HAKEEM AUTO LIMITED Vs. STATE
LAWS(SB)-2003-11-5
SECURITIES APPELLATE TRIBUNAL
Decided on November 06,2003

Appellant
VERSUS
Respondents

JUDGEMENT

G.N.Bajpai, - (1.) 0 BACKGROUND 1.1 Hakeem Auto Limited (hereinafter referred to as "the Acquirer") submitted a report dated September 12, 2002 to SEBI under Regulation 3(4) of SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ( hereinafter referred to as "the Regulations") claiming exemption under Regulation 3(1)(c) for acquisition of 22.31% shares of GG Automotive Gears Ltd. (hereinafter referred to as "the Target company") by way of preferential allotment. Pursuant to the aforesaid preferential allotment the shareholding of the Acquirer increased from Nil to 22.31% shares in the Target company. 1.2 The shares of the Target company are listed at The Stock Exchange, Mumbai & Madhya Pradesh Stock Exchange( MPSE). 1.3 On October 04, 2002 , SEBI , inter alia, advised the Acquirer to submit documentary evidence regarding compliance with Regulation 3(1)(c)(i) of the Regulations. 1.4 The Acquirer replied vide its letter dated October 23, 2002 and submitted inter alia a copy of letter dated June 14, 2002 of the Target Company addressed to the Stock Exchange, Mumbai in terms of Regulation 3(1)(c)(i). Further, the Acquirer also submitted a letter dated July 31, 2002 sent by the Target company to the Stock Exchange, Mumbai in terms of Regulation 3(3). 1.5 On November 20, 2002, SEBI advised the Stock Exchange, Mumbai to inter alia confirm whether the copy of the letter enclosing Board Resolution (in respect of the proposed preferential allotment) passed in the Board Meeting held on June 13, 2002 was sent to the Exchange by the Target company in terms of Regulation 3(1)(c)(i). 1.6 The Stock Exchange, Mumbai in its reply dated November 27, 2002 inter alia stated that the Target company has not submitted the copy of the Board Resolution in terms of Regulation 3(1)(c)(i) in respect of the proposed preferential allotment passed in the Board Meeting of the Target company held on June 13, 2002. 1.7 On November 18, 2002 the Acquirer filed another report under Regulation 3(4) inter alia stating that the same is in furtherance of its report dated September 12, 2002 and same is being submitted for seeking exemption under Regulation 3(1)(c) with regard to preferential allotment of shares of the Target company. In the said report, it was inter alia stated that consequent to the further preferential allotment on October 29, 2002 the shareholding of the Acquirer increased to 34.02% from 22.31%.
(2.) 0 SHOW CAUSE NOTICE 2.1 As the aforesaid acquisitions were, prima facie, in violation of Regulations 10 & 11(1) , a show cause notice dated February 14, 2003 was issued to the Acquirer inter alia stating that : 2.1.1 the Acquirer does not appear to have complied with the Regulation 3(1)(c)(i) of the Regulations. As a result of non-compliance with Regulation 3(1)(c)(i) of the Regulations, the exemption u/r 3(1)(c) from the non-applicability of Regulation 10 of the Regulations may not be available to the Acquirer for the acquisition of 22.31% on 25.08.02. Further, the exemption under regulation 3(1)(c) from the non-applicability of Regulation 11(1) of the Regulations may not be available to the Acquirer for the acquisition of 11.71% on 29.10.02. 2.1.2. a public announcement to acquire a minimum of 20% shares from the shareholders of the Target company should have been made by the Acquirer in terms of the Regulations, within 4 working days from the date of 25.08.02 & 29.10.02 in compliance with Regulation 10, 11(1) read with 14(1) of the Regulations. 2.1.3 why one or more or all action(s) under Regulation 44 and Regulation 45(6) of the Regulations and Sections 11 and 11B of the SEBI Act 1992, should not be initiated against it for violations specified Eply OF THE ACQUIRER 3.1 The Acquirer submitted its reply to the above said show cause notice vide its letter dated February 26, 2003 and inter alia stated that the Target company had sent a copy of the Resolution passed in the Board Meeting held on June 13, 2003 under Section 81 (IA) of the Companies Act, 1956 to the Stock Exchange, Mumbai in compliance of Regulation 3(1)(c)(i), by post Under Certificate of Posting. Further, the Acquirer stated that it appears that the Stock Exchange, Mumbai has not received the same and they are taking up the matter with the Target company for getting specific confirmation regarding receipt of copy of the aforesaid Board Resolution from MPSE. 3.2 The Acquirer vide letter dated June 3, 2003, submitted a copy of letter dated June 14, 2002 sent by the Acquirer, in compliance with Regulation 3(1)(c)(i), to MPSE regarding intimation of allotment of 16,15,900 shares by the Target company. 3.3 Subsequently vide letter dated June 16, 2003, the Acquirer forwarded a copy of letter dated June 14, 2003 from MPSE confirming that it had received the intimation letter from the Target company about allotment of 16,15,900 shares.
(3.) 0 HEARING 4.1 A personal hearing was granted to the Acquirer on June 19, 2003 wherein it reiterated the submissions made by it in reply to the Show Cause Notice and it sought time for submitting documents regarding sending of Resolution to the Stock Exchanges. 4.2 Further, during the hearing, the Acquirer inter alia submitted that the allotment of 7,15,900 equity shares constituting 11.71% shares of the equity capital of the Target company on 29.10.2002 was pursuant to the shareholders approval given in Annual General Meeting held on July 31, 2002. The said approval by the shareholders for the allotment of 7,15,900 equity shares of the target company was given prior to the coming into force of amendments to the Regulations i.e. September 9, 2002. Therefore, the said allotment of 7,15,900 equity shares of the Target company by the Board of Directors on October 29, 2002 should be eligible for exemption. 4.3 Pursuant to the hearing, the Acquirer vide its letter dated June 20, 2003 forwarded copies of : a) letter dated June 07, 2002 from the Target company to the Stock Exchange, Mumbai inter alia informing the Stock Exchange that the Target company is desirous of reissuing its forfeited shares and seeking their permission under clause 23(a) of Listing Agreement. b) letter dated June 13, 2002 sent to the Mumbai Stock Exchange by the Target company inter alia informing about the Annual General Meeting of the Target company on July 31, 2002 and reissue of forfeited shares. c) letter dated July 06, 2002 sent to the Mumbai Stock Exchange by the Target company inter alia seeking permission under clause 23(a) of the listing agreement .;


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