Order in respect of Shreevatsaa Finance & Leasing Limited

WTM/PS/141/CFD/JAN/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 Shreevatsaa Finance & Leasing 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. Shreevatsaa Finance & Leasing 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”), Ahmedabad Stock Exchange and erstwhile UP stock Exchange.

3. The Company vide its letter dated June 11, 2013 inter alia stated the following:

(a) Its promoter/promoter group is not able to sell their shares through secondary market (i.e. Offer for Shares through stock exchange) as the scrip was suspended by BSE for the last 10 years.

(b) The Company submitted that even if it applies for termination of suspension of trading and thereafter make an offer for sale, there may be a situation that no investor is interested in buying its shares. (c) The Company submitted that it does not want to make a rights issue as it does not require funds and would become answerable to shareholders if it was not able to deploy such funds. The Company stated that its promoter group holds a total of 89.61% (promoter, Mr. Praveen Kumar Arora holds 79.22% and Agarni Leasing & Finance Pvt. Ltd. holds 10.39%). (d) The public shareholding is held by 59 investors holding 10.39% of share capital. (e) The Company also stated that as per the directions issued vide the interim order with respect to freeze of excess promoters’ holding, only 58.10% of the promoter holding would be frozen and requested permission to transfer the remaining 31.10% to the prospective investors so that it could achieve MPS.

4. The Company did not undertake any steps including OFS (as proposed) for complying with the MPS requirements and therefore continued to be non-compliant with the MPS norms. The Company was afforded an opportunity of personal hearing on July 03, 2015, when its representative Mr. Rajen Gada, Chartered Accountant, appeared and made oral submissions. As requested, liberty was granted to file written submissions. Thereafter, vide letter dated July 06, 2015, the Company inter alia stated as follows:

(a) The paid-up and listed share capital of the Company is Rs.10,10,00,000/- divided into 1,01,00,000 equity shares of face value of Rs.10/- per share. (b) The net-worth of the Company is Rs.18,93,80,246/- as on March 31, 2015. (c) There are only 61 shareholders in the Company as follows:

Sr. no. Category of No. of No. of shares Percentage of shareholder shareholders held shareholding 1. Promoter 2 90,51,300 89.62% 2. Public 59 10,48,700 10.38% 61 1,01,00,000 100% (d) ‘The Company is active for trading at BSE Limited since December 05, 2014’. However, no shares were traded since September 20, 1999.

(e) The Company wishes to delist its shares from the stock exchange and therefore it would be cumbersome for the promoter to first reduce their promoter shareholding and then give exit opportunity for delisting. (f) According to the Company, the stock exchanges are charging very high fees for utilisation of their platform for undertaking the book building process and therefore it is economically not viable to undertake book building process for only 59 shareholders (public). (g) Mr. Praveen Kumar Arora, promoter, had subscribed to equity shares of Pine Animation Limited on preferential basis. SEBI vide Order dated May 08, 2015 put a freeze on the accounts of subscribers to equity shares issued under the preferential basis. The said promoter has been barred from undertaking transactions in the capital market. The Company is neither related to Pine Animation nor under the same management. The promoter would not be able to provide exit opportunity to the public shareholders of the Company. (h) In view of the above, the Company sought the following exemptions/permissions: 1. Exemption from undertaking OFS for meeting MPS; 2. Exemption from undertaking book building process as prescribed under regulation 14 of the SEBI Delisting Regulations; 3. Permission to Mr. Praveen Kumar Arora to undertake the delisting related transaction of the Company so as to give exit opportunity to the public shareholders. (i) In case SEBI decides otherwise, then the Company submitted that the promoters will have to offer 14,76,300 equity shares of the Company through OFS so as to comply with MPS requirements. The Company referred to the letter dated May 25, 2015 of Mr. Praveen Kumar Arora to SEBI and stated that he was in the process of undertaking OFS when the he was restrained vide another SEBI Order dated May 08, 2015. The Company requested SEBI to defreeze 14,76,300 equity shares of the Company held by the said promoter and also permit him to access the capital market for the limited purpose of undertaking necessary transactions for meeting MPS norms.

5. 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). It is an admitted position that till date the Company is not compliant with the MPS norms as the public shareholding in the Company is at 10.38% (less than the minimum requirement of 25%). The Company has therefore failed to comply with the MPS requirements within the stipulated timeline and is also in continuous violation of these norms.

6. The Company, in its submissions, has stated that it wishes to delist its shares from the stock exchanges and requested for an exemption from undertaking the book building process under the Delisting Regulations. The processes under the Delisting Regulations have been stipulated to ensure that the interest of shareholders are taken care and that the shareholders themselves decide on whether to delist the shares of their company. Further, the reverse booking building process has been prescribed to ensure that shareholders decide on the exit price to be paid by the promoter under the delisting offer. I note from the submissions that the Company/its promoter has not taken any steps towards the proposed delisting. There is not even a Board approval for such proposal.

7. The Company has submitted that its promoter (Praveen Kumar Arora) is not able to make an OFS as he has been debarred vide SEBI Order May 8, 2015 from dealing in the capital market and has requested SEBI to defreeze 14,76,300 equity shares held by this promoter to offer them for sale for complying with the MPS requirements. I note that OFS is not the only method for complying with the MPS requirements and that SEBI vide Circulars dated December 16, 2010, February 08, 2012 and August 29, 2012, had prescribed other methods also. Further, the amended MPS norms came into force from June 2010 and the promoter was debarred only on May 08, 2015. The Company/promoter had around 5 years at their disposal before the restraint on its promoter had been ordered. The Company/promoter therefore had adequate time for complying with the MPS norms and the facts and circumstances of the case suggest that they were not serious in complying with the MPS norms.

8. 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 me, 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.

9. 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, Shreevatsaa Finance & Leasing Limited, its directors, promoters and promoter group.

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

11. 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: January 21st, 2016 Place: Mumbai