In respect of Classic Electricals Limited and Shikhar Leasing & Trading Limited- minimum public shareholding requirement

WTM/PS/28/CFD/JULY/2014 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 Classic Electricals Limited and Shikhar Leasing & Trading 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. Classic Electricals Limited ("Classic") and Shikhar Leasing & Trading Limited ("Shikhar") are two such companies against whom the interim order was passed. For convenience, the above named companies are collectively referred to as "the Companies". The equity shares of the Companies are listed on the Bombay Stock Exchange Limited ("BSE").

3. Reply/submissions of Classic : Classic neither filed any response to the charges contained in the interim order passed against it nor sought for any personal hearing, even though the interim order had advised of such opportunities. However, in the interest of natural justice, an opportunity of personal hearing was afforded to the Company on June 25, 2014 and the same was communicated. Thereafter, Classic vide an email dated June 18, 2014, stated that its management was contemplating the delisting of equity shares from BSE and were negotiating with the merchant bankers. Classic also stated that its registered office has been shifted to 1301, 13th

Floor, Peninsula Business Park, Tower B, Senapati Bapat Marg, Lower Parel (West), Mumbai-400013. Thereafter, vide another e-mail dated June 23, 2014, Classic submitted that the 'concerned person' was not available on the date of hearing. In view of the same, the opportunity of personal hearing was again afforded to it and fixed on July 10, 2014. The Company, vide email dated July 02, 2014, stated that as it is contemplating delisting, it would not serve any purpose in attending the hearing. However, vide email dated July 10, 2014, Classic sought for an adjournment of the hearing fixed on that date. On the request of Classic, the hearing was rescheduled to July 25, 2014.

4. Reply/submissions of Shikhar : Like Classic, Shikhar did not respond to the interim order. Vide its e-mails dated June 26, 2014 and July 10, 2014, Shikhar also submitted that its management is contemplating delisting of shares from BSE and were negotiating with merchant bankers.

5. Personal hearing and submission of additional reply : In the personal hearing held on July 25, 2014, the Companies were represented by Mr. Sudhir R. Shah, who submitted letters dated July 22, 2014 of the respective companies. In those letters, the Companies had stated that they are small companies (Classic having a paid-up capital of 1.48 crore and Shikhar having a paid-up capital of 1 crore) and that they propose for delisting the equity shares from BSE. According to the Companies, they were not able to do so because of financial and other administrative difficulties. The Companies requested for time of about one year in order to take 'necessary steps'.

During the personal hearing, to a query as to what steps were taken by the Companies with respect to their proposed delisting, the authorised representative stated that no 'concrete steps' were taken till date.

6. I have considered the submissions of the Companies. The interim order was issued against the Companies as they were non-compliant with the provisions of rule 19A of the SCRR and Clause 40A of the Listing Agreement read with section 21 of the Securities Contract (Regulation) Act, 1956 ("SCRA"), by not maintaining atleast the minimum level (of 25%) of public shareholding as of June 03, 2013 (the time line before which such compliance was to be achieved).

7. As regards Classic, I note that admittedly (letter dated May 08, 2013 of Classic), the promoter holding was at 94.30% and the public shareholding was at 5.70%. The same is the position as per the shareholding pattern of Classic for the quarter ended March 31, 2014. With respect to Shikhar, the promoters' shareholding admittedly (vide Shikhar's letter dated May 8, 2013) was at 90.67%. The public shareholding was at 9.33%. The same shareholding pattern continues in the company as can be seen from its shareholding pattern for the quarter ended March 31, 2014 disclosed to BSE. From the above, it can be found that the Companies were non-compliant with the MPS requirements and such non-compliance continues till date.

8. The Companies have stated, in their replies and in the personal hearing, that they propose to delist their equity shares from the BSE and are negotiating with the merchant bankers. The Companies have informed SEBI of this proposal as early as May 08, 2013. However, the Companies have not taken any steps either towards complying with the MPS norms or towards their proposed delisting, even after a period of more than one year from the date of passing of the interim order. I also note that even a Board of Directors' approval (which is the very first step in a delisting process) with respect to their delisting proposal is not in place. The above conduct of the Companies suggests that they are not serious in carrying forward their proposal for delisting and in fact have not started any process and are just delaying compliance.

9. The Companies have also stated that they are 'small companies' and are not able to delist the shares because of financial and other administrative difficulties. A 'small company' falling with the criteria specified under sub-regulations (1) or (2) of regulation 27 of the SEBI (Delisting of Equity Shares) Regulations, 2009 ("the Delisting Regulations"), is eligible for special provisions for delisting, which are simpler compared to the normal delisting process. In view of the same, I am not convinced with the submissions of the Companies. Further, the Companies should note that in terms of rule 19A of the SCRR, which is a continuous listing requirement, they are mandated to have a minimum of 25% public shareholding.

10. In view of the non-compliance by the Companies 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, such non-compliance being continuous in nature and also the conduct of the Companies in not taking any steps towards their proposed delisting, it becomes necessary for SEBI, for the proper regulation of the securities market, to confirm the directions issued against the Companies, their directors and promoters/promoter group.

11. Further, considering the non-compliance by the Companies with the MPS norms and also the fact that such violations are being continued by them, SEBI may also initiate other action, as appropriate in law, against the Companies, their 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 – (i) Classic Electricals Limited, its directors, promoters and promoter group, and (ii) Shikhar Leasing & Trading 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 : 31/JULY/2014 Place : Mumbai