BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. AK/AO- 24-33 /2015]
______________________________________________________________________________
UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH
RULE 5 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY
ADJUDICATING OFFICER) RULES, 1995
In respect of
Mr. Jagat Mohan Aggarwal (PAN: AAQPA4920K), Mr. Bharat Bhushan Agarwal (PAN:
AAAHB6828H), Mr. Pradeep Aggarwal (AAMPA3247M), Mr. Ram Piari (PAN: AAXPP3799G), Mr.
Ajay Kumar Goel (PAN: AIBPG4407C), Mr. Kiran Goel (PAN: AADPG4446R), Ms. Saru Aggarwal
(PAN: ANIPA4774A), Ms. Suchita Aggarwal (PAN: AAJPA8808K), Mr. Bharat Bhushan AggarwalHUF (AAAHB6828H) and Mr. Vasu Aggarwal (PAN Not Available)

In the matter of
M/s. Pioneer Agro Extracts Limited
______________________________________________________________________________
FACTS OF THE CASE
1.

Securities and Exchange Board of India (hereinafter referred to as 'SEBI') received a letter
Ref: PAEL/CO/SEBI/2013-14/252 dated September 28, 2013 from M/s. Pioneer Agro
Extracts Ltd. (hereinafter referred to as the Company) in response to SEBIs letter Ref:
CFD/DCR/OW/23009/2013 dated September 11, 2013 seeking details about increase in
shareholding of the promoter group from 54.99% in March 2010 to 55.01% in June 2010.
Vide the said letter dated September 28, 2013, the company inter alia informed that one
of its promoters Mr. Jagat Mohan Aggarwal had acquired 1,000 shares of the company on
April 30, 2010.

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2.

Pursuant to examination of the shareholding of the promoter group, SEBI observed that
Mr. Jagat Mohan Aggarwal along with persons acting in concert (PACs) viz. Mr. Bharat
Bhushan Agarwal, Mr. Pradeep Aggarwal, Mr. Ram Piari, Mr. Ajay Kumar Goel, Mr. Kiran
Goel, Ms. Saru Aggarwal, Ms. Suchita Aggarwal, Mr. Bharat Bhushan Aggarwal- HUF and
Mr. Vasu Aggarwal (hereinafter referred to as Promoters/ Noticees), by acquiring 1,000
shares on April 30, 2010 and failing to make public announcement to acquire shares in
accordance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
(hereinafter referred to as Takeover Regulations), had violated the provision of
Regulation 11(2) read with regulation 14(1) of the Takeover Regulations. The shares of the
Company are listed on the Bombay Stock Exchange Ltd. (BSE).

APPOINTMENT OF ADJUDICATING OFFICER

3.

The undersigned was appointed as the Adjudicating Officer vide Order dated May 6, 2014
under section 15-I of Securities and Exchange Board of India Act, 1992 (hereinafter
referred to as SEBI Act') read with rule 3 of SEBI (Procedure for Holding Inquiry and
Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as SEBI
Rules) to inquire into and adjudge under Section 15H (ii) of the SEBI Act for the alleged
violation of Regulation 11(2) read with 14(1) of the Takeover Regulations committed by
the Noticees.

SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

4.

A common Show Cause Notice (hereinafter referred to as SCNs) Ref. No.

EAD/AK/RSL/3433/2015/1 to 10 dated January 30, 2015 was issued to the Noticees under
rule 4(1) of SEBI Rules communicating the alleged violation of Takeover Regulations as
detailed below. A copy of shareholding of the promoter group and the letter dated
September 28, 2013 received from the company was also sent along with the SCN. The
details of the acquisition made through off-market mode is as given below:

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Name of
Acquirer

Mr.
Jagat
Mohan
Aggarwal
along
with
the PACs*

Date of
Acquisition

Number of
Shares
Acquired

% of
shareholding
Acquired

April 30, 2010

1,000

0.023%

Total Promoters
Shareholding
PrePostacquisition acquisition
54.99%

55.01%

*PACs: Mr. Bharat Bhushan Agarwal, Mr. Pradeep Aggarwal, Mr. Ram Piari, Mr. Ajay Kumar Goel, Mr. Kiran Goel, Ms. Saru Aggarwal,
Ms. Suchita Aggarwal, Mr. Bharat Bhushan Aggarwal- HUF and Mr. Vasu Aggarwal

5.

Mr. Jagat Mohan Aggarwal, one of the promoter Noticees vide letter dated February 20,
2015 sought 15 days extension of time for preparing and submission of the reply. Vide
email dated February 20, 2015, the Noticees request was acceded to. Thereafter, in the
interest of natural justice and in terms of rule 4(3) of the SEBI Rules, the Noticees were
granted an opportunity of hearing on March 16, 2015 vide hearing notice dated February
24, 2015.

6.

Vide letter dated February 28, 2015, the Noticees/Promoters viz. Mr. Jagat Mohan
Aggarwal, Mr. Bharat Bhushan Agarwal, Mr. Pradeep Aggarwal, Mr. Ram Piari, Mr. Ajay
Kumar Goel, Mr. Kiran Goel, Ms. Saru Aggarwal, Ms. Suchita Aggarwal, Mr. Bharat
Bhushan Aggarwal- HUF and Mr. Vasu Aggarwal have inter alia submitted as follows:
a. That Mr. Jagat Mohan Aggarwal had acquired 1,000 equity shares of the company
under an "off Market Trade" from one Mr. Pawan Kumar on April 30, 2010 at a price of
Rs. 10 per share aggregating to Rs. 10,000/-;
b. That the above shares were in physical form and were lodged with the company for
transfer and were later on transferred in favour of Mr. Jagat Mohan Aggarwal;
c. That the information with respect to the said purchases by Mr. Jagat Mohan Aggarwal
was provided to the BSE vide shareholding pattern submitted for quarter ended June
2010;
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d. That prior to such purchase of 1,000 shares, the shareholding of the Promoter Group
was 23,82,300 (54.99%) equity shares;
e. That post acquisition and after the transfer of the said 1,000 equity shares in the name
of Mr. Jagat Mohan Aggarwal, the shareholding of the Promoter Group became
23,83,300 (55.01%) equity shares;
f. That as such the acquisition of 1,000 equity shares resulted into increase in
shareholding of the promoter group by 0.02%;
g. That it is admitted that the shareholding of the Promoter Group in the company
crossed 55% and went up to 55.01%. However the reasons for the same were as under:
That Mr. Jagat Mohan Aggarwal had enquired from the Compliance Officer before
entering into transaction regarding the shareholding of the promoter group and the
compliance officer suggested to Mr. Jagat Mohan Aggarwal that he could purchase
1,000 equity shares;
That acting on the Compliance Officer advice, Mr. Jagat Mohan Aggarwal went
ahead with the transaction and purchased 1000 equity shares;
That due information was filed with the Regulators for the said transaction;
That on rechecking the same, it transpired that there were some error in calculations
done by the Compliance Officer while calculating the shareholding of the Promoter
Group in the company, leading to increase in shareholding of the Promoter Group
beyond 55% and the total shareholding increasing to 55.01%;
That in order to rectify the same, on September 30, 2010 Mr. Bharat Bhushan
Aggarwal, one of the parties to the promoter group sold 1,000 equity shares to one
Mr. Anil Thaper for a sum of Rs. 19,000/- and the said shares were immediately
transferred in name of the investor Mr. Anil Thaper;
That, thus, the situation was rectified within the period of five months and necessary
compliances

of

all

the

transactions

were

reported

to

the

relevant

authorities/regulator;
h. That they are agreeable to the fact that the shareholding of the promoter group
exceeded 55% as laid down in the SEBI Regulations;
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i.

That the violation was not done with any malafide intention, but, was due to a human
error and was for a very small amount and by negligible percentage i.e. 0.01%;

j.

That no sooner the offence was brought to the notice of the promoter group, the
situation was rectified immediately by reducing the shareholding of the Promoter
Group back to 54.99%;

k. That in view of the fact that the violation was just for 0.01% and for very limited period
of time, and, as the offence was not continuing one and was immediately rectified, and
further that it was un-intentional and due to a human error, the mistake may be
condoned;
l.

That company is going through lot of financial stress and is incurring heavy losses, as
such, additional burden by way of penalty will further worsen the financial position of
the company;

m. That they undertake to be cautious in future and ensure that such mistakes are not
repeated in future.

7.

On the scheduled date for personal hearing, Mr. Sameer Kakar, Authorized Representative
(AR) of the Noticees appeared for the personal hearing and reiterated the submissions
made by the Noticees in their common reply dated February 28, 2015. The AR was inter
alia advised to submit details such as purpose of the purchase transaction; payment
details; details of receipt/ transfer of shares; basis, if any, for arriving at the sale price of
Rs. 19/- through off-market transaction; also reason, if any, why the sale transaction was
done off-market; details of relationship, if any, between the Noticees viz. Mr. Jagat Mohan
Aggarwal and Mr. Bharat Bhushan Agarwal; details of relationship/connection between
the Noticees and Mr. Pawan Kumar and/ or Mr. Anil Thaper, if any; whether Mr. Jagat
Mohan Aggarwal and Mr. Bharat Bhushan Agarwal were the directors/ officers/
designated employees of the company; whether the sale transaction on September 30,
2010 was disclosed to the exchange etc.

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8.

Vide letter dated March 23, 2015, the AR on behalf of the Noticees has inter alia
submitted as follows:
That the purpose of the purchase transaction for 1,000 shares by Mr. Jagat Mohan
Aggarwal was investment;
That the purpose of the sale transaction undertaken by Mr. Bharat Bhushan Aggarwal was
to reduce the holding of the promoter group in the company within the limits i.e. below
55% of the share capital;
That the price of Rs. 19/- per share for the sale transaction done through off-market mode
between Mr. Bharat Bhushan and Mr. Anil Thapar, was as per mutual discussion
between the purchaser and seller;
That the physical shares with respect to the purchase transaction were received by the
Noticees on April 24, 2010 and the payment made by Mr. Jagat Mohan Aggarwal to the
seller was cleared on April 30, 2010;
That Mr. Bharat Bhushan Aggarwal sold 1,000 shares to Mr. Anil Thaper on September 11,
2010 and the shares were transferred by the company on September 30, 2010. Payment
of Rs. 19,000/- was received by Mr. Bharat Bhushan Aggarwal in cash on September 30,
2010;
That Mr. Jagat Mohan Aggarwal and Mr. Bharat Bhushan Aggarwal are related to each
other as cousins;
That Mr. Anil Thaper, the purchaser of 1,000 shares from Mr. Bharat Bhushan Aggarwal
was holding the position of the Whole Time Director (Independent) in the company;
That Mr. Jagat Mohan Aggarwal and Mr. Bharat Bhushan Aggarwal as on the date of the
two transactions were holding the position of the Managing Director and Director
respectively in the company;
That the sale transaction on September 30, 2010 was disclosed to BSE by filing done on
October 31, 2010 for the quarter ended September 30, 2010;
That Mr. Vasu Aggarwal was minor on the date when the transaction took place and that
he continues to be a minor as on date, hence, does not have a Permanent Account
Number (PAN) and his guardian and father is Mr. Jagat Mohan Aggarwal.
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The AR vide email dated March 26, 2015 further submitted that as the Noticees have
completed their submissions in the matter, the request for another hearing in the matter
as made in their submission dated March 23, 2015 may be treated as closed.

CONSIDERATION OF ISSUES
9

I have carefully perused the written submissions of the Noticees and the submissions
made at the hearing by the AR on behalf of the Noticees. I observe that the allegation
against the Noticees is that they have violated Regulation 11(2) read with regulation 14(1)
of Takeover Regulations as stated above during the year 2010.

10

The issues that, therefore, arises for consideration in the present case are:
10.1 Whether the Noticees violated Regulation 11(2) read with 14(1) of the Takeover
Regulations during the year 2010?
10.2 Does the violation, if any, attract monetary penalty under Section 15 H (ii) of the
SEBI Act?
10.3 If so, what would be the monetary penalty that can be imposed taking into
consideration the factors mentioned in Section 15-J of SEBI Act?

FINDINGS
11

Before moving forward, it is pertinent to refer to the provisions of Regulations 11(2) read
with regulation 14(1) of the Takeover Regulations as it was prevailing at the time of
acquisition, which reads as under:
Consolidation of holdings.
11. (1)
1
[ (2)No acquirer, who together with persons acting in concert with him holds, fifty-five
per cent (55%) or more but less than seventy-five per cent (75%) of the shares or voting

Substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2006, w.e.f.
26-5-2006. Prior to its substitution, sub-regulation (2), as amended by the SEBI (Substantial Acquisition of Shares
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rights in a target company, shall acquire either by himself or through 2[or with] persons
acting in concert with him any additional shares 3[entitling him to exercise voting rights]
or voting rights therein, unless he makes a public announcement to acquire shares in
accordance with these Regulations:
Provided that in a case where the target company had obtained listing of its shares by
making an offer of at least ten per cent (10%) of issue size to the public in terms of
clause (b) of sub-rule (2) of rule 19 of the Securities Contracts (Regulation) Rules, 1957,
or in terms of any relaxation granted from strict enforcement of the said rule, this subregulation shall apply as if for the words and figures seventy-five per cent (75%) the
words and figures ninety per cent (90%) were substituted. ]
4

[Provided further that such acquirer may, 5[notwithstanding the acquisition made
under regulation 10 or sub-regulation (1) of regulation 11, without making a public
announcement under these Regulations, acquire, either by himself or through or with
persons acting in concert with him, additional shares or voting rights entitling him
upto five per cent. (5%) voting rights in the target company subject to the following:(i)
the acquisition is made through open market purchase in normal
segment on the stock exchange but not through bulk deal /block deal/
negotiated deal/ preferential allotment; or the increase in the shareholding
or voting rights of the acquirer is pursuant to a buyback of shares by the
target company;
(ii)
the post acquisition shareholding of the acquirer together with
persons acting in concert with him shall not increase beyond seventy five
per cent.(75%).]

and Takeovers) (Amendment) Regulations, 2005, w.e.f. 3-1-2005 and SEBI (Substantial Acquisition of Shares and
Takeovers) (Amendment) Regulations, 1998, w.e.f. 28-10-1998, read as under: (2) An acquirer, who together
with persons acting in concert with him has acquired, in accordance with the provisions of law, fifty five per cent
(55%) or more but less than seventy five per cent (75%) of the shares or voting rights in a target company, may
acquire either by himself or through persons acting in concert with him any additional share or voting right, only if
he makes a public announcement to acquire shares or voting rights in accordance with these regulations:
2
Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2009,
w.e.f. 6-11-2009.
3
Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2008, w.e.f. 3110-2008.
4
Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2008, w.e.f. 3110-2008.
5
Inserted by the SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2009,
w.e.f. 6-11-2009.
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Timing of the public announcement of offer.

14.(1) The public announcement referred to in regulation 10 or regulation 11 shall be
made by the merchant banker not later than four working days of entering into an
agreement for acquisition of shares or voting rights or deciding to acquire shares or
voting rights exceeding the respective percentage specified therein.
12

Now, the first issue for consideration is whether the Noticees violated Regulation 11(2)
read with Regulation 14(1) of the Takeover Regulations. I find from the replies of the
Noticees as well as the Shareholding Pattern of the Promoters and Promoter Group as
available on the BSE website that the Noticees formed a part of the Promoter group. I also
note that the Hon'ble Securities Appellate Tribunal (SAT) in its judgment dated June 01,
2012 in Appeal No.139 of 2011 in the matter of Mr. Rajesh Toshniwal vs. SEBI has held
that it is the basic principle of corporate law that the promoter group is a homogeneous
class and it is normal practice to club the entire promoter group into one class unless
otherwise proved by the acquirer. Hence, there appears no doubt about the fact that the
acquisition of 1,000 shares of the company on April 30, 2010 by Mr. Jagat Mohan
Aggarwal as the acquirer was in concert with the other promoters of the company viz. Mr.
Bharat Bhushan Agarwal, Mr. Pradeep Aggarwal, Mr. Ram Piari, Mr. Ajay Kumar Goel, Mr.
Kiran Goel, Ms. Saru Aggarwal, Ms. Suchita Aggarwal, Mr. Bharat Bhushan Aggarwal- HUF
and Mr. Vasu Aggarwal. I also note that the same has not been disputed by the promoter
Noticees in the submissions made.

13

I, thus, note here that Mr. Jagat Mohan Aggarwal as the acquirer in concert with the other
promoters of the company, as aforesaid, acquired 1,000 shares of the company through
off market mode on April 30, 2010 at an acquisition price of Rs. 10/- per share, pursuant
to which the shareholding of the promoter group of the company increased from 54.99%
to 55.01%. I note that the Noticees have not disputed the said facts as well.

14

As per Regulation 11(2) of the Takeover regulations no acquirer, who together with
persons acting in concert with him holds, fifty-five per cent (55%) or more but less than
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seventy-five per cent (75%) of the shares or voting rights in a target company, can acquire
either by himself or through or with persons acting in concert with him any additional
shares entitling him to exercise voting rights or voting rights therein, unless he makes a
public announcement to acquire shares in accordance with these Regulations.

15

In the extant matter, I note that since the acquirer Mr. Jagat Mohan Aggarwal acting in
concert with the other promoters of the company crossed the threshold limit of 55% due
to the acquisition of 1,000 shares, the Noticees had triggered the obligation to make the
public announcement within four working days from the date they agreed to acquire
equity shares in the off market transaction. I find that the Noticees in their submission
have cited that they acted on the advice of the Compliance Officer of the company, and, it
was due to an error in calculation done by the Compliance Officer while calculating the
shareholding of the Promoter Group in the Company that resulted in the shareholding of
the Promoter Group increasing beyond 55% to 55.01%. I also note that the Noticees have
inter alia also stated that the violation was just for 0.01% and for a limited period of time
as the offence was immediately rectified and that the same was unintentional and due to
human error. Thus, I note that the Noticees have admitted to violation of Regulation 11(2)
read with 14(1) of the Takeover Regulations.

16

I further note that at the time of the acquisition of 1,000 shares, Mr. Vasu Aggarwal was a
minor (date of birth as on the Indian Passport of Mr. Vasu Aggarwal: 15/01/1998). In this
regard it will be appropriate to refer to the decision of the Hon'ble Supreme Court in the
matter of Ritesh Agarwal and Another v. Securities and Exchange Board of India and
Others, 2008 INDLAW SC 989 that A contract must be entered into by a person who can make a promise or make an offer. If
he cannot make an offer or in his favour an offer cannot be made, the contract would be
void as an agreement which is not enforceable in law would be void. Section 11 of the
Indian Contract Act, 1872 provides that the person who is competent to contract must be
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of the age of majority. If Ritesh Agarwal and Deepak Agarwal were minors as would
appear from their birth certificates, they could not have entered into the contract.
We, therefore, are of the opinion that subject to any other or further order which the
Board may pass as against Shri Surender Kumar Agarwal and Smt Rooprekha Agarwal, the
impugned directions would not be binding or Ritesh Agarwal and Deepak Agarwal".

Even in the matter of Ms. Babiben Mafatlal Bansali and Others, I note that the Whole
Time Member of SEBI vide Order dated December 31, 2008 has also inter alia held that I
note that the SCN was issued to the following persons who were minors at the time of
commission of the act. I, therefore, do not pass any directions against them except
impounding gains made in their accounts by their parents on their behalf.

17

Considering the same, I conclude that the adjudication proceedings initiated against the
Noticee Mr. Vasu Aggarwal vide show cause notice dated January 30, 2015 cannot be
proceeded with.

18

Further, from all of the above, it, however, stands established without doubt that the
other promoter Noticees viz. Mr. Jagat Mohan Aggarwal, Mr. Bharat Bhushan Agarwal,
Mr. Pradeep Aggarwal, Mr. Ram Piari, Mr. Ajay Kumar Goel, Mr. Kiran Goel, Ms. Saru
Aggarwal, Ms. Suchita Aggarwal and Mr. Bharat Bhushan Aggarwal- HUF, had violated the
provisions of Regulation 11(2) read with regulation 14(1) of the Takeover Regulations by
acquiring 1,000 shares on April 30, 2010.

19

The Honble Supreme Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund [2006]
68 SCL 216(SC) held that In our considered opinion, penalty is attracted as soon as the
contravention of the statutory obligation as contemplated by the Act and the Regulations
is established and hence the intention of the parties committing such violation becomes
wholly irrelevant. Further in the matter of Ranjan Varghese v. SEBI (Appeal No. 177 of
2009 and Order dated April 08, 2010), the Honble SAT had observed Once it is
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established that the mandatory provisions of takeover code was violated the penalty must
follow.

20

In view of the foregoing, I am convinced that it is a fit case to impose monetary penalty
under Section 15H(ii) of the SEBI Act, which reads as under:
Penalty for non-disclosure of acquisition of shares and takeovers
15H. If any person, who is required under this Act or any rules or regulations made
thereunder, fails to(ii) make a public announcement to acquire shares at a minimum price; or
he shall be liable to a penalty of twenty-five crore rupees or three times the amount of
profits made out of such failure, whichever is higher.

21

While determining the quantum of monetary penalty under Section 15H(ii) of the SEBI
Act, I have considered the factors stipulated in Section 15-J of SEBI Act which reads as
under:
15J - Factors to be taken into account by the adjudicating officer
While adjudging quantum of penalty under Section 15-I, the adjudicating officer shall
have due regard to the following factors, namely:
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable,
made as a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the
default;
(c) the repetitive nature of the default.

22

In view of the charges as established, the facts and circumstances of the case, the
quantum of penalty would depend on the factors referred in Section 15-J of SEBI Act and
stated as above. The main objective of the Takeover Regulations is to afford fair treatment
for shareholders who are affected by the change in control. Section 15 H(ii) of SEBI Act
provides for imposition of monetary penalty of twenty-five crore rupees or three times
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the amount of profits made out of such failure, whichever is higher, if any person, who is
required under the Act or any rules or regulations made there under, fails to make a public
announcement to acquire shares at a minimum price. Further, under Section 15-J of the
SEBI Act, the adjudicating officer has to give due regard to certain factors which have been
stated as above while adjudging the quantum of penalty. It is noted that no quantifiable
figures are available to assess the disproportionate gain or unfair advantage made as a
result of such non-compliance by the Noticee promoters. Further from the material
available on record, it is not possible to ascertain the exact monetary loss to the investors
on account of non-compliance by the promoter Noticees.

23

I note here that the promoter Noticees in their submissions have prayed that the violation
was not done with any malafide intention, but, was due to a human error which was unintentional. In the matter, I note that in Appeal No. 78 of 2014 of Akriti Global Traders
Ltd. Vs. SEBI, the Hon'ble Securities Appellate Tribunal (SAT) vide Order dated September
30, 2014 had observed that:
Argument of appellant that the delay was unintentional and that the appellant has not
gained from such delay and therefore penalty ought not to have been imposed is without
any merit, because, firstly, penal liability arises as soon as provisions under the regulations
are violated and that penal liability is neither dependent upon intention of parties nor
gains accrued from such delay.

In view of the same, the argument put forth by the Noticees that the violation was not
done with any malafide intention, but, was due to a human error which was unintentional is not relevant for the given case.

24

I note that by not making the public announcement, the Noticees had resulted in denying
the statutory right of the shareholders of the company to exit through open offer
mechanism at the respective point of time. The Noticees, I find, have submitted that as
soon as it transpired upon them that the increase in the shareholding of the Promoter
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Group was beyond 55%, they rectified the same on September 30, 2010 i.e. within a
period of five months, by selling 1,000 equity shares of the Promoter Group, thereby,
reducing the shareholding of the Promoter Group back to 54.99%. In the matter, I note
from the submissions made that one of the promoter Noticees viz. Mr. Bharat Bhushan
Aggarwal, who was the promoter and the Director of the company at the relevant point of
time, sold 1,000 shares to Mr. Anil Thaper, the Whole Time Director (Independent) on
September 30, 2010 in off-market transfer at Rs. 19/- per share as per mutual discussion
between them, when the market price on the day was Rs. 16.5 to rectify the situation. I,
however, find that the Takeover Regulations does not provide for any rectification
mechanism as brought out by the Noticees, once open offer is triggered.

25

Besides, I note here that even under the provisions of Regulation 44 (g) of the Takeover
Regulations, Board in the interest of securities market or for protection of interest of
investors, can give direction including directing disinvestment of such shares as are in
excess of the percentage of the shareholding or voting rights specified for disclosure
requirement, only in case of violation of Regulations 6,7 or 8 of the Takeover Regulations,
and, not in case of violation of Regulation 11 of the Takeover Regulations, under which the
extant violation falls. Thus, I do not find any merit in the argument put forth by the
Noticees that the violation was immediately rectified by reducing the shareholding of the
promoter group back to 54.99%.

26

I also further note that Regulation 44 of the Takeover Regulation states that the directions
stipulated thereunder are without prejudice to Board's right to initiate action under
Chapter VIA and section 24 of the SEBI Act. And the present proceedings are, in fact,
covered under Chapter VI of the SEBI Act. As recorded earlier, I have been appointed as
the Adjudicating Officer by an Order dated May 06, 2014 under section 15-I of SEBI Act to
inquire into and adjudge under Section 15H(ii) of the SEBI Act for the alleged violation of
regulation 11(2) read with Regulation 14(1) of the Takeover Regulations committed by the
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Noticees. Both, Section 15-I as well as Section 15H (ii) are part of Chapter VIA of the SEBI
Act.

27

I believe that investor confidence in the securities market can be sustained largely by
ensuring investors protection. I note here that public announcement as envisaged under
Regulation 11(2) of the Takeover Regulations is the announcement of the open offer by
the acquirers and the persons acting in concert, primarily disclosing their intention to
acquire shares of the target company from the existing shareholders, thereby giving an
opportunity of exit to the public shareholders at a specified price during a specified time
and not a mere intimation of acquisition to the general public. In fact, I find that the
penalty provision under Section 15H (ii) of the SEBI Act also specifically refers to failure to:
make a public announcement to acquire shares at a minimum price.

28

Thus, I conclude that failure to make public announcement to acquire shares at a

minimum price is a serious matter and cannot be considered a mere "technical" lapse,
even if the transaction is otherwise in compliance, since the shareholders/ investors were
deprived of an exit opportunity at the relevant point of time. And I note that such failure
has continued since April 2010. It, thus, becomes imperative to impose monetary penalty
for violation of the provisions of Takeover Regulations. In this regard, I note from the BSE
website that as at quarter ended March 2010, there were about 1,115 public shareholders
holding approx. 40.39%, out of the total shareholding of 43,32,300 shares, who were
deprived of an exit opportunity due to failure of the promoter Noticees to make a public
announcement of the open offer disclosing their intention to acquire shares of the
company from the existing shareholders.

29

In the matter, I further note that the provisions of penalty for non-compliance of the
mandate of the SEBI Act are with an objective to have an effective deterrent to ensure
better compliance of the provisions of the SEBI Act and Regulations, which is crucial for
SEBI in order to protect the interests of investors in securities.
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ORDER
30

After taking into consideration all the facts and circumstances of the case, I impose a
penalty of Rs. 8,00,000/- (Rupees Eight lacs only) under Section 15H (ii) of the SEBI Act on
the promoter Noticees viz. Mr. Jagat Mohan Aggarwal (Acquirer) and Mr. Bharat
Bhushan Agarwal, Mr. Pradeep Aggarwal, Mr. Ram Piari, Mr. Ajay Kumar Goel, Mr. Kiran
Goel, Ms. Saru Aggarwal, Ms. Suchita Aggarwal and Mr. Bharat Bhushan Aggarwal- HUF,
Person Acting in Concert (PAC) with the Acquirer, which will be commensurate with the
violations committed by the aforenamed Noticees for violation of Regulation 11(2) read
with Regulation 14(1) of the Takeover Regulations. The aforenamed promoter Noticees
shall be jointly and severally liable to pay the said monetary penalty.

31

The aforenamed Noticees shall pay the said amount of penalty by way of demand draft in
favour of SEBI - Penalties Remittable to Government of India, payable at Mumbai, within
45 days of receipt of this order. The said demand draft should be forwarded to Shri V S
Sundaresan, Chief General Manager, Corporation Finance Department, SEBI Bhavan, Plot
No. C 4 A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051.

32

Further, the adjudication proceedings initiated against Mr. Vasu Aggarwal are infructuous
and are accordingly disposed of.

33

In terms of rule 6 of the Rules, copies of this order are sent to the Noticee and also to the
Securities and Exchange Board of India.

Date: March 27, 2015

Place: Mumbai

Anita Kenkare
Adjudicating Officer

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