WTM/PS/04/CFD/APR/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 Sirhind Steel 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.

Sirhind Steel 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) and the Ahmedabad Stock Exchange Limited (ASE).
3.

The Company did not submit any reply pursuant to the interim order. However, in

accordance with the principles of natural justice, SEBI afforded an opportunity of personal
hearing in the matter on July 03, 2015. However, the Company (through its promoter,
Mr. Ravi Malhotra), vide email dated July 02, 2015, informed that they would not be able to
attend the hearing and requested for an adjournment. On consideration of the same, the
personal hearing was fixed on August 10, 2015. However, Mr. Ravi Malhotra vide email dated

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August 07, 2015 informed his inability to appear in the said hearing as he could not travel due
to health issues.
4.

Thereafter, SEBI vide letter dated August 24, 2015, while referring to the

opportunities of personal hearing afforded to the Company, advised it, as a final opportunity,
to file written submissions to the interim order within a period of two weeks from the date of
receipt of the letter. The Company was also informed that SEBI shall proceed with further
action in the matter if the Company failed to submit its reply. A copy of the interim order was
also forwarded along with the above said letter.
5.

The Company, vide letter dated September 07, 2015, filed its reply inter alia making

the following submissions:

(a) The Company carried on manufacturing activities in steel rolling mill industries, which
has been reeling under doldrums since more than a decade and had lost investors
interest. Under the circumstances, the Company could not comply with the MPS
requirements though its promoters have the best intention to comply.
(b) Considering the long tenure of suspension of the scrip and unprecedented long
period of recession in the steel industry which eventually resulted into closing of the
operations of the Company and selling out the assets of the Company, the promoters
(holding close to 90%) were contemplating the option to delist the shares of the
Company from BSE.
(c) The promoters were intending to initiate the delisting process and that a Board
meeting would be called for. The Company requested to keep the proceedings on
hold till the board of directors of the Company decide on the same.
(d) The directions issued vide the interim order have been noted by the Company.
(e) The Company denied the allegations in the interim order and stated that it would
place true and correct facts and requested for copies of documents referred to in the
interim order.
(f) The Company requested for an opportunity of personal hearing. It further stated that
serious attempts were made to find a way out and are confident to come with a
proposal in the matter.

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6.

The Company was afforded an opportunity of personal hearing on December 10,

2015 when Mr. Ravi Malhotra, Director and Mr. M. L. Sharma, Chartered Accountant
appeared and made oral submissions. Liberty was granted to make written submissions within
a period of one week.
7.

Pursuant to the personal hearing, the Company, vide letter dated December 16, 2015,

stated the following:

(a) The existing promoters holding 89.98% of shares have expressed their intention to
acquire remaining shares of the Company thereby providing exit opportunity to all the
public shareholders. The Company therefore intends to delist its shares from the
stock exchange under the SEBI Delisting Regulations.
(b) A merchant banker was appointed on December 01, 2015 to enable the process of
voluntary delisting. The Company had also informed the stock exchange vide letter
dated December 03, 2015 regarding the offer as considered by the board of directors
of the Company in the board meeting held on December 03, 2015.
(c) The Company requested SEBI to lift the directions imposed vide the interim order to
enable the promoters to buy shares of the Company held by the public shareholders
and initiate the process of voluntary delisting of the equity shares of the Company
from the stock exchanges.
(d) The Company also sought time of one year to enable it to proceed with obtaining
various approval of shareholders and other authorities and to acquire shares held by
the public shareholders and complete the voluntary delisting process. It was further
stated that they would abide by the conditions laid down by SEBI.
8.

I have considered the interim order passed in the matter against the Company, its

promoters and directors. Before proceeding further, I note that the Company, vide reply
dated September 07, 2015, had requested for copies of documents referred to in the interim
order. In this regard, it needs to be noted that in the interim order (which has been delivered twice
on the Company), there is no reference of any letters/documents as sent by SEBI to the
Company. All other references were only with respect to the statutory provisions and SEBI
Circulars (prescribing the methods to comply with MPS norms). The Company, being a listed
company, was already under a statutory notice under the SCRR/listing agreement to comply

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with the MPS norms before the due date. Therefore, there is no document to be furnished to
the Company.
9.

The interim order was issued against the Company as it failed to maintain the minimum

public shareholding of 25% as mandated under rule 19A of the SCRR and Clause 40A of the
Listing Agreement read with section 21 of the Securities Contract (Regulation) Act, 1956
("SCRA"). It is an admitted position that the promoters of the Company hold 89.98%. I have
perused the shareholding pattern of the Company as available in the website of the BSE and
note that the public shareholders hold only 10.02%. From the above, it can be concluded that
the public shareholding in the Company is less than the mandated minimum of 25% in a
listed company. The Company is therefore in violation of the MPS requirements.
10.

The Company has submitted that its promoters intend to acquire the remaining shares

held by the public shareholders and thereafter to delist the shares from the stock exchange.
The Company has stated that it had informed BSE regarding the proposal of the promoter to
make a voluntary delisting offer. The announcement made to BSE also states that the board
of directors of the Company would consider the same and would keep the stock exchange
informed. Though the Company submitted that it has appointed a merchant banker to lead
the promoter in respect of the delisting process, I note that the Company has not produced
any document to state whether the board of directors have approved the same and also
whether the shareholders have approved the proposal. These are the most basic requirements
to be fulfilled in a delisting process under the SEBI Delisting Regulations. I also note that the
Company has not taken any steps towards delisting prior to June 04, 2013. In view of the
same, I find that such submissions are made without any seriousness and therefore do not
warrant any consideration. Further, this proceeding is a quasi-judicial proceeding pursuant to
the interim order passed against the Company and further action (confirming the interim order
along with action as contemplated in the interim order or revoking the interim order) in respect of the
Company, its promoters and directors would be taken based on the status of compliance with
the MPS norms.
11.

Considering the facts and circumstances of the case, it is clear 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-

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compliance being continuous in nature, it becomes necessary for SEBI, 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.
12.

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,
Sirhind Steel Limited, its directors, promoters and promoter group.
13.

This Order shall remain in force till further directions.

14.

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: April 06th, 2016
Place: Mumbai

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