WTM/GM/EFD/DRA III/10/FEB/2017. Case: In Re: Refex Industries Limited Vs. Securities and Exchange Board of India

Case NumberWTM/GM/EFD/DRA III/10/FEB/2017
Party NameIn Re: Refex Industries Limited Vs
JudgesG. Mahalingam, Whole Time Member
IssueSecurities And Exchange Board Of India Act, 1992 - Section 11B
Judgement DateFebruary 02, 2017
CourtSecurities and Exchange Board of India

Order:

G. Mahalingam, Whole Time Member

Background:

  1. Refex Industries Limited (hereinafter referred to as "Target Company" or "Refex") is a company registered under the Companies Act, 1956 having its registered office at 20, Mooker Nallamuthu Street, Chennai -- 600001 and its securities are listed on the Bombay Stock Exchange ('BSE').

  2. Securities and Exchange Board of India (SEBI) conducted an investigation to look into the trading activity of certain connected entities in the scrip of Refex for the period from August 1, 2008 to December 31, 2008. The investigation, inter alia, revealed that Mr. Anil T. Jain, who was a promoter and director of Refex during the relevant time, together with the promoter group entities, was holding more than 55% shares/voting rights in Refex during the quarter ending on June 30, 2008 and September 30, 2008. Mr. Anil T. Jain is hereinafter referred to as the "Noticee". The shareholding pattern of the promoter and promoter group entities in the company for the quarters June 30, 2008, September 30, 2008 and December 31, 2008 is as under:

  3. On September 4, 2008, the Noticee acquired 42 shares of Refex through off-market transaction from one Mr. Anand Kalu Marathe. It was alleged that this acquisition by the Noticee is in breach of regulation 11(2) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (hereinafter referred to as Takeover Regulations, 1997) as he did not make any public announcement of open offer to acquire shares from other shareholders of Refex.

  4. Thus, the Noticee's acquisition of 42 shares on September 4, 2008 through the off market transaction, without complying with the obligation to make a public announcement of an open offer in terms of regulation 11(2) of the Takeover Regulations, 1997 caused SEBI to issue a Noticee dated February 26, 2016 to Anil T. Jain calling upon him to show cause as to why suitable directions under section 11B of the Securities and Exchange Board of India Act, 1992 ("SEBI Act") and regulation 44 (f) and (i) of Takeover Regulations, 1997 should not be issued against him. There was no reply from the side of the Noticee.

    Submissions:

  5. An opportunity of hearing was given to the Noticee on December 19, 2016. Mr. B. Madhuprasad, Chartered Accountant, appeared for hearing on behalf of the Noticee and made the submissions. The Noticee has also filed written submission dated December 22, 2016 in the matter. The summary of the oral and written submissions of the Noticee are as follows:

    1. The total issued and subscribed equity shares of Refex was 1,54,75,176 and out of this the Noticee acquired only 42 shares on September 4, 2008. This acquisition is unintentional and forms a very negligible percentage and considering the materiality of 42 shares to such large capital it may not be...

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