Order in respect of Polson Limited

WTM/PS/54/CFD/JUNE/2016 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 Polson Limited Date of Hearing: March 31, 2016 Appearances: Ms. Sampada Sawant, Manager appeared for the Company and Mr. Abhishek Jain, Associate Vice President, Sobhagya Capital Options Limited. For SEBI: Mr. Pradeep Ramakrishnan, Deputy General Manager; Mr. Pradeep Kumar, Assistant General Manager and Mr. Rohan Vijay, Assistant Manager. 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. Polson 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’).

3. The Company filed reply to the interim order vide its letter dated June 17, 2013. The submissions of the Company, in brief, are as under: a. The scrip of the Company is not widely traded. However, the promoters of the Company are serious in achieving the MPS. In this regard, on April 26, 2013, the Company had applied to SEBI for seeking permission for making a rights issue with the promoters being given the right of partial renouncement for the purposes of complying with the MPS norms. However, the same was rejected by SEBI. b. Thereafter, the promoters of the Company had made a proposal for an Offer for Sale (‘OFS’) to BSE. However, the same was turned down by BSE as the quantum of shares being offered under OFS were found to be insufficient. c. The Company is again proposing to make a rights issue, wherein, the promoters would renounce their rights. For the said purpose, the Company has also appointed Merchant Bankers and work has commenced on the offer letter.

4. Thereafter, the Company was afforded opportunities of personal hearing on June 27, 2014 and October 09, 2014, when its authorised representatives appeared and filed the written submissions dated June 27, 2014 and October 07, 2014 respectively. The submissions in brief are as under: a. For complying with the MPS requirements, the Company had decided to come out with a rights issue to the public shareholders, with promoters and promoter group forgoing their rights/ entitlement. b. The Merchant Banker namely Sobhagya Capital Options Limited submitted the ‘draft Letter of Offer’ on September 30, 2013. However, the Company decided to withdraw the said ‘draft Letter of Offer’ and re-file the same with due-compliance with the provisions of clause 40A(ii)(E) of the Standard Equity Listing Agreement. Thereafter, a withdrawal letter dated January 27, 2014, stating the reason for the withdrawal of ‘draft Letter of Offer’ was submitted to SEBI. c. In the meantime, due to the sudden demise of the Chairman and Promoter of the Company namely Mr. Jagdish Kapadia on February 13, 2014, the process of rights issue was halted. d. Further, in a meeting held on May 24, 2014, the Board of Directors of the Company approved the issue of further equity shares on rights basis. The statutory auditors provided their report on restated audited accounts for the year ended March 31,

2014 in August 2014. Thereafter, the Company decided to issue 14,951 fully paid up equity shares of `50 each on rights basis to the existing shareholders in the ratio of 31 fully paid up equity shares for every 39 equity shares and the Merchant Bankers have submitted the ‘draft Letter of Offer’ with SEBI and BSE on September 30, 2014.

5. As considerable time had elapsed from the date of filing of the ‘draft Letter of Offer’ for rights issue and no update was received from the Company, another opportunity of personal hearing was granted to it on January 14, 2015. For the hearing, Mr. Noel Jacob, Company Secretary and Ms. Sampada Sawant, Manager appeared and made oral submission. They also sought one week’s time for submitting the written submissions, which was duly granted. Thereafter, the Company filed the written submissions on January 19, 2015, which were taken on record. The following was submitted in the written submissions: a. The Company filed a fresh ‘draft Letter of Offer’ for rights issue with SEBI and BSE on September 30, 2014, vide which the promoters would not be participating in the proposed rights issue. b. BSE has given it an in-principle approval on December 08, 2014. It is awaiting the final observations on the draft ‘Letter of Offer’ for the rights issue from SEBI. Upon receipt of such letter, it shall commence with the procedural formalities to conclude the rights issue and comply with the MPS norms.

6. While the draft ‘Letter of Offer’ of the Company was being scrutinised, SEBI also examined certain other allegations in the scrip. On completion of such examination, an observation letter dated May 22, 2015, on the draft ‘Letter of Offer’ was issued by SEBI. Later, on March 31, 2016, one more opportunity of personal hearing was granted to the Company when the authorised representatives of the Company appeared and made submissions.

7. I have considered the submissions of the Company. The interim order was issued against the Company as it 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. I note from the shareholding pattern of the Company for the period ended June 30, 2013, that the promoters held 84.33% and the public shareholders were holding 15.67%. As per the shareholding pattern of the Company as disclosed to BSE, for the quarter ended March 31, 2016, the promoter holding is at 84.33% and the public shareholding was at 15.67%. From the above, it can be seen that the Company was non-compliant with the MPS requirements at the time of passing of the interim order and such non-compliance continues till date.

8. The Company in its reply and in the personal hearing had stated that it will issue shares on rights basis to the existing shareholders with promoters/ promoter group foregoing their rights/ entitlement. I note that the Company had informed SEBI about this proposal on June 17, 2013. However, from the above discussion and on perusing the written submissions, it is noted that the Company had taken the first positive step towards complying with the MPS norms only on September 30, 2014, i.e. after a period of more than one year from the date of passing of the interim order. I note that the Company re-filed the ‘draft Letter of Offer’ for rights issue with promoters and promoter group forgoing their rights/ entitlements. The issue had opened on May 11, 2016 and closed on May 25, 2016.

9. The Company vide its e-mail dated May 30, 2016, while submitting the following requested for approval for de-listing of its shares: a. It had made offer for the issue of 14,951 equity shares of the face value of `50 each on rights basis in the ratio of 31 fully paid equity shares for every 39 fully paid shares. b. It had attempted to defer the rights issue, inspite of obtaining consent from SEBI prior to March 2016, with the expectation of improvement in the market value. c. The market value of the shares was `6,400, however, it made offer at `5,600 per equity share with the primary intention of achieving 100% subscription of the shares. d. The Company had expected complete participation from the shareholders and were of the opinion that the issue will be oversubscribed before the closure date of May 25, 2016. e. However, inspite of the discussed efforts it could receive subscription of 25.89% amounting to `216.77 lakh and requested permission to withdraw the offer, closed on May 25, 2016.

10. Considering the facts and circumstances (i.e. failure of rights issue of the Company) it is clear that the Company has not complied with the MPS requirements till date. I note that the Company had sufficient time to comply with the MPS requirement and it ought to have explored other methods prescribed. Further, as regards the submissions of the Company relating to delisting, I note that the Company has not specified any ground to delist from the exchange.

11. Such acts of the Company are in breach of Rule 19A of the SCRR and Clause 40 A of the Listing Agreement (as applicable at the relevant point of time) [now Regulation 38 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015] 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.

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 Polson Limited.

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.

DATE: June 14th, 2016 PRASHANT SARAN PLACE: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA