ORDER
UNDER RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER)
RULES, 1995
AGAINST
Dr M.P. AGGARWAL AND 21 OTHERS
IN THE MATTER OF THE ACQUISITION OF THE SHARES OF
M/S. SHRI LAXMI COTSYN LIMITED
1. The subject matter of the present proceedings ordered on March 01, 2006 relates to the issue of non compliance of the provisions of the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997 (Takeover Regulations) by the promoter group entities of Shri Lakshmi Cotsyn Limited (formerly known as Shrivastava international Limited and for brevity’s sake, hereinafter referred to as SLCL). The shares of SLCL are listed on the Stock Exchange, Mumbai, the Uttar Pradesh Stock Exchange and the Jaipur Stock Exchange (for brevity’s sake, hereinafter referred to as the BSE, UPSE and JSE respectively).
2. These promoter group entities i.e. Dr M.P. Aggarwal, Mr. Pawan Kumar Agarwal, Mr. Alok Agarwal, Mr. Vikas Agarwal, Ms. Sharda Agarwal, Mr. Suraj Mal Agarwal, Ms. Barsha, Mr. Mohan Lal Vaish, Mr Jayant Gupta, Mr. Devesh Gupta, Mr. Devesh Gupta HUF, Ms. Manjusha Gupta, Ms. Sujala Gupta, Ms. Kamini Agarwal, Ms. Madhu Agarwal, Mr. Rajkumar Agarwal, Mr. R.L. Agarwal, Galaxy Capital Finance Ltd, M/s. He-man Engg.Works P Ltd, Mac Glasses Pvt. Ltd, Jayant Textiles (P) Ltd and Navchetna Merchantiles Ltd (for brevity’s sake, hereinafter collectively referred to as the acquirers ) are being adjudicated under Section 15H (ii) of the SEBI Act, 1992 (Act) for the alleged violation of Regulation 3(1)(c)(i) and (ii) read with Regulation 11 (1) of the Takeover Regulations (as they existed at the relevant time) in the matter of the acquisition of the shares of SLCL, through preferential allotments, the details of which in brief is reproduced below.
|
Date of allotment
|
No. and % of shares allotted
|
Pre acquisition holding
|
Post acquisition holding
|
Total increase in the holding
|
Applicable creeping acquisition limit
|
|
29.04.98
|
6,40,000
|
24.69%
|
31.52%
|
6.83%
|
2%
|
|
03.08.98
|
3,40,000
|
31.85%
|
33.81%
|
1.96%
|
2%
|
|
28.12.98
|
3,00,000
|
38.71%
|
40.45%
|
1.74%
|
5%
|
3. In connection thereof, a notice dated June 28, 2006 in terms of Rule 4 of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995 (Rules) was sent to all the acquirers advising them to show cause as to why proceedings should not be initiated against them for the alleged violation of the specified provisions of the Takeover Regulations and why the penalty prescribed under the Act should not be levied upon them. The acquirers were also 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 indicate whether they were desirous of a personal hearing.
4. Dr M.P Agarwal, stating to be duly authorized by the acquirers, made extensive submissions vide his reply dated 18 July 2006. References were made to the judgments passed by the Supreme Court and the Securities Appellate Tribunal especially to highlight their contention that there was no malafide intention on their part and the lapses if any, were due to the lack of knowledge on the part of the acquirers and the company. It was also contended that when the Takeover Regulations came into operation in the year 1997; the subject was not very clear in the minds of many people and their then Company Secretary was also not well acquainted with the newly introduced subject and had hence made all the compliances as per his understanding of law and that he was also quite old and going through certain medical problems. The acquirers also requested for an opportunity of personal hearing. Subsequently vide their letter dated August 30, 2006, the acquirers reiterated that the requirements prescribed under Regulation 3(3) and (4) of the Takeover Regulations are post acquisition compliances and hence the belated compliance of the same was not very fatal and that consequently, Regulation 11 of the Takeover Regulations had no applicability to the three preferential issues made by SLCL to the promoter group entities.
5. In view of the request for a personal hearing, a notice of hearing dated August 09, 2006 was sent to all the acquirers under Rule 4(3) of the Rules with an advice to appear before me on August 30, 2006 along with the necessary documentary proof if any, in support of their contentions. The hearing was attended by the authorized representative of the acquirers, who while reiterating the contentions advanced earlier further requested that time upto September 12, 2006 be granted to enable them to make additional submissions. Thereafter, vide letter dated September 8, 2006, additional information was forwarded as regards the pre and post shareholding of the promoters of SLCL in the context of the preferential allotments.
APPRECIATION OF EVIDENCE AND ISSUES
6. I have considered the submissions advanced on behalf of the acquirers including the oral and documentary evidence placed on record as also the uncontroverted sequence of events and factual aspects relating to the impugned preferential allotments of the shares of SLCL at different points of time, the details of which are as under:
FIRST PREFERENTIAL ALLOTMENT DATED 29TH APRIL, 1998
|
Name of the Allottees (Promoters & PACs)
|
Pre-preferential holding as on 28.4.1998
|
Preferential issue size
|
Post preferential holding of shares
|
|
shares in Nos
|
In %
|
shares in Nos
|
shares in Nos
|
In %
|
|
M.P. Agarwal
|
140000
|
2.68%
|
50000
|
190000
|
3.11%
|
|
Pawan Agarwal
|
40000
|
0.77%
|
50000
|
90000
|
1.47%
|
|
Smt.Sharda Agarwal
|
50000
|
0.96%
|
50000
|
100000
|
1.64%
|
|
S.M.Agarwal
|
20000
|
0.38%
|
20000
|
40000
|
0.65%
|
|
M.L. Vaish
|
30000
|
0.58%
|
20000
|
50000
|
0.82%
|
|
Manjusha Gupta
|
0
|
0.00%
|
20000
|
20000
|
0.33%
|
|
Devesh Gupta
|
70000
|
1.34%
|
20000
|
90000
|
1.47%
|
|
Sujala Gupta
|
20000
|
0.38%
|
20000
|
40000
|
0.65%
|
|
Galaxy Capital Finance Ltd.
|
358300
|
6.87%
|
100000
|
458300
|
7.49%
|
|
Kamani Agarwal
|
0
|
0.00%
|
40000
|
40000
|
0.65%
|
|
He-man Engg.Works Pvt. Ltd
|
190000
|
3.64%
|
100000
|
290000
|
4.74%
|
|
Navchetna Mercantiles Ltd
|
0
|
0.00%
|
50000
|
50000
|
0.82%
|
|
Madhu Agarwal
|
52000
|
1.00%
|
15000
|
67000
|
1.10%
|
|
Raj Kumar Agarwal
|
18000
|
0.35%
|
15000
|
33000
|
0.54%
|
|
R.L. Agarwal
|
92500
|
1.77%
|
20000
|
112500
|
1.84%
|
|
Jayant Textiles Pvt. Ltd.
|
100000
|
1.92%
|
50000
|
150000
|
2.45%
|
|
Vikas Agarwal
|
1000
|
0.02%
|
0
|
1000
|
0.02%
|
|
Alok Agarwal
|
1000
|
0.02%
|
0
|
1000
|
0.02%,
|
|
Barsha Agarwal
|
0
|
0.00%
|
0
|
0
|
000%1
|
|
Devesh Gupta HUF
|
0
|
0.00%
|
0
|
0
|
0.00%
|
|
Jayant Gupta
|
0
|
0.00%
|
0
|
0
|
0.00%
|
|
Mac Glasses Pvt Ltd.
|
105000
|
2.01%
|
0
|
105000
|
1.72%,
|
|
|
.
|
|
0
|
|
|
|
TOTAL
|
1287800
|
24.69%
|
640000
|
1927800
|
31.52%
|
SECOND PREFERENTIAL ALLOTMENT DATED 3rd AUGUST, 1998
|
Name of the Allottees (Promoters & PACs)
|
Pre-preferential holding as on 28.4.1998
|
Preferential issue size shares
|
Post preferential holding shares
|
|
shares in Nos
|
In %
|
shares in Nos
|
shares in Nos
|
In %
|
|
M.P. Agarwal
|
190,000
|
3.11
|
20,000
|
210,000
|
3.10
|
|
Pawan Agarwal
|
90,000
|
1.47
|
20,000
|
110,000
|
1.63
|
|
Smt. Sharada Agarwal
|
100,000
|
1.64
|
20,000
|
120,000
|
1.77
|
|
S.M. Agarwal
|
40,000
|
0.65
|
20,000
|
60,000
|
0.89
|
|
Alok Agarwal
|
1,000
|
0.02
|
20,000
|
21,000
|
0.31
|
|
Vikas Agarwal
|
1,000
|
0.02
|
40,000
|
41,000
|
0.61
|
|
Manjusha Gupta
|
20,000
|
0.33
|
40,000
|
60,000
|
0.89
|
|
Devesh Gupta
|
90,000
|
1.47
|
20,000
|
110,000
|
1.63
|
|
Sujala Gupta
|
40,000
|
0.65
|
20,000
|
60,000
|
0.89
|
|
Galaxy Capital Finance Ltd.
|
458,300
|
7.49
|
30,000
|
488,300
|
7.22
|
|
Kamini Agarwal
|
60,000
|
0.98
|
50,000
|
110,000
|
1.63
|
|
Raj Kumar Agarwal
|
33,000
|
0.54
|
20,000
|
53,000
|
0.78
|
|
R.L. Agarwal
|
112,500
|
1.84
|
20,000
|
132,500
|
1.96
|
|
Barsha Agarwal
|
-
|
0.00
|
20000
|
-
|
0.00
|
|
Madhu Agarwal
|
67,000
|
1.10
|
-
|
67,000
|
0.99
|
|
ML Vaish
|
50,000
|
0.82
|
-
|
50,000
|
0.74
|
|
Devesh Gupta HUF
|
-
|
0.00
|
-
|
-
|
0.00
|
|
Jayant Gupta
|
-
|
0.00
|
-
|
-
|
0.00
|
|
He-Man Eng.Works Pvt Ltd
|
290,000
|
4.74
|
-
|
290,000
|
4.29
|
|
Navchetna Merchantiles Ltd
|
50,000
|
0.82
|
-
|
50,000
|
0.74
|
|
Mac Glasses Pvt Ltd
|
105,000
|
1.72
|
-
|
105,000
|
1.55
|
|
Jayant Textiles Pvt Ltd.
|
150,000
|
2.45
|
-
|
150,000
|
2.22
|
|
TOTAL
|
1,947,800
|
31.85
|
340000
|
2287800
|
33.81%
|
THIRD PREFERENTIAL ALLOTMENT DATED 28th DECEMBER, 1998
|
Name of the Allottees (Promoters & PACs)
|
Pre-preferential holding as on 28.4.1998
|
Preferential issue size shares
|
Post preferential holding shares
|
|
shares in Nos
|
In %
|
shares in Nos
|
shares in Nos
|
In %
|
|
Pawan Agarwal
|
11000
|
1.63
|
10000
|
120000
|
1.66
|
|
Alok Agarwal
|
21000
|
0.31
|
20000
|
41000
|
0.57
|
|
Vikas Agarwal
|
41000
|
0.61
|
20000
|
61000
|
0.85
|
|
Manjusha Gupta
|
60000
|
0.89
|
20000
|
80000
|
1.11
|
|
Devesh Gupta
|
110000
|
1.63
|
20000
|
130000
|
1.80
|
|
Sujala Gupta
|
60000
|
0.89
|
20000
|
80000
|
1.11
|
|
Galaxy Capital Finance Ltd
|
588300
|
8.69
|
80000
|
668300
|
9.26
|
|
Kamini Agarwal
|
110000
|
1.63
|
30000
|
140000
|
1.94
|
|
He-man Engg.Works Pvt Ltd
|
365000
|
5.39
|
40000
|
405000
|
5.61
|
|
Madhu Agarwal
|
67000
|
0.99
|
20000
|
87000
|
1.21
|
|
Raj Kumar Agarwal
|
53000
|
0.78
|
10000
|
63000
|
0.87
|
|
R.L. Agarwal
|
132500
|
1.96
|
10000
|
142500
|
1.97
|
|
Mata Prasad Agarwal
|
210000
|
3.10
|
0
|
210000
|
2.91
|
|
Sharda Agarwal
|
120000
|
1.77
|
0
|
120000
|
1.66
|
|
S.M. Agarwal
|
60000
|
0.89
|
0
|
60000
|
0.83
|
|
Barsha Agarwal
|
0
|
0.00
|
0
|
0
|
0.00
|
|
M L Vaish
|
50000
|
0.74
|
0
|
50000
|
0.69
|
|
Devesh Gupta HUF
|
0
|
0.00
|
0
|
0
|
0.00
|
|
Jayant Gupta
|
0
|
0.00
|
0
|
0
|
0.00
|
|
Navcchetna Merchantile Ltd
|
61000
|
0.90
|
0
|
61000
|
0.85
|
|
Mac Glasses Pvt Ltd
|
105000
|
1.55
|
0
|
105000
|
1.46
|
|
Jayant Textiles Pvt Ltd.
|
295200
|
4.36
|
0
|
295200
|
4.09
|
|
TOTAL
|
2619000
|
38.71
|
3,00,000
|
2919000
|
40.45%
|
7. The information provided in the tables is not disputed and from the same, it is evident that prior to the allotment on April 29, 1998, the acquirers were collectively holding 12,87,800 equity shares of SLCL constituting 24.69% of the equity capital of SLCL and post the said allotment, the post issue holding of the acquirers increased to 19,27,800 shares constituting 31.52% of the equity capital of SLCL.
8. The provisions of Regulation 11(1) of the Takeover Regulations (at the relevant time and prior to its amendment on 28.10.98) read as under:
“No acquirer, who together with persons acting in concert with him, has acquired in accordance with the provisions of law, not less than 10 per cent but more than 51% of the shares or voting rights in a company, shall acquire, either by himself or through persons acting in concert with him, additional shares or voting rights entitling him to exercise more than 2% of the voting rights, in any period of 12 months unless such an acquirer makes a public announcement to acquire shares in accordance with the Regulations” (emphasis not suuplied)
9. The Takeover Regulations (as per the then relevant provisions) however, contemplated acquisitions through the preferential route to be exempted from the applicability, of inter alia Regulation 11(1) of the Regulations, only in cases where the provisions of Regulation 3(1)(c) (i) and (ii) of the Takeover Regulations were duly complied with.
10. The mandatory compliance specified in Regulation 3(1)(c)(i) required the Board Resolution in respect of the proposed preferential allotment to be sent to all the Stock Exchanges on which the shares of the company are listed for being notified on the Notice Board while the disclosures specified in Regulation 3(1)(c)(ii) pertained to the identity of the class of proposed allotees and if any of the proposed allotee was to be allotted any shares that would increase his holding to over 5% of the post issue capital, then in such cases, the price at which the allotment is proposed, the identity of such persons, the purpose of and the reason of such allotment, consequential changes in the Board and in voting rights, the shareholding pattern of the company and whether such allotment would result in control over the company etc.
11. I have noted that in relation to the acquisitions as detailed above, the acquirers had filed three reports under Regulation 3(4) of the Takeover Regulations, all belated and dated February 06, 2006 along with the accompanying fees under Regulation 3(5) of the said Regulations, Upon examination of the same, it is clear that on April 29, 1998, the acquirers increased their stake in the company by 6.83%. Subsequent allotments were made on 03.08.98 and 28.12.98 respectively, within the period of 12 months from the date of the first acquisition such that that there was a total increase of 10.53% of the equity capital of SLCL within a period of 12 months. These are once again facts which form part of the record and are not in dispute.
12. Therefore in order to be exempted from the applicability of Regulation 11(1) of the said Regulations (in terms of making a public announcement under the said Regulations) the acquirers ought to have complied with the requirements specified under Regulation 3(1)(c)(i) and (ii) of the Takeover Regulations as elaborated above.
13. However these pre-requisites were admittedly not complied with by the acquirers in that, the copy of the Board resolution passed by SLCL in respect of the proposed preferential allotment was not sent either to the BSE, UPSE or the JSE where the shares of SLCL are listed as required in terms of Regulation 3(1)(c)(i) of the Takeover Regulations.
14. Furthermore, disclosures relating to the identity of the allotees, consequential changes in the control of the company, Board of directors, voting rights and shareholding pattern due to the aforesaid allotments in terms of Regulation 3(1)(c)(ii) of the said Regulations were not made in the Notice of the General Meeting called for the purpose of the allotment of shares thereby making the acquirers ineligible for being exempted from the purview of Regulation 11(1) of the Takeover Regulations in the first place.
15. The acquirers have however sought condonation of these lapses by contending that ample steps had been taken by them to validate the said preferential allotments by the suo motto filing of the reports and the accompanying fees in terms of Regulations 3(4) and (5) of the Takeover Regulations and have further contended that with the same being post acquisition compliances, the belated filing of the same was not fatal and did not cause any prejudice to anyone primarily because the company as well as the acquirers had made all attempts to keep the investors informed about the said preferential allotments.
16. I have also noted the reliance placed on the fact that necessary resolutions relating to the said allotments were passed on 28th March 1998 and 27th November, 1998 in the General Body Meeting of SLCL under Section 81(1A) of the Companies Act, 1956 and that the disclosures for the said preferential allotments had even been approved and taken on record by the shareholders of the company in the meeting held on 16th March, 2000. The fact that the UPSE had granted the listing approval to the company for the mentioned preferential issues was also brought to my notice along with supporting documents.
17. The facts of the instant case relate to the substantial acquisition of shares and the takeover of a company i.e. SLCL and hence would be governed by the provisions of the Takeover Regulations and not that of the Companies Act, 1956.
18. Accordingly as the shares of SLCL had been acquired, albeit through the preferential route beyond the threshold limit on April 29, 1998 followed by two subsequent allotments on August 03, 1998 and December 28, 1998, the provisions of Regulation 11(1) of the Takeover Regulations would become applicable necessitating the making of an open offer in terms of the provisions prescribed in the said Regulations except in case the conditions stipulated in Regulation 3(1) (c)(i) and (ii) of the Takeover Regulations were complied with. The filing of the reports and paying the requisite fees under Regulations 3(4) and 3(5) of the Takeover Regulations, though belatedly, are indeed post acquisition compliances but the same do not validate acquisition made without adhering to the provisions of Regulation 3(1)(c)(i) and (ii) of the said Regulations. Besides, the belated compliance with Regulations 3(4) and 3(5) of the Takeover Regulations does not form part of the scope of this reference.
19. Hence the contentions advanced by the acquirers of having made the requisite compliances required to fulfill the requisites for the aforementioned preferential allotments stands to naught. Equally irrelevant is the contention being advanced at this juncture that pursuant to the mentioned preferential allotments, there was no change in the control or management of the company. Clearly the acquirers had acquired the shares of SLCL without complying with the provisions of Regulations 3(1)(c )(i) and (ii) of the Takeover Regulations resulting in the violation of the provisions of Regulation 11(1) of the said Regulations.
20. During the course of the hearing, the acquirers agreed to the stated violations including their failure to have made the open offer under the Takeover Regulations but pleaded exoneration of their liability purely on the ground that the contravention of the provisions of the Takeover Regulations was on account of lack of knowledge and that the same did not adversely affect the interest of any of the investors and also that there was no willful intention whist committing the violation. References in this regard were made to the judgments passed by the Supreme Court and the Securities Appellate Tribunal for seeking a lenient view in the matter.
21. This contention raised on behalf of the acquirers is totally misconceived in that they admittedly acquired shares of a company beyond the stipulated limit without making the mandatory public announcement resulting in the violation of the stipulated provisions of the said Regulations.
22. All regulatory provisions have a specific purpose behind their enactment. The very purpose of enacting any legislation is due adherence to the procedures laid down there under to ensure the sound and smooth functioning of the capital market. If no cognizance were to be taken of any breach of these provisions and no liability fixed there upon, the entire purpose of incorporating the provisions in the said enactments would become redundant.
23. On a cumulative analysis of the facts as brought out above, it would seem that the failure to adhere to the provisions of the Regulations was largely on account of a lack of due diligence on the part of the acquirers who are now trying to unsuccessfully and unjustifiably raise the pleas as mentioned above, to make out a case of them not having to make the mandatory public announcement, pursuant to them acquiring shares through preferential allotments. Thus is against the very spirit and letter of the Takeover Regulation and against its objectives, foremost of which is the protection of the rights of the investors.
24. As regards the issue of lack of intention or mens rea, the said issue stands determined by the Hon’ble Supreme Court in their order dated May 23, 2006 passed in C.A Nos 9523-9524/ 2003 @ The Chairman, SEBI vs. Shriram Mutual Fund & Anr in which they inter alia observed that “……..unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not….”.
25. The principle as regards the issue of lack of mens rea in civil violations was earlier also stressed upon by the Supreme Court in the case of Swedish Match AB and Anr. Vs. SEBI & Anr., (2004) 11 SCC 641 wherein the Supreme Court was pleased to hold that existence of mens rea on the part of the appellants would come up for consideration only in criminal proceedings initiated against the appellants.
26. In view of the discussion above and the fact that the violation by the acquirers of Regulation 11(1) of the Takeover Regulations stands established, penalty is to follow since 'mens rea' is not a condition precedent for imposition of penalty for contravention of the provisions of a civil nature.
27. Consequently the acquirers would be liable for monetary penalty under Section 15H (ii) of the Act, which, as on the date of the commission of the offence, read as follows:-
15H - Penalty for non disclosures of acquisition of shares and takeovers.
If any person, who is required under this Act or any rules or regulations made there under, fails to
(i) disclose the aggregate of his shareholding in the body corporate before he acquires any shares of that body corporate; or
(ii) make a public announcement to acquire shares at a minimum price,
he shall be liable to a penalty not exceeding five lakhs rupees.
Pursuant to the amendment of the SEBI Act, 1992, on October 29, 2002, Section 15H of SEBI Act, 1992 read as under :-
If any person who is required under this Act or any Rules or Regulations made there under fails to
(i) … … … …
(ii) make a public announcement to acquire shares at a minimum price
(iii) … … … .
(iv) … … … ..,
he shall be liable to a penalty of Rs.25 crores or 3 times the amount of profits made out of such failure, whichever is higher.
28. In this aspect it is also pertinent to refer to the order of the Securities Appellate Tribunal in Appeal No.151/2004 dated 7.2.2005 in the case of Man Industries, wherein the Hon’ble Tribunal inter-alia held that for irregularities that were committed prior to the amendment of the SEBI Act, 1992 on 29.10.2002, penalty as existing at the relevant period only is to be imposed and not the new penalties under the amended Act. The Hon’ble Tribunal further held as under:
“Penalties unless specifically made retrospective must inevitably be only with effect from the date of amendment. ….”.
29. Without prejudice to the above, certain factors are also required to be taken into account by the adjudicating officer, before imposing a penalty as is evident from the provisions of Section 15J of the Act which also find mention in Rule 5(2) of the Rules, i.e. the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; the amount of loss caused to an investor or group of investors as a result of the default and the repetitive nature of the default.
30. The provisions of Section 15J of the Act, thus makes it clear that the adjudicating officer should have due regard to the factors stated in the section. The same is a direction and not an option, which is however to be exercised with due regard to his/her discretion, to be exercised judiciously, depending upon the facts and circumstances of each case as well as after analysing all the relevant material available on record especially in the case of failure to perform statutory obligations.
31. It also cannot be stated with total impunity that none of the interests of the investors is adversely affected. As on 30th June, 2006, the promoters along with the persons acting in concert are holding 4,44,3,035 shares constituting 32.43% of the equity capital of SLCL while the non promoters are holding 92,56,965 shares constituting 67.57% of the equity capital of SLCL. Hence the interests of these non promoters cannot be ignored.
32. In order to compute the disproportionate gain or unfair advantage enjoyed by the acquirers, I have perused the records and have noted that there are no quantifiable figures available on that count. There are also no figures or data on record to quantify the amount of loss caused to the investors and the shareholders of SLCL as a result of the default. However, as brought out above, the non promoter shareholding is considerable. Had the acquirers made a public announcement to acquire 20% of the shares of SLCL, their shareholders would have got an opportunity/option to tender their shares pursuant to such an open offer and exit from the company at a beneficial price, to be determined under the Takeover Regulations. This opportunity /option was denied to them. Further, such an announcement if made would have also impacted the price movement of the shares in the stock exchange. Thus, the exit opportunity available to the shareholders via the secondary market would have been in addition to the open offer, which the acquirers ought to have made under the Regulations, which they have not made till date.
33. Considering that there was a substantial acquisition of shares by the acquirers which necessitated an open offer to be made in terms of Regulation 11(1) of the Takeover Regulations which however was not made, and keeping the facts earlier discussed in mind, on a judicious exercise of the discretion conferred upon me, considering the offence in its entirety and also bearing in mind the factors enumerated in Section 15J of the Act, I am inclined to hold that the maximum penalty as prescribed under Section 15 H (ii) of SEBI Act, 1992 ought to be levied upon the acquirers.
PENALTY
34. Accordingly, I, 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, think it appropriate to levy a consolidated penalty of Rs.5.00 lakhs (Rupees Five Lakhs only) in terms of Section 15 H (ii) of SEBI Act, 1992 on Shri M.P. Aggarwal, Mr. Pawan Kumar Agarwal, Mr. Alok Agarwal, Mr. Vikas Agarwal, Ms. Sharda Agarwal, Mr. Suraj Mal Agarwal, Ms. Barsha, Mr. Mohan Lal Vaish, Mr Jayant Gupta, Mr. Devesh Gupta, Mr. Devesh Gupta HUF, Ms. Manjusha Gupta, Ms. Sujala Gupta, Ms. Kamini Agarwal, Ms. Madhu Agarwal, Mr. Rajkumar Agarwal, Mr. R.L. Agarwal, Galaxy Capital Finance Ltd, M/s. He-man Engg.Works P Ltd, Mac Glasses Pvt. Ltd, Jayant Textiles (P) Ltd and Navchetna Merchantiles Ltd. who are cumulatively directed to pay the said amount for their failure to make a public announcement in accordance with the provisions of Regulation 11(1) of the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997 in the matter of acquisition shares of Shri Lakshmi Cotsyn Limited.
35. These entities are jointly and severally liable payable to pay the penalty amount within a period of 45 days from the date of receipt of this order through a cross demand draft drawn in favour of “SEBI- Penalties remittable to the Government of India’ and payable at Mumbai which may be sent to Shri.S.V.Muralidhar Rao, General Manager, Securities and Exchange Board of India, Mittal Court, B Wing, 224 Nariman Point, Mumbai – 400021.
| PLACE: MUMBAI |
G. BABITA RAYUDU |
| DATE : OCTOBER 11, 2006 |
ADJUDICATING OFFICER |