Order in the matter of EICL Limited- minimum public shareholding requirement'

WTM/PS/71/CFD/JAN/2014 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 EICL 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. EICL Limited (hereinafter referred to as 'the Company') is one such company against whom the interim order was passed. The promoter shareholding in the Company on the date of the interim order was 77.92%. The shares of the Company are listed on the Bombay Stock Exchange Limited ('BSE') and the Calcutta Stock Exchange ('CSE').

3. The Company filed its replies to the interim order vide letters dated June 17, 2013, June 26, 2013, August 16, 2013 and October 01, 2013. Thereafter, an opportunity of personal hearing was afforded to the Company on January 21, 2014, when Mr. P.S. Saini (Company Secretary of the Company) appeared along with Mr. R.S. Loona (Advocate), Mr. Ankur Loona (Advocate), Mr. R.S. Kini (Partner, Sterling Associates), Mr. S.G. Waskar (Associate, Sterling Associates), Mr. Rajesh Ranjan, (AVP, Emkay Global Financial Services Limited) and made oral submissions. Pursuant to the hearing, the Company vide its letter dated January 22, 2014 filed its written submissions. The submissions of the Company inter alia are as follows:

a. The Company in order to ensure compliance with the requirement of MPS had examined the options available. It had opted to sell 25,00,000 equity shares held by the promoters through the secondary market. However, due to illiquidity in the shares of the Company, the promoter was able to sell only 10,00,000 equity shares (in the year 2011) i.e. about 2% of the total equity share capital of the Company. b. Thereafter, the Company had examined the other methods available to comply with the MPS but none of the methods were found feasible. In the meantime, one of the Company's promoter, M/s. DBH International Pvt. Limited, holding 51.03% of the paid up capital had expressed its intention for the voluntary delisting of the equity shares of the Company in the manner as provided in the SEBI (Delisting of Equity Shares) Regulations, 2009 (the 'Delisting Regulations'). c. The Board of Directors of the Company in their meeting held on May 03, 2013 had approved the resolution of authorising the delisting of the shares. Thereafter, the postal ballot process for seeking approval of the public shareholders of the Company for delisting of shares was completed and the scrutinizer vide its report dated June 06, 2013, reported that 49,71,179 (equity shares) votes were casted in favour of the resolution and 21,716 (equity shares) votes were casted against the resolution i.e., the ratio of public shareholders voting for delisting was 247:1. d. The Company has also filed an application with BSE and CSE for 'in principle' approval for the delisting of the equity shares of the Company. However, pursuant to the interim order, BSE and CSE have not granted the in principle approvals to the Company.

In view of the submissions, the Company has progressed significantly in the process as required under the 'Delisting Regulations and therefore requested SEBI to revoke/ amend the interim directions in order to enable it to complete the process of voluntary delisting in accordance with the Delisting Regulations. It has also been said that as per the Delisting Regulations, final application to the stock exchange for delisting is required to be made within one year from the date of special resolution. The public shareholders of the Company had passed the special resolution on June 06, 2013 and the Company and its promoters undertake to make the final application within the stipulated time period.

4. I have considered the reply and the submissions made by the Company and the material available on record. The shareholding of the promoter and the promoter group in the Company is at 77.92% and the public shareholders holds 22.08%. The Company has desired to delist the shares of the Company in terms of the Delisting Regulations. I note from the submissions of the Company that the voluntary delisting has been approved and the resolution has been passed by its shareholders.

5. The Company in its written submissions has requested SEBI to revoke/ amend the directions issued vide the interim order so as to enable the Company and its promoters to proceed with the delisting process. Considering the promoter's intention to acquire the remaining shares held by the public shareholders and to delist the shares of the Company, the approval of the board of directors with respect to such proposal for delisting, the approval of the shareholders through postal ballot favouring the proposal for delisting, the application to the exchanges seeking in principle approval for delisting, I am of the view that the Company be permitted to delist its shares in accordance with the provisions of the Delisting Regulations. 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. The Company has undertaken to complete the delisting process by June 06, 2014.

6. 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, EICL Limited and that M/s DBH International Pvt. Limited (promoter of the Company) shall be permitted to buy the equity shares from the public shareholders as part of the delisting offer. The Company shall complete the delisting process by June 06, 2014 and report the outcome 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 (without the need for passing of a separate order) in case the delisting process of the Company is not successful within the period directed in sub paragraph (i) above. (iii) The directions contained in paragraphs 17(a), (c) and (d) of the interim order dated June 04, 2013 shall continue to be in effect till such time the Company is delisted from the stock exchanges or till the time the Company becomes compliant with the MPS norms, whichever is earlier.

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

8. 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 the period as directed in paragraph 6(i) above.

9. 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: January 29th, 2014 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA