Order in the matter of Hindustan Wires Limited

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 requirement of minimum public shareholding by Hindustan Wires Limited.

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") had 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. Hindustan Wires Limited (hereinafter referred to as 'the Company') is one such companies against whom the interim order was passed. The copy of the interim order was forwarded to the Company vide letter datedJune 5, 2013. 3. The Company filed its replies to the interim order, vide letters dated February 25, 2015,March 26, 2015 and April 30, 2015. 4. The submissions of the Company vide letter dated February 25, 2015 inter alia are as follows: a. The shares of the company are listed in Bombay Stock Exchange.

The company is a sick company registered with Board for Industrial & Financial Reconstruction (BIFR). Due to the loss suffered, the Company has not paid any dividend for more than 23 years. b. The promoters had infused Rs. 8 crore as stipulated in the modified rehabilitation scheme approved by Appellate Authority for Industrial & Financial Reconstruction(AAIFR) in Appeal No. 282/2002 vide order dated November 8, 2012. In view of the infusion of funds by promoter, 80,00,000 equity shares with face value of Rs. 10 each were issued to the promoters. c. As on March 31, 2014, the Company was having paid up capital of Rs. 9.82 crores consisting of 98,20,000 shares with face value of Rs. 10 each. The promoter group shareholding was 90.96%(89,31,930 shares) and there were 3224 shareholders as on December 31, 2014. Of these, only 13 shareholders belong to the promoter and promoter group. d. The trading of the company was suspended by BSE and the trading commenced with effect from November 21, 2014 pursuant to the Notice of revocation of suspension dated March 14, 2014. e. The company wanted to go ahead with delisting.The company being a loss making entity, the prospects of OFS becoming successful appears to be difficult. f. Since most of the shareholding of the public is in physical form, and more than 20% of the letters sent to the public shareholders returned undelivered coupled with the loss of share certificates by many public shareholders, the delisting offer may also not succeed through reverse book building procedures.

5. Therefore, vide letter dated February 25, 2015, the Company wanted exemption from the requirement of OFS and reverse book building procedure for delisting. 6. However, vide letter dated March 25, 2015 the company submitted that it had complied with the MPS requirement by means of OFS through stock exchange which was completed on March 23, 2015. It was stated, vide the said letter, that the promoter group holding was reduced to 74.66 percentage.The company enclosed the list of shares held by the promoter and promoter group subsequent to the OFS as on March 23, 2015. 7. Thereafter, an opportunity of personal hearing was afforded to the Company on May 19, 2015. Mr. R.K Gupta, the Executive director and Mr.Rajan Gada, Chartered accountant appeared on behalf of the Company and made oral submissions.

8. I have considered the submissions made by the Company and other material available on record.The interim order was issued against the Company as it failed to maintain the minimum public shareholding of 25% as mandated under rule 19A of the SCRR and Clause 40A of the Listing Agreement read with section 21 of the Securities Contract (Regulation) Act, 1956 ("SCRA"). 9. SEBI had issued circulars dated December 16, 2010, February 08, 2012 and August 29, 2012, in order to suitably amend Clause 40A of the Listing Agreement by specifying the manner in which public shareholding may be raised to the prescribed minimum level. The amended Clause 40A of the Listing Agreement, inter alia,provided the following methods for complying with the MPS requirements: a. Issuance of shares to the public through prospectus, b. Offer for sale of shares held by promoters to public through prospectus, c. Sale of shares held by promoters through the secondary market i.e. OFS through Stock Exchange, d. Institutional Placement Programme, e. Rights Issues to public shareholders, with promoters/ promoter group shareholders forgoing their rights entitlement, f. Bonus Issues to public shareholders, with promoters/ promoter group shareholders forgoing their bonus entitlement, g. Any other method as may be approved by SEBI, on a case to case basis.

10. From the submissions of the Company dated March 26, 2015, as corroborated by the disclosure of shareholding pattern filed by the Company in BSE, I find thatAjay Commercial Company Pvt. Ltd., Facit Commosales Pvt. Ltd., General Enterprises Pvt.Ltd., J Boseck & Company Pvt. Ltd., JB Commercial Company Pvt. Ltd., Kashipur Holdings Ltd., Lund & Blockley Pvt. Ltd., Mayur Barter Pvt. Ltd., Sukhvarsha Distributors Pvt. Ltd., Pooja Bhartia, Pragya Bhartia, Sajani Devi Bhartia and Uma Shankar Bhartia are disclosed as the shareholders belonging to the promoter and promoter group of the Company and were collectively holding 90.96 percent of total shareholding. From the confirmation received from BSE vide e-mail dated July 2, 2015, I further find that the following entities of promoter and promoter group have sold 16,00,000 shares in the OFS made on March 23,2015 as shown in the following table.

Pre-OFS Pre-OFS Shares % Post-OFS Sr. (no. of (% offered in ofshares (% no Name of Promoter shares) Holding) OFS offered Holding) J. Boseck& Co. (P) 1 Ltd., 1,30,500 1.33 1,30,000 1.32 0.01 JB Commercial 2 Company (P) Ltd., 2,19,182 2.23 2,15,000 2.19 0.04 Mr. Uma Shankar 3 Bhartia 1,86,402 1.9 1,85,000 1.89 0.01 Kashipur Holdings 4 Limited 80,00,000 81.47 10,70,000 10.9 70.57 Total 85,36,084 86.93 16,00,000 16.29 70.63

11. In view of sale of 16,00,000 equity shares by J Boseck & Company Pvt. Ltd., JB Commercial Company Pvt. Ltd., Uma Shankar Bhartia and Kashipur Holdings Ltd., who were collectively holding 86.93 percentage of the total shareholding, the promoter and promoter group holding has come down from 90.96 percent to 74.67 percent.I further find from the disclosures filed by the company in BSE, the promoter holding is shown as 74.66% as on March 31, 2015. Therefore, I find that the Company has complied with the requirements of MPS on March 23, 2015. 12. From the aforesaid discussion, it is clear that the Company did not comply with the MPS requirements on or before June 03, 2013, i.e., the prescribed due date. The Company vide its letter dated April 30, 2015 stated that it could not comply with the MPS requirement, since the trading was suspended by BSE from August 11, 2006 tillNovember 21, 2014. I find from e-mail dated July 3, 2015 to SEBI that the trading in the scrip of the Company was suspended due to its failure to pay the listing fee.I note that the amended provisions of rules 19 and 19A of the SCRR came into force with effect from June 04, 2010, offering a time period of three years (i.e., on or before June 03, 2013) for a listed company to maintain public shareholding of at least 25%.As pointed out earlier in para 9 of this order, the Company and promoters/directors had various options for complying with MPS requirements. However, the Company and promoters/directors have not taken any step towards the timely compliance of MPS by available options.

13. In view of the failure to comply within the stipulated period without any justifiable reason, I am of the considered view that the case be referred for adjudication proceedings under Sections 23E and 23H of the SCRA. As the Company has achieved compliance now, as discussed above, I find it appropriate and reasonable to vacate the directions issued vide the interim order against the Company, its promoters and directors. 14. Accordingly, 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 issued vide the interim order dated June 04, 2013 against the company, Hindustan Wires Limited, its directors, promoters and promoter group, with immediate effect. The matter is referred for adjudication proceedings under Sections 23E and 23H of the Securities Contracts (Regulation) Act, 1956. For this purpose, an adjudicating officer shall be appointed by SEBI in terms of Section 23I of the Securities Contracts (Regulation) Act, 1956 read with the Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties By Adjudicating Officer) Rules, 2005 and such adjudicating officer shall conduct the inquiry in accordance with law. 15. Copy of this Order shall be served on the stock exchanges and depositories for their information and necessary action.

DATE: July 21, 2015 PRASHANT SARAN PLACE: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA