WTM/RKA/EFD-DRA-II/44/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER
Under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 and
Regulations 44 and 45 of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 read with Regulations 32 and 35 of the SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011 in respect of: 1.
2.
3.
4.
5.
6.
7.
8.

Mr. B. K. Narula (PAN: AABPN9040L),

Ms. Rita Narula (PAN: AABPN9041M)
B. K. Narula HUF (PAN: AAAHB4455L),
Ms. Sidhi Narula (PAN: AAEPN0229N),
Ms. Ridhi Suri (PAN: ACKPN7385D),
Sukarma Finance Ltd. (PAN: AAACS3512L),
Solar Renewable Urja Pvt. Ltd. (now known as Sridhi Infra Pvt. Ltd.) (PAN: AANCS7337J), and
B. K. Overseas Ltd. (now known as Xtrems Retails Limited) (PAN: AAACB3156B)

In the matter of acquisition of shares of Orosil Smiths India Ltd.

1. Orosil Smiths India Limited (hereinafter referred to as "the target company") is a company having
its registered office at Flat No. 620, Hemkunt Chambers, 89 Nehru Place, New Delhi- 110019,
India. The shares of the target company are listed on Bombay Stock Exchange Limited ("BSE").
2. Mr. B. K. Narula, Ms. Rita Narula, B. K. Narula HUF, Ms. Sidhi Narula, Ms. Ridhi Suri, Sukarma
Finance Ltd., Solar Renewable Urja Pvt. Ltd. and B. K. Overseas Ltd. (hereinafter collectively
referred to as "the promoter group" and individually by their respective names) are the promoters
of the target company.
3. As on September 30, 2008, the promoter group held 23,91,455 equity shares of the target
company constituting 57.88% of the its share capital. Through series of acquisitions the promoters
of the target company acquired 4,96,069 equity shares of the target company between October
2008 and September 2010 which led to an increase in the shareholding of the promoter from
23,91,455 shares constituting 57.88% as on September 2008 to 28,87,524 shares constituting
69.89% of the shareholding of the target company as on September 30, 2010, i.e., increase of
12.01%.
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4. It was observed that on June 06, 2009 B. K. Narula HUF acquired 20,637 equity shares of the
target company whereby the collective shareholding of the promoter group in the target company
increased from 57.88% to 63.36%, i.e., an increase of 5.48% which was beyond the specified 5%
creeping limit under regulation 11(2) of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997 (hereinafter referred to as Takeover Regulations, 1997). This
acquisition triggered the obligation to make a public announcement under said regulation 11(2)
read with regulation 14(1) of the Takeover Regulations, 1997 within 4 working days from June 06,
2009. Despite such increase, B. K. Narula HUF, i.e., the acquirer along with persons acting in
concert, failed to make the requisite public announcement in terms of these regulations.
5. In view of these acquisitions, SEBI issued a show cause notice dated June 30, 2014 (hereinafter
referred to as "the SCN") to the promoter group of the target company (hereinafter collectively
referred to as "the Noticees") calling upon them to show cause as to why suitable directions under
sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 ("SEBI Act") and
regulations 44 and 45 of the Takeover Regulations, 1997 read with regulations 32 and 35 of the
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to
as Takeover Regulations, 2011) should not be issued against them.
6. Vide letter dated August 07, 2014, the Noticees sought four weeks time to file reply in the matter.
However, no reply was filed by the Noticees within the stipulated time. Subsequently, during the
personal hearing granted to them on March 03, 2015, Mr. B. K. Narula appeared for himself and
on behalf of the remaining Noticees and made submissions. Vide letter dated March 12, 2015, the
Noticees also filed their written submissions. The submissions of the Noticees are inter alia as
following:(a) All allegations and averments that have been made against the Noticees are vague and
unsubstantiated and proceedings may be dropped on this ground alone.
(b) Averments made in the impugned notice are factually incorrect and are legally untenable and
that the impugned notice has been issued in violation of principles of natural justice.
(c) The allegation that through series of acquisitions, promoters of the target company acquired
4, 96,069 shares of the target company between October 2008 to September, 2010 resulting in
increase in their shareholding to 69.89% from 57.88%, the allegation is bald and superficial,
lacking the specification and categorization. The above allegation has not been substantiated as
to when and how the alleged shares were acquired by the Noticees.
(d) In the absence of any specific allegation against the Noticees other than B. K. Narula, HUF
are incapacitated to submit proper and suitable reply which might further prejudice the
conclusion of these proceedings. The SCN, therefore, deserves to be withdrawn on the ground
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(e)
(f)

(g)

(h)

(i)

(j)

(k)
(l)

of being bald and without any substance.

The SCN does not specify as to how and when the shares were allegedly acquired by the
Noticees other than B. K. Narula, HUF.
The SCN should have delineated the facts and legal provisions as to the violations alleged
therein and the Noticees other than B. K. Narula, HUF cannot be left to guess approximate
the allegations made against them. The proceedings under the SCN are liable to be dropped on
this ground of violation of principles of natural justice alone.
Not even a shred of evidence has been furnished in the SCN against the Noticees other than
B. K. Narula, HUF. Apart from the bald allegations, not even a single specific averment has
been made on this account. The Noticees other than B. K. Narula, HUF have never been
involved in the acquisitions of shares as alleged in para 6 of the SCN and cannot be clubbed in
the category of 'acquirer' merely because they form part of the promoter group.
Post amendment in regulation 11(2), wherein a window was provided to the promoters and
other groups holding substantial shares in target company to consolidate their shareholding
beyond the limits of 55% of paid up capital without making an open offer as contemplated
under the Takeover Regulations, 1997, B. K. Narula HUF acquired 20,637 shares on June 06,
2009. The true import of the said amendment was that the consolidation could be such that
the holding a promoter group could reach up to 75% of the total paid up capital of the target
company.
The amendment to regulation 11(2) permitted the promoter to increase their holding up to
75% of the total paid up capital and acting upon legal advice to this effect, certain shares were
acquired by B. K. Narula, HUF. The view of this noticee has also been substantiated by new
the Takeover Regulation, 2011, which permit the promoters to increase their holding up to
75% under creeping acquisition route.
None of the Noticees have been involved in manipulation of the securities market by
indulging in trading in shares of the target company. The Noticees have not traded in the
shares of the target company in as much as the shares were not off loaded and artificial
volumes were never created. It is further submitted that no acquisition of shares in the target
company has resulted in any profit in the hands of the Noticees herein.
The alleged acquisition has not resulted in change in control of the target company.
The alleged acquisitions in question were not made with any ulterior motive but were made to
consolidate the holding of the promoter group as provided in the amended regulation 11(2) of
the Takeover Regulations, 1997 as applicable during the relevant period and hence no
prejudice has been caused to the investors or the securities market in general on account of the
alleged acquisitions by the answering Noticees.

7. I have considered the SCN, oral/written submissions made by the Noticees and other material
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available on record. In the present case, it is admitted position that the Noticees were, at the
relevant time, forming promoter group of the target company. I note that except for general
denial, the Noticees have not made any specific submissions as to how the SCN is bald, vague or
ambiguous as sought to be contended by them. I note that the SCN has been issued to the
promoter group/Noticees in the background that the total shareholding of the promoter group in
the target company increased from 57.88% as on September 30, 2008 to 69.89% as on September
30, 2010 on account of the individual acquisitions of four members of the promoter group,
namely, B. K. Narula HUF, Ms. Ridhi Suri, Ms. Sidhi Narula and Sukarma Finance Ltd. During
this period, the acquisition of 20,637 shares by B. K. Narula HUF on June 06, 2009 resulted in an
increase of the promoter group's shareholding in the target company by 5.48% in the financial year
2008-09. These facts are not disputed by the Noticees. The SCN clearly describes that consequent
to this acquisition the obligation to make public announcement under regulation 11(2) of the
Takeover Regulations was triggered on June 06, 2009. I, therefore, do not find any vagueness,
ambiguity, etc. in the SCN as sought to be contended by the Noticees.
8. I note that the SCN has been issued describing all the transactions of the Noticees and the
consequences thereof. The specific allegations have been made therein with regard to the failure of
the Noticees and they have been given reasonable opportunity to defend themselves. I find that
the principles of natural justice have not been violated either in the issuance of SCN or in the
proceedings commenced by the SCN. I, therefore, reject the contentions of the Noticees in this
regard.
9. The Noticees have further contended that the alleged acquisitions of 4,96,069 shares of the target
company by the promoters during October 2008 to September, 2010 resulting in increase in their
shareholding to 69.89% from 57.88%, has not been substantiated as to when and how the alleged
shares were acquired by the Noticees. I note that these allegations have been made on the basis of
the details of acquisitions of the Noticees furnished by Mr. B. K. Narula, Managing Director of
the target company as well as the shareholding pattern and disclosures filed by the target company
with the stock exchanges. Thus, the facts/details about these acquisitions by them are within their
knowledge and the Noticees cannot plead ignorance about the facts/information having in their
possession and submitted by themselves. I, therefore, do not find any merit in these contentions
of the acquirers.
10. From the shareholding pattern of the target company, the disclosures filed by it with the stock
exchanges and information provided by the target company/its Managing Director - Mr. B. K.
Narula vide letter dated November 29, 2013 and January 21, 2014 to SEBI, it is noted that
additional shares of target company were acquired by certain entities of the promoter group from
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October 01, 2008 to April 10, 2010 as described in the following Table:Name
promoter/
acquirer

of Date
of No. and % of Pre-acquisition Post-acquisition
acquisition/Sale shares acquired/ holding
of holding
of
Sold
promoter group promoter group

B. K. Narula October 01, 2008

HUF
to December 31,
2008

33,555 (0.81%)

57.88%

58.69%

Ridhi Suri

October 01, 2008

to December 31,
2008

1,919 (0.05%)

58.69%

58.74%

B. K. Narula February 13, 2009

HUF

40,385 (0.98%)

58.74%

59.72%

Ridhi Suri

February 13, 2009

11,125(0.27%)

59.72%

59.99%

Sidhi Narula

February 13, 2009

13,923(0.32%)

59.99%

60.32%

Sukarma
Finance Limited

February 14, 2009

to March 31, 2009

(11,255) (0.27%)

60.32%

60.05%

B. K. Narula February 14, 2009

HUF
to March 31, 2009

51,757(1.25%)

60.05%

61.31%

Ridhi Suri

February 14, 2009

to March 31, 2009

30,761(0.74%)

61.31%

62.04%

Sidhi Narula

February 14, 2009

to March 31, 2009

33,764(0.82%)

62.04%

62.87%

B. K. Narula June 06, 2009

HUF

20, 637(0.50%)

62.87%

63.36%

B. K. Narula July 02, 2009

HUF

16,495(0.40%)

63.36%

63.76%

Sidhi Narula

July 02, 2009

5,000(0.12%)

63.76%

63.88%

Ridhi Suri

July 02, 2009

12,502 (0.30%)

63.88%

64.18%

B. K. Narula July 08, 2009

HUF

58,249 (0.40%)

64.18%

65.60%

Sidhi Narula

3,801(0.12%)

65.60%

65.69%

July 08, 2009

B. K. Narula September
HUF
2009

05,

16,948 (0.41%)

65.69%

66.10%

Sidhi Narula

September
2009

05,

29,100(0.70%)

66.10%

66.80%

Ridhi Suri

September
2009

05,

11,515(0.28%)

66.80%

67.08%

B. K. Narula November

30,

5,299 (0.13%)

67.08%

67.21%

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HUF

2009

Sidhi Narula

November 30,
2009

812(0.02%)

67.21%

67.23%

Ridhi Suri

November 30,
2009

7,240(0.17%)

67.23%

67.40%

B. K. Narula December 14,

HUF
2009

8,675(0.21%)

67.40%

67.61%

Ridhi Suri

December 14,
2009

9,744(0.23%)

67.61%

67.85%

B. K. Narula April 10, 2010

HUF

39,920(0.97%)

67.85%

68.82%

B. K. Narula April 10, 2010

HUF

11,854(0.29%)

68.82%

69.11%

11. It is noted that all the Noticees are promoters of the target company and are in its joint control.
Out of these 8 promoters, Mr. B. K. Narula, Ms. Rita Narula, Ms. Sidhi Narula, Ms. Ridhi Suri are
members of the same family. Mr. B. K. Narula is the karta of the B. K. Narula HUF. Further,
from the disclosures filed by the target company on the stock exchange (BSE) it is noted other
three Noticees viz; Sukarma Finance Ltd., Solar Renewable Urja Pvt. Ltd. and B. K. Overseas Ltd.
are promoter group companies/companies in same management wherein the Noticees hold
substantial shareholding to the extent of 90% or more. By virtue of these relations/connections
the Noticees are persons acting in concert with regard to the acquisitions in question. In this
regard, it is also relevant to mention that, by their own submissions, the Noticees have sought to
claim the benefit of 5% creeping acquisition by clubbing the shareholding of all promoters. Such
consolidation itself suggests concerted acquisitions by all the Noticees for the purpose of common
objective to acquire substantial shares in the target company. The Noticees have failed to prove
anything contrary to this fact. In these facts and circumstances, the community of interests and
commonality of objectives of all the Noticees are established in this case. I, therefore, find that all
the Noticees were "persons acting in concert" with regard to the acquisitions in question.
12. In the instant case, it has been alleged in the SCN that pursuant to the series of acquisition by four
promoters during the financial year 2008-2009 and 2009-2010, the total shareholding of the
promoter group had increased from 57.88% as on September 30, 2008 to 69.89% as on September
30, 2010 (i.e., increase of 12.01%). The charge against the Noticees is that pursuant to acquisition
of 20,637 shares by B. K. Narula HUF on June 06, 2009 the collective shareholding of B. K.
Narula HUF alongwith persons acting in concert (other promoters) in the target company
increased from 57.88% to 63.36%, i.e., an increase beyond the creeping limit of 5% under
regulation 11(2) of the Takeover Regulations, 1997.
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13. The Noticees have admitted this acquisition and have contended that pursuant to amendment to
regulation 11(2), wherein a window was provided to the promoters and other groups holding
substantial shares in target company to consolidate their shareholding beyond the limits of 55% of
paid up capital without making an open offer as contemplated under the Takeover Regulations,
1997. In this case, the Noticees had acquired additional shares in October 2008 during the
financial year 2008-09. After October 2008, they continued to acquire additional shares in the
target company and their collective shareholding in the target company increased from 57.88% to
62.87% during the period September 30, 2008 to March 31, 2009, i.e., an increase by 4.99%
during this period. During financial year 2009-10, the Noticees continued to consolidate their
shareholding in the target company and acquired further shares therein and as on June 06, 2009
their collective shareholding in the target company had increased to 63.36%. Their further
acquisitions on June 06, 2009 and thereafter, increased their collective shareholding from 63.36%
as on June 09, 2009 to 67.85% as on March 31, 2010 and thus there was total increase of 4.49% in
the collective shareholding of the Noticees during the financial year 2009-10. The charge in the
SCN is on the premise that the Noticees holding more than 55% shares in the target company as
on September 30, 2008 could not have breached the 5% benchmark provided in terms of
regulation 11(2) as applicable on June 06, 2009, without the requisite public announcement.
14. In order to deal with the charge and the submissions of the Noticees, it is necessary to refer to
background of second proviso of regulation 11(2) that was inserted therein vide amendment dated
October 30, 2008. It is noted that prior to this amendment, relevant provisions of regulation 11
provided as following:-

"Consolidation of holdings.
11. (1) No acquirer who, together with persons acting in concert with him, has acquired, in accordance with
the provisions of law, 15 per cent or more but less than fifty five per cent.(55%) of the shares or voting rights
in a company, shall acquire, either by himself or through or with persons acting in concert with him,
additional shares or voting rights entitling him to exercise more than 5% of the voting rights, in any financial
year ending on 31st March, unless such acquirer makes a public announcement to acquire shares in
accordance with the Regulations.
(2) No acquirer, who together with persons acting in concert with him holds, fifty five per cent. (55%) or more
but less than seventy five per cent. (75%) of the of the shares or voting rights in a target company, shall
acquire either by himself or through persons acting in concert with him any additional shares or voting rights
therein, unless he makes a public announcement to acquire shares in accordance with these Regulations:

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Provided that in a case where the target company had obtained listing of its shares by making an offer of at
least ten per cent. (10%) of issue size to the public in terms of clause (b) of sub-rule (2) of rule 19 of the
Securities Contracts (Regulation) Rules, 1957, or in terms of any relaxation granted from strict enforcement
of the said rule, this sub-regulation shall apply as if for the words and figures 'seventy five per cent. (75%)',
the words and figures 'ninety per cent. (90%)' were substituted."
15. In terms of the above regulation 11(1) as applicable till October 30, 2008, an acquirer, holding
55% or more but less than 75% shares or voting rights in a target company could acquire any
additional shares or voting rights therein only by way of an open offer by making a public
announcement in accordance with the Takeover Regulations, 1997. Thus, the benefit of creeping
acquisition of 5% was not available at all to such acquirers. Accordingly, if the Noticees acquired
any additional shares after September 30, 2008 and before October 30, 2008, that would be in
breach of the aforesaid regulation 11(2) as it existed during that period. The Noticees, admittedly,
acquired additional shares during October 2010 and continued to consolidate their shareholding in
the target company further.
16. On October 30, 2008, the Takeover Regulations, 1997 were amended vide the SEBI (Substantial
Acquisition of Shares and Takeover Regulations) (Amendment) Regulations, 2008 whereby
another proviso was added in regulation 11(2) which provided as under:"Provided further that such acquirer may, without making a public announcement under these Regulations,
acquire, either by himself or through or with persons acting in concert with him, additional shares or voting
rights entitling him up to five per cent. (5%) voting rights in the target company subject to the following:(i) the acquisition is made through open market purchase in normal segment on the stock exchange but not
through bulk deal /block deal/ negotiated deal/ preferential allotment; or the increase in the shareholding or
voting rights of the acquirer is pursuant to a buy back of shares by the target company;
(ii) the post acquisition shareholding of the acquirer together with persons acting concert with him shall not
increase beyond seventy five per cent.(75%)."
17. As per the language of this proviso, an acquirer holding 55% or more but less than 75% of shares
or voting right in a target company could acquire additional shares or voting rights upto 5%
without making a public announcement. This acquisition was, however, allowed subject to the two
conditions that
(a) the acquisition should be made through open market purchase in normal segment on the
stock exchange or it is pursuant to buy back of shares by the target company; and
(b) the post acquisition shareholding of the acquirer should not increase beyond 75%.
18. Following the above amendment, SEBI received several queries/informal guidance requests
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regarding the applicability of the amended regulation 11(2) such as whether the acquisition of
5% under amended regulation 11 (2) is only an interim measure up to March 31, 2009, whether it
is only a one-time measure, whether shares can be acquired in several tranches, whether 'creeping
acquisition' of 5% under regulation 11(2) was available in every financial year, etc. In view of such
doubts and ambiguities, SEBI issued interpretative circular dated August 06, 2009 under regulation
5 of the Takeover Regulations, 1997 for removal of difficulties in interpretation of the second
proviso to regulation 11(2). The said circular provided as under:"SEBI has been receiving representations from market participants/listed companies with respect to the
interpretation of the proviso inserted by the aforesaid amendment. After examining these representations, it
is hereby clarified that
a) The acquisition, within the limit of five per cent (5%) under the second proviso to sub-regulation (2) of
regulation 11, may be made by an acquirer who, together with persons acting in concert with him,
holds fifty five per cent (55 %) or more but less than seventy five per cent (75 %) of the shares or
voting rights in the target company ;
b) The acquirer together with persons acting in concert with him, holding shares or voting rights as
specified at (a) above, may acquire additional shares or voting rights upto a maximum of five per cent
(5%) voting rights in the target company in one or more tranches, without any restriction on the timeframe within which the same can be acquired;
c) The aforesaid acquisition of five per cent (5%) shall be calculated by aggregating all purchases, without
netting the sales.
d) Consequent to such acquisition, the percentage of shareholding/voting rights of the acquirer, together
with persons acting in concert with him, in the target company, shall not increase beyond seventy five
per cent (75%). This limit is applicable irrespective of the level of minimum public shareholding
required to be maintained by the target company in terms of clause 40A of the Listing Agreement."
19. Thus, on and from August 06, 2009 the generally prevailing doubts and ambiguities were removed
and it was clarified that an acquirer who holds 55% or more but less than 75% of the shares or
voting rights in a target company could acquire additional shares or voting right upto a maximum
of 5% in a target company in one or more tranches without any restriction on the time-frame
without making a public announcement. Accordingly, an acquirer falling under regulation 11(2), as
amended on October 30, 2008, could not avail benefit of 'creeping acquisition' of 5% in every
financial year.
20. It is worth mentioning that there was no ambiguity in the aforesaid amendment with regard to
percentage (5%) of creeping acquisition. In this case, even after the said amendment on October
30, 2008, the Noticees continued to acquire additional shares in the target company and during
October 2008 till July 08, 2009, i.e., prior to clarification dated August 06, 2009 they had already
acquired 7.71 % shares in the target company. They further continued to consolidate their
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shareholding in the target company and even after the clarification dated August 06, 2009 and
their shareholding in target company further increased from 65.59% as on July 08,2009 to 68.89%
as on September 30, 2010, i.e., 3.3% increase during this period.
21. From the above facts and circumstances it is noted that the Noticees substantially consolidated
their shareholding in the target company by acquiring shares when the benefit of creeping
acquisition was not available to them or when it was available the limit (5%) was breached and
further consolidated their shareholding despite the clarification issued by SEBI circular dated
August 06, 2009. They, however, failed to make mandatory public announcement in terms of
regulation 11(2) read with regulation 14(1) of the Takeover Regulations, 1997. Their subsequent
acquisitions clearly prove that the Noticees had little regard for the process of law and or any
intent to comply with the requirements of regulation 11(2) of the Takeover Regulations, 1997. It is
also noted that the Noticees made those acquisitions clandestinely as they did not disclose their
acquisitions to the stock exchange under regulation 7(1A) of the Takeover Regulations, 1997.
22. Considering the above facts and circumstances, I am of the view that the charge in the SCN
against the Noticees is established. Since these acquisitions were clearly in breach of regulation
11(2) of the Takeover Regulations, 1997 the consequences of this breach should follow. In this
regard, I note the Hon'ble SAT vide order dated September 08, 2011 in the matter of Nirvana
Holdings Private Limited vs. SEBI (Appeal no. 31/2011) observed as follows:
"It must be remembered that whenever an acquirer violates Regulation 10, 11 or 12 of the takeover code by not
making a public announcement, he should be directed to comply with the provision by making a public offer. The words
unless such acquirer makes a public announcement appearing in Regulations 10 and 11(1) make these provisions
mandatory and a public announcement has to be made. Similar words appear in Regulation 12 as well. These
provisions make the acquisition conditional upon a public announcement being made. The primary object of the
takeover code is to provide an exit route to the public shareholders when there is substantial acquisition of shares or a
takeover. This right to exit is an invaluable right and the shareholders cannot be deprived of this right lightly. It is only
when larger interest of investor protection or that of the securities market demands that this right could be taken away.
Therefore, as a normal rule, a direction to make a public announcement to acquire shares of the target company should
issue to an acquirer who fails to do that. The Board need not give reasons as to why such a direction is being issued
because that is the mandate of Regulations 10, 11 and 12. However, if the issuance of such a direction is not in the
interest of the securities market or for the protection of interest of investors, the Board may deviate from the normal rule
and issue any other direction as envisaged in Regulation 44 of the takeover code. In that event, the Board should record
reasons for deviation ."

23. In the present case, the obligation of the noticees to make the open offer has been triggered on
account of breach of regulation 11(2) and the acquisitions in such breach have been repeated by
them. For the purposes of suitable direction under regulation 44, I proceed to examine the facts
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and circumstances of this case.

24. I note that regulation 44 of the Takeover Regulations, 1997 which provides consequences of
breach as found in this case gives flexibility to SEBI to enforce regulation 11 by way of several
directions including - (a) disinvestment of shares acquired in breach of regulations; (b) transfer of
any proceeds or securities to the investors protection fund; (c) making open offer for acquiring
shares of the target company, etc. The guiding principles for the directions as provided in these
regulations are the interest of the investors and securities market which are the statutory guiding
principles as inbuilt in the SEBI Act, the Takeover Regulations, 1997 and the Takeover
Regulations, 2011.
25. In the present case, the obligation of the Noticees to make the open offer has been triggered on
account of breach of regulation 11(2) of the Takeover Regulations, 1997 and the acquisitions in
such breach have been repeated by them. Further, the Noticees made those acquisitions in
clandestine manner. Had the Noticees made the public announcement within a period of 4 days
from June 06, 2009 in accordance with the Takeover Regulations, 1997 and complied with all
related activities within the timelines specified therein, all formalities with respect to their public
announcement and the open offer would have been completed by September 10, 2009, i.e., 97
days from the date of making the public announcement. As per the provisions of regulation 20(7)
of the Takeover Regulations, 1997 if the acquirer acquires shares after making the public
announcement at a price higher than the offer price, then the highest of the price paid for such
acquisition shall be payable in the open offer. Thus, the acquirers in this case, could have acquired
further shares only in compliance of these regulations. In this case, they not only failed to make
the public announcement within 4 days from June 06, 2009 but also made further acquisitions in
breach of the regulations. The details of subsequent acquisitions prices by the Noticees are as
follows:
Name of promoter/ Date of acquisition
acquirer

No. and % of shares Price

acquired
acquisition (`)

B. K. Narula HUF

July 02, 2009

16,495 (0.40%)

20.19

Sidhi Narula

July 02, 2009

5,000 (0.12%)

15.24

Ridhi Suri

July 02, 2009

12,502 (0.30%)

17.05

B. K. Narula HUF

July 08, 2009

58,249 (1.41%)

13.10

Sidhi Narula

July 08, 2009

3,801 (0.12%)

11.95

B. K. Narula HUF

September 05, 2009

16,948 (0.41%)

13.85

Sidhi Narula

September 05, 2009

29,100 (0.70%)

12.32

Ridhi Suri

September 05, 2009

11,515 (0.28%)

15.39

B. K. Narula HUF

November 30, 2009

5,299 (0.13%)

21.31

of

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Sidhi Narula

November 30, 2009

812 (0.02%)

22.40

Ridhi Suri

November 30, 2009

7,240 (0.17%)

22.07

B. K. Narula HUF

December 14, 2009

8,675 (0.21%)

34.15

Ridhi Suri

December 14, 2009

9,744 (0.23%)

28.93

B. K. Narula HUF

April 10, 2010

39,920 (0.97%)

24.16

B. K. Narula HUF

April 10, 2010

11,854 (0.29%)

25.76

26. Thus, had the Noticees made the public announcement within the time stipulated in regulation 14
of the Takeover Regulations, 1997, the price offered to the shareholders in the open offer could
have been determined taking into consideration the highest of the price of such acquisitions. It is
also relevant to mention that at the relevant time the shares of the target company were
infrequently traded on the stock exchange. I find that the Noticees have deprived the shareholders
the exit opportunity at the best offer price.
27. In this case, the Noticees had acquired the shares which are found to be in violation of regulation
11(2) of the Takeover Regulations, 1997 at an average price of `19.18 per share. If the public
announcement were to be directed under regulation 44 read with regulation 11(2) of the Takeover
Regulations, 1997, as on the date of this order, the open offer would be at price of approximately
`30.30 per share (calculated in terms of regulation 20 of the Takeover Regulations, 1997 alongwith
interest @ 10% per annum thereon) whereas the present average market price of the shares of the
target company considering the trading on BSE in the last six months is `12.74 per share. In the
facts and circumstances of the present case, I do not find any reason to deviate from the normal
rule to make a public announcement to acquire shares of the target company in accordance with
the provisions of the Takeover Regulations, 1997, and issue any other direction as envisaged in
regulation 44.
28. I am also of the view that since the public announcement now would provide a delayed exit
opportunity to the shareholders of the target company, the Noticees should pay interest on the
consideration amount to the shareholders who tender their shares in the open offer and who are
eligible for interest as per law.
29. Considering the above, I, in exercise of powers conferred upon me under sections 11, 11B read
with section 19 of the Securities and Exchange Board of India Act, 1992 and regulation 44 and 45
of the Takeover Regulations, 1997 read with regulations 32 and 35 of the Takeover Regulations,
2011, hereby issue the following directions:
(a). The Noticees shall make a public announcement to acquire shares of the target company in
accordance with the provisions of the Takeover Regulations, 1997, within a period of 45 days
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from the date of this order;

(b). The Noticees shall, alongwith the consideration amount, pay interest at the rate of 10% per
annum from September 10, 2009 to the date of payment of consideration, to the shareholders
who were holding shares in the target company on the date of violation and whose shares are
accepted in the open offer, after adjustment of dividend paid, if any.
30. This order shall come into force with immediate effect. A copy of this order shall be served upon
the Noticees for ensuring compliance with the above directions.
Sd/DATE: MAY 13TH, 2015
PLACE: MUMBAI

RAJEEV KUMAR AGARWAL

WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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