Order in the matter of Delisting of Equity Shares of Assam Petro-Chemicals Limited

SEBI/WTM/SR/CFD–DCR/ 48 /09/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI CORAM: S. RAMAN, WHOLE TIME MEMBER ORDER UNDER REGULATION 25A OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) REGULATIONS, 2009. IN THE MATTER OF DELISTING OF EQUITY SHARES OF ASSAM PETRO–CHEMICALS LIMITED.

Background –

1.1 Securities and Exchange Board of India (“SEBI”) received a letter dated March 14, 2016 (“Application”), from Assam Industrial Development Corporation Limited (“AIDC/Applicant”), inter alia stating the following – i. Assam Petro–Chemicals Limited (“APCL”) is a Public Listed Company incorporated under the Companies Act, 1956. The shares of APCL are listed on BSE. The trading in the equity shares of APCL was earlier suspended by BSE on April 20, 2012, on account of penal reasons. The shares of APCL were earlier also listed on the Gauhati Stock Exchange (“GSE”); however, pursuant to the SEBI Exit Order dated January 27, 2015, providing for exit of GSE as a recognised stock exchange w.e.f. January 27, 2015, the equity shares of APCL were deemed to have been delisted from GSE on that date. ii. AIDC/Applicant, a company promoted by the Government of Assam, is the Promoter of APCL. iii. The shareholding pattern in APCL –

TABLE I TABLE I – SHAREHOLDING IN THE TARGET COMPANY FOR THE QUARTER ENDED JUNE 30, 2016 (SOURCE: BSE WEBSITE) SR. NO. SHAREHOLDERS EQUITY SHARES HELD NUMBERS % OF SHARE CAPITAL A. PROMOTER AND PROMOTER GROUP 1. ASSAM INDUSTRIAL DEVELOPMENT CORPORATION LIMITED 8041540 88.18 2. INDIVIDUALS 2507 0.02 TOTAL 8044047 88.20 B. PUBLIC INSTITUTIONAL HOLDERS 943200 9.67 C. PUBLIC – OTHERS 132700 2.13 GRAND TOTAL (A + B + C) 9119947 100.00 iv. As per Table I, AIDC/Applicant alongwith other members of the Promoter Group collectively hold 88.20% of the paid–up equity capital of APCL. AIDC/Applicant individually holds 88.18% of the paid– up equity capital of APCL.

1.2 Delisting of equity shares of APCL under the Delisting Offer made by AIDC/Applicant – i. Vide a letter dated June 3, 2014, AIDC/Applicant informed APCL of its intention to acquire shares from the public shareholders of APCL and thereafter, seek voluntary delisting of the equity shares of APCL from BSE (“Delisting Offer”). Vide the aforesaid letter, AIDC/Applicant requested the Board of Directors of APCL to convene a meeting to consider the Delisting Offer. The objective of the Delisting Offer (as per AIDC/Applicant) was – a. To provide full ownership to the Promoters with increased operational flexibility and greater efficiency in the operation of APCL and to support future plans; b. To provide an exit opportunity to the public shareholders, and c. The success of the Delisting Offer will facilitate the Government of Assam’s proposal to set up an industrial project with higher capital investment since it would help APCL raise funds from private sources through private placement of its equity shares.

ii. The Board of Directors of APCL in a meeting held on June 9, 2014, approved the proposal received from AIDC/Applicant to initiate the delisting of shares under the Delisting Offer in accordance with the SEBI (Delisting of Equity Shares) Regulations, 2009 (“Delisting Regulations, 2009”).

iii. Vide letter dated September 12, 2014, AIDC/Applicant appointed SPA Capital Advisors Limited (“SPA”), a Category I Merchant Banker, to manage the Delisting Offer.

iv. A Postal Ballot Notice dated March 9, 2015 was sent to shareholders for passing a Special Resolution in respect of the voluntary Delisting Offer made by AIDC/Applicant.

v. On March 24, 2015, the Delisting Regulations, 2009 were amended vide the SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2015 (“Delisting (Amendment) Regulations, 2015”). The amended Regulation 31(2) provided for the following – “Any proposal for delisting made by company or any promoter or acquirer who wanted to delist securities of the company, prior to commencement of these regulations and where the offer price has not been determined in terms of sub-regulation (1) of regulation 15 as on the date of such commencement, shall be proceeded with under the Securities and Exchange Board of India (Delisting of Equity) Regulations, 2009 as amended by the Securities and Exchange Board of India (Delisting of Equity Shares) (Amendment) Regulations, 2015.”

vi. The Special Resolution approving the Delisting Offer, was passed by the shareholders of APCL (through postal ballot) on April 23, 2015.

vii. APCL submitted an application to BSE on August 14, 2015 (received by BSE on September 3, 2015), for obtaining in–principle approval for the delisting of its shares through the Delisting Offer. Vide an e–mail dated September 10, 2015, BSE sought certain clarifications from APCL, which were replied to vide APCL’s letter dated September 15, 2015 (received by BSE on September 21, 2015).

viii. Vide its letter dated September 23, 2015, BSE granted conditional in–principle approval for revocation of trading of shares of APCL. One of the conditions to which such revocation was subjected was a requirement for APCL to pay a fine for non–appointment of a Woman Director as per Section 149 of the Companies Act, 2013 and Regulation 17(1)(a) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [erstwhile Clause 49(II)(A)(1) of the Listing Agreement].

ix. As stated at paragraph 1.1(i), trading in the equity shares of APCL was suspended by BSE on April 20, 2012, on account of penal reasons. In this regard, BSE vide letter dated December 30, 2015, informed APCL that in–principle approval for the delisting of shares under the Delisting Offer could not be granted without revocation of suspension of trading of APCL’s equity shares on BSE.

x. Vide letter dated January 5, 2016, APCL communicated to BSE, its inability to appoint a Woman Director on the grounds that after completion of the Delisting Offer, the requirement for such Director will cease. Further, as advised by BSE, APCL submitted its application for revocation of suspension of trading vide a letter dated January 8, 2016.

xi. Vide a Notice dated February 12, 2016, BSE revoked the suspension in trading of equity shares of APCL w.e.f. February 22, 2016. However, till date, BSE has not granted APCL in–principle approval for the delisting of APCL’s shares through the Delisting Offer.

1.3 In view of the above, the following exemptions were sought from SEBI, by AIDC/Applicant – i. As the proposal for the Delisting Offer was approved by the Board of Directors of APCL on June 9, 2014, and Postal Ballot Notice [refer paragraph 1.2(iv)] was dispatched to APCL’s shareholders prior to the amendment of the Delisting Regulations, 2009 (w.e.f. March 24, 2015), APCL be allowed to proceed with the Delisting Offer without seeking any further shareholder’s approval in terms of the Delisting (Amendment) Regulations, 2015.

ii. As per the Delisting Regulations, 2009, the process for delisting has to be completed within one year of the passing of the Special Resolution. As the time of one year expires on April 23, 2016, APCL be allowed time till October 2016 for completion of the delisting process and submission of final application of delisting to BSE.

2.1 Upon a consideration of the Application, SEBI, vide e–mail dated April 5, 2016, advised AIDC/Applicant to provide the reasons for delay in following the timelines in respect of delisting of shares through the Delisting Offer. AIDC/Applicant replied to SEBI vide letter dated April 7, 2016, providing a chronology of events [which have been detailed at paragraphs 1.1–1.3]. Vide the aforesaid reply, AIDC/Applicant also informed SEBI that when it followed up on its Delisting Offer with BSE (through the Merchant Banker i.e. SPA), it was advised to seek exemption from SEBI under Regulation 25A of the Delisting Regulations, 2009. Accordingly, AIDC/Applicant requested SEBI to grant extension of time to proceed and complete the delisting of its shares through the Delisting Offer.

2.2 Thereafter, SEBI, vide e–mail dated June 17, 2016, sought clarifications from BSE for the delay in revoking the suspension of trading of shares of APCL and granting in–principle approval to APCL for the delisting of its shares through the Delisting Offer. Vide a reply dated June 30, 2016, BSE inter alia informed SEBI that it granted in–principle approval for revocation of suspension of trading of shares of APCL on September 23, 2015. Since APCL completed the formalities for final resumption of trading only on February 3, 2016, the approval was granted by BSE only on February 12, 2016.

2.3 Vide letter dated July 21, 2016, AIDC/Applicant inter alia requested SEBI to grant extension of time to complete the delisting process i.e. submission of final delisting application to BSE, by six months.

Consideration of Issue and Findings –

I have considered the Application, the subsequent correspondence received from AIDC/Applicant and BSE alongwith other material available on record. In this regard, I note –

2.4.1 Regulation 25A of the Delisting Regulations, 2009 (as amended), states – “25A. Power to relax strict enforcement of the Regulations.

(1) The Board may for reasons recorded in writing, grant relaxation from strict enforcement of any of the requirements of these regulations, if the Board is satisfied that the relaxation is in the interests of investors in securities and the securities market. (2) For seeking exemption under sub-regulation (1), the promoter or the acquirer or the company shall file an application with the Board, supported by a duly sworn affidavit, giving details for seeking such exemption and the grounds on which the exemption has been sought. (3) The promoter or the acquirer or the company, as the case may be, shall along with the application referred to under sub-regulation (3) pay a nonrefundable fee of rupees fifty thousand, by way of a banker’s cheque or demand draft payable in Mumbai in favour of the Board. (4) The Board may after affording reasonable opportunity of being heard to the applicant and after considering all the relevant facts and circumstances, pass a reasoned order either granting or rejecting the exemption or relaxation sought as expeditiously as possible.”

2.4.2 At the outset, it is noted that as per sub–regulation (4) of Regulation 25A of the Delisting Regulations, 2009, a reasoned Order either granting or rejecting the exemption sought by an applicant, shall be passed by SEBI after affording such applicant a reasonable opportunity of being heard and after considering all the relevant facts and circumstances. In the instant proceedings, however, I am of the opinion that although AIDC/Applicant has not been afforded an opportunity of being heard, the submissions made by it to substantiate the request for exemptions vide the Application and subsequent correspondence/clarifications, etc. are sufficient for the purpose of considering the issue of whether grant of relaxation from strict enforcement of any of the requirements of the Delisting Regulations, 2009, is in the interests of investors in securities and the securities market.

2.5.1 In its Application, AIDC/Applicant submitted that as the proposal for the Delisting Offer has already been approved by the Board of Directors of APCL on June 9, 2014, and Postal Ballot Notice was dispatched to APCL’s shareholders prior to the amendment of the Delisting Regulations, 2009 (w.e.f. March 24, 2015), APCL be allowed to proceed with the Delisting Offer without seeking any further shareholder’s approval in terms of the Delisting (Amendment) Regulations, 2015. In this context, I note –

2.5.2 Subsequent to its amendment on March 24, 2015, Regulation 31(2) of the Delisting Regulations, 2009 [refer paragraph 1.2(v)] states that any proposal for delisting made by any Promoter who wanted to delist securities of the company, prior to commencement of the Delisting (Amendment) Regulations, 2015, and where the offer price has not been determined in terms of Regulation 15(1) as on the date of such commencement, shall be proceeded with under the Delisting Regulations, 2009, as amended by the Delisting (Amendment) Regulations, 2015.

2.5.3 Prior to the amendment of the Delisting Regulations, 2009, Regulation 8 of the said Regulations inter alia provided that any company desirous of delisting its equity shares through voluntary delisting, shall – a. Obtain the prior approval of the board of directors of the company in its meeting; b. Obtain the prior approval of shareholders of the company by special resolution passed through postal ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution. c. Make an application to the concerned recognised stock exchange for in-principle approval of the proposed delisting in the form specified by the recognised stock exchange; and d. Within one year of passing the special resolution, make the final application to the concerned recognised stock exchange in the form specified by the recognised stock exchange.

2.5.4 Vide the Delisting (Amendment) Regulations, 2015, new Regulations 8(1A), (1B) and (1C) were inserted w.e.f. March 24, 2015. The aforesaid Regulations provide for the steps to be taken by the Board of Directors of the concerned company prior to granting its approval for delisting the equity shares of such company under Regulation 8(1) of the Delisting Regulations, 2009 (such as disclosure to the recognised stock exchange on which the equity shares of the company are listed that the Promoters have proposed to delist the company; Appointment of Merchant Banker; Certifying that the delisting is in the interest of the shareholders, etc.).

2.5.5 It is reiterated that the proposal for the delisting of APCL’s shares through the Delisting Offer was approved by the Board of Directors of APCL on June 9, 2014 and was subsequently followed by the appointment of the Merchant Banker i.e. SPA, by AIDC/Applicant on September 12, 2014, which occurred prior to March 24, 2015. The Special Resolution approving the Delisting Offer, was passed by the shareholders of APCL (through postal ballot) on April 23, 2015. From the aforesaid, it is observed that APCL alongwith its Promoter i.e. AIDC/Applicant, had taken the requisite steps in respect of the delisting of shares through the Delisting Offer and further, a considerable period has elapsed for completion of such process.

2.6.1 In its Application, AIDC/Applicant submitted that as per the Delisting Regulations, 2009, the process of delisting has to be completed within one year of the passing of the Special Resolution, which was passed by the shareholders of APCL on April 23, 2015. As the time of one year expires on April 23, 2016, APCL be allowed time till October 2016 for completion of the delisting process and submission of final application of delisting to BSE. In this context, I note –

2.6.2 In the instant proceedings, as stated by AIDC/Applicant in the Application, APCL was unable to make the final application to the concerned stock exchange on or before April 23, 2016 i.e. one year from the passing of the Special Resolution, as it was engaged with BSE in complying with certain requirements including ensuring revocation of suspension of trading of its equity shares imposed since April 20, 2012.

2.6.3 In this regard, SEBI, vide e–mail dated April 5, 2016, advised AIDC/Applicant to provide the reasons for delay in following the timelines in respect of delisting of shares through the Delisting Offer. AIDC/Applicant replied to SEBI vide letter dated April 7, 2016, providing a chronology of events [which have been detailed at paragraphs 1.1–1.3].

2.6.4 SEBI also sought clarifications vide e–mail dated June 17, 2016, from BSE inter alia for the delay in revoking the suspension of trading of shares of APCL. Vide a reply dated June 30, 2016, BSE inter alia informed SEBI that it granted in–principle approval for revocation of suspension of trading of shares of APCL on September 23, 2015. BSE further informed that since APCL completed the formalities for final resumption of trading only on February 3, 2016, the approval was granted by it only on February 12, 2016.

2.6.5 The submission of AIDC/Applicant that it was unable to make the final application to the concerned stock exchange on or before April 23, 2016, since it was engaged with BSE inter alia for ensuring revocation of suspension of trading of its equity shares, appears substantiated from the facts detailed at paragraphs 2.6.2–2.6.4.

2.7.1 In the Application dated March 14, 2016, AIDC submitted that APCL has been permitted by the Government of Assam to set up an industrial project, which is in public interest and will also help in ensuring further industrial growth of the State of Assam. Upon a consideration of the aforementioned in light of the findings in the preceding paragraphs 2.4.1–2.6.4, I am of the considered view that exemption/relaxation as sought for in the Application made by AIDC, be granted, subject to certain conditions as ordered herein below.

Order –

3.1 I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) read with Regulation 25A of the Delisting Regulations, 2009, direct as under – i. The Applicant, viz. Assam Industrial Development Corporation Limited, is exempt from once again seeking approval of the Board of Directors of Assam Petrochemicals Limited and its shareholders with respect to its proposed Delisting Offer. It is, however, made clear that Assam Industrial Development Corporation Limited shall have to comply with all other steps/processes/compliances as mandated by the Delisting Regulations, 2009, including the amended provisions inserted by the Delisting (Amendment) Regulations, 2015. ii. Assam Industrial Development Corporation Limited/Assam Petrochemicals Limited shall make the final application for delisting on or before March 30, 2017.

3.2 This Order issued under Regulation 25A of the Delisting Regulations, 2009, is limited to the relaxation in timelines as ordered above. This Order shall not be construed as absolving or exempting the Company, its Promoters and Directors alongwith others concerned, from complying with any other law or condone lapses/violations, if any, of any other law administered by SEBI.

3.3 This Order shall come into force with immediate effect.

3.4 The Application dated March 14, 2016 (read with further correspondence/submissions/clarifications) filed by AIDC/Applicant, is accordingly disposed of.

Place: Mumbai S. RAMAN Date: September 30, 2016 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA