Order in respect of Trident Infotech Corporation Limited

BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. DSR/AO-02/2007-08]

 

 

In respect of

 

BRIEF FACTS OF THE CASE

 

1.      Trident Alco Chem Limited (hereinafter referred as`Target Company’) is a company having its registered office at Trident Complex, Sanghera , Barnala - 148 101.  

 

2.      A report in terms of Regulation 3(4) of SEBI (Substantial Acquisition of Shares and Takeovers), Regulations, 1997 (hereinafter referred to as “SAST Regulations”) was filed by Mr. Varinder Gupta (main acquirer) and Mayadevi Polycot Limited for acquisition of 49,88,800(61.97%) equity shares of “Target Company” claiming exemption in terms of Regulation 3(1)(e)(i).  The total paid –up capital of the Target Company is 80,50,000 equity shares.  Mr. Varinder Gupta acquired 11,50,000 shares and Mayadevi Polycot Limited acquired 38,38,800 shares out of the total acquired shares of 49,88,800. Before the said acquisition,  the acquirers had 4,510 (0.06%) equity shares of the Target Company and pursuant to the said acquisition the joint holding of the acquirers went up to 49,93,310(62.03%) equity shares of the Target Company. The transferors in the instant matter were Trident Infotech Corporation Ltd., Abhishek Industries Ltd. and ANG Securities Ltd.

 

3.      From the perusal of the said report, it was observed that there was non compliance vis a vis the provisions of Regulations 6 (3) and 8 (2) of SAST Regulations and a table depicting the non compliance is  as under:

 

Sl. No.	Regulation/Sub-regulations	Due Date for Compliance as mentioned in the Regulation	Actual date of compliance	Delay, if any (in no. of days) Col.4-Col.3
1	2	3	4	5
1	6(3)	20-Apr-97	Not Applicable	Not Applicable
2	8(2)	21-Apr-98	Not Applicable	Not Applicable
3	8(2)	21-Apr-99	Not Applicable	Not Applicable
4	8(2)	21-Apr-00	Not Applicable	Not Applicable
5	8(2)	21-Apr-01	Not Applicable	Not Applicable

 

4.      The relevant extract of the provisions of Regulation 6(3) and 8 (2) of SAST  Regulations is reproduced as under-

 

Transitional provisions

 

6.  (1) ………………..

 (2)…..…………….

(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.

 

 

Continual disclosures.

 

1. (1) …………. …

 

(2) A promoter or every 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 of 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."

 

APPOINTME NT OF AO

 

5.      Accordingly, Shri. Amit Pradhan was appointed as Adjudicating Officer under Section 15 I of SEBI Act, 1992, read with Rule 3 of SEBI (Procedure For Holding Inquiry And Imposing Penalties By Adjudicating Officer) Rules, 1995 (hereinafter referred as 'Adjudication Rules') vide SEBI order dated March 15, 2007 to inquire into and adjudge under 15 A (b) of the SEBI Act, 1992, the aforesaid alleged violation made by Trident Infotech Corporation Ltd, Abhishek Industries Ltd and ANG Securities Ltd.

 

6.      Shri. Amit Pradhan was transferred to Northern Regional Office. Pursuant to the said transfer, I was appointed as Adjudicating Officer vide order dated June 12, 2007. The proceedings of the Whole Time Member appointing me as Adjudicating Officer were conveyed vide communication dated July 19, 2007.

 

 

SHOWCAUSE NOTICE, REPLY AND HEARING

 

 

7.      The Show Cause Notice (hereinafter referred to as SCN) dated May 28, 2007 was issued to the noticees under Rule 4(1) of Adjudication Rules. The noticees vide their replies dated June 15, 2007 stated that they were neither promoters nor having any control over the Target Company during the year 1997 till 2000. It was further stated by the noticees that they were associates of Varinder Agro Chemicals Limited (hereinafter referred to as “VACL”), who was promoter of the Target Company and therefore be treated as persons acting in concert with VACL. It is also submitted that VACL being promoter of the company had made all required disclosures for the year 1997, 1998, 1999, 2000 and 2001 and enclosed copies of the letters dated 19.4.1997, 20.4.1998, 8.4.1999, 17.4.2000 and 18.4.2001. The noticees also submitted that separate disclosure by each of them being persons acting in concert was not required under law.

 

8.      In the interest of natural justice, an opportunity of personal hearing was granted to the noticees on September 4, 2007. Shri. Pawan Jain, represented all three noticees and made additional submissions. He submitted that the Target Company had informed the Stock Exchanges about individual shareholding of promoters and persons acting in concert in the company. He further submitted that the noticees were not promoters of the Target Company for the period 1997 – 2001 and their respective shareholdings were not more than 5% in the Target Company and they were merely persons acting in concert with the promoter i.e VACL.  He further submitted, even if it was assumed that the noticees were co-promoters of the Target Company then also there was no violation of Regulation 6(3) and/or 8(2) as it was sufficient if the promoters or one of the joint promoters made disclosures about their individual shareholdings as also of shareholding of other joint promoters and/or persons acting in concert.  

 

9.      Regulation 6(3) requires promoter or any person having control over a company to disclose the number and percentage of shares or voting rights of the company held by him and by persons acting in concert with him to the company within two months of notification of SAST Regulations. Further, Regulation 8(2) deals with yearly disclosures of number and percentages of shares/voting rights, required to be made to the company by the person/s who is a promoter (in addition to persons acting in concert) or every person having control over a company within 21 days from the financial year ending March 31, as well as the record date for dividend declaration.

 

10.   Disclosure by promoters under Regulation 8(2) facilitates compliance to be made by the company under Regulation 8(3) of SAST. Further, disclosure of information by the company, under Regulation 8(3), to the stock exchange enables dissemination of information to the investors and the general public, which in turn enables them to reformulate their perception about the prospects of the company and take well informed decisions.

 

CONSIDERATION OF ISSUES AND FINDINGS THEREOF

 

11.   I have carefully examined the reply letters dated June 15, 2007 submitted by all the three noticees. I note that VACL vide its letters dated 19.4.1997, 20.4.1998, 8.4.1999, 17.4.2000 and 18.4.2001 informed the Target Company about its shareholding alongwith persons acting in concert namely Trident Infotech Corporation Ltd, Abhishek Industries Ltd and ANG Securities Ltd. under Regulation 8(2) of SAST Regulations. Further, the target company vide its letter dated September 6, 2007 confirmed that it had received the disclosures under Regulation 6(3) and 8(2) of SAST Regulations from erstwhile VACL alongwith persons acting in concert, namely Trident Infotech Corporation Ltd, Abhishek Industries Ltd and ANG Securities Ltd.  The gist of the disclosures made by VACL alongwith persons acting in concert, namely Trident Infotech Corporation Ltd, Abhishek Industries Ltd and ANG Securities Ltd. to the target company is as under:

Name of the Promoter along with PAC	Year	No. of Shares	Percentage of Holding
VACL alongwith PACs 1.       Trident Infotech Corporation Ltd. 2.                   2. Abhishek Industries Ltd. 3.       ANG Securities Ltd	1997	13,44,900	38.98%
VACL alongwith PACs Trident Infotech Corporation Ltd. Abhishek Industries Ltd. ANG Securities Ltd	1998	13,44,900	38.98%
VACL alongwith PACs Trident Infotech Corporation Ltd. Abhishek Industries Ltd. ANG Securities Ltd	1999	13,44,900	38.98%
VACL alongwith PACs Trident Infotech Corporation Ltd. Abhishek Industries Ltd. ANG Securities Ltd	2000	13,44,900	38.98%
VACL alongwith PACs Trident Infotech Corporation Ltd. Abhishek Industries Ltd. ANG Securities Ltd	2001	49,64,900	61.68%

 

12.    The authorized representative of the noticees, during the course of hearing held on September 4, 2007, submitted that the target company had vide letters dated 17.4.1997, 21.3.1998, 17.4.1999, 20.4.2000 , 3.2.2001 and 19.4.2001 informed the stock exchanges about the individual shareholding of the promoter alongwith the persons acting in concert in the target company and submitted copies of the said letters. I also perused the letters and note that the target company had consistently disclosed the individual shareholdings of the promoter alongwith the persons acting in concert from the year 1997 to 2001 under Regulation 8(3) of SAST Regulations. The gist of the disclosures made by the company to the stock exchanges namely Ludhiana Stock Exchange, Delhi Stock Exchange and The Stock Exchange, Mumbai is as under:

 

 

13.   The disclosures made under Regulation 6(3) and 8(2) would enable the company to discharge its statutory obligation in terms of Regulation 6(4) and 8(3) of SAST Regulations. i.e. informing the stock exchange(s) in respect of the holdings of promoters along with persons acting in concert and persons having control over the company. In the instant case, I observe that the disclosures under Regulation 6(4) and 8(3) made by the Target Company to the respective Stock Exchanges were on time. Therefore, I am convinced that the very purpose of dissemination of information to the public has been fulfilled in this case. In view of the documentary evidence available on record and also in the absence of any prescribed format for making disclosures under Regulation 6(3) and 8(2) of SAST Regulations during the relevant point of time and in view of my findings mentioned hereinabove in the facts and circumstances of the case, I feel that this case does not warrant imposition of monetary penalty and matter is, accordingly, disposed of.

14. In terms of Rule 6 of the Adjudication Rules, copies of this order are sent to the Noticee and also to the Securities and Exchange Board of India.

 

Date: 11.10.2007    D.S.REDDY

Place: Mumbai  ADJUDICATING OFFICER