SECURITIES AND EXCHANGE BOARD OF INDIA

 ORDER

IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF ABHA PROPERTY PROJECT LIMITED EXEMPTION APPLICATION FILED UNDER REGULATION 4 (2) OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997.

CO/125/CFD/01/2005

1.0       BACKGROUND

1.1       Abha Property Project Ltd. (hereinafter referred to as ‘the target company’) having its registered office at 29, Ganesh Chandra Avenue, 4^th floor, R. No. – 407, Kolkata – 700 013, is listed on the Calcutta Stock Exchange Association Ltd. and Delhi Stock Exchange Ltd.   

2.0       APPLICATION FOR EXEMPTION

2.1       Karvy Investors Services Ltd., (herein after referred to as ‘Karvy’) a registered Merchant Banker with Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) filed an application dated August 23, 2004 under regulation 4(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘the Takeovers Regulations’), on behalf of Mr. Jagdish Prasad Agarwalla, and other 23 persons acting in concert with him (hereinafter referred to as ‘the acquirers’).  The said application was filed for seeking exemption from the applicability of the provisions of Chapter III of the Takeovers Regulations, in respect of the proposed acquisition of 9, 50,000 (50%) fully paid up equity shares from the shareholders of the target company @ Rs. 13 each.

2.2       On examination of the said application, SEBI noticed the following discrepancies:

a) the sworn affidavit regarding verification of the information in the application is not in order.

b) authority letter from the acquirers in favour of Karvy for filing the application has not been submitted.

c) there are contradictory statements in the application regarding the present shareholding of the acquirers and PACs.

d)  the grounds for seeking exemption were not given in detail. 

2.3       In view of the above, SEBI vide letter dated September 07, 2004, advised Karvy to file a revised application to enable SEBI to process the same.  Thereafter vide letter dated September 23, 2004 Karvy filed the revised application. SEBI received the revised application vide letter dated September 23, 2004 from Karvy.

3.0       SUBMISSIONS IN THE EXEMPTION APPLICATION

3.1    a) there are only 82 shareholders under the “Public” category in the Target Company.

        b) it will be highly expensive for the acquirers and persons acting in  concert to comply with the provisions in relation to matters like Escrow Account, issue of Public Announcement and printing and dispatch of letters of offer to the shareholders under Chapter III of the Takeovers Regulations.  Exemption from these provisions would save resources for the acquirer and persons acting in concert. 

        c). the acquirer and persons acting in concert have appointed a Merchant Banker (Karvy) to ensure that all the provisions of the Takeovers Regulations and other applicable statutes are complied with.

     d). the acquirer shall also send individual letters to the shareholders for buying shares directly from them.     

3.2             The shareholding of the applicants before and after the proposed acquisition is as follows:

*assuming the acquirers getting all the 9.50 lacs shares under the offer.

4.0       RECOMMENDATION OF THE TAKEOVER PANEL  

4.1       The aforesaid application dated September 23, 2004 was forwarded to the Takeover Panel in terms of sub-regulation (4) of regulation 4 of the Takeovers Regulations. The Takeover Panel vide its report dated October 14, 2004 has recommended as under –

 “On the facts stated in the application and taking totality of circumstances into consideration including the interest of investors in general, grant of exemption as sought is not recommended.”

4.2       The copy of the Takeover Panel recommendation dated October 14, 2004 was sent to the acquirer by SEBI vide letter dated November 09, 2004 and an opportunity of personal hearing was granted by SEBI to the acquirer on December 03, 2004.  The said hearing was adjourned to December 15, 2004.

5.0       Hearing

5.1       Shri P S Shastry from Karvy attended the hearing on December 15, 2004 before me on behalf of the acquirers and submitted the following:  

(i) the acquirers and the persons acting in concert are together holding more than 37.55% of the paid up capital of the target company of 18.9 lakhs shares, as on date.

(ii) the balance 62% of the paid-up capital is held by 82 members and the acquirers are proposing to consolidate their shareholding by offering to acquire 50% of this public shareholding.

(iii) since the offer being made is upto 50% of the remaining 62%, it is expected that the response if any is likely to be much less than this and hence every applicant’s share offered would be acquired.

(iv) similarly, by permitting the acquirer to issue the standard letter of offer prescribed by SEBI duly prepared by the Merchant Banker already appointed, it was expected to reduce the time gap in paying the consideration to the shareholders responding in the open offer.  This would be in the interest of investors at large.

(v) he had also submitted that panel recommendation did not contain any reasons for the rejection of the application.

5.2          The acquirer had also filed its written submissions dated December 15, 2004 reiterating the aforesaid contentions. 

6.0      Consideration of the issues and findings :

6.1       I have carefully gone through the application dated September 23, 2004 and have taken into consideration the submissions made by and on behalf of the acquirers, the written submissions dated December 15, 2004 and the recommendations of the Takeover Panel. 

6.2       I have noticed that the public shareholders of the target company, 82 in numbers are holding 62% of the shares of the target company.  I have noticed that the purpose of the proposed acquisition is to consolidate the holding of the acquirers so as to increase from the present holding of 37.55% to 87.55%. The contention of the acquirers is that, if the acquirers are permitted to issue the standard letter of offer without the requirement of filing the same with SEBI for its comments, it could reduce the time gap in paying the consideration to the shareholders responding in the open offer.  It may be noted that inorder to expedite the payment of consideration, SEBI has amended the Takeovers Regulations to reduce the whole open offer process duration from 120 days to 90 days. 

6.3             I have also noticed that the acquirers hold 37.55% in the target company and wishes to consolidate their holding to 87.55%.  As per regulation 25 of the Takeovers Regulations any person other than the acquirer can make a public announcement within 21 days of the public announcement of the offer made by the acquirer, for the acquisition of the shares of the target company.  In case of exemption from the applicability of chapter III of Takeovers Regulation like public announcement, is granted as requested by the acquirers in this case ,  the same may curtail the opportunity of the competitive bidding as provided under regulation 25 of the Takeovers Regulations and may deprive the public shareholding of getting the best price. 

6.4             The request of the acquirer cannot be allowed on the reason that exemption from the applicability of Chapter III of Takeovers Regulation may reduce the expenses. 

6.5    In view of the above facts and circumstances, I agree with the recommendations of the Takeover Panel and consider the present case as not a fit case for granting exemption from the applicability of Chapter III of Takeovers Regulation.

7.0      ORDER

7.1   Having regard to the above, and the recommendations made by the Takeover Panel and also in the interest of the public shareholders of the target company, Abha Property Ltd., I, in exercise of the powers conferred upon me under section 4(3) of the Securities and Exchange Board of India Act, 1992 read with sub - regulation (6) of regulation 4 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby reject the application dated September 03, 2004 filed by the acquirers, Shri Jagdish Prasad Agarwalla and persons acting in concert with him and direct the acquirers to comply with the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 regarding open offer as and when the Acquirers acquire the shares / voting rights in the target company . 

G. N. BAJPAI

        CHAIRMAN

SECURITIES AND EXCHANGE BOARD OF INDIA

Place: Mumbai

Dated:  January 10, 2005