, bearing in mind the issues enumerated above as well as after analysing all the material available on record and taking into consideration the facts and circumstances of the present case, �I am of the considered opinion that the imposition of any penalty is not necessitated. �� ORDER: 19.�� Accordingly, in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, the proceedings against M/s. Rushabh Precision Bearings Ltd are hereby dropped.� PLACE: MUMBAI�� G. BABITA RAYUDU DATE: DECEMBER 13, 2004�� ADJUDICATING OFFICER

PLACE: MUMBAI���������������������������� �������������� ��� �������G. BABITA RAYUDU

DATE: DECEMBER 13, 2004��� �������������� ADJUDICATING OFFICER

PLACE: MUMBAI�� G. BABITA RAYUDU

DATE: DECEMBER 13, 2004�� ADJUDICATING OFFICER