The case pertained to the alleged violation of the provisions of the SEBI (SAST) Regulations, 1994

and 1997 by

1 SHRI KISHORE RAJARAM CHHABRIA

2 SHRI MADANLAL DWARKADAS CHHABRIA

3 IMFA HOLDING PVT LTD.

4 MAHAMERU TRADING CO. P. LTD.

5 SHRISH FINANCE & INVESTMENT P. LTD.

6 GALAN FINVEST P. LTD.

7 VENEER INVESTMENTS & FINANCE P. LTD.

8 STINGRAY TRADERS P. LTD.

9 DARREL TRADERS P. LTD.

10 BEETHOVEN TRADERS P. LTD.

11 ALGID INVESTMENT & FINANCE P. LTD.

12 AIRDALE INVESTMENT & TRADING P. LTD.

(acquirers and persons acting in concert) for the acquisition of the shares of Herbertsons Ltd (target
company).

 Accordingly, a Show Cause Notice dated January 28, 2003 was issued to the acquirers and
persons acting concert.
 It is alleged that the acquirers and persons acting in concert who already held 22,15,800 shares
of the target company which constituted 26% of the paid-up capital on December 14, 1993, had
acquired 3,75,000 shares on August 11, 1995 and increased their holding in the target company
to 2590800 shares constituting 27.21% of the paid-up capital.
 The aforesaid acquisition was not preceded by a public announcement to acquire further shares
in terms of Regulation 10(2) of SEBI(SAST) Regulations, 19941.

Subsequent Acquisitons

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Reg. 10: Acquisition of 10% or more of the shares of any company through open market purchases. –
2) An acquirer who on the date of commencement of these regulations holds shares which carry more than
ten per cent of the voting rights in the capital of the company, shall not acquire any further shares in the
company from the open market unless such acquirer makes a public announcement of intention to acquire
shares in the open market in accordance with the regulations.
 The further acquisitions of shares of the target company were made by Kishore Rajaram
Chhabria (KRC) and Madanlal Dwarkadas Chhabria (MDC) through Persons Acting in Concert
namely Imfa, Mahameru and Shirish between 27.10.94 and 13.2.97.
 Subsequently, these acquirer entities themselves were taken over by Seven Star Investment &
Trading Co. P. Ltd. which is fully owned by MDC.
 Thus, MDC, KRC and PACs with them viz. Galan and its subsidiaries, Imfa, Mahameru and Shirish
acquired shares of the target company between the aforesaid dates without making a public
announcement . The link for acting in concert was also available.
 The acquirers viz. KRC, MDC, Galan and its subsidiaries and Seven Star Trading failed to make
disclosure of their holdings in the target company to the company in violation of Regulation 6(1)2
for the year 1997 and Regulation 8(1) 3 for the years 1998-2001 in terms of SEBI(SAST)
Regulations, 1997.

CONTENTIONS OF THE APPELLANTS

 It was submitted that KRC does not hold a single share in the target company and as such there
was no obligation to comply with Regulation 6(1) & 8(1) of the Regulations. It was, however,
submitted that KRC complied with Reg. 6(3) & 8(2) of 1997 Regulations

https://www.sebi.gov.in/adjorder/herbertsons1.html

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6) Acquisition of 5% and more shares of a company. – (1) Any acquirer, who holds five per cent or less than
five per cent shares in a company and acquires more than five per cent shares: -
a) in pursuance of a public issue, or
b) by one or more transactions, or
c) in any other manner not covered by (a) and (b) above,
shall disclose the aggregate of his shareholding in that company to the company and to all the stock exchanges
where the shares are listed.
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8) Continual disclosures. – (1) Every acquirer, including a person covered under regulation 5 who holds more
than ten per cent shares in any company, shall make half-yearly disclosures to the stock exchanges, on which
the shares are listed in respect of his holdings as on 31st March and 30th September each year.