Order in the matter of non-complaince with the requirement of MPS by listed companies in respect of Sah Petroleums Limited

WTM/PS/36/CFD/SEPT/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 Sah Petroleums 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. Sah Petroleums 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 13%. The shares of the Company are listed on the Bombay Stock Exchange Limited ('BSE') and the National Stock Exchange of India Limited ('NSE').

3. The Company filed its replies dated June 24, 2013 and July 19, 2013 to the interim order. Thereafter, an opportunity of personal hearing was afforded to the Company on August 07, 2013, when its Joint Managing Director, Mr. Aditya Sah, director, Mr. Ashish Agarwal and company secretary, Mr. D. Malla Reddy appeared and made submissions. It was submitted by the Company that it has undertaken a bonus issue of equity shares to the public shareholders and has allotted 69,84,383 equity shares to its public shareholders on July 12, 2013 for the purposes of complying with the MPS norms. Consequently, the promoter holding was reduced from 87% to 74.98%. During the personal hearing, the representatives also submitted that the Company is now compliant with the MPS norms and requested SEBI to withdraw the directions issued in paragraph 17 of the interim order.

4. I have considered the reply and submissions made by the Company. The Company has submitted that it had examined various methods to comply with the MPS norms. It also said that in view of the severe operational and financial constraints faced by the Company like the weakening of the Indian Rupee, rise in procurement costs, increase in operating costs, there was considerable fall in the demand of the shares of the Company. Further, it has also been said that there is very low trading volume in its scrip as the Company was closely held by the promoter group. Due to all these constraints, the Company decided to proceed with the issue of bonus shares, where the promoters had foregone their entitlement and expedited its efforts to secure all necessary approvals from its stakeholders in this regard. It has been submitted that the Company had taken various irreversible steps to comply with the MPS norms such as the approval of the Board of Directors for the issue of the bonus shares at a meeting held on May 24, 2013, approval from the concerned stock exchanges under the clause 24A of the listing agreement, issuance of notice for convening the Extra Ordinary General Meeting for approval of shareholders on May 24, 2013. Further, as the process of issue of bonus shares entails the publication of various public notices, convening of a shareholders' general meeting, obtaining shareholders' consent and other requirements, the Company submitted that the delay occurred in the compliance with MPS norms. It requested for condoning the delay in achieving compliance with the MPS norms.

5. I note that the Company has achieved the minimum public shareholding level as stipulated under the SCRR on July 12, 2013. In this regard, I find that the Company was aware that it was mandated under the SCRR to raise the minimum public shareholding to 25% on or before June 03, 2013. The Company had proposed to issue bonus shares only on May 24, 2013, whereas the due date for compliance was June 03, 2013. If the Company had decided much earlier, as to the mode and manner as permitted under law, for complying with the MPS requirement, it could have complied with the MPS norms within the due date.

6. The Company has definitely delayed in complying with the MPS requirements under the SCRR, even when it was under notice for three years for achieving such compliance. 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 vide the interim order dated June 04, 2013 against the Company, Sah Petroleums 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.

PLACE: Mumbai PRASHANT SARAN DATE: September 04th, 2013 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA