Exemption order under regulation 11 of SEBI (SAST) Regulations, 2011 in the matter of Jai Corp Limited

WTM/GM/CFD/94/2017–2018 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER 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 JAI CORP LIMITED – COMPANY CIN PAN 1. JAI CORP LIMITED L17120MH1985PLC036500 AAACJ2591A

BACKGROUND –

1.1 Jai Corp Limited (“Target Company”) was incorporated in June 1985. The Registered Office of the Target Company is at A-3, M.I.D.C. Industrial Area, Nanded, Maharashtra, 431603 and its Corporate Office is at 12-B, Mittal Tower, Nariman Point, Mumbai, 400021. The shares of the Target Company are listed on BSE Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”).

1.2 An Application dated December 20, 2016 (“Application”) seeking exemption from the applicability of Regulation 3 and 4 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”) in the matter of proposed acquisition of shares and voting rights in the Target Company, was received by SEBI from Satyapal Jain, the Trustee of the following Trusts (collectively referred to as “Acquirer Trusts”) – i. NK Trust (“Acquirer Trust 1”), ii. LJNK Trust (“Acquirer Trust 2”), iii. Evergreen Trust (“Acquirer Trust 3”) and iv. Mega Trust (“Acquirer Trust 4”).

Order in the matter of Jai Corp Limited

1.3 Regulation 3 and 4 of the Takeover Regulations state – “Substantial acquisition of shares or voting rights. 3. (1) No acquirer shall acquire shares or voting rights in a target company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such target company, entitle them to exercise twenty-five per cent or more of the voting rights in such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations. (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.

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. (3) For the purposes of sub-regulation (1) and sub-regulation (2), acquisition of shares by any person, such that the individual shareholding of such person acquiring shares exceeds the stipulated thresholds, shall also be attracting the obligation to make an open offer for acquiring shares of the target company irrespective of whether there is a change in the aggregate shareholding with persons acting in concert.

Acquisition of control. 4. Irrespective of acquisition or holding of shares or voting rights in a target company, no acquirer shall acquire, directly or indirectly, control over such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these Regulations.”

1.4 In the aforementioned Application, the following was inter alia stated – i. The Acquirer Trusts are proposing to acquire shares of the Target Company.

ii. The pre–acquisition shareholding in the Target Company as on September 30, 2016 (as provided in the Application) along with the proposed post–acquisition shareholding in the Target Company, are provided below:

Table A Sr. Name Pre – Acquisition Post – Acquisition No. No. of shares % No. of shares % Shareholding Shareholding A. Promoter/ Promoter Group 1. Satyapal Jain 1,82,11,800 10.21 100 0.00 2. Laxmi Jain 1,42,53,540 7.99 100 0.00 3. Gaurav Jain 1,05,27,200 5.90 100 0.00 4. NK Trust 0 0.00 1,05,27,100 5.90 5. LJNK Trust 0 0.00 66,71,823 3.74 6. Evergreen Trust 0 0.00 1,82,11,700 10.21 7. Mega Trust 0 0.00 75,81,617 4.25 8. Rina Jain 2,17,19,220 12.17 2,17,19,220 12.17 9. Ankit Jain 1,54,01,700 8.63 1,54,01,700 8.63 10. Jai Kumar Jain 4,780 0.00 4,780 0.00 11. Virendra Jain 58,71,620 3.29 58,71,620 3.29 12. Anand Jain 36,10,240 2.02 36,10,240 2.02 13. Sushma Jain 16,130,740 9.04 16,130,740 9.04 14. Harsh Jain 2,32,51,560 13.03 2,32,51,560 13.03 15. Sparsh Trading Private Limited 2,00,000 0.11 2,00,000 0.11 16. Richmond Traders Private 2,00,000 0.11 2,00,000 0.11 Limited 17. Ridhi Synthetics Limited 1,00,000 0.06 1,00,000 0.06 18. Pet Fibres Limited 2,00,000 0.11 2,00,000 0.11 19. Kasturi Trading Co. Private 2,00,000 0.11 2,00,000 0.11 Limited 20. Hide N Chic Furniture Private 2,00,000 0.11 2,00,000 0.11 Limited 21. Somerset Trading Private Limited 2,00,000 0.11 2,00,000 0.11 Total 13,02,82,400 73.01 13,02,82,400 73.01 B. Public Shareholding 4,81,67,010 26.99 4,81,67,010 26.99 C. Total (A + B) 17,84,49,410 100.00 17,84,49,410 100.00 iii. As on September 30, 2016, none of the Acquirer Trusts hold shares in the Target Company.

iv. The proposed acquisition of shares by the Acquirer Trusts will occur simultaneously as under –

A. Acquisition 1 – Acquisition of equity shares of the Target Company by entity at Sr. no. 4 from entity at Sr. no. 3 of Table A.

 Acquisition of 1,05,27,100 (5.90%) equity shares of Jai Corp Limited by NK Trust from Gaurav Jain.  NK Trust or Acquirer Trust 1, is a private family trust settled on December 9, 2016.  The Settlor, Trustees and Beneficiaries of Acquirer Trust 1 are as under –

Acquirer Trust 1 Settlor Trustees Beneficiaries* Relationship* Gaurav Jain 1. Satyapal Jain 1. Satyapal Jain The two Trustees are 2. Laxmi Jain 2. Laxmi Jain spouses. 3. Nidhi Kanoi and her lineal descendants. 4. Arjun Kanoi and his lineal descendants (‘Arjun Nidhi Kanoi is the Kanoi Family’). daughter of the two 5. Ahana Kanoi and her lineal descendants Trustees. Arjun (collectively known as ‘Ahana Kanoi Family’). Kanoi and Ahana Kanoi are the lineal In an event wherein all the above Beneficiaries cease descendants of Nidhi Kanoi. Yash Jain and to exist, the following individuals shall be appointed Esha Jain are the as Beneficiaries with equal Beneficial interest: lineal descendants of 1. Yash Jain and his lineal descendants (collectively the Settlor, viz. known as ‘Yash Jain Family’). Gaurav Jain. 2. Esha Jain and her lineal descendants (collectively known as ‘Esha Jain Family’). Transferor – Gaurav Jain (5.90%) *Amended as per the Supplementary Trust Deed dated October 23, 2017, which was informed to SEBI vide letter dated October 25, 2017.

B. Acquisition 2 – Acquisition of equity shares of the Target Company by entity at Sr. no. 5 from entity at Sr. no. 2 of Table A.

 Acquisition of 66,71,823 (3.74%) equity shares of Jai Corp Limited by LJNK Trust from Laxmi Jain.  LJNK Trust or Acquirer Trust 2, is a private family trust settled on December 9, 2016.  The Settlor, Trustees and Beneficiaries of Acquirer Trust 2 are as under –

Acquirer Trust 2 Settlor Trustees Beneficiaries* Relationship* Laxmi Jain 1. Satyapal Jain 1. Satyapal Jain The two Trustees are 2. Laxmi Jain 2. Nidhi Kanoi spouses. 3. Arjun Kanoi and his lineal descendants (‘Arjun Kanoi Family’). Nidhi Kanoi is the 4. Ahana Kanoi and her lineal descendants daughter of the two (collectively known as ‘Ahana Kanoi Family’). Trustees. Arjun Kanoi and Ahana In an event wherein all the above Beneficiaries cease Kanoi are the lineal descendants of Nidhi to exist, the following individuals shall be appointed Kanoi. Yash Jain and as Beneficiaries with equal Beneficial interest: Esha Jain are the 1. Yash Jain and his lineal descendants (collectively lineal descendants of known as ‘Yash Jain Family’). Gaurav Jain who is 2. Esha Jain and her lineal descendants (collectively the son of Satyapal known as ‘Esha Jain Family’). Jain and Laxmi Jain. Transferor – Laxmi Jain (3.74%) *Amended as per the Supplementary Trust Deed dated October 23, 2017, which was informed to SEBI vide letter dated October 25, 2017.

C. Acquisition 4 – Acquisition of equity shares of the Target Company by entity at Sr. no. 7 from entity at Sr. no. 2 of Table A.

 Acquisition of 75,81,617 (4.25%) equity shares of Jai Corp Limited by Mega Trust from Laxmi Jain.  Mega Trust or Acquirer Trust 4, is a private family trust settled on December 9, 2016.  The Settlor, Trustees and Beneficiaries of Acquirer Trust 4 are as under –

Acquirer Trust 4 Settlor Trustees Beneficiaries* Relationship* Laxmi Jain 1. Satyapal Jain 1. Satyapal Jain The two Trustees are 2. Gaurav Jain 2. Gaurav Jain and his lineal descendants. father and son. 3. Yash Jain and his lineal descendants (collectively Yash Jain and Esha known as ‘Yash Jain Family’). Jain are the lineal 4. Esha Jain and her lineal descendants (collectively descendants of known as ‘Esha Jain Family’). Gaurav Jain. Ahana Kanoi and Arjun In an event wherein all the above Beneficiaries cease Kanoi are the lineal descendants of Nidhi to exist, the following individuals shall be appointed Kanoi who is the as Beneficiaries with equal Beneficial interest: daughter of Satyapal 1. Arjun Kanoi and his lineal descendants (‘Arjun Jain and Laxmi Jain. Kanoi Family’). 2. Ahana Kanoi and her lineal descendants Transferor – Laxmi (collectively known as ‘Ahana Kanoi Family’). Jain (4.25%) *Amended as per the Supplementary Trust Deed dated October 23, 2017, which was informed to SEBI vide letter dated October 25, 2017.

D. Acquisition 3 – Acquisition of equity shares of the Target Company by entity at Sr. no. 6 from entity at Sr. no. 1 of Table A.

 Acquisition of 1,82,11,700 (10.21%) equity shares of Jai Corp Limited by Evergreen Trust from Satyapal Jain.  Evergreen Trust or Acquirer Trust 3, is a private family trust settled on December 9, 2016.  The Settlor, Trustees and Beneficiaries of Acquirer Trust 3 are as under –

Acquirer Trust 3 Settlor Trustees Beneficiaries* Relationship* Satyapal Jain 1. Satyapal Jain 1. Laxmi Jain The two Trustees are 2. Laxmi Jain 2. Gaurav Jain spouses. 3. Yash Jain and his lineal descendants (collectively Yash Jain and Esha known as ‘Yash Jain Family’). Jain are the lineal 4. Esha Jain and her lineal descendants (collectively descendants of known as ‘Esha Jain Family’). Gaurav Jain. Ahana Kanoi and Arjun In an event wherein all the above Beneficiaries cease Kanoi are the lineal descendants of Nidhi to exist, the following individuals shall be appointed Kanoi who is the as Beneficiaries with equal Beneficial interest: daughter of Satyapal 1. Arjun Kanoi and his lineal descendants (‘Arjun Jain and Laxmi Jain. Kanoi Family’). 2. Ahana Kanoi and her lineal descendants Transferor – Satyapal (collectively known as ‘Ahana Kanoi Family’). Jain (10.21%) *Amended as per the Supplementary Trust Deed dated October 23, 2017, which was informed to SEBI vide letter dated October 25, 2017.

v. The Board of Directors of the Target Company as on March 31, 2016 (as provided in the Application) is as follows –

NAME DESIGNATION 1. Anand Jain Chairman 2. Virendra Jain Vice Chairman 3. Gaurav Jain Managing Director 4. V. S. Pandit Director-Works 5. K. M. Doongaji Independent Director 6. S. H. Junnarkar Independent Director 7. S. N. Chaturvedi Independent Director 8. Anup P. Shah Independent Director 9. Aziza A. Chitalwala Independent Director vi. Grounds for seeking exemption – a. The Acquirer Trusts and the Transferors are part of the Promoter and Promoter Group of the Target Company. b. The Trustees and Beneficiaries of the Acquirer Trusts are Satyapal Jain and his family members, who are a part of the promoter and promoter group of the Target Company. c. The Transferors and persons acting in concert with the Transferors are directly in control of the Acquirer Trusts and hence, there will be no change in control of the Target Company after the proposed acquisition. d. The proposed acquisition is only a part of the internal restructuring within the Jain Family (i.e. Satyapal Jain, his wife viz. Laxmi Jain, and his son viz. Gaurav Jain) and will not affect the interests of the public shareholders of the Target Company. It is intended to streamline Shri. Satyapal Jain and his family’s shareholding in the Target Company and facilitate succession planning. e. There will be no change in the shareholding pattern, control and management of the Target Company, pre and post the proposed acquisition. f. It is a non-commercial transaction which will not prejudice the interests of the public shareholders of the Target Company in any manner. g. There will be no change in the identity of the persons who will exercise voting rights over the Target Company. There will be only change in their capacity from voting in their personal capacities as promoters of the Target Company to voting as Trustees of the Acquirer Trusts.

1.5 Vide a letter dated May 3, 2017, Satyapal Jain in his capacity as a Trustee on behalf of the Acquirer Trusts furnished Supplementary Trust Deeds on behalf of the Acquirer Trusts, which suitably incorporated the following conditions:

a. Clause 3.6: The Trustees may delegate their powers to any other person from the family and their lineal descendants. b. Clause 11.1.4: The Trustees, at all times, shall be the members of the family and their lineal descendants. c. Clause 14.1: Any change in the trustees or beneficiaries and any change in the ownership or control of shares or voting rights held by Trust shall be disclosed to the concerned stock exchanges. d. Clause 14.2: The provisions of the SEBI Act and the regulations framed thereunder will apply on the basis that the ownership or control of shares or voting rights vests not only directly with the trustees but also indirectly with the beneficiaries. e. Clause 14.3: The Trust Deed shall not contain any limitation of liability of the trustees/ beneficiaries in relation to the provisions of the SEBI Act and all regulations framed thereunder. f. Clause 14.4: The liabilities and obligations of the individual transferors under the SEBI Act and the regulations framed thereunder will not change or get diluted due to the transfers to the Trusts. g. Clause 14.5: The Trust shall confirm, on an annual basis, that it is 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. h. Clause 14.6: The Trust shall get the compliance status certified from an independent auditor annually and furnish the same to stock exchange for public disclosure with a copy endorsed to SEBI for its records.

1.6 The Application along with the further submissions were forwarded to the Takeover Panel in terms of the proviso to Regulation 11(5) of the Takeover Regulations and deliberated by the Takeover Panel in its meeting held on June 03, 2017. The Panel noted the provisions for Child Trusts, secondary beneficiaries and adding other persons (including outsiders) as beneficiaries in the trust deeds, and recommended not granting exemption to the proposed acquisitions. Subsequently, in terms of Regulation 11(5) of the Takeover Regulations, a hearing was granted to the applicant on July 13,

2017, pursuant to which further submissions were made by the Acquirer Trusts vide letter dated July 20, 2017, inter alia reiterating its proposal for retaining the Child Trusts. The Takeover Panel in its meeting held on September 14, 2017 noted that the trust structure involves layering and did not recommend grant of exemption. Subsequently, vide letter dated October 25, 2017, additional supplementary trust deeds were submitted by the Acquirer Trusts, wherein, Clause 1.1.3 defining ‘Beneficiaries’ has been amended to essentially include only the individuals who are promoters, their family members/immediate relatives and their lineal descendants.

2.1 The matter was again deliberated by the Takeover Panel in its meeting held on December 16, 2017, in light of additional submissions of the Acquirer Trusts made vide the said letter dated October 25, 2017. The Takeover Panel made the following observations – “In case of Jai Corp Limited, the Panel noted that the said matter was earlier deliberated in earlier meeting wherein the Panel recommended that the proposed transaction does not warrant grant of exemption as the trust deed had provision related to secondary beneficiaries and appointment of outsiders as beneficiaries and the list of beneficiaries included trust. The Panel took note of the revised trust deed, wherein, the applicant has suitably modified the trust deed in respect of the aforesaid clauses. Accordingly recommended grant of exemption to the proposed transaction in the matter.”

3.1 I have considered the Application submitted by the Acquirer Trusts along with their additional submissions; the recommendations of the Takeover Panel and other material available on record.

3.2.1 From the preceding paragraphs, it is noted that –

A. The Application submitted is in respect of the proposed acquisition of shares and voting rights in the Target Company i.e. Jai Corp Limited.

B. The aforesaid acquisition is proposed to be made by NK Trust, LJNK Trust, Evergreen Trust and Mega Trust i.e. the Proposed Acquirers, in the following manner – i. Transfer of 1,05,27,100 (5.90%) equity shares of the Target Company, by the existing Promoter i.e. Gaurav Jain, to NK Trust.

ii. Transfer of 66,71,823 (3.74%) equity shares of the Target Company, by the existing Promoter i.e. Laxmi Jain, to LJNK Trust.

iii. Transfer of 75,81,617 (4.25%) equity shares of the Target Company, by the existing Promoter i.e. Laxmi Jain, to Mega Trust.

iv. Transfer of 1,82,11,700 (10.21%) equity shares of the Target Company, by the existing Promoter i.e. Satyapal Jain, to Evergreen Trust.

v. NK Trust, LJNK Trust, Evergreen Trust and Mega Trust will collectively acquire a total of 4,29,92,240 (24.09%) equity shares of the Target Company from 3 transferors belonging to the Promoter Group.

C. The proposed acquisition is pursuant to an internal restructuring of the shareholding in the Target Company and for streamlining the shareholding structure of the Promoters of the Target Company.

D. There will be no change in control of the Target Company pursuant to the proposed acquisition.

E. The pre-acquisition and post-acquisition shareholding of the Promoter in the Target Company will remain the same at 73.01%.

F. There will also be no change in the public shareholding of the Target Company.

G. The Target Company shall continue to be in compliance with the minimum public shareholding requirements under the Securities Contracts Regulation Rules, 1957 (“SCRR”) and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

H. The Proposed Acquirers have executed and submitted their respective supplementary Trust Deeds vide letter dated October 25, 2017.

I. The Takeover Panel has also recommended grant of exemption to the Proposed Acquirers.

3.2.2 Considering the aforementioned, I am of the view that exemption as sought for in the Application (read with further correspondence/submissions/ clarifications) be granted to the Proposed Acquirers, subject to certain conditions as ordered herein below.

Order –

4.1 I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) read with Regulation 11(5) of the Takeover Regulations, hereby grant exemption to the Proposed Acquirers, viz. NK Trust, LJNK Trust, Evergreen Trust and Mega Trust, from complying with the requirements of Regulation 3 of the Takeover Regulations with respect to the proposed acquisition/exercise of voting rights in respect of the Target Company, viz. Jai Corp Limited, by way of proposed transactions as mentioned in the Application.

4.2 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. 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 provisions of the SEBI Act and the Regulations framed thereunder will apply on the basis that the ownership or control of shares or voting rights vests not only directly on the Trustees but also indirectly on the beneficiaries of the Proposed Acquirers. v. There shall be no limitation of liability of the Trustees/beneficiaries in relation to the provisions of the SEBI Act and all Regulations framed thereunder. vi. The Proposed Acquirers shall honour their undertakings and shall also ensure compliance with the statements, disclosures and undertakings made in the Application and in the subsequent correspondence. vii. The Proposed Acquirers 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 Target Company, which 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. viii. The Proposed Acquirers shall get the compliance status certified from an Independent Auditor annually and furnish the same to the stock exchanges with a copy endorsed to SEBI for its records.

ix. The liabilities and obligations of the transferor under the SEBI Act and Regulations framed thereunder will not change or get diluted due to transfers to the Proposed Acquirers. x. The Proposed Acquirers shall also ensure that the covenants in the Trust Deeds are not contrary to the above conditions and undertaking provided by the transferors. In such case, the Trust Deeds shall be suitably modified and expeditiously reported to SEBI.

4.3 The exemption granted above is limited to the requirements of making open offer under the Takeover Regulations 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.

4.4 The Application filed by Shri Satyapal Jain – Trustee of NK Trust, LJNK Trust, Evergreen Trust and Mega Trust, is accordingly disposed of.

Place: Mumbai G. MAHALINGAM Date: February 23, 2018 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA