Order in respect of Jayesh V Valia and 10 Ors. in the matter of VAS Infrastructure Ltd.

ORDER Under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulations 44 and 45 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 read with Regulations 32 and 35 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, in respect of Jayesh V. Valia (HUF), Mr. Raj J. Valia, Mr. Madhav J. Valia, Mr. Jayesh V. Valia, M/s Yashraj Containeurs Ltd., M/s Precision Containeurs Ltd., Mrs. Sangeeta J. Valia, Mr. Vinodrai V. Valia, M/s Vasparr Shelter Ltd., M/s Vasparr Trading Private Ltd. (presently known as VAS Educomp Private Ltd.) and M/s Pushpanjali Drums Private Ltd. in the matter of VAS Infrastructure Ltd. 1. VAS Infrastructure Ltd. (hereinafter referred to as the "target company") is a company having its registered office at 401, Court Chambers, 4th Floor, S. V. Road, Borivali (West), Mumbai - 400 092. The shares of the target company are listed in Bombay Stock Exchange Ltd. and Ahmedabad Stock Exchange Ltd. The promoter group of the target company comprising of Jayesh V. Valia (HUF), Mr. Raj J. Valia, Mr.Madhav J Valia, Mr.Jayesh V. Valia, M/s Yashraj Containeurs Ltd.., M/s Precision Containeurs Ltd., Mrs.Sangeeta J. Valia, Mr.Vinodrai V Valia, M/s Vasparr Shelter Ltd., M/s Vasparr Trading Private Ltd. (now known as VAS Educomp Private Ltd.) and M/s Pushpanjali Drums Private Ltd. (group of eleven entities) held 67,31,554 shares i.e. 53.85% of the share capital of the target company as on March 31, 2011.

2. On April 30, 2010, the target company allotted 25,00,000 share warrants (detachable) to six of the eleven promoter group entities viz. Jayesh V. Valia (HUF), Mr.Raj J. Valia, Mr.Madhav J. Valia, Mr.JayeshV. Valia, M/s Yashraj Containeurs Ltd., and M/s Precision Containeurs Ltd. (hereinafter collectively referred to as "the six of the eleven promoter group entities") and certain other non-promoter investors viz. M/s Power Pack Finance & Investments Private Ltd., M/s Leena Investments Consultancy LLP and M/s N.K. Chemplast Private Ltd. (hereinafter collectively referred to as "non-promoter investors"). As per the terms and conditions of the issue of share warrants, each share warrant was convertible into one equity share (of nominal value of Rs. 10/-each at a premium of Rs.45/- per share), of the target company at the sole option of the warrant holders at any time within a period of eighteen months from the date of allotment. The warrant holders were required to pay upfront an amount equivalent to 25% of the total consideration per share warrant, i.e. Rs. 13.75 per share warrant (each share warrant price being Rs. 55/-). They were also required to pay the balance 75% i.e. Rs. 41.25 per share warrant before the date of conversion. In case the option to acquire the equity shares was not exercised by the warrant holders, the aforesaid upfront amounts paid would be forfeited. On April 6, 2011 the aforesaid six of the eleven promoter group entities acquired 6,25,000 equity shares of the target company upon conversion of their portion of warrants (hereinafter referred to as "the acquisition"). Consequently, the collective shareholding of the entire promoter group (eleven entities) in the target company increased from 53.85% to 56.04%.

3. By virtue of the aforesaid acquisition on April 6, 2011, certain provisions of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the “SAST Regulations, 1997”) were triggered. In view of this, Securities and Exchange Board of India (hereinafter referred to as “SEBI”) issued a Show Cause Notice (SCN) dated September 24, 2012 to the six of the eleven promoter group entities viz. Jayesh V. Valia (HUF), Mr.Raj J. Valia, Mr.Madhav J. Valia, Mr.JayeshV. Valia, M/s Yashraj Containeurs Ltd., and M/s Precision Containeurs Ltd., asking them to show cause as to why suitable directions under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the “SEBI Act”) read with Regulations 44 and 45 of the SAST Regulations, 1997 read with corresponding provisions of Regulations 32 and 35 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011(hereinafter referred to as the "SAST Regulations, 2011") should not be issued against them for the alleged violations of the SAST Regulations, 1997. Following were the allegations mentioned in the SCN:

i. On account of the acquisition of 6,25,000 equity shares (2.19%) by the six of the eleven promoter group entities, the collective shareholding of the Promoter Group increased from 53.85% to 56.04%, thereby crossing the threshold limit of 54% as specified under Regulation 7(1) of the SAST Regulations, 1997, which mandates them to disclose the shareholding to the company and to the stock exchange(s), where the shares of the target company are listed. As the promoter group entities failed to make the aforesaid disclosures to the target company and the stock exchange(s), they were alleged to have violated the provisions of Regulation 7(1) of the SAST Regulations, 1997, ii. The aforementioned increase in the collective shareholding of the Promoter Group from 53.85% to 56.04% on April 6, 2011 and the resultant crossing of the post shareholding limit beyond 55%, also triggered the provisions of Regulation 11(1) of the SAST Regulations, 1997, read with Regulation 14(1) of the SAST Regulations, 1997, which mandates public announcement to be made within four working days from the date of acquisition i.e April 6, 2011.

iii. The promoter group entities by acquiring shares under Regulation 11(1) of the SAST Regulations failed to disclose the aforesaid purchase of shares aggregating to 2.19% of the shares along with the aggregate shareholding after such acquisition to the target company and to the stock exchanges within two days of the purchase as mandated by Regulation 7(1A) of the SAST Regulations, 1997.

iv. The promoter group entities by the alleged non-disclosures mentioned at item No. i and iii above (i.e disclosures mandated under Regulation 7 (1) and 7(1A) of the SAST Regulations, 1997) violated the provisions of Regulation 7(2) of the SAST Regulations, 1997, which mandates the disclosures to be made within two days of such acquisition.

4. In response to the aforesaid SCN, the six of the eleven promoter group entities vide letter dated November 25, 2013 filed their reply before SEBI. In their reply, they made the following submissions:

a) The target company had allotted 25,00,000 warrants to them as well as to the 3 non-promoter group investors viz, (i) M/s. N.K. Chem Plast Private Ltd; (ii) M/s. Power Pack Finance & Investment Private Ltd and (iii) M/s. Leena Investments Consultancy LLP. Out of the 25,00,000 warrants, 6,25,000 warrants were issued to the six of the eleven promoter group entities and 18,75,000 warrants were allotted to three non-promoter investors. These warrants were to be converted into equity shares @ Rs. 55 per share at any time within a period of 18 months from the date of allotment (i.e. by September 30, 2011).

b) They converted all their warrants into equity shares of the company on April 6, 2011. The promoter group believed that the non-promoter investors would likewise effect conversion of the warrants allotted to them. It was the prior understanding between them that the resultant increase in the overall paid-up capital of the target company would ensure that there would be no increase in the percentage holding of the promoter group.

c) The non-promoter investors, however, did not effect conversion of their portion of warrants. This was rather unexpected and resulted in a bona fide expectation being belied. Besides, the entities also believed that the increase in their stake from 53.85% to 56.04% was in one stroke and well within the creeping acquisition limit.

d) The conversion was well within the perceived annual permissible limit of 5% additional voting rights. The acquisition of 2.19% shareholding pursuant to the conversion was much below the 5% limit then allowed during a financial year as per then extant rules. The present situation emerged entirely due to non-conversion of warrants into equity shares by the non-promoter investors.

e) The Bombay Stock Exchange was informed on June 10, 2011, regarding the increase in shareholding pursuant to the conversion.

f) Some of the promoter group entities had already disposed of a part of their shareholdings in the target company bringing the same to 52.30% from their original shareholding of 53.85% (This, as mentioned in their subsequent reply dated August 7, 2015 was done by selling their shares between April 13, 2011 and April 19, 2011 and also on June 16, 2011). The fact that the promoter group was not desirous of increasing its shareholding in the target company at the relevant time and sold off the additional shares acquired pursuant to the conversion and reverted back to less than their original shareholding is demonstrative of the bona fide intentions of the acquirers. The provisions of Regulation 44(a) of the SAST Regulations, 1997 have been complied with by selling the shares acquired pursuant to the conversion.

g) The promoter group entities were always the promoters of the target company and there was no change in control or change in the composition of the promoters' holding in the target company on account of the conversion of warrants. The purpose of the takeover regulations is to give shareholders an opportunity of exit every time when there is a substantial acquisition or change in control in relation to the target company. In the present case, there was neither any substantial acquisition nor any shift in control on account of the conversion. Therefore, on a purposive interpretation of the SAST Regulations, 1997, no open offer ought to be directed against the acquirers.

h) In any event, pursuant to an amendment to Regulation 11(2) of the SAST Regulations, 1997, an acquirer could acquire upto 5% shareholding or voting rights in addition to acquisition under Regulation 11(1). The requirement in this regard indeed was to ensure that such acquisitions are effected from the open market. However, this means that the intention of the regulation was to allow further acquisitions beyond the 55% threshold limit without making an open offer. Therefore, it was indeed possible for the promoter group entities to acquire upto 10% additional shares at the relevant time without making an open offer.

i) The Report of the Takeover Regulations Advisory Committee dated July 19, 2010 also felt that the then current threshold beyond which creeping acquisition was no longer permitted was not appropriate in the context of a mandatory 100% open offer and hence recommended that creeping acquisition of 5% per annum be allowed up to the maximum permissible non-public shareholding limit. In other words there was indeed a proposal to allow acquisitions upto 5% every financial year without regard to whether 55% limit was crossed or not, without making public announcement. In view of this, they indeed believed that the same approach would be adopted whilst reading the provisions of the 1997 Takeover Regulations, j) SEBI may consider referring the matter for adjudication proceedings under Chapter VIA of the SEBI Act instead of passing a direction to make open offer given the facts and circumstances of the present case.

4.1 An opportunity of personal hearing was granted to the six of the eleven promoter group entities on February 12, 2014, when Mr.Paras Parekh, Advocate appeared and made submissions on behalf of them. The learned Advocate reiterated the submissions made by them in their reply dated November 25, 2013. The entities were granted liberty to file additional written submissions, if any, within a period of one week from the date of hearing. Vide letter dated February 17, 2014 they filed their further written submissions. Following are the additional submissions made in the said letter dated February 17, 2014:

a. The other warrant-holders had confirmed that they would be converting their warrants but did not do so even while the acquirers exercised their warrants. Had the non-promoter investors honoured their commitment, the shareholding of the acquirers would have remained within the 55% threshold.

b. In a similar situation, in the case of MAN Industries (India) Ltd., adjudication proceedings were initiated against the promoters, despite the acquirers not reducing their holding, and no direction to make an open offer seems to have been made for crossing the 55% threshold.

4.2 Subsequently, another SCN dated March 13, 2015 was issued to the remaining 5 of the promoter group entities viz. Mrs.Sangeeta J. Valia, Mr.Vinodrai V Valia, M/s Vasparr Shelter Ltd., M/s Vasparr Trading Private Ltd. (now known as VAS Educomp Ltd.) and M/s Pushpanjali Drums Private Ltd., who were acting in concert with the six of the eleven promoter group entities of the target company, to show cause as to why suitable directions under Sections 11 and 11B of the SEBI Act and Regulations 44 and 45 of the SAST Regulations 1997 read with Regulations 32 and 35 of the SAST Regulations 2011 should not be issued against them for the alleged violations of Regulations 7(1), 7(1A), 7(2), 11(1) and 14(1) of the SAST Regulations, 1997.

4.3 The said 5 promoter group entities vide letter dated April 4, 2015 sought time till April 30, 2015 to file their reply. This was however, never done.

4.4 Subsequently, a personal hearing was granted on June 25, 2015 to the full Promoter Group (hereinafter referred collectively as the "Noticees"), comprising of the six of the eleven promoter group entities who actually acquired the shares viz. Jayesh V. Valia (HUF), Mr. Raj J. Valia, Mr.Madhav J Valia, Mr.Jayesh V. Valia, M/s Yashraj Containeurs Ltd.., M/s Precision Containeurs Ltd. and the remaining 5 promoter group entities who were acting in concert, viz. Mrs.Sangeeta J. Valia, Mr.Vinodrai V Valia, M/s Vasparr Shelter Ltd., M/s Vasparr Trading Private Ltd. (now known as VAS Educomp Private Ltd.) and M/s Pushpanjali Drums Private Ltd. The said hearing was however adjourned as some of the entities did not confirm their presence. In order to give a hearing to all the Noticees together, another opportunity of personal hearing was granted on July 24, 2015. All the Noticees made their appearance on July 24, 2015 through their Advocate and made submissions at length. Noticees sought time till July 31, 2015 to file their additional written submissions, which was granted. During the course of hearing, the Noticees were also asked to file certain documents/information such as the details of the terms of warrants issued by the company vide resolution dated April 30, 2010, copies of balance sheet of the company for the FY 2011-2012, 2012 -2013, 2013 -14, 2014-2015 etc.

4.5 Subsequently, the Noticees vide letter dated August 7, 2015 filed their additional written submissions through their Advocate. In the said written submission the Noticees mainly reiterated their earlier submissions. Additionally, they made the following submissions:

a) On March 16, 2010, a notice was given to the shareholders of the target company of an extra – ordinary general meeting proposed to be held on April 3, 2010, wherein it was proposed to issue 25,00,000 detachable Warrants at the price of Rs.55 per Warrant (Rs.10 per equity share and Rs.45 as premium ) amounting to Rs.13,75,00,000/- to the six of the promoter entities and 3 non-promoter investors, b) The terms of issuance of the warrants were set out in the said notice. The warrants were convertible within a period of 18 months from the date of the allotment at the option of each subscriber. The warrants were convertible by September 30, 2011. Further, the holder was required to pay an upfront amount of Rs. 13.75 per warrant i.e. 25% of the consideration in relation to the warrant on the date of share warrant. The terms clearly specified that the amount paid by the subscriber would be forfeited in the event the subscriber did not exercise the option of converting the warrants into shares of the target company. At a meeting of the Board of Directors of the target company on April 30, 2010, the warrants were allotted to the allotees set out above.

c) The target company also issued separate letters dated May 3, 2010 and reminders dated June 25, 2010 to the three non-promoter investors: i) N. K. Chem Plast Private Ltd. ;ii) Power Pack Finance & Investments Private Ltd.; and iii) Leena Investment Consultancy LLP, requesting them to make payment of the 25% subscription money. The entire amount of the subscription money of 25% on the warrants was paid by all the entities by December 2010.

d) As stated earlier, the promoter group converted the warrants on April 6, 2011 under the bona fide belief that the non promoter investors would also convert their warrants. However, the non promoter investors did not convert their share of warrants resulting in the increase in the shareholding of the promoter group from 53.85% to 56.04% i.e. by 2.19%.

e) There was an unwritten arrangement between the warrant holders (promoters and non-promoter warrant holders) that the warrants would be converted by all of them simultaneously. The promoter group became aware about the failure on part of the non promoter investors to convert the warrants, post facto such conversion.

f) Promoter group, on becoming aware of such increase in their shareholding in the Target Company reduced their shareholding in the Target Company to 52.30% from 56.04% during the period April to June 2011. This was done by selling a total of 1,50,000 shares (between April 13, 2011 and April 19, 2011) and 1,75,000 shares (on June 16, 2011) by Vasparr Trading Private Ltd., Pushpanjali Drums Pvt. Ltd and Ms. Sangeeta Valia [who are part of the remaining 5 promoter group entities/PACs].

g) The non-promoter holders of the warrants did not pay the remaining subscription amount. Consequently, the 25% subscription amount deposited by the non-promoter investors (Rs. 2.58 Cr.) was forfeited pursuant to a resolution of the Board of Directors of the Target Company on February 7, 2012. This amount has been included in the financial statement of the target company for the financial year 2011-2012 at Page 28 under "Additions on account of share forfeitures" (The same is also reflected in the Balance Sheets for the subsequent periods).

h) Without prejudice to their submissions, in the event it is felt that there is any technical violation on part of them, the same may be referred for an adjudication.

4.6 The Noticees also furnished the following documents along with the said written submission:

a) Copy of notice dated March 5, 2010 of the Extra Ordinary General Meeting scheduled on April 3, 2010, which inter alia contains the terms of issuance of the Warrants, b) A copy of the resolution passed by the shareholders of the Target Company at the Extra Ordinary General Meeting held on April 3, 2010, c) A copy of the resolution of the Board of Directors of the Target Company dated April 30, 2010, d) Copies of the letters dated May 3, 2010 and June 25, 2010 from the Target Company to the non-promoter allottees, e) Copy of the contract notes evidencing sale of shares. f) A copy of Board Resolutions dated February 7, 2012 with regard to forfeiture of 25% subscription amount. g) Copies of the Financial Statements of the Target Company for the FY 2011-12 (inter-alia showing the additions on account of share forfeitures), as also the statements for FY 2012 -13 and 2013-14.

Consideration of issues

5. I have considered the SCNs issued to the acquirers, replies filed by them, written as well as oral submissions made on behalf of the acquirers along with the documents contained therein during hearing and all other relevant materials available on record. There is no dispute to the fact that the Noticees were the promoter group entities of the target company and are a homogenous group and hence acting in concert in the acquisition of shares. The issues that arise for consideration, in the instant case are:

a) Whether the collective shareholding of the Noticees (Promoter Group) increased from 53.85% to 56.04% consequent to the additional acquisition of shares of the target company by the six of the eleven promoter group entities on April 6, 2011, b) If the issue at (a) is decided in the affirmative, then- i. Whether the Noticees have violated Regulation 7(1) read with Regulation 7(2) of the SAST Regulations, 1997, ii. Whether the Noticees have violated Regulation 11(1) of the SAST Regulations, 1997, by not making open offer within the time prescribed under Regulation 14(1) of the SAST Regulations, 1997, iii. Whether the Noticees have violated Regulation 7(1A) read with Regulation 7(2) of the SAST Regulations, 1997.

c) If the issues at (a) and (b) are decided in the affirmative, whether the Noticees are liable for any actions under Regulation 44 and 45 of the SAST Regulations, 1997.

5.1 Before I proceed to deal with the issues, the relevant legal provisions (pertaining to SAST Regulations, 1997), the contravention of which have been alleged in this case are reproduced hereunder:

Regulations 7(1) "Any acquirer, who acquires shares or voting rights which (taken together with shares or voting rights, if any, held by him) would entitle him to more than five per cent or ten per cent or fourteen per cent or fifty four percent or seventy four per cent shares or voting rights in a company, in any manner whatsoever, shall disclose at every stage the aggregate of his shareholding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed." Regulation 7(1A) "Any acquirer who has acquired shares or voting rights of a company under sub-regulation (1) of regulation 11, or under second proviso to sub-regulation (2) of regulation 11, shall disclose purchase or sale aggregating two per cent or more of the share capital of the target company to the target company, and the stock exchanges where shares of the target company are listed within two days of such purchase or sale along with the aggregate shareholding after such acquisition or sale."

Regulation 7(2) "The disclosures mentioned in sub-regulations (1) and (1A) shall be made within two days of,— (a) the receipt of intimation of allotment of shares; or (b) the acquisition of shares or voting rights, as the case may be."

Regulation 11(1) " No acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, 15 per cent or more but less than fifty five per cent (55%) of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than 5% of the voting rights, with post acquisition shareholding or voting rights not exceeding fifty five per cent in any financial year ending on 31st March unless such acquirer makes a public announcement to acquire shares in accordance with the regulations." Regulation 14(1) "The public announcement referred to in regulation 10 or regulation 11 shall be made by the merchant banker not later than four working days of entering into an agreement for acquisition of shares or voting rights or deciding to acquire shares or voting rights exceeding the respective percentage specified therein."

Regulation 44

44.Without prejudice to its right to initiate action under Chapter VIA and section 24 of the Act, the Board may, in the interest of securities market or for protection of interest of investors, issue such directions as it deems fit including:— (a) directing appointment of a merchant banker for the purpose of causing disinvestment of shares acquired in breach of regulation 10, 11 or 12 either through public auction or market mechanism, in its entirety or in small lots or through offer for sale; (b) directing transfer of any proceeds or securities to the Investors Protection Fund of a recognized stock exchange; (c) directing the target company or depository to cancel the shares where an acquisition of shares pursuant to an allotment is in breach of regulation 10, 11 or 12; (d) directing the target company or the depository not to give effect to transfer or further freeze the transfer of any such shares and not to permit the acquirer or any nominee or any proxy of the acquirer to exercise any voting or other rights attached to such shares acquired in violation of regulation 10, 11 or 12; (e) debarring any person concerned from accessing the capital market or dealing in securities for such period as may be determined by the Board; (f) directing the person concerned to make public offer to the shareholders of the target company to acquire such number of shares at such offer price as determined by the Board; (g) directing disinvestment of such shares as are in excess of the percentage of the shareholding or voting rights specified for disclosure requirement under regulation 6, 7 or 8;

(h) directing the person concerned not to dispose of assets of the target company contrary to the undertaking given in the letter of offer; (i) directing the person concerned, who has failed to make a public offer or delayed the making of a public offer in terms of these regulations, to pay to the shareholders, whose shares have been accepted in the public offer made after the delay, the consideration amount along with interest at the rate not less than the applicable rate of interest payable by banks on fixed deposits. Regulation 45

Penalties for non-compliance. 45. (1) Any person violating any provisions of the regulations shall be liable for action in terms of the regulations and the Act. (2) If the acquirer or any person acting in concert with him, fails to carry out the obligations under the regulations, the entire or a part of the sum in the escrow account shall be liable to be forfeited and the acquirer or such a person shall also be liable for action in terms of the regulations and the Act. (3) The board of directors of the target company failing to carry out the obligations under the regulations shall be liable for action in terms of the regulations and the Act. (4) The Board may, for failure to carry out the requirements of the regulations by an intermediary, initiate action for suspension or cancellation of registration of an intermediary holding a certificate of registration under section 12 of the Act: Provided that no such certificate of registration shall be suspended or cancelled unless the procedure specified in the regulations applicable to such intermediary is complied with. (5) For any mis-statement to the shareholders or for concealment of material information required to be disclosed to the shareholders, the acquirers or the directors where the acquirer is a body corporate, the directors of the target company, the merchant banker to the public offer and the merchant banker engaged by the target company for independent advice would be liable for action in terms of the regulations and the Act. (6) The penalties referred to in sub-regulations (1) to (5) may include:— (a) criminal prosecution under section 24 of the Act; (b) monetary penalties under section 15H of the Act; (c) directions under the provisions of section 11B of the Act; (d) directions under section 11(4) of the Act; (e) cease and desist order in proceedings under section 11D of the Act; (f) adjudication proceedings under section 15HB of the Act.

5.2 In respect of the issue stated at item No. 5 (a) above, following are my observations:

i. The target company allotted 6,25,000 warrants to the six of the promoter group entities on April 30, 2010. As on March 31, 2011, the shareholding of promoter group (Noticees) of the target company was 53.85%. On April 6, 2011, the six of the eleven promoter group entities converted 6,25,000 warrants into equity shares. Consequently, the collective shareholding of the Noticees increased from 53.85 % to 56.04%. Therefore, I find that the six of the eleven promoter group entities along with the persons acting in concert, i.e. the remaining 5 promoter group entities (all together referred to as the Noticees) acquired 6,25,000 equity shares of the target company upon conversion of warrants on April 6, 2011. The individual shareholding of the Noticees in absolute numbers and in percentage terms prior to the acquisition and subsequent to the acquisition are shown in the following table:

Name of the Promoter Pre acquisition holding Shares Post acquisition holding as on as on 31/3/2011 (Pre-acquired 6/4/2011 (Post conversion of conversion) pursuant to 6,25,000 warrants) conversion of warrants on 6/4/2011

No. of shares % No. of shares No. of shares % Jayesh V. Valia (HUF), 3,45,825 02.77% 1,04,200 4,50,025 03.43% Mr. Raj J. Valia, 0 00.00% 1,04,200 1,04,200 00.79% Mr. Madhav J. Valia, 2,82,800 02.26% 1,04,200 3,87,000 02.94% Mr. Jayesh V. Valia, 2,83,800 02.27% 1,04,200 3,88,000 02.95% M/s YashrajContaineurs Ltd., 10,71,511 08.57% 1,04,100 11,75,611 08.96% M/s Precision Containeurs Ltd 13,49,562 10.80% 1,04,100 14,53,662 11.08% Ms. Sangeeta J. Valia 5,04,671 04.03% 0 5,04,671 03.84% 0 Mr. Vinodrai V. Valia 153 00.00% 153 00.00% 0 M/s Vasparr Shelter Ltd. 6,00,516 04.80% 6,00,516 04.58% M/s Vasparr Trading P. 0 Ltd.(now known asVAS Educomp Private Ltd.) 9,74,836 07.80% 9,74,836 07.43% M/s Pushpanjali Drums 0 P. Ltd. 13,17,880 10.55% 13,17,880 10.04% Total (of the eleven promoter group) 67,31,554 53.85% 6,25,000 73,56,554 * 56.04% * As per the BSE website, the promoters shareholdings came down to 50.45% as on 30/06/2011.

ii. It is noted that the Noticees have not disputed the aforesaid percentage of acquisition, either in the replies or in their written submissions. Noticees admitted that they acquired 6,25,000 equity shares of the target company upon conversion of warrants on April 6, 2011 whereby the collective shareholding of the Promoter Group/Noticees increased from 53.85% to 56.04% shares in the target company. In view of the above, the first issue under consideration whether the collective shareholding of the Noticees (Promoter Group) increased from 53.85% to 56.04% consequent to the additional acquisition of shares of the target company by the six promoter group on April 6, 2011 is found in the affirmative.

5.3 Before I proceed further to consider this issue at item No. 5 (b) (i) on facts, I proceed to examine herein below the relevant provisions of Regulation 7(1) and Regulation 7(2) of the SAST Regulations, 1997, the text of which have been reproduced on Page 10 at Paragraph No. 5.1 of this Order:

i. A Cumulative reading of the provisions of Regulation 7(1) and 7(2) of the SAST Regulations, 1997 makes it abundantly clear that Regulation 7(1) of the SAST Regulations, 1997 makes it mandatory on any acquirer, who acquires shares or voting rights, which would entitle him to more than fifty four percent shares or voting rights in any target company, to make a disclosure of the acquisition to the target company and the stock exchanges, where shares of the target company are listed. As per Regulation 7(2) of the SAST Regulations, the aforesaid disclosures shall be made within two days from the date of acquisition.

ii. In the instant matter, it has already been concluded that by virtue of the acquisition of shares of the target company by the six of the eleven promoter group entities, through conversion of warrants, the collective shareholding of the Noticees/promoter group increased from 53.85 % to 56.04%. Therefore, it is clear that Noticees did indeed cross the threshold limit of 54% as specified under Regulation 7(1) of the SAST Regulations, 1997. The Noticees do not appear to have made any disclosures to the target company and the stock exchange(s) where the shares of the target company are listed within two days from April 6, 2011 as mandated by the provisions of Regulation 7(2) of the SAST Regulations, 1997. Noticees have not disputed the fact that they are part of promoter group entities and are persons acting in concert. Noticees in their written submissions (vide letter dated August

7, 2015) have stated that on becoming aware of such increase in their shareholding in the target company, three of the Noticees (all part of the group of eleven promoter entities), viz. Vasparr Trading Private Ltd., Pushpanjali Drums Pvt. Ltd and Ms.Sangeeta Valia reduced their shareholding in the target company to 52.30% by selling a total of 1,50,000 shares of the target company between April 13, 2011 and April 19, 2011 and 1,75,000 shares of the Target company on June 16, 2011. Noticees, however did not provide any explanation to the failure on their part to make disclosures to the target company and the stock exchange(s) where the shares of the target company are listed within two days from April 6, 2011. The Noticees, therefore appear to have failed in complying with the provisions of Regulation 7(1) read with Regulation 7(2) of the SAST Regulations, 1997.

5.4 In respect of the issue at item No. 5 (b)(ii), my findings are as under:

i. Regulation 11(1) of the SAST Regulations, 1997 provides that an acquirer together with persons acting in concert, who has acquired 15% or more but less than 55%, in accordance with law, shall not acquire additional shares or voting rights, which entitles him to exercise more than 5% of the voting rights, (with his post-acquisition shareholding or voting rights not exceeding 55%, in any financial year ending on 31st March) unless such acquirer makes a public announcement to acquire shares in accordance with the regulations within four working days of acquisition of shares or voting rights in the target company. In result, the acquirer falling under this regulation can acquire upto 5% shares or voting rights in a financial year without making a public announcement. Further, if the acquirer acquires more than 5% shares/voting rights or his post offer shareholding exceeds fifty five percent, he shall make a public announcement in accordance with the regulations.

ii. In the instant matter, it is found that the Noticees, who already had 53.85% shares in the target company acquired an additional 2.19% of shares in the target company (subsequent to the conversion of warrants by the six of the eleven promoter group entities). I note that such acquisition is in the financial year ending March 2012 and by virtue of acquisition of these 2.19% shares, the Noticees exceeded the post shareholding limit of 55% shares in the target company. However, the Noticees have not made any public announcement to acquire shares from the remaining shareholders till date, thereby triggering the provisions of Regulation 11(1) of the SAST

Regulations, 1997 read with Regulation 14(1) of the SAST Regulation, 1997, which mandates public announcement to be made within 4 working days from the date of acquisition i.e April 6, 2011.

iii. The Noticees in their reply dated November 25, 2013 have stated that they were under the belief that as the acquisition of 2.19% shares through conversion of warrants by the six of the eleven promoter group entities was well within the creeping acquisition limit of 5% voting rights or shares in the financial year, there was no requirement of making any public announcement. However, the Noticees in the same letter have also referred to an arrangement (unwritten) with the three non-promoter investors, who were also issued warrants. According to the Noticees, the said arrangement with the non-promoter investors was to the effect that the non-promoter investors would also simultaneously convert the warrants so that post conversion, the shareholding percentage of the Noticees (promoter group) would remain within the limit of 55%. If as contended, the Noticees truly believed that they could acquire an additional 5% shares in a financial year (without making any public announcement), thereby resulting in the post acquisition aggregate shareholding exceeding beyond the 55% limit, there would have been no requirement in the first place for the aforesaid arrangement (unwritten agreement with the non-promoter investors) for converting the warrants simultaneously to avoid breach of the 55% permissible limit. The contention put forth by the Noticee is thus not credible due to the internal contradictions within their reply as detailed above. I am of the view that, even accepting the Noticees' plea that the violation occurred only on account of failure on the part of the non-promoter investors to convert their warrants (as per the unwritten arrangement/agreement with the non-promoter investors), it cannot justify or absolve the Noticees of the violation of the provisions of Regulation 11(1) of the SAST Regulations.

iv. Noticees in their reply have further stated that pursuant to an amendment in 2009 to the second proviso of Regulation 11(2) of the SAST Regulations, 1997, an acquirer could acquire upto 5% shareholding or voting rights in addition to acquisitions under Regulation 11(1). According to the Noticees, the intention of the amendment was to allow further acquisitions beyond the 55% threshold limit without making an open offer and hence it was indeed possible for them to acquire upto 10% additional shares or voting rights at the relevant time without making an open offer. In this regard, it is observed that the question of extending the benefit under the second proviso of Regulation 11(2), as brought out by the amendment, (which allowed the acquirer to acquire additional shares or voting rights upto 5% without making public announcement), it is observed that the creeping acquisition upto 5% was allowed subject also to the condition that such acquisition could only be (i) via open market purchases in the normal segment or (ii) if it was the result of buy back by a company. In the instant case, the shareholding of the Noticees increased from 53.85% to 56.04% neither via any open market purchases nor any buy back by the company. In view of this, Regulation 11(2) is not really applicable in the instant case.

v. Another contention put forth by the Noticees was that there was no change in control pursuant to the acquisition. While this is indeed so, the requirement of open offer under the Regulation 11(1) is also to ensure that any purchase of shares by a person in control holding beyond 55% should be in a transparent manner through public offer. The Noticees, by exceeding the threshold limit of 55% prescribed by the Regulation 11(1), triggered the Regulation, which mandates an open offer.

5.5 In respect of the issue at item No. 5 (b) (iii), the relevant provision alleged to have been violated is Regulation 7(1A) read with Regulation 7(2) of SAST Regulations, 1997.

i. It is clear from the reading of the Regulation 7(1A) of the SAST Regulations, 1997 that this provision casts an obligation on the acquirer, who had acquired shares under Regulation 11(1) to disclose purchase or sale aggregating two per cent or more of the share capital of the target company to the target company, and the stock exchanges, where shares of the target company are listed within two days of such purchase or sale, under Regulation 7(2) of the SAST Regulations, 1997 along with the aggregate shareholding after such acquisition or sale.

ii. In the instant matter, there is no dispute as to the fact that the Noticees who were holding 53.85% of shares in the target company on March 31, 2011 acquired, on April 6, 2011, 2.19% of additional shares taking their holdings to 56.04% (as a result of the conversion of warrants by the six of the eleven promoter group entities). After the acquisition of 2.19 % shares, the Noticees however, did not make any disclosures to the target company and the stock exchanges (where shares of the target company are listed) within two days of such purchase as mandated in Regulation 7(2) of the SAST Regulations, 1997. Noticees in their reply have not disputed this fact, instead they maintain that they believed that Regulation 7(1A) gets triggered only when an individual acquirer acquires more than 2% shares, and, in this case, no individual acquirer has acquired more than 2% of shares. In this regard, it is observed that the definition of acquirer includes within its ambit, the persons acting in concert (PACs). Therefore, the phrase “Any acquirer who has acquired shares or voting rights of a company under sub-regulation (1) of regulation 11, or under second proviso to sub-regulation(2) of regulation 11” would mean any acquirer along with PACs who have acquired shares or voting rights of a company under sub-regulation (1) of Regulation 11, or under second proviso to sub-regulation(2) of Regulation 11. In the instant case, the Noticees are the promoter group entities of the target company and hence they were all acting in concert. This fact has also not been disputed by the Noticees. This fact is also strengthened by the Noticees' own statement (in their reply dated August 7, 2015) that on becoming aware of the increase in the shareholdings consequent to the conversion of warrants by some of the Noticees, three of the Noticees, who were PACs to the acquisition sold some of their shares in order to bring down the shareholding of the promoter group within the permissible limit. In view of the above, I find that collective percentage of the persons acting in concert also should be taken into consideration for the purpose of triggering of Regulation 7(1A). I therefore find that the Noticees have violated Regulation 7(1A) read with Regulation 7(2) of the SAST Regulations, 1997.

5.6 In the facts and circumstances as explained in the forgoing paragraphs, I find that the Noticees apparently violated Regulations7(1) and 7(1A) read with 7(2) and Regulation 11(1) read with 14(1) of the SAST Regulations, 1997. In view of this, the next issue (at Paragraph No. 5(c) above) to be determined is whether the Noticees are liable for any actions under Regulation 44 and 45 of the SAST Regulations, 1997.

i. Regulation 44 read with Regulation 45 of the SAST Regulations, 1997 provides for various kinds of directions/measures for the breach of the provisions of SAST Regulations, such as disinvestment of shares acquired in breach of the regulations, transferring the proceeds or securities to the Investors Protection Fund of a recognized stock exchange, directing the acquirers to make open offer etc., in the interests of securities market and for the protection of investors.

ii. In the instant case, it is noted that the increase in the shareholdings of the Noticees from 53.85% to 56.04% i.e. by 2.19% was due to the conversion of the warrants by the Noticees on April 06, 2011 and the non-conversion of warrants by the non-promoter investors. Noticees in their reply have stated that they were under the bona fide belief that the non-promoters would also simultaneously convert their warrants, whereas they did not actually do so. It is also noted that consequent to the conversion of warrants, the aggregate promoters' holding increased from 53.85% to 56.04%, i.e. an increase of 2.19%. Noticees have also stated that on becoming aware of the non-conversion of warrants by the non-promoter investors and on realizing the resultant increase in the collective shareholdings of the Promoter Group (Noticees), they immediately divested part of their shareholding in the target company and came down below 55%, by selling some of their shares. Noticees have also stated that as the non-promoter investors did not convert their warrants, the initial subscription made by these non-promoter investors was forfeited by the target company. On perusal of the Annual Report 2011-2012 furnished by the Noticees, it is observed that an amount of Rs.2.58 Cr. has been accounted in the "Reserves and Surplus" of the balance sheet of the target company as amount of share forfeiture. This fact is also reflected in the balance sheets for the subsequent periods.

iii. Noticees in their reply dated November 25, 2013 submitted "The Report of the Takeover Regulations Advisory Committee (TRAC) dated July 19, 2010 recommended inter alia: "..The committee also felt that the current threshold beyond which creeping acquisition is no longer permitted is not appropriate in the context of mandatory 100% open offer and hence recommended that creeping acquisition of 5% per annum be allowed up to the maximum permissible non-public shareholding limit..." In other words there was indeed a proposal to allow acquisitions upto 5% every financial year without regard to whether 55% limit was crossed or not, without making public announcement. In view of this, we indeed believed that the same approach would be adopted whilst reading the provisions of the 1997 Takeover Regulations." As contended above by the Noticees, subsequent to the referred Takeover Regulations Advisory Committee Report, SAST Regulations, 1997 was repealed and new SAST Regulations, 2011 came into force on October 22, 2011. As per the provisions of the new SAST

Regulations, 2011, the threshold limit is 75% instead of 55% limit (as per the earlier SAST Regulations, 1997). The acquirers could therefore (subsequent to October 22, 2011), acquire upto 75% of the shares, by way of the creeping acquisition of 5% in a financial year. As submitted by the Noticees, the acquisition of 2.19% of shares, which resulted in the breach of the threshold limit of 55%, would not have resulted in the open offer requirement as per the new SAST Regulations, 2011. The new Regulations came into force only on October 22, 2011. The Noticees violated the provisions of the SAST Regulations, 1997 which were in existence at the time of acquisition of shares in April 2011. The benefit of change of law cannot be given retrospectively to the Noticees, who violated the provisions of law as applicable at the time acquisitions were made. It is noted that the Noticees divested some shares immediately after the acquisition and brought down their holding to the permitted limit prescribed by of the provisions SAST Regulations, 1997.

iv. Considering the facts and circumstances of the case and also the mitigating factors detailed in previous paragraphs, it is felt that a direction to make an open offer by the Noticees at this juncture may not be appropriate. At the same time, one cannot ignore the fact that the Noticees have violated the provisions of Regulations 7(1) and 7(1A) read with Regulation 7(2) of the SAST Regulations, 1997 and Regulation 11(1) read with 14(1) of the SAST Regulations, 1997. As a Regulator, SEBI cannot be a mere spectator and condone such violations.

v. All things considered, I find this is a case where a monetary penalty is the most appropriate penalty. I find the ends of justice would be met, if adjudication proceedings are initiated, in terms of Regulations 45 of the SAST Regulations, 1997.

Order-

6. I, therefore, in exercise of powers conferred upon me under Sections 11 and 11B read with Sections 19 of the SEBI Act, 1992 and Regulations 44 and 45 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 read with Regulation 32 and 35 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, hereby issue the following directions :

Adjudication proceedings under the provisions of the SEBI Act, 1992 read with SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 shall be initiated against the Noticees, viz. Jayesh V. Valia (HUF), Mr. Raj J. Valia, Mr. Madhav J Valia, Mr. Jayesh V. Valia, M/s Yashraj Containeurs Ltd., M/s Precision Containeurs Ltd., Mrs. Sangeeta J. Valia, Mr. Vinodrai V Valia, M/s Vasparr Shelter Ltd., M/s Vasparr Trading Private Ltd. (now known as VAS Educomp Private Ltd.) and M/s Pushpanjali Drums Private Ltd. for violation of Regulation 11(1) read with 14(1) of the SAST Regulations, 1997and Regulations 7(1) and 7(1A) read with 7(2) of the SAST Regulations, 1997.

7. A separate Order appointing the Adjudicating Officer would be issued and the Adjudicating Officer shall conduct the inquiry in accordance with law, without being prejudiced by the observations made in this Order within a period of four months from the date of his appointment.

8. This Order shall come into force with immediate effect.

S RAMAN Date: October 28, 2015 WHOLE TIME MEMBER Place: Mumbai SECURITIES AND EXCHANGE BOARD OF INDIA