takeover panorama: september 2014

Takeover Panorama A Monthly Newsletter by Corporate Professionals

Year VIII-Vol VIII

September Edition

2

Legal Update

SAT order in the matter of M/s. Coimbatore Flavors & Fragrances

Limited, Mr. Benny Abraham and Mrs. S. Subashini

SAT order in the matter of M/s. E-Ally Consulting (India) Private

Limited, M/s. Shree Jaisal Electronics and Industries Limited and

others

SAT order in the matter of Mr. Vijay Jain, Mrs. Urvashi Jain, Mrs.

Sunita Jain and others

Consent Order in the matter of Mr. Santhosh J. Karimattom

Consent Order in the matter of M/s.IFL Promoters Limited

Consent order in the matter of M/s. Welspun India Limited

Adjudicating Officer/WTM Orders

3

Latest Open Offers

10

Regular Section

Open offer Escrow Account under SEBI (SAST)Regulations,2011

13

Market Update

16

Our Team

17

Insight

3

The Hon’ble Tribunal held

that penalty shall be

imposed proportionately

can be contended only

when very high penalty

has been imposed.

SAT order in the matter of M/s. Coimbatore Flavors & Fragrances

Limited, Mr. Benny Abraham and Mrs. S. Subashini

Facts: M/s. Coimbatore Flavors & Fragrances Limited

(Appellant 1) had delayed in making disclosure as required

under Regulation 8(3) of SEBI (SAST) Regulations, 1997 by

30 days for the year ended 2003, Mr. Benny Abraham

(Appellant 2) had delayed in making disclosures as required

under Regulation 30(1) and 30(2) read with 30(3) of SEBI

(SAST) Regulations, 2011 for the year ended 2012 by 10

days and Mrs. S. Subashini (“Appellant 3”) had delayed in making disclosure as required under

Regulation 8(1) and 8(2) of SEBI (SAST) Regulations, 1997 for the year ended 2003 and 2005

by 38 days and 5 days respectively. Accordingly SEBI imposed a penalty of Rs. 2,00,000

eachon Noticee 1 and Noticee 2 and Rs. 2,50,000 on Noticee 3 for the aforesaid violations..

Being aggrieved by the direction of SEBI, the Appellants has filed the appeal before Hon’ble

Tribunal and contended that:

Penalty imposed is very high and it should be imposed proportionately.

Delay was due to inadvertence and was purely unintentional in nature.

There are no complaints from any investors claiming loss as a result of delayed

disclosure and no loss caused to any investors.

Issues: Whether the penalty imposed by the SEBI on the appellants is justified?

Decision: After taking into considerations the facts and circumstances of the case, the Hon’ble

Tribunal held that contention made by Appellants that penalty shall be imposed proportionately

can be contended when very high and shocking penalty has been imposed by SEBI, but in this

particular case no high penalty has been imposed. Accordingly SAT dismissed the case and

found no order to the cost.

LEGAL

UPDATES

4

The Hon’ble Tribunal held that

obligation to make disclosure

is mandatory and is

independent of the obligation

to make disclosures under the

listing agreement.

SAT order in the matter of M/s. E-Ally Consulting (India) Private

Limited, M/s. Shree Jaisal Electronics and Industries Limited and

others

Facts: M/s. E-Ally Consulting (India) Private Limited,

M/s. Shree Jaisal Electronics and Industries Limited, Mr.

Sandeep Maloo, Mrs. Neeta Maloo, Mr. Labhchand

Maloo, Mrs. Lata Maloo, Sandeep Maloo HUF,

Labhchand Maloo HUF (“Appellants”) had delayed

inmaking disclosures as required under Regulation 30(1)

and 30(2) read with 30(3) of SEBI (SAST) Regulations,

2011 by 15 days. Accordingly SEBI imposed a penalty of

Rs. 3,00,000 for the aforesaid violations on the Appellants. Being aggrieved by the direction of

SEBI, the Appellants have filed the appeal before Hon’ble Tribunal and contended that:

Appellants who are current/ existing promoters have acquired the company in the year

2011-2012. Although all regulatory requirements were duly complied with declaration

under regulation 30(1) and 30(2) read with regulation 30(3) of SAST Regulations, 2011

were delayed by 15 days due to lack of proper advise from professional consultants.

In all the subsequent years declarations have been made within the stipulated time and

therefore inadvertent delay of 15 days in the initial year deserves to be condoned.

There was no fraudulent intention or improper motive behind the delay in making

disclosures.

There are no complaints from any investors claiming loss as a result of delayed

disclosure.

Disclosures made in compliance with the provisions contained in the listing agreement

contained all particulars that are required to be made under regulation 30(1) and 30(2)

read with regulation 30(3) of SEBI (SAST) Regulations, 2011 and therefore delay of 15

days being only a technical delay, lenient view ought to have been taken by the AO.

Issues: Whether the penalty imposed by the SEBIon the appellants is justified?


Tribunal held that obligation to make disclosures under regulation 30(1) and 30(2) read with

5

The Hon’ble Tribunal held that

obligation to make disclosure

is mandatory and is

independent of the fact that

whether trading in shares

were done or not at the time

of default.

regulation 30(3) of SEBI (SAST) Regulations, 2011 is mandatory and is independent of the

obligation to make disclosures under the listing agreement. Similarly, fact that proper advise

was not there or that the delay was unintentional/without any fraudulent intention or there is no

complaint from the investors, does not absolve appellants from their obligation to make

disclosures under SEBI (SAST) Regulations, 2011.Accordingly SAT dismissed the appeal with

no order to cost.

SAT order in the matter of Mr. Vijay Jain, Mrs. Urvashi Jain, Mrs.

Sunita Jain, Mrs. Shivani Jain and Vijay Jain (HUF)

Facts:

Mr. Vijay Jain, Ms. Urvashi Jain, Ms. Sunita Jain, Ms.

Shivani Jain and Vijay Jain (HUF) (hereinafter

collectively referred as “Appellants”) had delayed in

making the disclosures as required under Regulation

30(2) and 30(3) of SEBI (SAST) Regulations, 2011 by

147 days. Accordingly SEBI imposed a penalty of Rs.

3,00,000 for the aforesaid violations on the Appellants.

Being aggrieved by the direction of SEBI, the Appellants

have filed the appeal before Hon’ble Tribunal and

contended that:

Since declaration under Regulation 8(2) of SEBI (SAST) Regulations, 1997 was made,

failure to make disclosure under Regulations 30(2) and 30(3) of SEBI (SAST)

Regulations, 2011 was only a technical irregularity for which imposition of penalty was

improper.

There was no trading in the shares of the company during such period of default.

Issues: Whether the penalty imposed by the SEBI on the appellants is justified?


Tribunal held that failure to make disclosure under each regulation constitutes independent

offence attracting independent penalty irrespective of the fact that whether the trading in shares

were done at the particular time of default, in the present case, obligation to make disclosures

under regulation 30(2) and 30(3) of SEBI (SAST) Regulations, 2011 is of mandatory in nature

6

irrespective of declaration under Regulation 8(2)of SEBI (SAST) Regulations, 1997, Accordingly

SAT dismissed the appeal and found no order to the cost.

Consent order in the matter of M/s. Cityman Limited

Mr. Santhosh J. Karimattom (“Applicant”), is one of the promoter of M/s. Cityman Limited

(“Target Company”) had voluntarily filed the consent application in respect of delay in

compliance of Regulation 6(3) for the year 1997, 7(1) for the year 2010 and 8(2) for the year

1998 to 2009 of SEBI (SAST) Regulations, 1997. It was observed by Internal Committee that

the Target Company had settled delayed compliance of Regulation 6(2), 6(4) and 8(3) of SEBI

(SAST) Regulations, 1997 by settlement order dated 4th April, 2013 and three promoters of

Company had settled Regulation 3(3), 3(4), 6(3), 7(1A), 8(2) and 10 of SEBI (SAST)

Regulations, 1997 by settlement order 28th June, 2013. Internal Committee observed that only

the delay from December 27, 2010 to January 07, 2012 in filing requisite disclosure under

Regulation 7(1) of SEBI (SAST) Regulation, 1997 remains to be settled. Further Committee also

observed that the delay under Regulation 13(1) and 13(4) of SEBI (PIT) Regulations, 1992 is

also remains to be settled from December 27, 2010 to January 07, 2012.

The applicant proposed to settle the above non-compliances on the payment of Rs. 6,16,875

towards settlement charges. The terms as proposed by the applicant were placed before High

Power Advisory Committee (HPAC) and on the recommendation of HPAC, SEBI settle the

above non compliances.

Consent order in the matter of M/s. IFL Promoters Limited

M/s. IFL Promoters Limited (“Applicant”) has voluntarily filed the consent application in respect

of delay of 1073 days for the year 2009 and 343 days for the year 2011 for filing the requisite

disclosure under 8(3) of SEBI (SAST) Regulation, 1997. It was also observed by Internal

Committee that Applicant that there was delay in compliance of Regulation 7(3) along with 8(3)

of SEBI (SAST) Regulations, 1997 and Regulation 13(6) of SEBI (PIT) Regulations, 1992.

The applicant proposed to settle the above non-compliances of Regulation 7(3) and 8(3) of

SEBI (SAST) Regulations, 1997 and Regulation 13(6) of SEBI (PIT) Regulations, 1992 on the

payment of Rs. 6,16,000 towards settlement charges. The terms as proposed by the applicant

7

were placed before High Power Advisory Committee (HPAC) and on the recommendation of

HPAC, SEBI settle the above non compliances.

Consent order in the matter of M/s. Welspun India Limited

M/s. Welspun India Limited (“Applicant”) has voluntarily filed the consent application in respect

of delayed compliance of Regulation 7(3) of SEBI (SAST) Regulations, 2011 and Regulation

13(6) of SEBI (PIT) Regulations, 1992. It was also submitted by the Applicant that there was a

delay of 5 days in compliance of Regulation 13(6) of SEBI (PIT) Regulations, 1992 and due to

acquisition of shares on April 07, 2010 by Welspun Fintrade Private Limited, there was a delay

of 5 days in compliance of Regulation 7(3) of SEBI (SAST) Regulations, 2011 and Regulation

13(6) of SEBI (PIT) Regulations,1992.

The applicant proposed to settle the above non-compliances of Regulation 7(3) of SEBI (SAST)

Regulations, 2011 and Regulation 13(6) of SEBI (PIT) Regulations,1992 on the payment of Rs.

3,44,532 towards settlement charges. The terms as proposed by the applicant were placed

before High Power Advisory Committee (HPAC) and on the recommendation of HPAC, SEBI

settle the above non compliances.

8

Adjudicating/WTM orders

Target Company Noticee Regulations Penalty

Imposed/

Decision

Taken

M/s. Avail Holdings

Limited

M/s. Avail Holdings Limited Regulation 8(3) of the SEBI

(SAST) Regulations, 1997

Rs. 23,00,000

M/s. B & A

Packaging India

Limited

M/s. Amrex Marketing Private

Limited and M/s. Bhubanesh

Commercials Private Limited

Regulation 29(1) read with

Regulation 29(3) of the SEBI


Rs. 2,00,000

M/s. Capital Trade

Links Limited

M/s. Capital Trade Links

Limited

Regulation 8(3)of the SEBI


Rs. 10,00,000

M/s. Capital Trade

Links Limited

Mr. Udit Agrawal, Ms. Rashmi

Agrawal, Mr. Suresh Chand

Agrawal, Mr. Harish Agrawal

(HUF), Suresh Chand

Agrawal (HUF), Mr. Madhur

Agrawal and Mr. Harish

Chandra Agrawal

Regulation 30(1) and 30(2) read

with Regulation 30(3) of the SEBI

(SAST) Regulations, 2011 and




Rs. 15,00,000

M/s. Essen

Supplements India

Limited (now known

as Square Four

Projects India Ltd.)

M/s. Essen Supplements

India Limited (now known as

Square Four Projects India

Ltd.)

Regulation 8(3) of SEBI (SAST)

Regulations,1997

Rs. 5,50,000

M/s. Essen

Supplements India

Limited (now known

as Square Four

Projects India Ltd.)

Mr. Natwarlal L Kanani,

Mr. Mayur N Kanani,

Mr. Kishorekumar Paun and

others

Regulation 7(1A) read with 7(2)

of SEBI (SAST) Regulations,

1997

Rs. 19,00,000

M/s. Focus Industrial

Resources Limited

M/s. Focus Industrial

Resources Limited


Regulations,1997

Rs. 2,00,000

9

HINT OF THE MONTH

M/s. Gee Gee

Granites Limited

M/s. Gee Gee Granites

Limited


Regulations,1997

Rs. 6,00,000

M/s. Gee Gee

Granites Limited.

Mr. Gopichand Idandas, Mr.

Sunil G. Duseja, Mr. R. Sekar

and others

Regulation 30(2) read with 30(3)

of SEBI (SAST) Regulation, 2011

Rs. 15,00,000

M/s.Waverly

Investments Limited

M/s. Mega Resources Limited Regulation 7(1) read with

Regulation 7(2) and Regulation

11(1) read with Regulation 14(1)

of SEBI (SAST) Regulation, 1997

Rs. 52,00,000

M/s. One Source

Ideas Venture

Limited

M/s. One Source Ideas

Venture Limited



Rs. 5,00,000

M/s. Southern Fuel

Limited

M/s.Southern Fuel Limited Regulation 8(3) of SEBI (SAST)

Regulation, 1997

Rs. 10,00,000

M/s. Southern Fuel

Limited

M/s. Shivamani and

Company Private Limited, Mr.

K. Vijay Anandh and Mr. C. V.

Kaleeswaran

Regulation 8(1) and 8(2) of SEBI

(SAST) Regulation, 1997 and

Regulation 30(2) read with 30(3)

of SEBI (SAST) Regulation,

2011.

Rs. 13,00,000

M/s. Waverly

Investments Limited

M/s. Hooghly Mills Project

Limited and M/s. Hooghly

Stocks & Bonds Pvt. Limited



Regulation, 1997

Rs. 50,00,000

If the regulatory approvals required for completing the open offer and acquisition are delayed,

the acquirer may be unable to make the payment within 10 working days of closure of open

offer. In such an event, SEBI may grant extension of time for making payments, subject to the

acquirer agreeing to pay interest to the shareholders of the target company for the delay at such

rate as may be specified by SEBI. If statutory approvals are required for some but not all

shareholders, the acquirer can make payment to such shareholders in respect of whom no

statutory approvals are required in order to complete the open offer.

{As substantiated from FAQ of SEBI on SEBI (SAST) Regulations, 2011}

10

Target Company

M/s. Dynacons

Technologies Limited

Registered Office

Mumbai

Net worth of TC

Rs. 2,592.95

Lacs(31.03.2014)

Listed At

BSE and NSE

Industry of TC

Comm. Trading &

Distribution

Acquirer

Mr. Arun Govil

Target Company

M/s. Matru-Smriti

Traders Limited

Registered Office

Mumbai

Net worth of TC

Rs. 78,01,856

(31.03.2014)

Listed At BSE

Industry of TC

Finance (Including

NBFCs)

Acquirer-

M/s Shreeji Corporate

Solutions & Trade

Private Limited

Details of the offer:Offer to acquire 1,41,368

equity shares at a price of Rs. 15/- per fully paid up

equity share payable in cash.

Triggering Event:Share Purchase Agreement

(SPA) for the acquisition of 3,56,278 (65.63%) Equity

Shares and control over Target Company.


(SPA) for the acquisition of 28,180,652 (35.93%)Equity


Details of the offer:Offer to acquire 2,03,90,006 equity

shares at a price of Rs. 1.30/- per fully paid up equity

share payable in cash.

Latest Open

Offers

11

Target Company

M/s Palred Technologies

Limited

Registered Office

Hyderabad

Net worth of TC

Rs. 8643.09 Lacs

(31.03.2014)

Listed At

BSE and NSE

Industry of TC

IT Software Products

Acquirers

Mr. Palem Srikanth

Reddy along with Ms.

Stuthi Reddy

Target Company

M/s R. R. Corporate

Securities Limited

Registered Office

New Delhi

Net worth of TC

Rs. 130.10 Lacs

(31.03.2014)

Listed At

DSE

Industry of TC

Financing

Acquirers

M/s RV Buildtech &

Amusement Private

Limited

Details of the offer:Offer to acquire 8,32,000 Equity

Share at a price of Rs. 5/- per fully paid up equity share

payable in cash.


(SPA) for the acquisition of 17,43,870 (54.50%)Equity Shares

and control over Target Company.

Triggering Event: There is no triggering event, Acquirer

holds 89,20,607 Equity Shares representing 22.85% of the

share capital of Target Company.

Details of the offer:Offer to acquire 1,01,49,700equity

shares at a price of Rs. 16.70/- per fully paid up equity share

payable in cash

12

Target Company M/s Josts Engineering

Company Limited

Registered Office Mumbai

Net worth of TC

Rs. 1523.04Lacs

(31.03.2014)

ListedAt

BSE

Industry of TC

Industrial Machinery

Acquirers and PACs

Mr. Jai Prakash

Agarwal, Mr. Vishal

Jain, Mr. Krishna

Agarwal, Mr.Abhishek

Agarwal, J. P Agarwal

& Sons (HUF), Mr.

Rajendra Kumar

Agarwal, Mrs. Anita

Agarwal, Mrs. Shikha

Jain

Triggering Event: Share Purchase Agreement

(SPA) for the acquisition of 3,69,910 (48.38%) Equity


Details of the offer:Offer to acquire 1,98,810 Equity

Shares at a price of Rs 410/- per fully paid up equity

share payable in cash.

13

Regular Section: Open Offer Escrow Account under

SEBI (SAST) Regulations, 2011

Meaning & Purpose:

Escrow Account is an account wherein the acquirer is required to deposit some percentage of

the offer price, in an escrow account before issuing a Detailed Public Statement. This serves as

a security for performance of acquirer’s obligations under the open offer. SEBI (SAST)

Regulations, 2011 have made detailed provisions regarding the Escrow Account. These

provisions are contained in regulation 17 of SEBI (SAST) Regulations, 2011. The purpose of

these provisions is to ensure that the acquirer has sufficient funds to pay the consideration

under the offer and he has secured sufficient financial arrangement.

I. Timing of opening of Escrow Account: [Regulation 17(1)]

The Acquirer shall open an escrow account atleast two working days prior to the date of

Detailed Public Statement.

II. Amount to be deposited in Escrow Account: [Regulation 17(1)]

Sl. No. Consideration payable under

the Open Offer

Escrow Amount Example

a. On the first Rs. 500 Crores 25% of the

consideration

Consideration = 50 Cr.

Amount to be deposited

in Escrow = 12.50 Cr.

b. On the balance consideration An additional amount

equal to 10%

Consideration = 520 Cr.

Amount to be deposited

in Escrow

(25% of 520Cr) + (10%

of 520 Cr)

=130cr.+52cr. = 182Cr.

14

It is further provided that where offer is made conditional upon minimum level of acceptance,

then higher of following two shall be deposited in the Escrow Account:

Hundred percent of the consideration

payable in respect of minimum level of

acceptance

Fifty per cent of the consideration payable

under the open offer

If the Acquirer makes any upward revision in the open offer, whether by way of increase in offer

price, or of the offer size, then the Acquirer shall make corresponding increases to the amount

kept in escrow account prior to making such revision. [Regulation 17(2)]

III. Mode of Deposit in Escrow Account: [Regulation 17(3)]

(a) Cash Deposit with any scheduled commercial bank

(b) Bank guarantee issued in favor of the manager to the open offer by any scheduled

commercial bank

(c) Deposit of frequently traded and freely transferable equity shares or other freely

transferable securities with appropriate margin subject to compliance with regulation 9(2).

Important Points:

Applicable

Regulation

Details

17(4) Bank Guarantee or Deposit of

Security

Deposit at least 1% of the total consideration

payable in cash with schedule commercial bank

as part of Escrow Account.

17(5) Cash deposit Empower the manager to the open offer to

instruct the bank to issue a banker’s cheque or

demand draft or to make payment of the

amounts lying to the credit of the escrow

account

17(6) Bank Guarantee The bank guarantee shall be in the favor of

manager to the offer and shall be kept valid

throughout the offer period and additional 30

days after the payment to the shareholders who

15

have tendered their shares have been made.

17(7) Securities Manager to the Open Offer shall be empowered

to realize the value of escrow account by way of

sale or otherwise.

Further in case of any shortfall in the amount in

the escrow account, such shortfall shall be

made good by the Manager.

IV. Release of amount from Escrow Account

The amount lying in escrow account can be released in the following cases only:

1. In case of withdrawal of offer, the entire amount can be released only after certification by the

merchant banker.

2. The amount deposited in escrow account is transferred to special bank account opened with the

Bankers to an issue; however the amount so transferred shall not exceed 90% of the cash

deposit.

3. The balance 10% is released to the acquirer on the expiry of thirty days from the completion of

all obligations under the offer.

4. The entire amount to the acquirer on the expiry of thirty days from the completion of all

obligations under the offer where the open offer is for exchange of shares or other secured

instruments.

5. In the event of forfeiture of amount, the entire amount is distributed in the following manner:

5.1. One third of the amount to Target Company;

5.2. One third of the escrow account to the Investor Protection and Education Fund established

under SEBI (Investor Protection and Education Fund) Regulations, 2009;

5.3. Residual one third is to be distributed to the shareholders who have tendered their shares in

the offer

16

Jindal Saw’s Overseas unit acquires PSL North America LLC

Jindal Saw Limited through its subsidiary incorporated in USA naming Jindal Tubular USA LLC

has acquired the assets of PSL Limited North America LLC, a US-based steel pipe maker

through bankruptcy proceedings, the company provided the details in a filing with stock

exchange.

Religare buys part of portfolio management ‘Prime Broking Limited’

Religare Global Asset Management through its subsidiary Religare Portfolio Managers &

Advisors acquired Prime Broking Limited, part of N Jayakumar's Prime group.The purchase by

Religare will lead to expand the PMS space however the size of the deal and asset acquired are

not disclosed in the market.

Astral Poly Technik Picks Up Majority Stake In Seal It Services

Astral Poly Technik has acquired a majority controlling stake of 80% in UK based manufacturer

of adhesives and sealants, Seal It Services Limited, for INR 440 Mn. Astral is planning to

consolidate its adhesive and sealant business and is in the process of expanding its

manufacturing capabilities in India, the company said in a filing.

Market Updates

17

Disclaimer:

This paper is a copyright of Corporate Professionals (India) Pvt. Ltd. The entire contents of this paper

have been developed on the basis of SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 and latest prevailing SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations, 2011 in India. The author and the company expressly disclaim all and any liability to any

person who has read this paper, or otherwise, in respect of anything, and of consequences of

anything done, or omitted to be done by any such person in reliance upon the contents of this paper.

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Manoj Kumar


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Divya Vijay


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