Order in the matter of Ocean Agro India Limited.

WTM/PS/20/CFD/JULY/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 requirement of minimum public shareholding by listed companies

In respect of Ocean Agro India 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. Ocean Agro India Limited (hereinafter referred to as "the Company") is one such company against whom the interim order was passed. The equity shares of the Company are listed on the Bombay Stock Exchange Limited ("BSE").

3. The Company, vide letters dated June 18, 2013, July 30, 2013 (this letter was from the Company's promoter Mr. Babubhai Jamanadas Parikh), August 01, 2013, December 17, 2013 and April 03, 2014, filed replies to the interim order. The following submissions were inter alia made by the Company :

Submissions with respect to the steps taken and the difficulties faced by Company for complying with the MPS requirement within the stipulated time: (a) The Company had, vide letter dated May 21, 2010 to BSE, attempted to seek expeditious approval of BSE to its proposal of increasing public shareholding by re-allotting 11,91,300 forfeited shares on preferential basis to persons other than existing members of the Company. BSE was subsequently informed of (i) the decision of its Board of Directors to re-issue equity shares not exceeding 12,00,000 shares of ₹10/- at a price as may be arrived as per the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("the ICDR Regulations") and (ii) the approval of shareholders obtained through a special resolution on August 02, 2010 for such proposal. Thereafter, BSE reminded the Company to submit the checklist with documentary proof of compliance to enable BSE to process the application. The Company vide letter dated September 15, 2010 submitted the list of persons other than the existing shareholders of the Company who have expressed their interest in investing in the shares of the Company for prior approval so that the Company could complete the requirement of checklist to be submitted. However, as no response was received from BSE, the Company conceived that prior approval of names of persons to be allotted shares was a pre-requisite before submission of checklist. In view of the same, the genuine efforts made by the Company became a futile exercise.

(b) Pursuant to the SEBI Circular dated December 16, 2010 and the amendments to Clause 40A of the Listing Agreement, the Company and its promoters were in complete dilemma regarding its action to be taken to increase public shareholding, i.e., whether to issue and re-allot the forfeited shares or to divest promoters' shareholding. However, considering the time period of three years available to achieve compliance, the Company and its promoters decided to wait for suitable circumstances to comply with the MPS provisions. Unfortunately, the suitable circumstances did not take place till the deadline stipulated in that regard and thereby the offer to the public through prospectus or sale of shares through market could not be materialized. The IPO price of ₹50/- in 1994 and the trading history of the shares of the Company during the period 2010-2013 are self explanatory factors manifesting and influencing the inability of the Company and its promoters to comply with the MPS requirements.

(c) The Company and its promoters were not aware of the issuance of the SEBI Circular dated August 29, 2012, whereby SEBI had communicated that proposals seeking relaxation from existing methods or other methods for MPS compliance would be considered on merits. If they had known of the same, the Company would have approached SEBI for guidance as is evident from its efforts made in 2010 and also in respect of the circumstances which existed during the intervening period.

(d) The Company was in receipt of a letter dated March 06, 2013 from BSE requesting information regarding status of compliance with MPS requirement. For the first time, the Company became aware that SEBI has decided to 'initiate a process with the market participants to elicit a concrete plan of action and resolve issue, if any' and further 'SEBI has written to the companies that are not meeting the MPS requirement and initiated consultative process with the representatives of the companies'. This has surprised the Company as till the date of receipt of BSE letter, it did not receive any letter from SEBI as has been claimed in the BSE letter. The Company and its promoters were anxiously waiting for such SEBI letter to avail an opportunity to participate in consultative process to express the difficulties and seek guidance. However, till the passing of the interim order, the Company did not receive any letter from SEBI. The interim order also refers to letters dated December 11, 2012, February 01, 2013 and April 15, 2013 issued by SEBI to the Company. However, such letters were not received by the Company.

(e) The Company and its promoters and other directors have been observing the prohibitory directions, as applicable to each of them, pursuant to the interim order.

Submissions with respect to the Company's compliance with the MPS requirement:

(f) Pursuant to its letter dated December 17, 2013, the Company initiated steps to comply with the MPS requirement, whereby its promoters proposed to divest their 11.42% shares through secondary market in compliance with the method suggested by SEBI in its Circulars. (g) BSE accepted its application and opened a special trading window on December 30, 2013 to enable the promoter group entities to sell 7,70,000 shares in secondary market. (h) The promoter group accordingly divested 7,70,000 shares on December 30, 2013, thereby bringing down their shareholding in the Company below the maximum permissible limit (i.e., 75%). Consequentially, the public shareholding increased to more than 25%. (i) Copy of the shareholding pattern of the Company, as submitted to BSE, for the quarter ended December 31, 2013 demonstrating compliance, was submitted.

4. The Company submitted that SEBI should consider the fact that the decrease of public shareholding below 25% was on account of forfeiture of 20.06% shares under the 'public category' resulting in the increase of promoters' shareholding. The increase in the promoters' shareholding was therefore without any conscious act by the promoters to increase their shareholding beyond 75%. The Company also contended that its promoters never had the advantage on account of their disproportionate stake compared to the public in the Company and also did not place them in a more advantageous position as compared to the promoters of the compliant companies.

5. In view of its compliance, Company requested that it should not be continued to be treated as a non-compliant company and that the directions passed vide paragraph 17 of the interim order be lifted. The Company further requested SEBI not to take further action as contemplated in paragraph 18 thereof. The Company, while referring to SEBI Orders in the matter wherein directions have been lifted and the show cause notice disposed off for compliant companies, requested for a personal hearing in case SEBI has any contrary views.

6. As provided for in the interim order, the Company was afforded an opportunity of personal hearing on June 10, 2014, when it was represented by Mr. Ashwin Shah and Mr. Anish Kharidia, authorised representatives. The representatives reiterated the submissions and tendered copies of reply dated April 03, 2014 and other documents.

7. I have considered the submissions made by the Company and other material available on record. The Company was able to comply with the MPS requirement, as stipulated under rule 19A of the SCRR and clause 40A the Listing Agreement read with section 21 of the Securities Contracts (Regulation) Act, 1956 ("the SCRA"), only on December 30, 2013. The due date for such compliance was on June 03, 2013. Though the Company has cited reasons for this gross delay, the same cannot be the grounds to condone the delay in complying with such statutory requirements. The promoters' have divested a portion of their stake in the Company at a floor price of ₹6.50/- during December 2013. As per the price-volume chart presented for the period May 2009-March 2014, I find that the price and the volumes were fluctuating during that period. In such circumstances, I do not find any special factor that had enabled the promoters to complete OFS only during December 2013 and not earlier. The OFS could have been attempted during the three year period available, under law, for complying with the MPS requirement. The dilemma whether to issue forfeited shares or to off-load shares held by promoters cannot also be a ground for non-compliance within the due date. It is also not clear from such submissions as to why the Company did not offer shares (the forfeited shares) first to the public shareholders, as mentioned in the check-list of the BSE. No cogent reasons are given by the Company as to why its proposal to issue forfeited shares did not proceed. The Company has merely submitted that when BSE did not respond to its letter intimating list of proposed allottees, it conceived that it should have first provided the name of the proposed allottees before submitting the check-list.

8. The Company has also contended that it did not receive the SEBI letters as indicated in the interim order. In this regard, it is noted that the SEBI e-mails dated December 11, 2012 and February 01, 2013, affording opportunities to the Company to meet SEBI officials on December

14, 2012 (in the Western Regional Office of SEBI at Ahmedabad) and February 07, 2013 (Head Office at Mumbai), were sent to the e-mail address of the Company as provided by BSE to SEBI. Further, the SEBI letter dated April 15, 2013, advising the Company to take appropriate steps to ensure compliance with MPS norms within the stipulated timeline, was sent to the Company at its registered address. Despite such steps taken by SEBI, the Company failed to respond. In view of the same, BSE was advised vide SEBI letter dated February 28, 2013 to obtain information from those companies who did not respond to the SEBI notices including the Company, with respect to their status of MPS compliance. The Company could have approached SEBI after receipt of the BSE letter and inform the status of MPS compliance and/or to submit its proposal, if any, for SEBI's consideration. However, the Company failed to do so and had initiated steps only in the month of December 2013 for achieving compliance with the MPS norms.

9. The amended provisions of rules 19 and 19A of the SCRR came into force only 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 atleast 25%. Pursuant to this amendment and even as per the submissions of the Company, a concrete step (the OFS) taken towards compliance was only during December 2013. As per the shareholding pattern of the Company, the public shareholding crossed 25% only in the quarter ended December 2013 (as informed to BSE on January 16, 2014), when the public shareholding was at 30.14%. The same is the public shareholding level as reported for the period ended March 2014.

10. On considering the facts and circumstances of this case, I do not find the reasons/submissions offered by the Company with respect to its delay in complying with the MPS requirements, as plausible. However, as the Company has now complied with the MPS requirements as stipulated under rule 19A of the SCRR read with clause 40A of the listing agreement, it would be appropriate and reasonable to vacate the directions issued against the Company, its promoters and directors. In respect of the non-compliance of the MPS requirements by the Company within the due date, I am of the considered view that the case be referred for adjudication proceedings for adjudicating the Company under sections 23E and 23H of the SCRA.

11. 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, Ocean Agro

India Limited, its directors, promoters and promoter group, with immediate effect. The matter is referred for adjudication proceedings for adjudicating 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.

12. Copy of this Order shall be served on the stock exchanges and depositories for their information and necessary action.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Date : July 21st, 2014 Place : Mumbai