SIKA INTERPLANT SYSTEMS LIMITED Vs. STATE
SECURITIES APPELLATE TRIBUNAL
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(1.) SHRI Rajeev Sikka and SHRI Sanjeev Sikka (hereinafter collectively referred to as "the Acquirers") are the promoters of Sika Interplant Systems Ltd. (hereinafter referred to as the "Target company") . The Acquirers propose to acquire 10.56% of shares from Indian Bank, Bangalore in pursuance of out of court settlement between the Acquirers and the Indian Bank.
1.1 As a result of the proposed acquisition, the Acquirers shareholding, alongwith their relatives and associates will increase from 30.71% to 41.27% in the equity share capital of the Target company and the Acquirers will have to make an open offer to the public shareholders of the Target company in terms of sub regulation (1) of regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "the Regulations").
1.2 The shares of the Target company are listed at the Bangalore Stock Exchange and The Stock Exchange, Mumbai.
(2.) The Acquirer made an application dated April 16, 2003 under sub-regulation (2) of regulation 4 of the Regulations to the Securities and Exchange Board of India (hereinafter referred to as "SEBI") seeking exemption from the operation of Chapter III of the Regulations relating to public announcement, appointment of merchant bankers, etc.
In the aforesaid application, the Acquirer, inter-alia, submitted the following:
3.1 As per Regulation 2(h) of Regulations, the Acquirers are promoter shareholders of the Target company.
3.2 As on 31.12.2002, the Acquirers held 0.079% of shares and along with promoters / relatives and associates held 27.19% of paid up capital in the Target company. The details of the shareholding of the Target company are as given below:
Shareholding Pattern of the target company before and after the proposed acquisition
Note : Since Acquirers are also promoters hence shown together
3.3 The Target company had issued debentures and it had approached the Indian Bank to underwrite the issued debentures to the extent of 25,000 debentures of aggregate value of Rs. 25 lakhs. There was an underwriting devolvement on the Indian Bank resulting in the investment by the Indian Bank to the extent of Rs. 23,10,200/- and consequently 23,102 debentures being issued and allotted in favour of the Indian Bank. The said debentures were converted into equity shares as per offer compulsorily on 16.7.1990 of the same value and the Indian Bank ultimately came to hold equity shares of the Target company of aggregate face value of Rs. 23,10,200/- which constitute about 14.085% of the total paid up share capital of the Target company.
3.4 At the time of issue of said convertible debentures, the Acquirers entered into an agreement with the Indian Bank to buy back the shares under certain terms and conditions.
3.5 The Indian Bank thereafter filed a suit before the City Civil Judge at Bangalore in O.S. No. 7075 of 1994 for recovery of the sum of Rs. 43,87,665/- alleged to be due to the Indian Bank in terms of the buy back agreement entered into by the Acquirers with the Indian Bank. It was thereafter transferred to Debt Recovery Tribunal (DRT), wherein DRT has agreed with the contention of the Acquirers that it is not a debt due. Hence, the case was reverted back to Civil Court.
3.6 The parties have reached an out of Court settlement whereunder the Acquirers have agreed to pay a sum of Rs. 28,88,000/- in full and final settlement of the claim of the Indian Bank against which the Indian Bank is required to transfer the shares of the Target company in favour of the Acquirers.
3.7 Pursuant to agreement entered into with Indian Bank the Acquirers have to acquire 2,31,020 equity shares of Rs. 10/- each in the Target company (which constitutes 14.085% of paid up capital) from Indian bank for a consideration of Rs. 28.88 lacs by transfer of shares, by the Indian Bank to the Acquirers as per the compromise agreement as approved by the Civil Court Bangalore, between the Indian Bank and the Acquirers.
3.8 On 25.1.2003, the Acquirers acquired 3.52% of shares totaling to 57,755 number of shares of Indian Bank as a part of 2,31,020 shares as stated above and increased its present holding upto 30.71% of paid up capital in the Target Company. Further, the Acquirers have to acquire balance 10.56% of shares equivalent to 1,73,265 shares before 20th June 2003 as per the terms of agreement entered into with Indian Bank and will come to hold about 41.27% of the total paid up capital.
3.9 The payment by the Acquirers and transfer of shares by the Indian Bank is to be completed within a period of nine months. If the compromise proposal is given effect to, the Acquirers together with their relatives and associates will come to hold about 41.27% of the total paid up share capital of the Target company.
3.10 By virtue of the agreement entered into with the Indian Bank by the Acquirers prior to the date of publication, the Acquirers or their nominees have come under an obligation to buy back the shares from Indian Bank.
3.11 The acquisition proposed by the Acquirers is in the form of discharge of obligation under buy back agreement and also due to a suit filed by the Indian Bank before the city Civil Judge at Bangalore and consequent to out of court settlement arrived at thereon.
3.12 The acquisition is neither voluntary nor with a view to acquire substantial shares for gaining control or takeover of the Target company.
3.13 The requirement relating to public announcement, appointment of merchant bankers, etc. will place the Acquirers under financial burden in addition to the transfer considerations which they are otherwise forced to pay under law.
(3.) THE abovesaid application for exemption dated April 16, 2003 was forwarded to the Takeover Panel on April 24, 2003 in terms of sub-regulation (4) of regulation 4 of the Regulations. THE Takeover Panel vide its report dated May 02, 2003 has recommended, inter alia, as under:
"Taking the totality of circumstances into consideration, the grant of exemption as sought is recommended.";
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