Exemption order under regulation 11(5) of SEBI (SAST) Regulations, 2011 in the matter of Crimson Metal Engineering Company Limited

WTM/GM/CFD/10 /2020-21 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1) AND SECTION 11(2)(h) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH REGULATION 11(5) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011. IN THE MATTER OF PROPOSED ACQUISITION OF SHARES AND VOTING RIGHTS IN – TARGET COMPANY ACQUIRERS CRIMSON METAL ENGINEERING SHRI PREMCHAND GOYAL TRUST COMPANY LIMITED SHRI SUNIL GOYAL TRUST SHRI NITIN GOYAL TRUST SHRI VINAY GOYAL TRUST SUNIL KUMAR AND SONS HUF NITIN GOYAL HUF VINAY GOYAL HUF PREMCHAND GOYAL

BACKGROUND –

1. Crimson Metal Engineering Company Limited (“Target Company”/ “CMECL”) was incorporated under the Companies Act, 1956 on February 15, 1985. The Registered Office of the Target Company is at 163/1, II Floor, K. Sons Complex, Prakasam Salai, Broadway, Chennai-600108. The shares of the Target Company are listed on the BSE Limited (“BSE”) since May 05, 1995.

2. An Application dated June 14, 2019 read with letter dated July 25, 2019 and emails dated July 26, 2019, August 28, 2019, September 14, 2019, September 30, 2019 and May 27, 2020 (collectively referred to as “Application”) seeking exemption from the applicability of Regulations 3(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”) in the matter of proposed acquisitions of shares and voting rights in the Target Company by Shri Premchand Goyal Trust (“Acquirer 1”), Shri Sunil Goyal Trust (“Acquirer 2”), Shri Nitin Goyal Trust (“Acquirer 3”), Shri Vinay Goyal Trust (“Acquirer 4”), Sunil Kumar and Sons HUF (“Acquirer 5”), Nitin Goyal HUF (“Acquirer 6”), Vinay Goyal HUF (“Acquirer 7”) and Premchand Goyal (“Acquirer 8”) (collectively referred Order in the matter of Crimson Metal Engineering Company Limited to as “Proposed Acquirers / Applicants”) was received by SEBI from Sunil Kumar Goyal on behalf of aforementioned Applicants.

3. Regulation 3(2) of the Takeover Regulations 2011 states as under – “Substantial acquisition of shares or voting rights. 3 (1) ….. (2) No acquirer, who together with persons acting in concert with him, has acquired and holds in accordance with these regulations shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations: Provided that such acquirer shall not be entitled to acquire or enter into any agreement to acquire shares or voting rights exceeding such number of shares as would take the aggregate shareholding pursuant to the acquisition above the maximum permissible non-public shareholding. Provided further that, acquisition pursuant to a resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016 [No. 31 of 2016] shall be exempt from the obligation under the proviso to the sub-regulation (2) of regulation 3. Explanation. — For purposes of determining the quantum of acquisition of additional voting rights under this sub-regulation,— (i) gross acquisitions alone shall be taken into account regardless of any intermittent fall in shareholding or voting rights whether owing to disposal of shares held or dilution of voting rights owing to fresh issue of shares by the target company. (ii) in the case of acquisition of shares by way of issue of new shares by the target company or where the target company has made an issue of new shares in any given financial year, the difference between the pre-allotment and the post-allotment percentage voting rights shall be regarded as the quantum of additional acquisition.”

4. In the aforementioned Application and subsequent submissions, the following was, inter alia, stated: A. The shareholding in the Target Company prior to acquisition is as under, -

Table I Shareholding in the Target Company (Source: Application) Name No. of shares % Shareholding A. Promoter/ Promoter Group 1. Premchand Goyal and Sons HUF 327,551 7.40 2. Premchand Goyal 423,570 9.57 3. Shakuntala Devi 4,560 0.10 4. Sunil Kumar Goyal 249,330 5.63 5. Hina Devi Goyal 320 0.01 6. Deepika Goyal 320 0.01 7. Vinay Kumar Goyal 548,791 12.39 8. Anuradha Goyal 320 0.01 9. Yashomati Goyal Sahuwala 203,430 4.59 Total Promoter Holding 17,58,192 39.70 B Public Shareholding 26,70,015 60.30 Total 44,28,207 100.00

B. Applicants propose to acquire 12.91% shares of Target Company from promoters as given below: Table II - Details of Proposed Acquisition Name of acquirer Name of the No. of % of Remarks Transferor shares share proposed capital to be acquired Shri Premchand Premchand 1,31,119 2.96 Transferor is the Goyal Trust Goyal settlor of acquirer trust Shri Sunil Goyal Sunil Kumar 81,119 1.83 Transferor is the Trust Goyal settlor of acquirer trust Shri Nitin Goyal Deepika Goyal 160 0.00 Transferor is a Trust beneficiary of acquirer trust Shri Vinay Goyal Vinay Kumar 1,12,386 2.54 Transferor is the Trust Goyal settlor of acquirer trust Sunil Kumar and Sunil Kumar 81,119 1.83 Transferor is the Sons HUF Goyal Karta of the acquirer HUF

Nitin Goyal HUF Deepika Goyal 160 0.00 Transferor is a member of acquirer HUF Vinay Goyal HUF Vinay Kumar 1,12,386 2.54 Transferor is the Goyal Karta of the acquirer HUF Premchand Goyal Yashomati 53,583 1.21 Transferor is Goyal disclosed as part of Sahuwala the Promoter group for period less than three years Total 5,72,032 12.91

C. The Settlor, Trustees and beneficiaries of the aforementioned Acquirer Trusts are as under –

Table III Acquirer Trust- Shri Premchand Goyal Trust (Acquirer 1) Settlor Trustees Beneficiaries Relationship Premchand Goyal Sunil Goyal, Spouse : Spouse and Lineal Nitin Goyal Shakuntala Devi descendants of Vinay Goyal Lineal descendants : Premchand Goyal Sunil Goyal and their lineal descendants (Yashomati Goyal Sahuwala, Sejal Goyal, Ishaani Goyal) Nitin Goyal and their lineal descendants (Pragyan Goyal, Anvita Goyal) Vinay Goyal and their lineal descendants (Arpit Goyal, Aayushman Goyal) Acquirer Trust- Shri Sunil Goyal Trust (Acquirer 2) Sunil Goyal Sunil Goyal Spouse: Spouse and Lineal Nitin Goyal Hina Devi Goyal descendants of Vinay Goyal Lineal descendants : Sunil Goyal Yashomati Goyal Sahuwala Sejal Goyal Ishaani Goyal Acquirer Trust- Shri Nitin Goyal Trust (Acquirer 3) Nitin Goyal Nitin Goyal Spouse: Spouse and Lineal Sunil Goyal Deepika Goyal descendants of Vinay Goyal Lineal descendants : Nitin Goyal Pragyan Goyal Anvita Goyal

Acquirer Trust- Shri Vinay Goyal Trust (Acquirer 4) Vinay Goyal Vinay Goyal Spouse : Spouse and Lineal Sunil Goyal Anuradha Goyal descendants of Nitin Goyal Lineal descendants : Vinay Goyal Arpit Goyal Aayushman Goyal

D. The shareholding in the Target Company subsequent to the Proposed Acquisition by Acquirers will be as under: Table IV Shareholding in the Target Company (Source: Application) Name No. of shares % Shareholding A. Promoter/ Promoter Group 1. Premchand Goyal and Sons HUF 327,551 7.40 2. Premchand Goyal 346,034 7.81 3. Shakuntala Devi 4,560 0.10 4. Sunil Kumar Goyal 87,092 1.97 5. Hina Devi Goyal 320 0.01 6. Deepika Goyal 0 0.00 7. Vinay Kumar Goyal 324,019 7.32 8. Anuradha Goyal 320 0.01 9. Yashomati Goyal Sahuwala 149,847 3.38 10. Shri Premchand Goyal Trust 131,119 2.96 11. Shri Sunil Goyal Trust 81,119 1.83 12. Shri Nitin Goyal Trust 160 0.00 13. Shri Vinay Goyal Trust 112,386 2.54 14. Sunil Kumar and Sons HUF 81,119 1.83 15. Nitin Goyal HUF 160 0.00 16. Vinay Goyal HUF 112,386 2.54 Total Promoter Holding 17,58,192 39.70 B. Public Shareholding 2,670,015 60.30 Total 4,428,207 100.00

5. Grounds for seeking exemption – i. The acquisition for which exemption is sought will take place pursuant to a private family arrangement intended to streamline ownership and welfare of the Goyal Family. ii. In case of transfer between Promoters wherein one Promoter is Promoter for a period of less than 3 years, although the relation between the transferor and acquirer (the latter being grand parent of the former) is not covered in the definition of immediate relative as per takeover regulations but it is transfer within the promoter group only. The transferor and acquirer are promoters of the Target Company. However, the transferor has not been not a promoter for a period of three years. The transferor however is a member of promoter group by virtue of Regulation 2(1)(zb) of Issue of Capital and Disclosure Requirements regulations and accordingly transfer by one promoter to another shall not be considered as change in control and hence shall not trigger open offer. iii. In the case of transfer from Promoters to Family Trusts, it is evident that the legal and beneficial owners of the shares and voting rights indirectly held by the Trusts in the CMECL will continue to be the individual Promoters.

Therefore, there is no change of ownership of 39.70% Promoter shareholding in the Company, as a result of the entire exercise. iv. There will also be no change of control of the Target Company on completion of the transfer that the individual Promoters shall continue to exercise control over the Company through the Trusts and HUFs. v. The Trusts were created by the trustees for the benefit of themselves; their wife, and their children. The Trusts can be identified as a shadow or an alter ego of these persons. Though the Trusts may not qualify as an 'immediate relative' under the Takeover Regulations, the transfer of shares by Premchand Goyal, Sunil Goyal, Nitin Goyal and Vinay Goyal to the trusts, are in effect, a transfer / allotment of shares by the aforesaid four persons to themselves, their wife and to their children. Therefore, in view of the spirit and intent behind the said provision exempting transfer of shares inter se between immediate relatives, the instant case merits an exemption. vi. The transfers from Promoters to HUF are again in effect a transfer / allotment of shares by the aforesaid four persons to themselves, their wife and to their children (being members of HUF) and stand a merit to qualify as exemption. vii.

Thus from the above it can be seen that Acquirer Trusts and HUF are Promoters or are directly / indirectly part of the promoter group of the Target Company as they would fall within the definition of the 'Promoter Group' under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. The present Trustees and beneficiaries of the Acquirer Trusts are the family members of the Promoters and their bloodline descendants. viii. The proposed transfer of shares is a non-commercial transaction which will not prejudice the interest of the public shareholders of the Target Company.

ix. The proposed transfer of shares of the Target Company is not to any third party but to Private Family Trust(s) and HUF. The Trustees and beneficiaries of the Trust and members of HUF are the family members of the individual Promoters and their bloodline descendants. x. There is no new acquisition of shares by the Promoter Group as the pre-acquisition and post-acquisition shareholding will remain same pursuant to the said transaction. Thus there is no change in control of the Target Company. xi. The change in the identity of persons who will directly exercise voting rights over the Target Company will only be between persons who, in their personal capacities, are Promoters (and their relatives) of the Target Company.

6. The Acquirer Trusts (vide the Application read with letter dated. July 25, 2019 and emails dated July 26, 2019, August 28, 2019, September 14, 201 and September 30, 2019) have confirmed their compliance with the following Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017 – i. The Trusts are, in substance, only a mirror image of the Promoters’ holdings and consequently, there is no change of ownership or control of the shares or voting rights in the Target Company. ii. Only individual promoters or their immediate relatives or lineal descendants are Trustees and beneficiaries. iii. The beneficial interest of the beneficiaries of the Trusts have not been and will not, in the future, be transferred, assigned or encumbered in any manner including by way of pledge / mortgage. iv. In case of dissolution of the Trusts, the assets will be distributed only to the beneficiaries of the trusts or to their legal heirs. v. The Trustees will not be entitled to transfer or delegate any of their powers to any person other than one or more of themselves. vi. Any change in the trustees / beneficiaries and any change in ownership or control of shares or voting rights held by Trusts shall be disclosed within two days to the concerned stock exchanges with a copy endorsed to SEBI for its record. vii. As far as the provisions of the SEBI Act and the regulations framed thereunder are concerned, the ownership or control of shares or voting rights will be treated as vesting not only with the Trustees but also indirectly with the beneficiaries.

viii. The liabilities and obligations of individual transferors under the SEBI Act and the regulations framed thereunder will not change or get diluted due to transfers to the Trusts. ix. The Trusts shall confirm, on an annual basis, that they are in compliance with the exemption order passed by SEBI. The said confirmation shall be furnished to the company which it shall disclose prominently as a note to the shareholding pattern filed for the quarter ending March 31 each year, under Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. x. The Trusts shall get their compliance status certified from an independent auditor annually and furnish the certificate to the Stock Exchanges for public disclosure with a copy endorsed to SEBI for its records. xi. The proposed acquisition is in accordance with the provisions of the Companies Act, 2013 and other applicable laws. xii. The transferors are disclosed as promoters in the shareholding pattern filed with the Stock Exchanges for a period of at least three years prior to the transfer (except for holding on account of inheritance). xiii. There is no layering in terms of trustees / beneficiaries in case of Trusts. xiv. The Trust Deed does not contain any limitation of liability of the trustees / beneficiaries in relation to the provisions of the SEBI Act and all regulations framed thereunder.

7. The Acquirer Trusts, vide email dated May 27, 2020, also undertook to delete a clause in the Trust Deeds, which provided that the Family Constitution dated April 1, 2014, shall have an overriding effect over the Trust Deeds.

CONSIDERATION –

8. I have considered the Application submitted by the Proposed Acquirers and other materials available on record. Without reiterating the facts as stated above, the following is noted:

i. The Application submitted is in respect of the proposed acquisitions of shares and voting rights in the Target Company i.e. Crimson Metal Engineering Company Limited. The proposed Acquisitions as detailed at paragraph 4B, which are to be made by the Proposed Acquirers, will attract the provisions of Regulations 3(2) of the Takeover Regulations. ii. Pursuant to the proposed acquisitions, Proposed Acquirers shall acquire 12.91% shares and along with promoter group it will hold an aggregate of 39.70% of the paid up equity capital in the Target Company. iii. There will be no change in control of the Target Company pursuant to the proposed acquisition, as stipulated under the SEBI Circular dated December 22, 2017. iv. The pre–acquisition and post–acquisition shareholding of the Promoters in the Target Company will remain the same. v. There will also be no change in the public shareholding of the Target Company. vi. The Target Company shall continue to be in compliance with the minimum public shareholding requirements under the Securities Contracts (Regulation) Rules, 1957 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. vii. The Proposed Acquirers have also confirmed that they are in compliance with the Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017. Further, the Acquirer Trusts have undertaken to execute amendments in the Trust Deeds in this regard.

9. SEBI Takeover Panel, in its meeting held on February 25, 2020, considered the application and recommended grant of exemption as below:

i. In respect of acquisition of shares by the Trusts, the Panel observed that the transferors themselves were the trustees and beneficiaries of the Trusts and the transfer would not result in change in control or shareholding of the promoter group and recommended granting exemption. ii. In respect of acquisition of shares by HUFs, the Panel recommended grant of exemption as the shares are proposed to be transferred to the Kartas of HUFs by the respective family members. iii. In respect of transfer of shares between Yashomati Goyal (grandchild) and Premchand Goyal (grandfather), the Panel recommended granting exemption as the transferor and transferee are lineal descendants.

10. I note that the Panel had recommended exemption for the proposed transfer of shares from Yashomati Goyal to Premchand Goyal on February 25, 2020. Subsequent to the aforementioned, the transfer of shares from Yashomati Goyal to Premchand Goyal became automatically exempted under Regulation 10(1)(a)(ii) as the transferor and the transferee had been disclosed as promoters in the shareholding pattern for a period of three years prior to the transfer i.e. since March 2017.

11. Considering the aforementioned, I am of the view that exemption as sought for in the Application may be granted to the Proposed Acquirers, subject to certain conditions as ordered herein below.

ORDER –

12. I, in exercise of the powers conferred upon me under Section 19 read with Section 11(1) and Section 11(2)(h) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) and Regulation 11(5) of the Takeover Regulations, hereby grant exemption to the Proposed Acquirers from complying with the requirements of Regulations 3(2) of the Takeover Regulations with respect to the proposed acquisitions in the Target Company, viz. Crimson Metal Engineering Company Limited, by way of proposed transactions as mentioned in the Application.

13. The exemption so granted is subject to the following conditions:

i. The proposed acquisition shall be in accordance with the relevant provisions of the Companies Act, 2013 and other applicable laws. ii. On completion of the proposed acquisition, the Proposed Acquirers shall file a report with SEBI within a period of 21 days from the date of such acquisition, as provided in the Takeover Regulations 2011. iii. The statements / averments made or facts and figures mentioned in the Application and other submissions by the Proposed Acquirers are true and correct. iv. The Proposed Acquirers shall ensure compliance with the statements, disclosures and undertakings made in the Application. The Proposed

Acquirers shall also ensure compliance with the provisions of the SEBI Circular dated December 22, 2017. v. The Proposed Acquirers shall also ensure that the covenants in the Trust Deed are not contrary to the above conditions and the undertaking provided by the Applicants. In such case, the Trust Deed shall be suitably modified and expeditiously reported to SEBI.

14. The exemption granted above is limited to the requirements of making open offer under the Takeover Regulations 2011 and shall not be construed as exemption from the disclosure requirements under Chapter V of the aforesaid Regulations; compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015, Listing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or any other applicable Acts, Rules and Regulations.

15. The Application dated June 14, 2019 filed by Sunil Kumar Goyal on behalf of the Proposed Acquirers, is accordingly disposed of.

Place: Mumbai G. MAHALINGAM Date: June 5, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA