| Home | Back | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
SECURITIES AND EXCHANGE BOARD OF A. O. NO: ACR/ 4 /2005 ADJUDICATION ORDER AGAINST SARAF CREDIT & PORTFOLIO (P) LTD. IN THE
MATTER OF KETAKI ESTATES & FINANCE LTD., UNDER SECTION 15 I OF THE SEBI ACT
READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES
BY ADJUDICATING OFFICER) RULES, 1995 1.
Wiezmann Capital Ltd, a merchant
banker, filed a draft open offer document dated April 21, 2001 for acquiring 640,000
shares of Ketaki Estate & Finance Ltd (hereinafter referred to as �KEF�), on
behalf of the acquirer Shri Jithendernath Alluri and persons acting in concert
with him viz., Smt. Rajeshwari Alluri, Smt. Chintalapati Laxmidevi and Smt.
Swati Alluri. KEF is listed public company having its registered office at
Mumbai. As per the aforesaid draft offer document the acquirers, vide Memorandum
of Understanding dated March 12, 2001, agreed to acquire 1,636,530 equity
shares of KEF from the persons who were part of�
promoter group viz., Expert Hotel & Properties Pvt Ltd, Fundamental
Finvest Pvt Ltd, G.S. Modi, M. Chand Distributing Co. Pvt Ltd, Narayan
Distributors Pvt Ltd, New Ways Finance Pvt Ltd, Nikat Finlease Ltd, Rajhans
Exports Pvt Ltd, RKM Securities Pvt Ltd, Saraf Credit & Portfolio Pvt Ltd,
Sincere Management Services Pvt Ltd, Subam Capital Services Pvt Ltd, Tyagi
Trading Pvt Ltd, Prabhat Management Services Pvt Ltd, RRP Management Services
Pvt Ltd, Joginder Associates Pvt Ltd, R.K. Bansal Finance Ltd, Sunlog Credit
Pvt Ltd, Medusa Associates Pvt Ltd, (hereinafter collectively referred to as
�the sellers�). The aforesaid agreement to acquire shares and the consequential
change in control and management of KEF triggered the open offer for which the
aforesaid offer document was filed. As per Para No.4.15 of the aforesaid offer
document, chapter II of SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 (hereinafter referred to as �SAST� Regulations) were not
complied by the sellers. �Based on the
aforesaid information with respect to the non-compliance of SAST Regulations by
the sellers it was decided to launch adjudication under Sec. 15A(b) of SEBI
Act, 1992 against the sellers.�� 2.
SEBI appointed Smt. Poonam Bamba
as the Adjudicating Officer under Rule 3 of SEBI (Procedure For Holding Inquiry
And Imposing Penalties By Adjudicating Officer) Rules, 1995 �read with Section 15 I of SEBI Act, 1992 to
inquire into and adjudge the failure of Saraf Credit & Portfolio (P) Ltd.,
(hereinafter referred to as �SCP� for the sake of brevity) to make disclosures
of its share holding in KEF to the company, in violation of Regulations 6(1)
& (3) and 8(1) and (2) of the SEBI (SAST) Regulations, 1997 under 15A(b) of
the SEBI Act, 1992, vide order dated May 02, 2001.����� 3.
In view of the launching of the
amnesty scheme by SEBI in the year 2002, the matter was kept in abeyance.
Subsequently, Shri S.V. Krishna Mohan was appointed as Adjudicating Officer in
the place of Smt Poonam Bamba vide order dated 4.
Notice dated
5.
The notice also called up on SCP
to show cause as to why an inquiry in terms of the adjudication rules should
not be conducted against it.� However,
despite receipt of the said notice, SCP did not reply to the notice.� In the above circumstances the then Adjudicating
Officer was of the view that an inquiry should be held in the matter and
accordingly notice of inquiry dated October 16, 2002 was issued to SCP, fixing
the date for inquiry on October 30, 2002.�
Though, SCP did not attend the proceedings, vide letter dated October
30, 2002 it stated that its shareholding never crossed 5% of KEF�s equity at
any point of time, thereby contending that there was no violation of SEBI
(SAST) Regulations, 1997 as alleged. Subsequently, vide letter dated 6.
Subsequently, one more notice of
inquiry, was issued to SCP by Shri S.V. Krishna Mohan, the then Adjudicating Officer
vide letter dated November 01, 2004, fixing November 11, 2004 as the date of inquiry,
on noticing that SCP did not avail the amnesty scheme. The said notice of
inquiry was sent by registered post with acknowledgement due and the receipt of
the same was acknowledged by SCP but it chose not to attend the proceedings on
the aforesaid date. Therefore, the undersigned decided in terms of Rule 4(7) of
SEBI (Procedure for Holding Inquiry And Imposing Penalties By Adjudicating
Officer) Rules, 1995 to proceed with the inquiry as it appeared that SCP
deliberately failed to appear for the inquiry. 7.
SCP, vide its letter dated October
30, 2002 contended that its shareholding in KEF never exceeded 5% limit and
therefore provisions of SEBI (SAST) Regulations, 1997 are not violated. The
relevant Regulations are as follows: 6(1) Any person, who holds more than five
per cent shares or voting rights in any company, shall within two months of
notification of these regulations disclose his aggregate shareholding in that
company, to the company. 6(3) A promoter or any person having control
over a company shall within two months of notification of these regulations
disclose the number and percentage of shares or voting rights held by him and
by person(s) acting in concert with him in that company, to the company. 8(1) Every person, including a person mentioned
in regulation 6 who hold more than fifteen percent shares or voting rights in
any company, shall, within 21 days from the financial year ending March 31,
make yearly disclosures to the company, in respect of his holdings as on 31st
March. 8(2) A promoter or ever person having
control over a company shall, within 21 days from the financial year ending
March 31, as well as the record date of the company for the purposes of
declaration of dividend, disclose the number and percentage of shares or voting
rights held by him and by persons acting in concert with him, in that company
to the company.� 8.
Upon careful perusal of the
Regulations, the undersigned is inclined to give SCP the benefit of doubt for the
alleged violation of Regulation 6(1) SEBI (SAST) Regulations, 1997 for the
reason that there is no information available on record pertaining to the
number and percentage of shares of KEF held by SCP.� Nor has SCP stated its holding in KEF at the
relevant time. It has merely stated that it is less than 5% of KEF�s equity. However,
SCP did not dispute that it was part of the promoter group. Therefore, SCP was
under obligation under regulation 6(3) not only to disclose its own holding to
KEF by 9.
The aforesaid finding is
applicable mutatis mutandis in
respect of regulation 8(2) also.�
Therefore, violation of regulation 8(2) of SEBI (SAST) Regulations, 1997
is also established as there is nothing on record to suggest that SCP has made
the annual disclosure for the years 1997-2001.��
10.
However, violation of regulation
8(1) of the SEBI (SAST) Regulations, 1997 is not established as it pertains to annual
disclosure by persons who hold more than 15% of the target company�s equity and
the material on record does not provide information on the shareholding of SCP.
The above findings are summarized in table below.
11.
SEBI came out with �SEBI
Regularization Scheme, 2002 for Non compliance with Regulations 6 and 8 of the
SEBI (SAST) Regulations, 1997�. This scheme was open from 01.10.02 to 31.12.02
and subsequently extended till 20.02.03. It is unambiguous from the material made
available to the undersigned by SEBI that SCP did not participate in the aforesaid
amnesty scheme. The violations being thus established as above, only the
quantum of penalty to be imposed on SCP remains to be decided. 12.
The information on holding of
the promoter in the target company is vital to the investors as it has bearing
on the control and management. When there is more than one promoter, it is
imperative that the information on their individual and aggregate shareholding
is made available to the investors, through the stock exchanges. However, when
the collective shareholding of the promoters is not disclosed, as in the
instant case, then investors are forced to take investment decisions on insufficient
information. That would be the anti- thesis of the spirit of SEBI (SAST)
Regulations, 1997. 13.
In this context the order dated March
20, 2002 of the Hon�ble SAT in the appeal no. 48 of 2001 in the matter of
Luxury Foams Ltd. vs SEBI may be cited. The relevant portion is reproduced here
for ready reference. �In this
context, the object of the regulation should be remembered.� It is meant for �information disclosure� to
the investors.� Had one of the appellants
complied with the requirements of disclosing the acquisition of shares made by
him and the remaining 10 appellants, it would have been considered sufficient,
as such� an action would have met with
the object for which the regulation is put in place.� But since there is a failure in this regard,
imposition of penalty on each one of the appellants �acquirers-is legally in
order.� 14.
From the above, it is clear that
the duty to make disclosure under Regulation 6(3) & 8(2) of SEBI (SAST)
Regulations, 1997 is joint and several in nature and if there is a violation,
the liability for penalty is also joint and several in nature. 15.
Section 15A(b) of Securities and
Exchange Board of India Act, 1992 prescribes a punishment of five thousand
rupees for every day during which the violation continues, if any person who is
required under the Act or any rules or regulations made thereunder to file any return
or furnish any information, books or other documents within the time specified
therefor in the regulations, fails to file return or furnish the same within
the time specified therefor in the regulations. With effect from 16.
To determine the quantum of
penalty under Section 15A(b), the undersigned considered the following factors
as provided in the section 15J of SEBI Act, 1992 viz.(a) the amount of
disproportionate gain or unfair advantage, wherever quantifiable, made as a
result of the default ; (b) the amount of loss caused to an investor or group
of investors as a result of the default and; (c) the repetitive nature of the
default. 17.
As regards the disproportionate
gain or unfair advantage there are no quantifiable figures available on record
with respect to the default of the company. There are also no figures or data
on record to quantify the amount of loss caused to an investor or group of
investors as a result of the default. However, the default in disclosure to the
company was repetitive in nature as the disclosures were not made consecutively
for several years.� 18.
Therefore in exercise of the
powers conferred under section 15-1(2) of the SEBI Act, 1992, read with Rule 5
of the Securities and Exchange Board of India (procedure for Holding Inquiry
and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a
penalty of Rs 65,000/- (Rupees sixty five thousand only) on Saraf Credit &
Portfolio (P) Ltd., for the aforesaid violations. The company shall pay the
said amount of penalty by way of demand draft in favour of �SEBI- Penalties
Remittable to Government of India�, payable at Mumbai within 45 days of receipt
of this order. The said demand draft should be forwarded to Shri S.V. Muralidhar
Rao, General Manager, Division of Corporate Restructuring, Mittal Court, 1st
floor, B- Wing, 224, Nariman Point, Mumbai 400 021. 19.
In terms of Rule 6 of the SEBI
(Procedure for holding Inquiry and Imposing Penalties by Adjudicating Officer)
Rules, 1995, copies of this order are sent to the company and also to
SEBI.�� Date:�� Place : Mumbai�������������������������� Adjudicating Officer |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 | Printer Friendly page |  | Email this page |
