9911796707
TMI Blog2004 (8) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... rvashri P R Ramasubrahmaneya Rajha, Chairman of Ramco Industries Ltd and P R Venketrama Raja, Vice Chairman and Managing Director of the said company (hereinafter collectively referred to as the Acquirers ) was found to have increased by 11.17% (from 17.75% to 29.46%) of the voting share capital of the Target Company i.e. more than the permissible annual creeping limit of acquisition of 5% specified in Regulation 11(1) of the Takeover Regulations. 1.2 The Target Company is a listed company, with its shares listed at the Madras Stock Exchange and The Stock Exchange, Mumbai. 2. SHOW CAUSE NOTICE 2.1 The Acquirers did not make a public announcement to acquire 20% of the voting capital of the company from the public as envisaged in the Takeover Regulations. A show cause notice was, therefore, issued on November 14, 2003 to the Acquirers to show cause as to why regulatory action should not be taken against them for the said prima facie violation. 3. REPLY OF THE ACQUIRERS 3.1. The Acquirers submitted their reply to the above said Show Cause Notice vide their letter dated 06.12.2003 stating inter alia that: a The preferential allotment of warrants which entitled the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed into shares on a subsequent date by the acquirers. m Hence, there is no violation of any of the provisions of the Regulations as alleged. 4. HEARING 4.1 An opportunity of personal hearing was granted to the Acquirers. The hearing took place as scheduled on 25.03.2004 and was attended by Mr. K K Shroff, Advocate, Mr. A V Dharmakrishna, Mr. K Selvanayagam and Mr. J Ramasubramanian. They reiterated the written submissions made by Acquirers vide letter dated 06.12. 2003. 5. CONSIDERATION OF ISSUES 5.1 I have carefully considered the facts of the case, the written as well as oral submissions made by the Acquirers and also the documents submitted by them in support of their submission. The issues that arise for consideration are : Whether the acquisition made by the acquirers in the Target Company qualified for exemption from the applicability of Regulation 11 of the Takeover Regulations and whether the acquirers had committed any violation of the Takeover Regulations and, if so, the regulatory action, if any, called for. 5.2 Recapitulation of relevant facts of the case will facilitate consideration of the issues in proper perspective: It was on February 27, 2002 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 and 12 of these regulations shall apply to: (a) ............. (b) ............. (c) preferential allotment, made in pursuance of a resolution passed under section 81 (1A) of the Companies Act, 1956 (1 of 1956): Provided that, - (i) board resolution in respect of the proposed preferential allotment is sent to all the stock exchanges on which the shares of the company are listed for being notified on the notice board; (ii) full disclosures of the identity of the class of the proposed allottee(s) is made, and if any of the proposed allottee(s) is to be allotted such number of shares as would increase his holding to 5 per cent or more of the post issued capital, then in such cases, the price at which the allotment is proposed, the identity of such person(s), the purpose of and reason for such allotment, consequential changes, if any, in the board of directors of the company and in voting rights, the shareholding pattern of the company, and whether such allotment would result in change in control over the company are all disclosed in the notice of the general meeting called for the purpose of consideration of the preferential allotment; 5.6 Briefly stated, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Acquirers on May 18 and 24, 2002, in terms of exemption available under the then existing provisions of regulation 3(1)(c) ibid. 5.8 The issue for consideration, however, got complicated due to deletion of the regulation 3(1)(c) effective 9 September 2002 - subsequent to the said preferential allotment of the warrants on May 18 and 24, 2002 and prior to the conversion of the warrants into shares on August 21, 2003. 5.9 It is noted that the deletion of the provisions for exemption of preferential allotment from the Takeover Regulations was intended to avoid possible misuse of the exemption for the purpose of effecting a change of the hands of control over the company, without incurring an obligation to make a public offer as envisaged in the Takeover Regulations. The facts of the case do not indicate any such intentions on the part of the company/ the Acquirers. 5.10 In terms of Regulation 12 read with Regulation 2(c), 'control' includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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