Order in the matter of M/s. K K Ropeways Ltd

1.1 K. K. Ropeways Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at Jabli Tehsil Kasauli, District-Solan, Himachal Pradesh. The equity shares of the target company are listed on the Ludhiana Stock Exchange Limited (LSE) and the Ahmedabad Stock Exchange Limited (ASE).

2.0 APPLICATION FOR GRANT OF EXEMPTION

2.1 Mr. Vikram Bakshi, vide letter dated May 5, 2008 filed an application under Regulation 4(2) read with Regulation 3(1)(l) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations) on behalf of himself and persons acting in concert with him namely, Vikram Bakshi and Company Private Limited, Mrs. Madhurima Bakshi and Ms. Devika Bakshi (hereinafter collectively referred to as the acquirers). It was stated in the said application that the acquirers are holding 6,49,000 equity shares representing 14.90% of the voting rights in the target company, as on the date of the application. It was further stated that the acquirers propose to acquire 25,73,200 equity shares constituting 59.10% voting rights in the target company at a price of Rs.12/- per share from the existing promoters of the target company, namely Mr. Krishna

Kumar Kashyap, Mrs. Sita Kashyap, Mr. R. K. Kashyap, Ms. Monika Kashyap and K. K. Carriers and Advances Limited. In terms of the application, the shares of the target company were infrequently traded in terms of the explanation (i) to Regulation 20(5) of the Takeover Regulations. The acquirers further submitted that, pursuant to the proposed acquisition, their shareholding in the target company would increase from 14.90% to 74%, with a change in control in the target company. According to the acquirers, the said proposed increase in their shareholding and change in control would consequently trigger Regulations 10 and 12 of the Takeover Regulations and therefore sought exemption from Regulations 13, 14, 15, 16 and 18 of the Takeover Regulations, inter alia, on the following grounds:

a) There are only five public/non-promoter shareholders in the target company, holding 0.06% of the total share capital of the target company. b) Each of the five public/non-promoter shareholders can be reached effectively by issuing registered acknowledgement due letters to them and thus, the purpose of making an open offer could be effectively achieved. All the five public/non-promoter shareholders have given their consent in writing for the acquisition of control by the acquirers from the present promoters. c) The acquirers are ready and undertake to make an individual offer to all the non-promoter shareholders by directly addressing offer letters offering to buy the shares through registered post acknowledgement due at their registered/recorded address.

2.2 It was stated in the application that, subsequent to the proposed acquisition, the acquirers intend to delist the shares of the target company from the stock exchanges. The shareholding pattern of the target company before and after the proposed acquisition (as given in the application) is as under:

After the Proposed Acquisition (from the Before the Proposed Acquisition promoters) Category No of Shares/ % of Shares/ total No of Shares/ total % of Shares/ total total voting rights voting rights held voting rights held voting rights held held Promoters 37,02,800 85.04 11,29,600 25.94 Acquirers 6,49,000 14.90 32,22,200 74.00 FIs/ Banks, MFs 0 0 0 0 FIIs/ NRIs/ OCBs 0 0 0 0 Public 2500 0.06 2500 0.06 Total 43,54,300 100 43,54,300 100

3.0 RECOMMENDATION OF THE TAKEOVER PANEL

3.1 The aforesaid application was forwarded by SEBI to the Takeover Panel in terms of Regulation 4(4) of the Takeover Regulations. The Takeover Panel, vide report dated June 9, 2008, has recommended as under: “During the year 2006/2007 (as per Directors Resolution) Mr. Vikram Bakshi, Mr. Vinod Surha & Mr. Wadia Parkash were inducted in the Board as additional Directors, and the decision to forfeit the share worth (paid up) amount to Rs. 26,910,576 was made. No mention in the auditors report also made. Also, the application for delisting is not mentioned in the Director’s Report. Panel was not informed about the LSEs observations and whether the forfeiture (No. of shareholders is not known). It was also observed that the promoter shareholding increased from 53.67% to 85.04% on August, 2006, is in violation of Takeover Code. Whether application was made for exemption is not known, as it resulted in forfeiture of shares of say 22%. Panel further observe that the Acquirers are already ‘Directors’ and hold alongwith the promoters- 99.94% and only 5 shareholders are left, and they are ready to provide exit option to them. Considering the above the panel felt that this is not a fit case for giving exemption.”

3.2 Subsequently, an opportunity of personal hearing was granted to the acquirers on July 22, 2008 before my predecessor. Ms. Deepika Vijay, Advocate and Ms. Preeti Arora, Advocate represented the acquirers on the said date. Thereafter, vide letter dated July 24, 2008, the acquirers submitted additional facts. According to the acquirers, the forfeiture of shares was solely the decision of the then existing board of directors of the target company and that they were never involved in any manner in the decision taken by the target company regarding the forfeiture of shares. They also stated that the delisting was not started in the absence of procedural formalities and consequently no formal application was made to any stock exchange. In view of the above submissions, the acquirers requested that they may be exempted inter alia from the appointment of Merchant Bankers, publishing of public announcement. Thereafter, SEBI remitted the application back to the Takeover Panel. The Takeover Panel, vide its report dated January 20, 2009, had recommended as under:

“………………………… it was observed that upon increase of promoters shareholding from 53.67% to 99.94% on account of forfeiture of shares by the Target Company, no application for exemption from the applicability of the provisions of Takeover Regulations was sought by the promoters. Further, the Target Company is found to be non-compliant with clause 40A of the Listing Agreement requiring the Company to raise the public shareholding to the minimum threshold limit prescribed thereunder. Considering the aforesaid background of the promoters, the panel did not find it a suitable case for exemption.” 4.0 HEARING

4.1 An opportunity of hearing was granted to the acquirers on September 18, 2009 before me. Mr. Anshuman Dutta, Financial Advisor and Mr. Manoj Kumar, Legal Advisor represented the acquirers and made submissions on the said date. According to the learned representative, the earlier violations committed by the promoters of the target company was not intentional. He also stated that there are only five shareholders left in the target company and requested that exemption as sought for may be granted by SEBI. Thereafter, the acquirers vide letter dated September 22, 2009 filed written submissions inter alia stating that they had informally discussed their proposal to delist the targat company with the stock exchanges and that latter had shown reluctance for the same because of non-compliance with Clause 40 A of the Listing Agreement. The acquirers made further representation, vide letter dated February 8, 2010.

5.0 FINDINGS

5.1 I have considered the application for grant of exemption, the recommendations of the Takeover Panel, the submissions made by the acquirers and other material available on record. I note that pursuant to the proposed acquisition of 59.10% of the voting rights of the target company from the promoters, the shareholding and voting rights of the acquirers in the target company would increase from 14.90% to 74.00% of the total equity capital of the target company. It is also intimated that there would be a change in the control in the target company. It was stated in the application that the acquirers intend to delist the shares of the target company from the stock exchanges, after their proposed acquistion. I note that pursuant to the forfeiture of shares of the target company, there was an increase in the shareholding of its promoters. The said increase had brought down the public shareholding below the mandated minimum level as specified in the listing agreement. Clause 40A of the Listing Agreement requires a listed company to maintain, on a continuous basis, minimum public shareholding. Therefore, when the promoters had increased their holding in the target company, they should have ideally reduced their stake to ensure that the minimum public shareholding is maintained at the prescribed level. However, the promoters did not take steps to reduce their holding in the taregt company. Furher, no steps were taken for delisting the target company from the stock exchanges. The Takeover Panel has also observed that the target company was found to be non-compliant with Clause 40A of the Listing Agreement.

5.2 I note that SEBI had also required LSE and ASE to report on ‘investor complaints’ and ‘compliance with the listing agreement’ in respect of the target company. LSE and ASE, vide letters dated February 4, 2010 and February 23, 2010 respectively, had stated that there were no investor complaints for the period between April 1, 2006 and May 30, 2008. However, LSE has further stated that the target company has not been complying with the provisions of the listing agreement and that the public holding is below the minimum requirement prescribed under the listing agreement.

5.3 Taking into consideration all the necessary facts and circumstances of the case, I am of the view that the present application filed by the acquirers do not merit exemption from the requirements of the Takeover Regulations. Thus, I am in agreement with the recommendation of the Takeover Panel in the matter.

5.4 I further note that the acquirers requested SEBI to give necessary directions to LSE and ASE to allow them to proceed with the delisting of the target company in compliance with the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009. If they so desire, they may take necessary steps as envisaged under the said Regulations, for the purposes of delisting the target company. On receipt of request for delsiting, if any, the concerned stock exchanges shall act upon the same in accordance with law.

5.5 In view of the foregoing, the application for exemption filed by the acquirers in the present matter is disposed of as ordered hereinbelow.

6.0 ORDER

6.1 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 Regulation 4(6) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby reject the application dated May 5, 2008 filed by Mr. Vikram Bakshi (for himself and the others) requesting exemption from complying with the requirements of the said Regulations in respect of their proposed acquisition of 25,73,200 equity shares of K. K. Ropeways Limited.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: MARCH 31, 2010