Order in the matter of Anshu’s Clothing Limited

Under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 and regulations 32 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

In respect of: - 1. Ravi Bhandari PAN: ADQPR8496J 2. Rekha Bhandari PAN: AAHPR8129A 3. Ravi Bhandari -HUF PAN: AAJHR4856E 4. Lollipop Fashions Pvt. Ltd. PAN: AACCL1423B 5. Samir Ghosh PAN: AMPPG0185K

In the matter of Anshu’s Clothing Limited

Background 1. Anshu’s Clothing Limited (hereinafter referred to as “Target Company” or “ACL”) is a company having its registered office at A-212, Titenium City Centre, Satellite, Ahmedabad and its securities are listed on the Bombay Stock Exchange. The noticee nos.1 to 4, namely Ravi Bhandari, Rekha Bhandari, Ravi Bhandari HUF and Lollipop Fashions Pvt. Ltd, were the promoters and promoter group entities of ACL as per the shareholding pattern of the Target Company filed with BSE for the quarter ending on September 30, 2013. Samir Ghosh (the noticee no.5) and the promoter & promoter group entities (the noticee nos. 1-4) had carried out transactions between themselves in shares of ACL, as a consequence of which the present proceedings have arisen. 2. It was observed by Securities and Exchange Board of India (SEBI) that the Promoter Group had entered into three different agreements in 2013 with various persons for providing/arranging loan to the Company/ Promoters. The details of the Agreements are given below:

Date of Pledgor Pledgee Loan No. of shares Agreement Amount (Rs.) provided for pledge 18.10.2013 Ravi Bhandari Chirag N. Shah 10,00,000 1,00,000 18.10.2013 Ravi Bhandari Pragnesh Doshi 30,00,000 2,80,000 27.11.2013 Anshus Clothing Samir Ghosh No loan was NA Limited proprietor of availed/ S.K.Ghosh & provided Co.

3. Pursuant to the abovementioned agreement dated November 27, 2013 entered between Ravi Bhandari, a Director of the target company (Borrower) and Samir Ghosh, Proprietor of S K Ghosh & Co. (Lender), for providing or arranging loan to the Target Company/Promoters, the promoter group entities of ACL, consisting of Ravi Bhandari, Ravi Bhandari HUF, Lollipop Fashions Pvt. Ltd. and Rekha Bhandari, transferred a total of 25,00,000 shares constituting 40.1% share capital/voting rights of the Target Company to Mr. Samir Ghosh, the proprietor of S K Ghosh & Co. on November 27 and 28, 2013. The said agreement provided inter alia for the following: i. The lender would lend an amount of Rs.2 crore to the borrower against the equity shares of the Company. ii. The Borrower would transfer shares equivalent to 4 times the Loan amount at last quoted price as security for the loan. iii. The loan amount would be for a period of 12 months. Borrower would pay an interest of 17% per annum on the loan amount. iv. The Lender would return the shares to the Borrower immediately on repayment of the Loan. v. If the Borrower defaults in the due performance of the terms of the Agreement, the Lender after giving due notice shall have the absolute right to sell shares. vi. In case the share price of the company goes down to 25% of the market rate in such case the Borrower would deposit cash margin or further shares were to be deposited by the Borrower to the Lender. 4. The details of shares transferred by the promoter group to Samir Ghosh, pursuant to the abovementioned agreements, are as follows:

Date Name of the Promoter Name of the Party to No. of Shares and Promoter Group whom shares are transferred transferred to 28.11.2013 Ravi Bhandari Samir Ghosh 7,00,000 (11.23%) 27.11.2013 Rekha Bhandari 6,36,000 (10.20%) 27.11.2013 Ravi Bhandari HUF 6,52,000 (10.46%) 27.11.2013 Lolipop Fashions 5,12,000 (8.21%) Private Limited Total Shares 25,00,000(40.1%) 5. Subsequent to the transfer of shares by the promoter group to Samir Ghosh in terms of the abovementioned agreement, in December 2013, the target company issued bonus shares in the ratio of 1:1 by virtue of which the number of shares held by Mr. Ghosh became 50,00,000. However, Samir Ghosh later informed the target company that he was not in a position to arrange/ provide any funds/loans to the Company. As a result, there was no financial assistance or any amount whatsoever provided by Samir Ghosh to the company or its Promoters Group, as per the abovementioned agreement dated November 27, 2013. Subsequently, Samir Ghosh transferred back a total of 45,00,000 shares to Ravi Bhandari on December 16, 2013 and January 15, 2014, as per the following details: Date Name of promoter and promoter group No. of shares entity to whom shares were transferred 16.12.2013 Ravi Bhandari 35,00,000 15.01.2014 Ravi Bhandari 10,00,000

6. A portion of the aforesaid shares which were transferred back by Samir Ghosh to Ravi Bhandari belonged to Rekha Bhandari, M/s. Lollipop Fashions Private Limited and Ravi Bhandari HUF which were earlier provided by them to Ravi Bhandari in good faith. Hence, Ravi Bhandari further transferred those shares to the respective demat account of the Promoter Group entities, the details of which are given below: Date Name of the persons to whom shares were No. of shares transferred by Ravi Bhandari 01.01.2014 Rekha Bhandari 12,72,000 01.01.2014 Ravi Bhandari HUF 13,04,000 03.01.2014 Lollipop Fashions Private Limited 9,00,000

7. In the background of the facts narrated above, a Show Cause Notice dated 23 March, 2016 was issued to the noticee nos. 1-4 stating the above facts and alleging the following : (i) That since the transfer of shares to Samir Ghosh by the promoter group amounted to the shares/voting rights being transferred to Samir Ghosh by the Promoter Group entities, the same would amount to acquisition of shares of the target company by Samir Ghosh. The return of shares by Samir Ghosh to the Promoter Group entities would also amount to acquisition by the Promoter Group of Target Company. (ii) That as a result of the transfer of shares by Samir Ghosh to the promoter group on December 16, 2013, the noticees’ shareholding in the Target Company had increased from 22.37% to 50.63% of the total share capital of the target company and, consequently, breached the threshold of 25% as stipulated in the Regulation 3 (1) read with 13 (1) of the SEBI (Substantial Acquisition of Shares and Takeover Regulations), 2011 (Take over Regulations). Thus, the noticees have not complied with the obligation to make a public announcement in terms of regulation 3(1) read with 13(1) of Takeover Regulations, 2011. (iii) That as on 02.01.2014, the total shareholding of the Promoter Group was 50.44%.

On 03.01.2014, one of the Promoter Group entities, Ravi Bhandari, transferred 7.22% shares to other Promoter Group entities. Since Ravi Bhandari is a seller and other Promoter Group entities are buyers, they cannot be termed as ‘Person Acting in Concert” (PAC) for the above transaction. However, the total shareholding of the Promoter Group entities excluding Ravi Bhandari increased from 21.87% (50.44%-28.57%) to 29.09% (i.e. 21.87%+7.22%) of the total share capital of the target company and consequently, breached the threshold of 25% as stipulated in the regulation. Thus, Rekha Bhandari, Ravi Bhandari HUF and Lollipop Fashions Pvt. Ltd. have not complied with the obligation to make a public announcement in terms of regulation 3(1) read with 13(1) of Takeover Regulations, 2011. (iv) That as on 01.01.2014, the total shareholding of the noticees was 50.44% which increased to 58.39% of the total share capital of the target company on 15.01.2014 resulted in a breach of 5% creeping acquisition limit in the financial year 2013-14. In view of the same, the promoters group were required to make public announcement as per regulation 3(2) read with regulation 13(1) of Takeover Regulations, 2011 which they failed to comply.

8. Further, a separate SCN dated March 23, 2016 was issued to noticee no. 5, Samir Ghosh, stating the abovementioned facts at paras 2-6 and alleging the following: (i) That since the transfer of shares to Samir Ghosh by the promoter group amounted to the shares/voting rights being transferred to Samir Ghosh by the Promoter Group entities, the same would amount to acquisition of shares of the target company by Samir Ghosh. The return of shares by Samir Ghosh to the Promoter Group entities would also amount to acquisition by the Promoter Group of Target Company. (ii) That as a result of the aforesaid acquisitions of shares by the noticee no. 5 on 27.11.2013, his shareholding in the Target Company had increased from 0% to 28.87% of the total share capital of the target company and consequently, breached the threshold of 25% as stipulated in the regulation 3(1) read with 13(1) of Takeover Regulations, 2011. Thus, the noticee no. 5 has not complied with the obligation to make a public announcement in terms of regulation 3(1) read with 13(1) of Takeover Regulations, 2011. (iii) That as on 27.11.2013, the total shareholding of the noticee no. 5 in the target company was 28.87%.

On 28.11.2013, he acquired 7,00,000 shares from Ravi Bhandari which increased his shareholding in the target company to 40.1% of the total share capital of the target company, resulting in a breach of 5% creeping acquisition limit in a financial year 2013-14. In view of the same, the noticee no. 5 was required to make public announcement as per regulation 3(2) read with regulation 13(1) of Takeover Regulations, 2011 which he failed to comply. 9. In light of the above, the noticee nos. 1-5 were called upon to show cause as to why suitable directions under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 and Regulation 32 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 should not be issued against them for the alleged violations referred to hereinabove. Reply and hearing 10. The noticee nos. 1-4, namely Ravi Bhandari, Rekha Bhandari, Ravi Bhandari -HUF and Lollipop Fashions Pvt. Ltd., filed their reply vide separate letters each dated July 21, 2016.

They were granted an opportunity of hearing on April 3, 2017. Mr. Rajesh Khandelwal, Advocate, attended the hearing on behalf of them and made submissions. After the personal hearing, the said entities have also filed written submissions dated April 20, 2017 and provided various documents and records of email communications. The replies and submissions made by these entities are briefly summarized as under:

i. Anshu’s Clothing Limited (ACL) was in need of funds and for this purpose, ACL/promoter, entered into agreements with financier/brokers for providing loan to the company / promoter against shares of ACL as security.

ii. One such agreement was entered into by Ravi Bhandari, on behalf of ACL, with Mr. Samir Ghosh on November 27, 2013. Pursuant to the agreement, the promoter group entities, viz. Ravi Bhandari HUF, Ravi Bhandari, Rekha Bhandari and Lollipop Fashions Private Limited transferred 25,00,000 equity shares to Mr. Samir Ghosh on November 27 & 28, 2013, in advance before availing any loan / acting upon the agreement as a good gesture. Later, ACL declared bonus shares in the ratio of 1:1 (record date: December 05, 2013) which doubled the number of shares held by Mr. Ghosh.

iii. Subsequently, Samir Ghosh expressed his inability to arrange for loan amount and it was also realised by parties to the agreement that there were certain legal complications arising out of the terms of agreement, hence both parties decided not to act upon the agreement. As the transaction of availing / arranging loan did not materialize, Mr. Ravi Bhandari requested Mr. Samir Ghosh to return back 50,00,000 shares of ACL which were held in trust by Mr. Samir Ghosh.

iv. As the shares were provided in advance before availing of loan / acting upon the agreement, Mr. Samir Ghosh was only holding the said shares as trustee on behalf of the promoter group entities. Therefore, the transaction of providing shares did not amount to sale / disposal or any kind of encumbrance on the shares / voting rights.

v. Mr. Samir Ghosh returned back 45,00,000 shares of ACL held by him in trust into the demat account of Mr. Ravi Bhandari, one of the promoter group entities, in two tranches (December 16, 2013 and January 15, 2014) instead of returning it into the demat account of respective promoter entities. In view of this, Mr. Ravi Bhandari, in turn, transferred 34,76,000 shares to other promoter group entities in order to rectify the mistake committed by Mr. Samir Ghosh and these transactions did not amount to sale / disposal or purchase / acquisition of share / voting rights.

vi. No fund/amount was received by promoter entities or ACL from Samir Ghosh and the shares were returned by him (except 50,000 shares) within a short span of 48 days. There was no monetary transaction between the parties either preceding or succeeding the said act of giving or receiving back the securities. The debit-credit of shares has taken place due to bona fide mistake and there was no intention to acquire / transfer / sell / dispose of or create any encumbrance on shares or voting rights of the company.

vii. The intentions of the prties were not to acquire or dispose of any shares / voting rights of ACL. The transaction was originally for pledge of shares, which did not happen due to inability of Mr. Samir Ghosh to provide loan and hence Mr. Samir Ghosh was only holding those shares in his demat account in trust for the promoter group entities.

viii. The change in shareholding of promoters, as reflected in the demat account of the promoter entities, was not due to any sale / disposal or purchase / acquisition of shares or voting rights but due to the act of giving shares to Samir Ghosh in trust and receiving back the shares by Ravi Bhandari in trust for various promoter group entities. The promoter group entities were of bonafide opinion that no disclosure was to be made by the them for debit and credit of shares between demat account of various promoter group entities and Shri Samir Ghosh and vice versa. Thus, they were not required to make any public announcement under Regulation 3(1) read with 13(1) of the Takeover Regulations.

ix. The promoter entities have the right to receive back 5,00,000 shares of ACL from Samir Ghosh, to whom shares were provided in trust, and which are yet to be returned.

11. Each of the noticee nos. 1-4 has also produced certificates from a Chartered Accountant certifying to the effect that he has verified the bank statements and books of accounts provided to him and that he confirms that no money has been received till date from the noticee no. 5 in any of the accounts of the notice nos. 1-4, as committed in the agreement for loan against shares. 12. Mr. Samir Ghosh filed his reply through a letter which was received by SEBI on April 16, 2016. Subsequently, he was granted an opportunity of hearing on February 15, 2017. Vide letter dated February 7, 2017, Mr. Ghosh requested for adjournment of hearing due to illness and requested to schedule the hearing in the month of April 2017. Accordingly, another opportunity of hearing was granted to him on April 03, 2017. However, on further request of Mr. Ghosh, the same was rescheduled to April 13, 2017. On the said date, Mr. Abid Hussain, Advocate, appeared on behalf of Mr. Ghosh and sought time till May 2, 2017 to file written submissions. Accordingly, Samir Ghosh filed written submissions dated April 29, 2017 after the personal hearing.

Vide the said submissions dated April 29, 2017, Shri Ghosh requested that he may be furnished documents relied upon in the matter. Accordingly, all documents relied upon in the matter were sent to him vide email dated May 26, 2017 and he was advised to file / make additional submission, if any, within seven days. No additional submissions have been made till date. The reply and submissions made by Samir Ghosh, in brief, are as under: i. A conference was held between Mr. Ghosh and Ravi Bhandari whereby Shri Bhandari sought his help for obtaining loan by transferring the shares of the company. In order to create good gesture, Mr. Bhandari transferred shares of ACL into the demat account of Mr. Ghosh. He was only holding the said shares in trust which were liable to be returned. ii. The agreement dated 27.11.2013 entered between S K Ghosh & Co and ACL did not materialise as funds could not be arranged. Accordingly, he could not provide any financial assistance to the said company. The said agreement was consequently cancelled / revoked by virtue of a Deed of Revocation in December 2013 by him.

Accordingly, Samir Ghosh returned back shares to Ravi Bhandari, except 5,00,000 shares which were transferred, as per instruction of Shri Bhandari, to one Anand Kumar Dhanuka who agreed to finance from a private source against the shares. Anand Dhanuka has mortgaged or sold some shares to one of his associates but no payment was made to Ravi Bhandari. iii. He never acquired any share of ACL but was merely holding them in trust and the same were liable to be returned. Thus, the question of acquisition of shares and increase in his shareholding does not arise and he was not required to make any public announcement as per regulation 3(2) read with 13(1) of the Takeover Regulations. He never held those shares for his own financial benefit save and except his legal remuneration as solicitor and advocate. iv. There was no money transaction till date with any of the parties due to non-materialization of the agreement and therefore these dealings cannot be considered as sale /pledge/ encumbrance / acquisition / purchase / disposal. v. For the purpose of processing the procurement of the loan, Shri Ghosh was supposed to get a remuneration from ACL.

Since it failed to make payment of the said remuneration, he had to exercise lien over the 5,00,000 shares which were later transferred to Anand Kumar Dhanuka upon instructions of Shri Bhandari, without making any monetary gains whatsoever. vi. A bare perusal of the said agreement would show that the said agreement was entered into only for the purpose of obtaining loan against pledging shares and there was no acquisition of shares by any means. He had no intent nor any interest of any nature whatsoever in the said company or its shares. There was no acquisition of shares nor there was any monetary transaction connected with such shares. vii. Even after the receipt of the shares and during the continuance thereof, Shri Ghosh never exercised any voting rights or participate in dealing the management of ACL.

13. I have considered the facts as brought out in the SCN, the allegations against the noticees contained in the two SCNs, the replies and submissions of the noticees and other material available on record. I find that the transactions involving transfer of shares through demat account by different parties among themselves over a period of time as brought out in the SCNs have not been controverted or disputed by any of the noticees. However, the noticees have vehemently denied the allegation in the SCNs that the said transfers of shares amounted to ‘acquisition of shares’. After careful examination of their submissions, I find that the noticees have rested their case entirely on the ground that the referred transactions were executed as part of a deal for availing loan by pledging the shares as collateral and not as a transaction involving transfer of ownership/control. Thus, according to the noticees, the said transactions cannot give rise to the consequences alleged in the SCNs, as the same would arise only in case of ‘acquisition’ of shares involving transfer of ownership / voting rights / control and not in case of transfer of shares as collateral for purpose of creating a pledge on them.

14. I, therefore, find that the fundamental and moot question which needs to be addressed for deciding this matter is whether the transactions as referred to in the SCN and as brought out above amounted to acquisition of shares within the meaning of Regulation 3 of the Takeover Regulations. 15. I note that the noticees have contended that the transfer of shares by the promoter group entities on 27/11/2013 and 28/11/2013 to the demat account of Samir Ghosh was pursuant to an agreement dated 27/11/2013 for availing loan by pledging of securities. They have further contended that the subsequent transfers of shares by Samir Ghosh to Ravi Bhandari on 16/12/2013 and 15/01/2014 were merely transactions involving return of pledged shares due to the failure of the lender to provide the loan amount as per the agreement. 16. I note that in respect of creation of pledge or hypothecation of securities held in dematerialised form, Section 12 of the Depositories Act provides that a beneficial owner may with the previous approval of the depository create a pledge or hypothecation in respect of a security owned by him through a depository.

The manner in which a pledge or hypothecation is created is provided in regulation 58 of the SEBI (Depositories and Participants) Regulations, 1996. Thus, the Depositories Act and the Regulations made thereunder specifically regulate the manner of creation of pledge or hypothecation of securities held in dematerialised form and as such pledge of securities held in dematerialised form can be created only by following the procedure prescribed in regulation 58 of the DP Regulations. 17. Be that as it may, it is an admitted fact that the noticees have not taken recourse to the provisions of regulation 58 of the DP Regulations for creation of pledge purportedly intended by them. Further, I also note that the deal for loan against securities as per agreement dated 27/11/2013 did not materialise as no loan amount was provided by the noticee no. 5 to the promoter group. 18. At this juncture, I feel it is relevant to consider the question as to whether any transfer of shares in demat account from one party to another, as a security for a loan promised by lender, without following the procedure prescribed for creation of pledge on the said shares would change the nature of transaction from intended pledge to “acquition” or transfer of ownership of shares.

I am of the opinion that there cannot be a definite answer to the said question in affirmative or negative which may be applicable to all cases and circumstances at all times. In my opinion, the said question has to be decided in the context of the facts and circumstances specific to each case, rather than merely by literal interpretation of the provisions of the applicable statutes. In this regard, the intention of the parties involved is a very crucial factor which plays an important role in deciding the question either way. 19. In the instant matter, it is important to ascertain whether the noticees really intended to carry out the transfers of shares as transactions related to pledge or whether the intended purpose was transfer of ownership amounting to acquisition of shares covered under regulation 3 of the Takeover Regulations. In this regard, the facts of the case, the documents available on record, the conduct of the parties and other circumstantial evidences have to be looked into for ascertaining the real intention of the parties. I note that the following are some of the points which throw light on the real intention and purpose of the noticees while executing the aforesaid transactions involving transfer of shares: a) The transfer of shares on 27/11/2013 and 28/11/2013 by the promoter group entities to Shri Samir Ghosh has been done pursuant to an ‘Agreement of Loan against Shares’ executed between Samir Ghosh, proprietor of S.K.

Ghosh & Co., and Shri Ravi Bhandari, one of the promoter group entities, as lender and borrower respectively. The said agreement contains inter alia the following terms, quoted as they are:

 LENDER, at the request of BORROWER has agreed to extend a loan (“Loan”) of up to Rs.20,000,000 (INR Rupees Two crores only) to BORROWER against Equity shares of Rs. 10/- each fully paid of Anshus Clothing BSE Code 534707 (“the said shares”) on buy back system.  BORROWER will transfer shares equivalent to 4 times the Loan amount at last quoted price as security for the loan in the account of the lender as security for the Loan in the account of LENDER.  The LENDER will transfer through RTGS the proportionate Loan amount immediately within 4 days to the account of BORROWER (as mentioned in Annexure 1) immediately on receipt of shares in Lender’s account officially.  The said Loan is being given for a period of 12 months from the date of down of the Loan amount.  BORROWER agrees to pay an interest of 17% per annum on the Loan amount. The cheque for interest amount will be paid by 6/12 P.D.C. in advance.  LENDER also agrees that the said shares will be returned immediately on repayment the Loan amount along with interest and other charges.  If BORROWER shall default in the due performance of the term of this Agreement and its repayment obligation LENDER after giving seven days notice in writing to BORROWER shall have the absolute right and power to sell transfer or otherwise dispose of the said shares or any part thereof t such prices as the LENDER thinks fit and apply the net proceeds thereof towards the payment of the LENDER dues under and in terms of this Agreement.  The LENDER will have full authority to sale the mortgaged shares in case the borrower fails to honour the interest cheques handed over by the BORROWER to the LENDER.  LENDER irrevocably agrees that the said shares will not be sold in the market to any entity other than the purposes of the said loan.  All bonus shares will be the property of the borrower. (Emphasis supplied)

b) It is observed from various email communications dated December 11, 2013 between Ravi Bhandari (the borrower) and Samir Ghosh (the lender) that subsequent to transfer of shares by promoter entities to the lender on 27/11/2013 and 28/11/2013, the lender had failed to provide the loan amount till December 11, 2013 and thus had defaulted on the terms of agreement dated November 27, 2013. The email communications exchanged on December 11, 2013 and December 12, 2013 and December 15, 2013 show that the borrower demanded 50 lakh shares back from the lender. It is observed that subsequent to email exchanges as mentioned above, Shri Samir Ghosh transferred 35 Lakh Shares back to Ravi Bhandari on December 16, 2013. Shri Ravi Bhandari further transferred 12,72,000 shares, 13,04,000 shares and 9,00,000 shares to Rekha Bhandari, Ravi Bhandari HUF and Lollipop Fashions Private Limited (the noticee nos. 2-4) respectively. c) It is further observed from the copies of email communications provided by promoter noticees that, subsequently, Shri Bhandari through email dated January 03, 2014 demanded the remaining 15 Lakh shares from the lender, Shri Samir Ghosh.

In the said email, Shri Bhandari inter alia wrote: “Dear Mr. Ghosh, With reference to the agreement we have made with you, you was supposed to transfer us 2 Cr rupees against security of our 50 Lacs shares of Anshu’s Clothing Ltd. However, the deal could not go through and you have returned us 35 Lacs shares back. … … …”. It is observed that subsequently, Shri Samir Ghosh, the lender, returned 10 Lakh shares to Ravi Bhandari, the borrower, on January 15, 2014. d) From the copies of various email communications exchanged between Ravi Bhandari and Samir Ghosh, made available by the promoter entities, it is observed that the promoter entities still have dispute with Samir Ghosh regarding return of remaining 5,00,000 shares of ACL which were part of 50 Lakh shares earlier received by Samir Ghosh. e) It is observed that no monetary consideration whatsoever has been exchanged by the noticees in respect of the shares exchanged between the parties. 20. I find that the terms and conditions mentioned in the agreement dated November 27, 2013, the chain of events and the conduct of parties as mentioned above clearly indicate that the noticee nos. 1-5 had entered into a series of transactions among themselves with an intention of giving effect to the agreement dated November 27, 2013 for loan against depositing securities and subsequently to reverse the transactions due to failure of the lender to provide the loan as agreed.

I find that though the noticees did not take recourse to the provisions of regulation 58 of the DP Regulations for creation of pledge, the terms of the agreement and the conduct of the parties as mentioned above, in totality, indicate that the essence of the said series of transactions was in the nature of intended pledge, even if the transaction could not be completed due to default on part of lender to provide funds. In this regard, a case in point is the clause in the agreement dated November 27, 2013 which provided that all the bonus shares would be the property of the borrower. The same clearly shows that what was intended by parties was pledge of shares and not transfer of ownership. 21. I am aware of the judgement of Hon’ble SAT in Liquid Holdings Pvt. Ltd. vs. SEBI (Appeal No. 83 of 2010 decided on March 11, 2011) wherein the receipt of shares in demat account pursuant to invocation of a pledge, created under regulation 58 of the DP Regulations, by lender was held to amount to “acquisition” of shares. However, in the instant case, the parties had not taken recourse to the procedure provided under Regulation 58 for the intended pledge nor was there any occasion for invoking of pledge which would have resulted in transfer of ownership to the lender.

Further, I have taken into account the judgment of Hon’ble High Court of Bombay in the case of Jry Investments Private Limited vs. Deccan Leafine Services Ltd. and Ors (2004 121 CompCas 12 Bom) wherein the court, in respect of similar transfer of shares in demat account pursuant to an agreement for loan against shares as in the present case, held the transaction to amount to transfer of ownership, by also looking into the real intention of the parties to the transaction as reflecting from the terms and conditions of the loan agreement, apart from considering other facts and circumstances. 22. I am of the considered opinion that, for the reasons recorded herein above, the referred transactions do not amount to ‘acquisition’ of shares as contemplated under the Takeover Code, and, therefore, the facts of the case do not merit invoking the provisions of the Takeover Code, as specified in the SCNs, against the noticees. Having arrived at the findings as above, I feel it is equally important to point out that the statutory duty of ensuring an orderly market compels SEBI, as a regulatory body, to strictly interpret and apply the rules and regulations and initiate action / proceedings against entities found to be in default, whether such default is intentional or otherwise.

The said perspective and the resultant initiation of enforcement actions on part of SEBI cannot be found fault with, in the larger interest of the securities market. Thus, promoters / lenders/ other persons dealing in the shares of a listed company, at all times, need to be mindful of the significance and impact of their actions in the securities market including the unintended legal consequences, likely to arise out of their failure to adhere to the procedures laid down under laws pertaining to securities market, no matter however bonafide their intentions might be. Strict compliance with the provisions of law, in letter and spirit, by the market participants in all situations is the ideal solution for avoiding all such legal and regulatory complications and for ensuring an orderly securities market. Directions 23. In view of the above, in exercise of powers conferred upon me under Sections 11 & 11B of the Securities and Exchange Board of India Act, 1992, I hereby dispose of the SCNs dated March 23, 2016 issued against the noticee nos. 1 to 5, namely Ravi Bhandari, Rekha Bhandari, Ravi Bhandari HUF, Lollipop Fashions Pvt. Ltd. and Samir Ghosh, by dropping the allegations levelled against them therein.

24. Further, the noticees are hereby cautioned and advised to exercise due care and diligence in future while undertaking transactions in the securities market, so as to comply with all provisions and procedures prescribed under the prevalent securities laws and regulations.

Date: August 28, 2017 G. MAHALINGAM Place: Mumbai WHOLE TIME MEMBER