WTM/PS/59/CFD/JUN/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 Monotype India Limited

Date of hearing: June 06, 2016

Appearance:
For the Company: Mr. Prakash Shah, Advocate and Mr. Naresh Jain, Director
For SEBI: Dr. Anitha Anoop, General Manager, Mr. Pradeep Ramakrishnan, Deputy General Manager,
Mr. T. Vinay Rajneesh, Assistant General Manager and Mr. Rohan Vijay, Assistant Manager

1.

Securities and Exchange Board of India ("SEBI"), vide an Order dated January 22, 2016, had

for the reasons stated therein, observed that the company, Monotype India Limited (the
Company) had not complied with the Minimum Public Shareholding (MPS) norms stipulated
under rule 19A of the of the Securities Contracts (Regulation) Rules, 1957 ("SCRR"). SEBI was
directed to make an enquiry into the subject as to whether the promoters and their connected entities
have reduced their shareholding to 75% or below and come out with findings and thereafter proceed
in accordance with law.
2.

Thereafter, the Company vide letter dated March 17, 2016 made the following submissions:
(a) The promoters holding in the Company was 75.27% prior to the approval of the scheme of
amalgamation and reduced to 25.23% after approval by the Honble High Court.
(b) As the matter was pending in the Honble Calcutta High Court since 2011, the Company was
unable to reduce the promoters holding to 75% as required under rule 19A of the SCRR.
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(c) The Company is in compliance of the MPS norms upon allotment of shares to the
shareholders of the transferor companies as per the Scheme approved by the Honble High
Court.
(d) As observed in the SEBI Order dated January 22, 2016 and to comply with the same by
offering shares in OFS, the Company submitted that the promoter/director of the Company
would tender shares to the extent of 0.27% of the old capital of the Company i.e. 5000 shares
of Rs.10/- each (equivalent to 50000 shares of Re.1/- now) upon getting listing approval of
new shares by BSE and lifting of directions issued vide the interim order.
3.

SEBI vide email dated March 30, 2016 and letter dated April 13, 2016, advised the Company

that its promoter/s can make offer for sale of 0.27% as per the pre-scheme paid up capital and the
shareholding pattern of the Company for the quarter ended on December 31, 2014 for the purpose
of achieving compliance with the MPS requirement.
4.

The Company vide e-mail dated May 18, 2016 submitted that the offer for sale of 44880 shares

of Re.1/- constituting 0.27% of pre-scheme capital had been completed and referred to the disclosures
made in that regard in terms of the Takeover Regulations. BSE, vide e-mail dated May 23, 2016
confirmed and stated as under:
(a) Swagatam Tradevin Limited, the promoter of the Company had offer 50,000 equity shares
under the OFS on April 26, 2016 (for non-retail investors) and April 27, 2016 (for retail
investors).
(b) In the first OFS, bids were received for only 20,000 shares and accepted by the promoter.
Therefore, Company was not able to achieve compliance with the MPS norms.
(c) Another OFS was made on May 16, 2016 and May 17, 2016 for 24,880 shares which was
completed successfully.
(d) On completion of the second OFS, the Company is in compliance with MPS norms.
5.

The Company was afforded an opportunity of personal hearing on June 06, 2016. In the

personal hearing, the Company was represented by Mr. Prakash Shah, Advocate and Mr. Naresh Jain,
Director. The representatives made oral submissions and also tendered written submissions dated
June 04, 2016. The following submissions were inter alia made therein:
(a) SEBI had granted permission to make offer for sale of excess promoter shareholding of 0.27%
as per the pre-scheme paid up capital.

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(b) Thereafter, the promoter, Swagatam Tradevin Limited approached BSE expressing its
intention to make the OFS of 50,000 equity shares. BSE, vide notice dated April 25, 2016 on
its website informed all market participants about the opening of the OFS.
(c) On completion of OFS, SEBI was informed vide e-mail dated May 18, 2016.
(d) The promoter holding of 12,40,860 shares of Rs.10/- each consisting of 75.27% was reduced
by 4488 shares to 12,36,372 shares of Rs.10/-, which worked out to 75% of the total
shareholding as on December 31, 2014. With effect from March 17, 2015, the stock split was
from Rs.10/- to Rs.1/- therefore OFS of 44,880 shares of face value of Rs.1/- as on May 17,
2016 should be considered as 4480 shares of face value of Rs.10/- as on December 31, 2014.
(e) A copy of the latest shareholding pattern filed with BSE was annexed and the Company
submitted that it had complied with the MPS norms by one of the SEBI approved methods.
(f) The Company therefore requested SEBI to vacate the directions issued vide the interim order
and confirmed vide orders dated July 22, 2014 and January 22, 2016.
(g) The Company also requested SEBI not to initiate penal proceedings for delay in compliance
with the MPS norms on the following grounds:
i. On and around June-July 2011, then promoter of the Company, viz.,
Swagatam Tradevin Limited (holding 74.23%) was mandatorily required to
make an open offer in terms of the Takeover Regulations. Post the open offer,
the shareholding of the promoter increased to 75.27%.
ii. The Company submitted that only on account of the mandatory offer, the
promoters holding increased by 0.27% beyond 75%.
iii. On and around 2011, the Company filed a Scheme of Amalgamation/Merger
before the Honble High Court of Calcutta whereby effectively the promoter
shareholding was reduced from 75.27% to 25.23% from March 18, 2015 on
allotment of 68,66,36,929 fresh shares pursuant to approval of scheme of
merger.
iv. The Company had persistently, consistently and in timely manner followed the
process and procedure for approval of the scheme.
v. Subsequent to the Order passed by SEBI on January 22, 2016, the Company
had advised Swagatam Tradevin Limited to make the OFS for compliance with
the MPS norms.
The representatives also sought liberty to file additional submissions, which was allowed.
6.

Thereafter, vide submissions dated June 07, 2016 and June 09, 2016, the Company inter alia

made the following submissions:

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(a) The Company and its promoter were keen in complying with the MPS norms. However, as
the Company had filed a petition for amalgamation on November 29, 2011, it was not
considered appropriate by the promoter to dilute its shareholding post the filing of the scheme
before the Honble High Court. Thereafter, the Company had persistently and consistently
followed the process and procedure for approval of scheme.
(b) Before submission of letter dated May 21, 2013 with BSE, the Company had sought legal
opinion from an Advocate on whether the promoter could go for dilution of its shareholding
as per SEBI circular dated December 16, 2010 relating to compliance with MPS norms.
(c) The Advocate had opined that as the matter was sub-judice and pending with the Honble
Calcutta High Court, it was not advised to dilute the shareholding, if done may be a violation
of orders of the Honble High Court passed on December 01, 2011 upon submission of the
scheme. Therefore, the promoter did not dilute its shareholding.
(d) Further, the Company had not applied or moved any application before the Honble High
Court for any change in shareholding and therefore is not able to furnish any order passed by
the Honble Court whereby the Company and promoters were restrained from diluting their
shareholding in the Company for the purpose of compliance with MPS requirement.
(e) The Company submitted that no fault could be attributed to it or any of its directors or
promoter for the delay in complying with the MPS norms and requested SEBI not to initiate
penal proceedings in the larger interest of the Company and its shareholders.
7.

I have considered the submissions made by the Company, the confirmation from BSE that

the Company has complied with the MPS norms and other material available on record. The Company
has stated that during June-July 2011, its promoter Swagatam Tradevin Limited had to mandatorily
make an open offer to the public shareholders in terms of the Takeover Regulations and on acquisition
of shares in the open offer, its shareholding had increased to 75.27% from 74.23%. It is also submitted
that a Scheme for amalgamation for merger of 6 companies (including the aforesaid promoter) into
the Company was filed before the Honble Calcutta High Court in the year 2011 and the same was
sanctioned on December 09, 2014. The Company has submitted that its promoter was not able to
make an OFS during the period the Scheme was pending consideration before the Honble High
Court.
8.

I note that the promoter of the Company had made an OFS and sold 44,880 shares of Re.1/-

(post stock split) during May 2016 and had brought down its shareholding to 75% (considering the capital
prior to the Scheme). BSE has also confirmed that the Company is now in compliance with the MPS
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norms. As the promoters shareholding was brought down to 75% (which implies that the public
shareholding is at 25%, the requirement under rule 19A of the SCRR) of the pre-scheme shareholding, the
directions imposed on the Company, its promoter/s and directors can now be revoked. However,
SEBI shall scrutinize the shareholding pattern of the Company post implementation of the Scheme
and listing of the newly allotted shares (as per the approved scheme), in order to be satisfied that the
Company continues to be compliant with the MPS norms pursuant to such corporate actions.
9.

In view of the foregoing, 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 revoke the
directions issued vide the interim order dated June 04, 2013 and confirmed vide SEBI Orders dated July
22, 2014 and January 22, 2016 against the company, Monotype India Limited, its directors,
promoters and promoter group.
10.

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

information and necessary action.

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Date: June 17th, 2016
Place: Mumbai

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