Order in the matter of non-complaince with the requirement of MPS by listed companies in respect of Shree Karthik Papers Limited

WTM/PS/48/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 Shree Karthik Papers 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. Shree Karthik Papers 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 19.72%. The shares of the Company are listed on the Bombay Stock Exchange Limited ('BSE').

3. The Company had filed its reply to the interim order vide letters dated June 24, 2013 and August 27, 2013. Thereafter, an opportunity of personal hearing was afforded to the Company on September 16, 2013, when Mr. M.S. Velu, Managing Director appeared and made submissions. The Company also filed the written submissions which were taken on record.

4. I have considered the reply of the Company, the submissions made during the personal hearing and the written submissions. The company has submitted that the promoters' holding as on December 31, 2006 was 50.54%. Later, as the Company had become a sick company, a reference was made to the Board of Industrial and Financial Reconstruction ('BIFR'). Pursuant to the same, BIFR sanctioned a scheme for rehabilitation vide order dated February 07, 2007. According to the Company, the promoters' brought in a fresh capital of 600 lakhs and the same resulted in the increase of the promoters' holding to 80.28% as on March 31,

2007. The Company further submitted that in order to comply with the MPS norms, it had opted to divest 11,00,000 equity shares constituting 5.76% of the share capital of the Company through an Offer for Sale ('OFS') on August 17, 2013. Pursuant to the same, the promoters' holding was reduced to 74.52%, thereby raising the public shareholding to 25.78%.

5. It was also submitted that the delay in compliance was due to its belief that it will be exempted from complying with the provisions of the MPS norms and requested SEBI to condone the delay. 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. I note that pursuant to the rehabilitation scheme, the promoters' holding increased to 80.28% as on March 31, 2007. It is observed that rule 19A of the SCRR was inserted w.e.f. June, 2010. The Company was under a three (3) years' notice to achieve compliance with the MPS norm. Therefore, I find that the Company has definitely delayed in complying with the MPS requirements under the SCRR. 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 issued vide the interim order dated June 04, 2013 against the Company, Shree Karthik Papers 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 1st, 2013 PRASHANT SARAN PLACE: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA