WTM/PS/141/CFD/JAN/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
ORDER
Under sections 11(1), 11(2)(j), 11(4) and 11B of the Securities and Exchange Board of
India Act, 1992 read with section 12A of the Securities Contracts (Regulation) Act, 1956
in the matter of non-compliance with the requirement of minimum public
shareholding by listed companies
In respect of Shreevatsaa Finance & Leasing Limited
1.

Securities and Exchange Board of India (hereinafter referred to as "SEBI") had passed

an interim Order dated June 04, 2013 (hereinafter referred to as "the interim order ") with
respect to 105 listed companies who did not comply with the Minimum Public Shareholding
("MPS") norms as stipulated under rules 19(2)(b) and 19A of the Securities Contracts
(Regulation) Rules, 1957 (hereinafter referred to as "SCRR") within the due date i.e., June 03,
2013. The interim order was passed without prejudice to the right of SEBI to take any other
action, against the non-compliant companies, their promoters and/or directors or issuing such
directions in accordance with law. The interim order was to be treated as a show cause notice
by those companies for action contemplated in paragraph 18 thereof.
2.

Shreevatsaa Finance & Leasing Limited (hereinafter referred to as the

Company) is one such company against whom the interim order was passed. The equity
shares of the Company are listed on the Bombay Stock Exchange Limited (BSE),
Ahmedabad Stock Exchange and erstwhile UP stock Exchange.
3.

The Company vide its letter dated June 11, 2013 inter alia stated the following:
(a) Its promoter/promoter group is not able to sell their shares through secondary market
(i.e. Offer for Shares through stock exchange) as the scrip was suspended by BSE for
the last 10 years.

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(b) The Company submitted that even if it applies for termination of suspension of trading
and thereafter make an offer for sale, there may be a situation that no investor is
interested in buying its shares.
(c) The Company submitted that it does not want to make a rights issue as it does not
require funds and would become answerable to shareholders if it was not able to
deploy such funds. The Company stated that its promoter group holds a total of
89.61% (promoter, Mr. Praveen Kumar Arora holds 79.22% and Agarni Leasing &
Finance Pvt. Ltd. holds 10.39%).
(d) The public shareholding is held by 59 investors holding 10.39% of share capital.
(e) The Company also stated that as per the directions issued vide the interim order with
respect to freeze of excess promoters holding, only 58.10% of the promoter holding
would be frozen and requested permission to transfer the remaining 31.10% to the
prospective investors so that it could achieve MPS.
4.

The Company did not undertake any steps including OFS (as proposed) for complying

with the MPS requirements and therefore continued to be non-compliant with the MPS
norms. The Company was afforded an opportunity of personal hearing on July 03, 2015,
when its representative Mr. Rajen Gada, Chartered Accountant, appeared and made oral
submissions. As requested, liberty was granted to file written submissions. Thereafter, vide
letter dated July 06, 2015, the Company inter alia stated as follows:
(a) The paid-up and listed share capital of the Company is Rs.10,10,00,000/- divided into
1,01,00,000 equity shares of face value of Rs.10/- per share.
(b) The net-worth of the Company is Rs.18,93,80,246/- as on March 31, 2015.
(c) There are only 61 shareholders in the Company as follows:
Sr. no.
1.
2.

Category of
shareholder
Promoter
Public

No.
of
shareholders
2
59
61

No. of shares
held
90,51,300
10,48,700
1,01,00,000

Percentage of
shareholding
89.62%
10.38%
100%

(d) The Company is active for trading at BSE Limited since December 05, 2014. However, no
shares were traded since September 20, 1999.

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(e) The Company wishes to delist its shares from the stock exchange and therefore it
would be cumbersome for the promoter to first reduce their promoter shareholding
and then give exit opportunity for delisting.
(f) According to the Company, the stock exchanges are charging very high fees for
utilisation of their platform for undertaking the book building process and therefore
it is economically not viable to undertake book building process for only 59
shareholders (public).
(g) Mr. Praveen Kumar Arora, promoter, had subscribed to equity shares of Pine
Animation Limited on preferential basis. SEBI vide Order dated May 08, 2015 put a
freeze on the accounts of subscribers to equity shares issued under the preferential
basis. The said promoter has been barred from undertaking transactions in the capital
market. The Company is neither related to Pine Animation nor under the same
management. The promoter would not be able to provide exit opportunity to the
public shareholders of the Company.
(h) In view of the above, the Company sought the following exemptions/permissions:
1. Exemption from undertaking OFS for meeting MPS;
2. Exemption from undertaking book building process as prescribed under
regulation 14 of the SEBI Delisting Regulations;
3. Permission to Mr. Praveen Kumar Arora to undertake the delisting related
transaction of the Company so as to give exit opportunity to the public
shareholders.
(i) In case SEBI decides otherwise, then the Company submitted that the promoters will
have to offer 14,76,300 equity shares of the Company through OFS so as to comply
with MPS requirements. The Company referred to the letter dated May 25, 2015 of
Mr. Praveen Kumar Arora to SEBI and stated that he was in the process of
undertaking OFS when the he was restrained vide another SEBI Order dated May 08,
2015.
The Company requested SEBI to defreeze 14,76,300 equity shares of the Company
held by the said promoter and also permit him to access the capital market for the
limited purpose of undertaking necessary transactions for meeting MPS norms.

5.

I have considered the interim order as passed against the Company and the

submissions of the Company. The interim order was issued against the Company, its
promoters and promoter group and directors, as the Company was non-compliant with the

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provisions of rule 19A of the SCRR and Clause 40A of the Listing Agreement read with
section 21 of the Securities Contract (Regulation) Act, 1956 ("SCRA"), by not maintaining
atleast the minimum level (of 25%) of public shareholding as of June 03, 2013 (the time line
before which such compliance was to be achieved). It is an admitted position that till date the Company
is not compliant with the MPS norms as the public shareholding in the Company is at 10.38%
(less than the minimum requirement of 25%). The Company has therefore failed to comply
with the MPS requirements within the stipulated timeline and is also in continuous violation
of these norms.
6.

The Company, in its submissions, has stated that it wishes to delist its shares from the

stock exchanges and requested for an exemption from undertaking the book building process
under the Delisting Regulations. The processes under the Delisting Regulations have been
stipulated to ensure that the interest of shareholders are taken care and that the shareholders
themselves decide on whether to delist the shares of their company. Further, the reverse
booking building process has been prescribed to ensure that shareholders decide on the exit
price to be paid by the promoter under the delisting offer. I note from the submissions that
the Company/its promoter has not taken any steps towards the proposed delisting. There is
not even a Board approval for such proposal.
7.

The Company has submitted that its promoter (Praveen Kumar Arora) is not able to

make an OFS as he has been debarred vide SEBI Order May 8, 2015 from dealing in the
capital market and has requested SEBI to defreeze 14,76,300 equity shares held by this
promoter to offer them for sale for complying with the MPS requirements. I note that OFS
is not the only method for complying with the MPS requirements and that SEBI vide Circulars
dated December 16, 2010, February 08, 2012 and August 29, 2012, had prescribed other
methods also. Further, the amended MPS norms came into force from June 2010 and the
promoter was debarred only on May 08, 2015. The Company/promoter had around 5 years
at their disposal before the restraint on its promoter had been ordered. The
Company/promoter therefore had adequate time for complying with the MPS norms and the
facts and circumstances of the case suggest that they were not serious in complying with the
MPS norms.

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8.

Considering the fact that the Company has not complied with the MPS requirements

till date in breach of rule 19A of the SCRR and Clause 40 A of the Listing Agreement read
with section 21 of the SCRA, and such non-compliance being continuous in nature, it becomes
necessary for me, to confirm the directions issued vide the interim order against the Company,
its directors and promoters/promoter group. Further, for proper regulation of the securities
market and in view of the continuing nature of the violations committed by the Company,
SEBI may also initiate other action, as appropriate in law, against the Company, its directors
and promoters.
9.

Accordingly, I, in exercise of the powers conferred upon me under section 19 of the

Securities and Exchange Board of India Act, 1992 read with sections 11(1), 11(2)(j), 11(4) and
11B thereof and section 12A of the Securities Contracts (Regulation) Act, 1956, hereby
confirm the directions issued vide the interim order dated June 04, 2013 against the company,
Shreevatsaa Finance & Leasing Limited, its directors, promoters and promoter group.
10.

This Order shall remain in force till further directions.

11.

Copy of this Order shall be served on the stock exchanges and depositories for their

information and necessary action.

Date: January 21st, 2016

Place: Mumbai

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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