Appeal No. 85 of 2012. Case: 1. S. R. B. Ramesh Chandra, 2. S. R. B. Ramesh Chandra (HUF), 3. Mr. S. Chandra Mohan, 4. S. Chandra Mohan (HUF), 5. Ms. S, Laxmi Mohan, 6. Mr. S. Karthik Sarat Chandra, 7. Ms. Deepthi Sunethri, 8. Ms. Vimala Kumari, 9. Mr. S. Chatur Swaroop Chandra, 10. Ms. S. Dharani, 11. Mr. S. Kishore Chandra, 12. S. Kishore Chandra (HUF), 13. Ms. S. Sasi Rekha Vs Securities and Exchange Board of India. Securities and Exchange Board of India

Case Number:Appeal No. 85 of 2012
Party Name:1. S. R. B. Ramesh Chandra, 2. S. R. B. Ramesh Chandra (HUF), 3. Mr. S. Chandra Mohan, 4. S. Chandra Mohan (HUF), 5. Ms. S, Laxmi Mohan, 6. Mr. S. Karthik Sarat Chandra, 7. Ms. Deepthi Sunethri, 8. Ms. Vimala Kumari, 9. Mr. S. Chatur Swaroop Chandra, 10. Ms. S. Dharani, 11. Mr. S. Kishore Chandra, 12. S. Kishore Chandra (HUF), 13. Ms. S. Sasi Rekha Vs Securities and Exchange Board of India
Counsel:For Appellants: Mr. Janak Dwarkadas, Senior Advocate with Mr. Vinay Chauhan, Mr. Prashant Ingle and Mr. K.C. Jacob, Advocates and For the Respondent: Mr. Shiraz Rustomjee, Senior Advocate with Mr. Ajay Khaire, Advocate
Judges:Jog Singh, Member & Presiding Officer (Offg.)
Issue:SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ('Takeover Regulations') - Regulation 11(2)
Judgement Date:June 28, 2013
Court:Securities and Exchange Board of India
 
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Order:

Jog Singh

  1. The present appeal is filed by 13 entities ("Appellants") against order dated July 19, 2011, ("Impugned Order") passed by the Securities and Exchange Board of India ("Respondent") directing the Appellants to disinvest 41,96,760 shares of Bheema Cements Limited ("the Company") within a period of two months from the date of the Impugned Order for the violation of Regulation 11(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ("Takeover Regulations") while acquiring the abovementioned shares.

  2. The Company was originally incorporated in the name of M/s. Coromandel Cements Limited in 1978, and had its name changed subsequently to Bheema Cements Limited on September 29, 2008. It constructs, runs, operates, acquires factories for the manufacture of cement and other allied products. The Appellants are promoters of the Company which is listed on the BSE. It has 2,78,37,969 shares, out of which 63.26% are held by the Appellants and the remaining 36.74% are held by the public. Out of the 63.26% of the equity share capital held by the Appellants, 45.17% have been pledged with banks. In 2005 the Company approached banks for term loans of approximately Rs. 20 Crore, against which a margin of around Rs. 6 Crore was demanded by the banks. The Appellants, therefore, agreed to infuse Rs. 3 Crore into the Company by way of preferential allotment of shares. As a result of this, the shareholding of the Appellants in the Company would go up from 63.26% to 69.11% leading to the triggering of Regulation 11(1) of the Takeover Regulations. The Appellants, in order to circumvent this situation, made an application dated January 22, 2005 under Regulation 4(2) of the said Regulations to the Respondent asking to be exempted from the obligation of making an open offer under Regulation 11(1). The Respondent graciously granted the exemption sought by the Appellants for the acquisition of 30,00,000 equity shares at Rs. 10 each exercising it powers under Section 19 of the SEBI Act, read with Regulation 4(6) of the Takeover Code of 1997. Following the aforesaid exemption, the Company held an EGM on December 13, 2005 wherein the shareholders granted their approval to the preferential allotment of 30,00,000 shares along with the allotment of 41,96,790 warrants in favour of the Appellants. If may be noted that the allotment of 41,96,790 warrants was beyond the exemption granted by the Respondent, which was only for acquisition of 30,00,000 equity shares.

  3. After securing the shareholders'' approval, the Company sought and received in-principal approval from the BSE vide letter dated January 12, 2007 for issue and allotment of 30,00,000 equity shares and 41,96,790 warrants. The Company finally allotted the said shares and warrants to the Appellants on July 6, 2007. The warrants had to be converted into shares within 18 months from the date of allotment as per law and if not converted were to lapse automatically. The 30,00,000 shares got listed on the BSE on December 7, 2007. This allotment took the shareholding of Appellants in the Company to 69.11%. The allotment of these shares and warrants led to the infusion of Rs. 3,41,96,790 into the Company. Now, the warrants were converted into equity shares on December 15, 2008 by the Appellants who paid an amount of Rs, 3,77,71,110 to the Company as the balance amount payable for subscription of warrants before conversion. This took the shareholding of the Appellants from 69.11% to 74.01%. The Appellants did not make any public announcement as required under Regulations 11(2) and 14(2) of the Takeover...

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