Order in respect of Sirhind Steel Limited

WTM/PS/04/CFD/APR/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 Sirhind Steel 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. Sirhind Steel 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 Ahmedabad Stock Exchange Limited (ASE).

3. The Company did not submit any reply pursuant to the interim order. However, in accordance with the principles of natural justice, SEBI afforded an opportunity of personal hearing in the matter on July 03, 2015. However, the Company (through its promoter, Mr. Ravi Malhotra), vide email dated July 02, 2015, informed that they would not be able to attend the hearing and requested for an adjournment. On consideration of the same, the personal hearing was fixed on August 10, 2015. However, Mr. Ravi Malhotra vide email dated

August 07, 2015 informed his inability to appear in the said hearing as he could not travel due to health issues.

4. Thereafter, SEBI vide letter dated August 24, 2015, while referring to the opportunities of personal hearing afforded to the Company, advised it, as a final opportunity, to file written submissions to the interim order within a period of two weeks from the date of receipt of the letter. The Company was also informed that SEBI shall proceed with further action in the matter if the Company failed to submit its reply. A copy of the interim order was also forwarded along with the above said letter.

5. The Company, vide letter dated September 07, 2015, filed its reply inter alia making the following submissions:

(a) The Company carried on manufacturing activities in steel rolling mill industries, which has been reeling under doldrums since more than a decade and had lost investors’ interest. Under the circumstances, the Company could not comply with the MPS requirements though its promoters have the best intention to comply. (b) Considering the long tenure of suspension of the scrip and unprecedented long period of recession in the steel industry which eventually resulted into closing of the operations of the Company and selling out the assets of the Company, the promoters (holding close to 90%) were contemplating the option to delist the shares of the Company from BSE. (c) The promoters were intending to initiate the delisting process and that a Board meeting would be called for. The Company requested to keep the proceedings on hold till the board of directors of the Company decide on the same. (d) The directions issued vide the interim order have been noted by the Company. (e) The Company denied the allegations in the interim order and stated that it would place true and correct facts and requested for copies of documents referred to in the interim order. (f) The Company requested for an opportunity of personal hearing. It further stated that serious attempts were made to find a way out and are confident to come with a proposal in the matter.

6. The Company was afforded an opportunity of personal hearing on December 10, 2015 when Mr. Ravi Malhotra, Director and Mr. M. L. Sharma, Chartered Accountant appeared and made oral submissions. Liberty was granted to make written submissions within a period of one week.

7. Pursuant to the personal hearing, the Company, vide letter dated December 16, 2015, stated the following:

(a) The existing promoters holding 89.98% of shares have expressed their intention to acquire remaining shares of the Company thereby providing exit opportunity to all the public shareholders. The Company therefore intends to delist its shares from the stock exchange under the SEBI Delisting Regulations. (b) A merchant banker was appointed on December 01, 2015 to enable the process of voluntary delisting. The Company had also informed the stock exchange vide letter dated December 03, 2015 regarding the offer as considered by the board of directors of the Company in the board meeting held on December 03, 2015. (c) The Company requested SEBI to lift the directions imposed vide the interim order to enable the promoters to buy shares of the Company held by the public shareholders and initiate the process of voluntary delisting of the equity shares of the Company from the stock exchanges. (d) The Company also sought time of one year to enable it to proceed with obtaining various approval of shareholders and other authorities and to acquire shares held by the public shareholders and complete the voluntary delisting process. It was further stated that they would abide by the conditions laid down by SEBI.

8. I have considered the interim order passed in the matter against the Company, its promoters and directors. Before proceeding further, I note that the Company, vide reply dated September 07, 2015, had requested for copies of documents referred to in the interim order. In this regard, it needs to be noted that in the interim order (which has been delivered twice on the Company), there is no reference of any letters/documents as sent by SEBI to the Company. All other references were only with respect to the statutory provisions and SEBI Circulars (prescribing the methods to comply with MPS norms). The Company, being a listed company, was already under a statutory notice under the SCRR/listing agreement to comply with the MPS norms before the due date. Therefore, there is no document to be furnished to the Company.

9. The interim order was issued against the Company as it failed to maintain the minimum public shareholding of 25% as mandated under rule 19A of the SCRR and Clause 40A of the Listing Agreement read with section 21 of the Securities Contract (Regulation) Act, 1956 ("SCRA"). It is an admitted position that the promoters of the Company hold 89.98%. I have perused the shareholding pattern of the Company as available in the website of the BSE and note that the public shareholders hold only 10.02%. From the above, it can be concluded that the public shareholding in the Company is less than the mandated minimum of 25% in a listed company. The Company is therefore in violation of the MPS requirements.

10. The Company has submitted that its promoters intend to acquire the remaining shares held by the public shareholders and thereafter to delist the shares from the stock exchange. The Company has stated that it had informed BSE regarding the proposal of the promoter to make a voluntary delisting offer. The announcement made to BSE also states that the board of directors of the Company would consider the same and would keep the stock exchange informed. Though the Company submitted that it has appointed a merchant banker to lead the promoter in respect of the delisting process, I note that the Company has not produced any document to state whether the board of directors have approved the same and also whether the shareholders have approved the proposal. These are the most basic requirements to be fulfilled in a delisting process under the SEBI Delisting Regulations. I also note that the Company has not taken any steps towards delisting prior to June 04, 2013. In view of the same, I find that such submissions are made without any seriousness and therefore do not warrant any consideration. Further, this proceeding is a quasi-judicial proceeding pursuant to the interim order passed against the Company and further action (confirming the interim order along with action as contemplated in the interim order or revoking the interim order) in respect of the Company, its promoters and directors would be taken based on the status of compliance with the MPS norms.

11. Considering the facts and circumstances of the case, it is clear 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.

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 the company, Sirhind Steel 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: April 06th, 2016 Place: Mumbai