Order in the matter of Best Eastern Hotels Limited

WTM/PS/51/CFD /OCT/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM : PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Section 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 Best Eastern Hotels Limited 1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') 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. Best Eastern Hotels Limited (hereinafter referred to as 'the Company') is one such company against whom the interim order was passed. The public shareholding in the Company on the date of the interim order was 10.40%. The shares of the Company are listed on the Bombay Stock Exchange Limited ('BSE').

3. The Company vide its letters dated July 29, 2013 and August 12, 2013, filed its reply to the interim order. Thereafter, an opportunity of personal hearing was afforded to the Company on August 27, 2013, when Mr. Dilip V. Khothari, Managing Director and Mr. Balveer Singh Choudhary, Chartered Accountant appeared and made submissions.

4. I have considered the reply of the Company, the letter submitted and the submissions made during the personal hearing. The company has submitted that it had made efforts to comply with the MPS requirements within the stipulated period, however, the same could not be completed as the broker with whom the promoters of the Company is having demat account, had intimated that the process of Offer for Sale ('OFS') was a lengthy process, wherein due diligence has to be carried out and presentations are to be given to the prospective buyers. According to the Company, its scrip was very thinly traded and the promoters were in the process of giving presentations to the strategic investors so that OFS is successful. It has also been said that its promoters were not able to get the fair value of the shares as the market value was low as compared to the expected enterprise value of the Company. Due to this, the OFS by the promoters of the Company got delayed.

The Company has further submitted that when it approached other consultants, it realised that the process is not lengthy. It then filed the relevant documents with BSE for OFS. As per the Company, the concerned broker in the meantime intimated BSE that the promoters of the Company have not taken its consent. The Company discussed the matter with BSE and provided the name of new broker and accordingly it completed with the OFS.

5. The Company has submitted that as the circumstances were beyond the control of the promoters, the MPS requirements could not be met and requested to condone the delay. It has been submitted by the Company that in order to comply with the MPS norms, it had opted to divest 12,29,735 equity shares constituting 14.59% of the share capital of the Company through an Offer for Sale ('OFS') on July 24, 2013. Pursuant to the same, the promoters holding was reduced to 75%, thereby raising the public shareholding to stipulated 25%.

It was also submitted that the delay in compliance was due to the circumstances beyond the control of the promoters of the Company. The Company also represented that it is now compliant with the minimum public shareholding norms and requested SEBI to withdraw the directions issued in paragraph 17 of the interim order.

6. The Company has definitely delayed in complying with the MPS requirements under the SCRR, even when it was under notice for three years for achieving compliance. I note that it was primarily the responsibility of the Company to comply with the MPS requirement. The Company is, therefore, warned for the same and is advised to ensure compliance with all the applicable laws and regulations administered by SEBI that govern its activities in the securities market. Considering the fact that the Company is now compliant with the stipulated minimum public shareholding level, I do not propose to initiate further action against the Company, its directors, promoters and promoter group, as contemplated in paragraph 18 of the interim order.

7. With the above observations, 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 revoke the directions vide the interim order dated June 04, 2013 against the Company, Best Eastern Hotels Limited, its directors, promoters and promoter group, with immediate effect.

8. 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.

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