Order in respect of J.R. Organics Limited (Earlier known as Somaiya Organics (India) ltd.)

WTM/PS/ 117/CFD/DEC/2015 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 J. R. Organics Limited {earlier known as Somaiya Organics (India) 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 orderwas to be treated as a show cause notice by those companies for action contemplated in paragraph 18 thereof.

2. J. R. Organics Limited {earlier known as Somaiya Organics (India) 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 erstwhile Delhi Stock Exchange Limited.

3. The Company was afforded an opportunity of personal hearing on July 03, 2015, when its Managing Director, Mr.Yogendra Kumar Jhunjhunwala appeared and filed written submissions enclosing therewith copies of BIFR’s Order dated November 06, 2013 and Order dated February 05, 2015 passed by the Hon’ble High Court at Allahabad in W. P. No. 5697/2015. The following submissions were made therein:

(a) The Company has been registered with the Board for Industrial and Financial Reconstruction (BIFR), New Delhi vide Reference No. 72/2012 dated December 05, 2012. The Company has been declared as a ‘sick industrial company’ under section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (‘SICA’) vide Order dated November 06, 2003.

(b) The Managing Director had filed M.A. no. 108/2014 with the latest audited accounts of the Company before BIFR and prayed for de-registration of the Company from the purview of SICA.

(c) The Managing Director also filed M.A. no. 350/2014 praying for de-registration of the Company from purview of SICA or for permission to sell certain assets of the Company for the compliance of the Order dated January 04, 2013 passed by the Hon’ble High Court at Allahabad, Lucknow Bench. A writ petition was filed before Hon’ble High Court at Allahabad praying for a direction to BIFR for early disposal of the M.A. no. 350/2014 and the Hon’ble High Court vide its Order dated February 05, 2015 (in Writ Petition no. 5697/2015) ordered BIFR to dispose of M.A. no. 350/2014 preferably within 4 weeks. Because of the resignation of the Chairman of BIFR, the matter could not be taken up so far. A new Chairman was posted and the next date was on July 14, 2015.

(d) The Company requested SEBI to – 1. Adjourn the proceedings against the Company in view of the BIFR proceedings, 2. Pass any other order as may deem fit and proper in the facts of the case.

4. I have considered the interim order as passed against the Company and the submissions of the Company. The interim order was issued against the Company, its promoters and promoter group and directors, as the Company was 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).

5. The Company’s representative has stated that the Company has been declared as “sick” by the BIFR and further stated that he has moved the BIFR for deregistration of the Company from the purview of the SICA. He has also referred to the Order of the Hon’ble High Court directing BIFR to dispose of the application filed for such de-registration. In this regard, I note that the Company has not submitted (with proof) that the BIFR has granted/allowed relaxation from the complying with the requirements of the MPS norms. The order dated November 06, 2013 declaring the Company as ‘sick’ does not grant exemption from compliance with the MPS norms and had inter alia directed the Company to prepare draft rehabilitation scheme and restrained it from disposing off its assets without prior approval of the BIFR. From the perusal of the proceedings dated September 23, 2015 of the BIFR (latest as seen from BIFR’s website, accessed on November 13, 2015), it is seen that the application for de-registration has not yet been ordered. Further, there is no co-relation with the pendency or disposal of such application with the present proceedings for non-compliance with the MPS norms.

6. SEBI, vide email dated December 04, 2015, advised the Company to inform its latest shareholding pattern as on date as the shareholding pattern was available in BSE only upto March 2007. The Company, vide its reply emails dated December 04, 2015, while informing that its promoters’ shareholding, as on December 04, 2015, is 77.26% and that its public shareholding is 22.74%, enclosed copy of Miscellaneous Application (M.A.) No. 70/2014 in case no. 72/2012 filed by the Company’s director, Mr.Ashok Kumar and the reply dated July 14, 2015 filed by SEBI before the BIFR. The Company further submitted that it was declared ‘sick’ and SEBI is also a party in such proceedings and has filed its reply. The Company also submitted that as soon as the case is disposed, it shall be able to comply with SEBI order dated June 04, 2013.

7. From the perusal of aforesaid miscellaneous application filed before BIFR, it is observed that the Company had inter alia sought directions to infuse fresh equity share capital by making offer to existing shareholders on proportionate basis to meet the fund requirements for re-commencing its operations of its Captainganj unit without further approval of shareholders/SEBI/stock exchanges in terms of section 81 of the Companies Act, 1956, Listing Agreement, SEBI (Issue of Capital and Disclosure requirements) Regulations, 2009 (“the ICDR Regulations”), SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“the Takeover Regulations”)

and rules 19(2)(b) and 19A of the SCRR. In response to such prayer, SEBI vide reply filed before BIFR has inter alia submitted that – (a) the provisions under the ICDR Regulations with respect to issue of shares under rights issue have been prescribed only in the interest of investors, (b) the said regulations provides exemption only in case of a preferential allotment made in terms of a rehabilitation scheme approved by BIFR. (c) there are no exemptions under the ICDR Regulations, the Listing Agreement and SCRA for rights issue.

SEBI also submitted that exempting the Company from the aforesaid requirements for Rights Issue may not be in the interest of investors at large and requested BIFR not to grant any blanket exemptionfrom the SEBI Act, Listing Agreement, the ICDR Regulations, the Takeover Regulations and rules19(2)(b) and 19A of the SCRR. 8. As already observed above, the BIFR had not granted any exemption to the Company, so far, from complying with the minimum public shareholding norms. The Company has also admitted vide email dated December 04, 2015 that its case is presently pending before the BIFR. The BIFR website was again accessed on December 14, 2015 to find if any further orders had been issued in respect of the Company. However, it is noted that the last order/proceedings is dated September 23, 2015 which has been already discussed above in paragraph 5.

9. The Company has not yet complied with the MPS norms and such violation is committed on a continuous basis. It does not have any exemption, till date, from the BIFR with respect to such compliance. Considering the fact 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-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.

10. 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, J. R. Organics Limited, its directors, promoters and promoter group.

11. This Order shall remain in force till further directions.

12. 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: December 16, 2015 Place: Mumbai