WTM/PS/43/CFD/MAY/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 Citurgia Biochemicals Limited
Date of Hearing:
Appearances:

July 08, 2015

Mr. Ashok Marwah, Director, Mr. Sarthak Vijlani, Consultant, Mr.
Vinay Chauhan, Advocate and Mr. K.C. Jacob, Advocate.

For SEBI:

Dr. Anitha Anoop, Deputy General Manager, Mr. Pradeep Kumar,

Assistant General Manager, Mr. Rohan Vijay, Assistant Manager.

Date of Hearing:
Appearances:

February 11, 2016

Mr. Ashok Marwah, Director and Mr. Sarthak Vijlani, Consultant.

For SEBI:

Dr. Anitha Anoop, General Manager, Mr. Pradeep Ramakrishanan,

Deputy General Manager, Mr. Pradeep Kumar, Assistant General
Manager, Mr. Rohan Vijay, Assistant Manager.

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. In terms of the said rule, listed companies are statutorily
mandated to have a minimum of 25% shareholding by the public. 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

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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.

Citurgia Biochemicals 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 (hereinafter referred to
as BSE). The scrip of the Company is suspended for trading at BSE

3.

The Company vide its letters dated June 20, 2013, August 05, 2013 and September 09,
2013, submitted the reply to the interim order and requested for an opportunity of
personal hearing. The submissions of the Company, in brief, are:
a. The Company is a Sick Company in terms of the Sick Industrial Companies (Special
Provisions) Act, 1985 (hereinafter referred to as SICA) which has the overriding
effect over all other Acts. The trading in the shares of the Company was suspended.
b. The Company had complied with all the requirements for revocation of suspension
and the exchange had accorded the in-principle approval for revocation of suspension
on May 24, 2013.
c. The Company while meeting with the requirements and before obtaining the inprinciple approval, had submitted an undertaking with the exchange to comply with
the MPS requirement.
d. As the trading in the shares of the Company had remained suspended, it is not able to
meet the criteria of maintaining MPS. It was said that as and when trading in the shares
of the Company will start, the Company will adopt the prescribed methods to raise the
public shareholding to the minimum required level.

4.

An opportunity of personal hearing was afforded to the Company on July 10, 2014.
However, the same was deferred due to certain administrative exigencies. The
Company vide its letter dated July 31, 2014, again requested for a personal hearing.
The personal hearing was afforded to the Company on July 01, 2015, which was later
postponed to July 08, 2015, when Mr. Ashok Marwah, director of the Company
appeared along with Mr. Sarthak Vijlani, Consultant; Mr. Vinay Chauhan, Advocate
and Mr. K.C. Jacob, Advocate as authorised representative of the Company and made

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oral submissions. The representatives of the Company also requested for time for
filling of the written submissions. The request was acceded to and a time of one week
was granted for the same.
5.

The Company vide its letters dated July 13, 2015 and August 14, 2015, submitted the
written submissions, which were taken on record. Thereafter, one more opportunity
of personal hearing was granted to the Company on January 25, 2016, which was later
rescheduled to February 11, 2016. On the date fixed Mr. Ashok Marwah, director of
the Company appeared along with Mr. Sarthak Vijlani, Consultant and made oral
submissions. Thereafter, the Company vide e-mail dated April 28, 2016, made
additional submissions, which were taken on record.

6.

The submissions of the Company made vide letters dated July 13, 2015 and August
14, 2015 are as under:
a. The Company was listed on BSE in the year 2000 with a capital of `3,38,12,650 divided
into 33,81,265 equity shares of `10 each, at that time the promoter shareholding was
49.13% and the public shareholding was 50.23%.
b. The Company was inter alia in the business of manufacturing calcium carbonate at its
plant in Rishikesh. Due to problems of lower yield and productivity, the operations of
the Company were suspended w.e.f. March 2003. The performance of the Company
was also adversely affected inter alia due to sluggish demand in industry, serious
competition from the unorganized sector leading to substantial drop in prices, cost of
power going up, stoppage of mining in Dehradun region from where the Company
used to get limestone, etc. Consequently, the business of the Company suffered and
the networth of the Company got eroded and the Company was declared a sick
industrial company in terms of the Section 3(1)(o) of the SICA.
c. As part of the revival plan for the Company, the Board for Industrial and Financial
Reconstruction (hereinafter referred to as BIFR) in its meeting held on January 12,
2007, had approved a scheme for the Company, which inter alia entailed reduction of
capital of the Company followed by infusion of funds by promoters by subscribing to
the shares by way of preferential allotment.

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d. Consequent to the same, the equity share capital of the Company reduced by 95% and
the paid up capital, post reduction stood at 1,69,063 equity shares of `10 each. Post
reduction of the equity capital, the Company allotted 62,50,000 equity shares of `10
each to the promoter, namely, Elite Capital Management Services Limited. With this,
the paid up capital increased to 64,19,063 equity shares of `10 each fully paid up. The
promoter shareholding had increased to 98.66% and the public shareholding
decreased to 1.34%.
e. Subsequently, again pursuant to the directions given by BIFR vide its order dated
October 07, 2010 read with order dated July 02, 2009, as part of the scheme, the
Company had further allotted 2,00,00,000 equity shares of `10 each on April 17, 2010
to the promoters group entities. Pursuant to such allotment the promoter
shareholding further increased to 99.67% from 98.66%.
f. Thereafter, the Company vide its miscellaneous applications bearing number
248/2012 (dated July 11, 2012) and 296/2012 (August 07, 2012) had sought the
approval of BIFR for issuance of shares/ warrants to non-promoters for bringing the
public shareholding of the Company in consonance with the provisions of the MPS
requirements. The said applications were disposed of by BIFR vide its order dated
November 01, 2012, by granting the approvals as sought for by the Company. The
following directions were also issued by BIFR vide the said order dated November 01,
2012:
-

The validity of the existing share warrants of `2,500 lakh held by Satyasheel
Engineers & Miners Limited was extended on the same terms and conditions by a
period of further 18 months and it was allowed to sell/ transfer the said revalidated
equity share warrants to non-promoter entities.

The allotment of fresh equity share warrants of `2,500 lakh to the non-promoter
entities was also approved against the payment of 10% of the said amount within 18
months from the date of allotment, subject to the lock-in period, as may be
applicable as per clause 13.3.1 of the SEBI (Disclosure and Investor Protection)
Guidelines, 2000.

The Company was also exempted from the applicability of the Takeover code of the
SEBI, as permissible in terms of para 3(1)(j)(i) of the SEBI Takeover Regulation

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1997, as also clause 13.7.(ii)(a) of the SEBI (DIP) Guidelines, 2000 and clause 40(a)
of the Listing Agreement.
-

On request of the Company, NSE was directed to list the shares of the Company.

g. The Company was conscious of MPS requirements and had intentions to comply with
it. The same was also discussed in the BIFR order dated November 01, 2012.
h. Pursuant to the approval from BIFR, while the Company was in process of issuance
of share/ warrant to non-promoters, BSE vide its notice dated December 24, 2012
suspended the trading in the shares of the Company w.e.f. January 16, 2013, for certain
non-compliances as mandated in the listing agreement. Thereafter, the Company had
taken steps for getting the suspension revoked by making compliances with regard to
the matters pointed out. In the meantime, BSE vide its letter dated March 08, 2013,
had also granted the listing approval for 2,00,00,000 equity shares allotted by the
Company on April 17, 2010.
i. On fulfilling the compliance requirements, BSE vide its letter dated May 24, 2013,
granted in-principle approval for revocation of the suspension in trading of the equity
shares of the Company, subject to submission of certain documents. The said
documents were also submitted to BSE by the Company vide its letter dated May 28,
2013.
j. While BSE was processing the Companys request for revocation of suspension, SEBI
passed the interim order. Thereafter, BSE had expressed its inability to revoke the
suspension of trading in the scrip of the Company, on the ground that the interim order
has debarred the Company and its promoters, from the securities market. One of the
pre-conditions imposed by BSE, for revocation of suspension is that there should not
be a SEBI order debarring the Company or promoters. Therefore, the application for
revocation of suspension of the Company was struck and the same could not proceed.
k. The Company is making consistent efforts to get the public shareholding in
consonance with MPS requirements, but it kept on hitting road blocks. In order to
bring the public shareholding in compliance with the MPS requirements, now the
promoters of the Company have decided that they will sell around 70 lakh shares
through the Offer for Sale (OFS) route.
l. For adopting OFS route, it is imperative that the scrip of the Company is listed and
traded on the stock exchange. The Company in its submissions has requested that BSE

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be directed to process the application of the Company seeking revocation of

suspension and the Company will comply with all other requirements of BSE, for
revocation of suspension. The Company in its submissions also requested that post
revocation of suspension, it be given a time of six months to complete the OFS and
undertook to file a status report, indicating therein the compliance with the MPS
requirements after completion of the proposed OFS.
m. The equity shares of the Company were listed under the permitted trade category on
NSE, however, the same were removed without any notice or intimation. In this
regard, the Company requested for a direction to NSE, for permitting the trading in
its shares, by which the promoters of the Company would be able to complete the
OFS, within a shorter span, as trading on NSE will enhance the liquidity of the shares
of the Company.
7.

The Company vide its e-mail dated April 28, 2016, again requested for revocation of
suspension and submitted that within a period of 6 to 9 months from revocation of
suspension, the Company will sell around 70,00,000 shares, through OFS route and
comply with the MPS requirements.

8.

I have considered the replies and submissions made by the Company. I note that the
Company was a sick company for which the BIFR had sanctioned a scheme for
revival vide order dated January 12, 2007. The BIFR had appointed the Union Bank
of India as the monitoring agency to monitor the progress of the implementation of
the scheme of revival. While the proceedings were pending before BIFR, the
Company filed miscellaneous applications inter alia dated July 11, 2012 and August 07,
2012, before the BIFR. The BIFR vide order dated November 01, 2012, had issued
the following directions:
9.6 Having considered the submissions made in the hearing and material on record, the
Bench issued the following directions:i) The validity of the existing equity share warrant of Rs. 2500 lakhs held by M/s
Satyasheel Engineers & Miners Limited is hereby extended on the same terms and
conditions by a period of further eighteen months from the date of this order and the said Copromoter is allowed to sale/ transfer the said revalidated equity share warrants to nonpromoter entities;
ii) The allotment of the fresh equity share warrants of Rs. 2500 lakhs to the non-promoter
entities is hereby approved against payment of 10% of the said amount i.e. Rs. 2500 lakhs

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within 18 months from the date of allotment, subject to lock in period as may be applicable
as per clause 13.3.1. of the SEBI (DIP) Guidelines, 2000. Shares to be issued in Demat
form.
iii) Exempted from the applicability of the takeover code of SEBI, as permissible in terms
of para 3(1)(j)(i) of the SEBI Regulation, 1997, as also clause 13.7.1(ii)(a) of the
SEBI(DIP) Guidelines, 2000 and Clause 40(a) of the Listing Agreement for above stated
(a) & (b) in accordance with the said modification in the Sanctioned Scheme.
iv) The Board directed to National Stock Exchange (NSE) for listing share of said
company.

From the above, it is noted that the Company was inter alia allowed to allot fresh equity
share warrants of `25 crore to the non-promoter entities against the payment of 10%
of the said amount within 18 months from the date of allotment. On a perusal of the
proceedings of BIFR dated January 22, 2015, it appears that the Company is still
registered as sick company.
9.

From the submissions of the Company, it is noted that BSE vide notice dated
December 24, 2012, had suspended the trading in its shares w.e.f. January 16, 2013 for
certain non-compliances as mandated in the listing agreement. Thereafter, BSE vide
its letter dated May 24, 2013, communicated the decision of the Internal Committee
to revoke the suspension in the trading of the shares of the Company and asked it to
submit certain documents. From the records, it is noted that the Company vide its
letter dated May 28, 2013 and May 30, 2013, submitted certain details/ documents to
BSE. As per the submissions of the Company, while its request for revocation of
suspension was being processed, SEBI passed the interim order, due to which the
revocation of suspension of the scrip of Company could not happen and the same was
not proceeded with.

10.

The Company has submitted that it had taken consistent efforts to comply with the
MPS requirements, however, it could not allot the shares/ warrants to non-promoters
in terms of the approval granted by BIFR vide its order dated November 01, 2012, as
the non-promoters to whom the Company was proposing to issue shares/ warrants
had lost confidence, as subscribing to the shares which are not tradable would not
make any business sense. The Company has also submitted that its promoters have
decided to sell 70 lakh shares through OFS for complying with the MPS requirements.

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11.

I note that BSE vide its email dated December 21, 2015, has confirmed that it had
informed the Company about the status of pending compliances. BSE vide the said email has also stated that the Company is in compliance with all the critical clauses of
the erstwhile listing agreement. Vide another e-mail dated May 11, 2016, BSE has
stated that the Company would be required to seek revocation of suspension as per
the prevailing uniform norms.

12.

In view of the above discussion, it can be said that the Company had taken efforts for
achieving compliance with the MPS requirements. However, it could not achieve
compliance with the MPS requirements due to various reasons as citied in the reply
and written submissions. Further, as on date, the Company is still non-compliant with
the MPS norms.

13.

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 Citurgia Biochemicals Limited. However, it is clarified that the said
directions will not cause any hindrance for revocation of suspension and for any steps
that are taken by the Company for compliance with the MPS requirement or
implementation of the directions of the BIFR made in respect of the Company.

14.

This Order shall remain in force till further directions.

15.

Copy of this Order shall be served on the stock exchanges and depositories for their
information and necessary action.

Date: May 20th, 2016

Place: Mumbai

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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