Order in respect of Titan Trading & Agencies Limited

WTM/PS/52/CFD/OCT/2013 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 minimum public shareholding requirements

In respect of Titan Trading & Agencies Limited

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") vide an interim ex-parte order dated June 04, 2013 (hereinafter referred to as the "interim order") had issued certain directions in respect of 105 listed public companies who had failed to comply with the Minimum Public Shareholding ("MPS") requirements stipulated under rules 19(2)(b) and 19A of the Securities Contracts (Regulation) Rules, 1957 within the due date i.e., June 03, 2013. Such directions issued vide the interim order are as follows: a) The voting rights and corporate benefits like dividend, rights, bonus shares, split, etc. with respect to the excess of proportionate promoter/promoter group shareholding in the non-compliant companies were directed to be frozen, till such time the companies complied with the minimum public shareholding requirement. b) The promoters/promoter group and directors of those non-compliant companies were prohibited from buying, selling or otherwise dealing in securities of their respective companies, either directly or indirectly, in any manner whatsoever, except for the purpose of complying with minimum public shareholding requirement till such time those companies complied with the minimum public shareholding requirement. c) The shareholders forming part of the promoter/promoter group in the non-compliant companies were restrained from holding any new position as a director in any listed company, till such time those companies comply with the minimum public shareholding requirement. d) The directors of non-compliant companies were restrained from holding any new position as a director in any listed company, till such time those companies complied with the minimum public shareholding requirement. 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. Titan Trading & Agencies Limited (hereinafter referred to as "the Company") was one such company which was found to be non-compliant with the MPS norms. The promoter's shareholding in the Company as on the date of the interim order was 96.89%. The shares of the Company are listed on the Bombay Stock Exchange Limited ("BSE").

3. The Company filed its interim reply vide its letter dated June 05, 2013. Later, the Company filed its detailed reply to the interim order vide letter dated August 02, 2013. Thereafter, an opportunity of personal hearing was afforded to the Company on August 27, 2013, when Mr. Atul Choksey (Director the Company) appeared along with Mr. Bipin Jhaveri (Company Representative), Mr. Zal Andhyarujina (Counsel), Mr. Bhoumick Vaidya (Partner, Kanga & Co.), Ms. Upasana Parasrampuria (Advocate), Rajnish Rangari (Country Head and Managing Director, Global Trustcapital Finance Pvt. Limited) and made submissions. Pursuant to the hearing, the Company vide its letter dated August 28, 2013 gave the written submissions. Thereafter, vide another letter dated September 10, 2013, the Company filed the revised written submissions and requested to ignore the written submissions dated August 28, 2013.

4. I have considered the reply dated August 02, 2013, written submissions dated September 10, 2013, the oral submissions made during the personal hearing and the documents submitted by the Company. It is the case of the Company that, it has a share capital of less than 1 crore and has a very small shareholder base of 90 shareholders, out of which five (5) form part of the promoter/ promoter group and eighty five (85) are public shareholders. It has been said that the public shareholders were holding 7,000 equity shares representing 3.11% of the equity share capital. According to the Company, it had examined the options available in order to ensure the compliance with the requirement of MPS. The Company also said that the possibility of finding any buyers for the divested/ fresh shares was remote and since there was no transaction in the shares of the Company in last 5 years, any exercise which required new investment by investors would prove to be futile.

5. The Company, then in consultation with the merchant banker, decided that delisting in a manner as provided in Regulation 27 in Chapter VII of the SEBI (Delisting of Equity Shares) Regulations, 2009 (hereinafter referred to as 'Delisting Regulations') is the most feasible and practical option available. Accordingly, by January 17, 2013, the promoters had taken an in-principle decision to delist the Company from BSE. On April 01, 2013, a resolution for delisting the shares of the Company was passed by the Board of Directors. Pursuant to this, the approval of the shareholders were obtained through the postal ballot route. Then, according to the Company, a scrutinizer was appointed to scrutinize the postal ballots, who in his report dated April 25, 2013 submitted that the resolution for delisting was unanimously approved by all the public shareholders of the Company. Thereafter, a Chartered Accountant's firm was appointed to value the equity shares of the Company, who in its report dated May 20, 2013 proposed the value of 614 per equity share of face value of 10 each. Thereafter, the Company filed an application dated May 22, 2013 with BSE for an in-principle approval for the delisting of shares of the Company. However, the process could not be completed due to interim order.

6. I note from the submissions of the Company that pursuant to the in-principle approval by the BSE, the promoters of the Company have to make a firm and binding offer at a fixed price to all the public shareholders, as per Regulations 8 and 27 of the Delisting Regulations. In the event of 90% of the public shareholders giving their consent in writing to such proposal either to sell their shares at the price offered by the promoter or to remain as holders of the shares even if they are delisted, the promoters of the company must, make payment to the consenting public shareholders to purchase their shares as such within 15 working days. It has also been said that once the consent of 90% of the public shareholders are obtained, the process of delisting will become irreversible and the promoters of the Company will be legally bound to buy out the shares of the consenting public shareholders.

7. The Company in its submissions dated September 10, 2013, has requested SEBI to modify paragraph 17(b) of the interim order to the extent that it shall not hinder the already commenced voluntary delisting process initiated by the Company and that Ms. Parul Choksey and Mr. Atul Choksey, the two promoters of the Company be permitted to buy the equity shares from the public shareholders, as part of the delisting offer. It has been said that the Company shall endeavour to complete the delisting process within a period of 6 (six) months and report its outcome on completion of the 6 (six) months' period. Further, it has also been said that the directions contained in paragraph 17(b) of the interim order may be re-imposed/ revived immediately in case the delisting process of the Company is not successful within a period of 6 (six) months.

8. The Company submitted that the interim order prohibits the Company and its promoter from continuing with the delisting process even though it had taken a bonafide decision to voluntarily delist its shares.

9. I note that as on June 03, 2013, the Company was non-compliant with the MPS requirements. I have considered the special provisions of delisting for small companies as provided in Regulation 27 of the Delisting Regulations. One of the requirements under such provisions is that the promoter has to individually write to all public shareholders in the Company informing them of his intention to get the equity shares delisted, indicating therein the exit price (along with the justification) and seeking their consent for the proposal for delisting. I note that at least 90% of such public shareholders are required to give their positive consent in writing to the proposal for delisting and also the consent either to sell the equity shares at the price offered by the promoter or to remain as holders of the equity shares even if they are delisted. I note that the Company has written to all the shareholders and as per the scrutinizer's report the shareholders have unanimously resolved to delist.

10. I note that the Company has failed to comply with the MPS requirements within the stipulated time. However, considering the facts and circumstances as brought out by the Company, I am convinced that the Company be allowed to proceed with its voluntary delisting process. Accordingly, I find it reasonable and appropriate to modify the directions issued vide the interim order to the extent that the same does not affect or prejudice the efforts of the Company/ its promoter from continuing with the voluntary delisting process. I also note that the Company has sought 6 (six) months' time for complying with the MPS norms in view of its delisting offer. The period sought by the Company appears to be too long for completing the voluntary delisting process.

11. In view of the foregoing, 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 issue the following directions which are in modification of the directions issued vide the interim order dated June 04, 2013 :

(i) The direction issued in paragraph 17(b) of the interim order dated June 04, 2013 stands modified to the extent that it shall not hinder the already commenced voluntary delisting process initiated by the Company, Titan Trading & Agencies Limited and that Ms. Parul Choksey and Mr. Atul Choksey (the two promoters of the Company) shall be permitted to buy the equity shares from the public shareholders as part of the delisting offer. The Company shall endeavour to complete the delisting process within a period of three (3)

months from the date of this Order and report within one (1) months' period from the date of delisting. (ii) The direction contained in 17(b) of the interim order dated June 04, 2013 shall be re-imposed/ revived immediately in case the delisting process of the Company is not successful within a period of three (3) months from the date of this Order. (iii) The directions contained in paragraphs 17(a), (c) and (d) of the interim order dated June 04, 2013 shall continue till the time the Company is delisted from the stock exchange or till the time the Company becomes compliant with the MPS norms.

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

13. The aforesaid directions are issued without prejudice to the right of SEBI to initiate action as contemplated in paragraph 18 of the interim order in case the delisting process of the Company is not successful within a period of three (3) months from the date of this Order.

14. Copy of this Order shall be served on the stock exchanges and depositories for their information and action that may deem fit and necessary in this case.

PLACE: Mumbai PRASHANT SARAN DATE: October 09, 2013 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA