Order In the matter of Polo Hotel Ltd.

WTM/GM/CFD/10/2019–20 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTIONS 11(1), 11(4) AND 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 AND REGULATION 10 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997 READ WITH REGULATION 32(1) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011. IN THE MATTER OF POLO HOTELS LIMITED – ACQUIRERS PAN 1. ABHEY RAM DAHIYA ABVPD0924C 2. AMARDEEP SINGH DAHIYA AANPD3910B 3. PANKAJ DAHIYA AGLPD1665M

BACKGROUND –

1. Polo Hotels Limited (“Target Company/Polo Hotels”) was incorporated under the Companies Act, 1956 and its shares are listed on BSE Limited (“BSE”). The Board of Directors of the Target Company are as under:

TABLE I – BOARD OF DIRECTORS OF TARGET COMPANY [SOURCE: BSE WEBSITE] NAME DESIGNATION 1. ABHEY RAM DAHIYA NON–EXECUTIVE NON–INDEPENDENT DIRECTOR CHAIRPERSON RELATED TO PROMOTER 2. AMARDEEP SINGH DAHIYA NON–EXECUTIVE INDEPENDENT DIRECTOR 3. VIKAS TIBREWAL NON–EXECUTIVE INDEPENDENT DIRECTOR 4. GURPREET SINGH TOOR EXECUTIVE DIRECTOR 5. ANSHUMAN SINGH NON–EXECUTIVE INDEPENDENT DIRECTOR

2. On January 4, 1993, V. P. Garg (“Garg”) (erstwhile Promoter of the Target Company) had entered into an Assisted Sector Agreement with the Haryana State Industrial Development Corporation Limited (“HSIDC”) for the purpose of setting up a hotel in Haryana. As part of the Assisted Sector Agreement, HSIDC extended a term loan to Garg and also subscribed to 3 Lakh shares of the Target Company. The Assisted Sector Agreement also provided for buy– back of the aforesaid 3 Lakh shares of HSIDC. Garg defaulted in repayment of loan as well as in buying back the shares of HSIDC in the Target Company.

3. In March 1999, Garg entered into another Agreement with A. R. Dahiya and his Associates, viz. Amardeep Singh Dahiya and Pankaj Dahiya (Collectively referred to as “Acquirers”) for sale of his entire shareholding of 28.09% in the Target Company. The aforementioned Agreement was subject to the approval of HSIDC and contained a clause that Garg would be Order in the matter of Polo Hotels Limited absolved of fulfilling the buy–back obligation provided HSIDC agreed to accept the Acquirers in place of Garg. Subsequently, the Acquirers, Garg and HSIDC entered into a Tripartite Financial Collaboration Agreement, whereby HSIDC consented to the Acquirers stepping into the shoes of Garg.

4. On April 20, 1999, Garg and the Acquirers entered into an Agreement whereby the Acquirers agreed to purchase the entire share capital of 28.09% held by Garg at the rate of ₹8.50 per share. Since the aforesaid acquisition was in excess of 15% of the total shareholding of the Target Company, the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“Takeover Regulations 1997”), were attracted. In order to comply with the aforementioned Regulations, the Acquirers made a Public Announcement on April 24, 1999, making an Open Offer to the remaining shareholders of the Target Company to purchase a minimum of 20% shares of the said Company at an offer price of ₹8.75 per equity share.

5. On May 5, 1999, a draft Letter of Offer was sent by the Merchant Banker (on behalf of the Acquirers) to SEBI for its approval. In the draft Letter of Offer the Acquirers inter alia made a disclosure about the Financial Collaboration Agreement entered into between the Acquirers, Garg and the HSIDC on April 19, 1999 and the details of how the price will be determined at the time of buy–back of shares from HSIDC by the Acquirers. SEBI reverted with a letter dated May 26, 1999, seeking clarifications from the Merchant Banker. The SEBI letter stated that the price at which the Acquirers proposed to acquire the shares from HSIDC as per the Financial Collaboration Agreement, had to be specified upfront in the Offer document. Further, SEBI also stated that if the price payable to HSIDC as per the said Agreement was higher than the offer price of ₹8.75 per share, then the offer price must be justified as required under Regulation 20(6) of the Takeover Regulations 1997. Vide a letter dated May 31, 1999, the Merchant Banker replied inter alia stating that as the price to be paid to HSIDC cannot be determined as on that date, it cannot be considered for pricing under Regulation 20 of the Takeover Regulations 1997. SEBI cleared the draft Letter of Offer vide its letter dated September 30, 1999 advising the Acquirers to inter alia disclose in the draft Letter of Offer that the acquisition of shares under the Financial Collaboration Agreement will be governed by the relevant provisions of the Takeover Regulations 1997 when the acquisition actually takes place. Accordingly, the Letter of Offer was sent to the shareholders of the Target Company by the Acquirers containing the disclosures as advised by SEBI. It was subsequently gathered that the buy–back transaction with HSIDC had, in fact, been concluded on April 19, 1999 at ₹23.75 per share and this fact was not disclosed by the Acquirers to SEBI. As it transpired, in response to the Public Announcement, the Acquirers could acquire only 2.42% of the shares of the Target Company under the Open Offer as the shareholders were not willing to offer their shares at ₹8.75 when the face value was ₹10.

6. Subsequent to the above, SEBI received a complaint from one, Komlam Sardana alleging that the Acquirers had acquired 3 Lakh shares from HSIDC for ₹71.25 Lakhs at the rate of ₹23.75 per share, whereas the shares were not offered at the same price to the existing shareholders of the Target Company.

7. After enquiring into the complaint, SEBI found that the the Acquirers had violated the provisions of the Takeover Regulations 1997 as the price of ₹23.75 per share paid by the Acquirers for the acquisition of 3 Lakh shares from HSIDC on April 19, 1999, had not been considered. Accordingly, vide an Order dated August 1, 2003 (“SEBI Order”), directed the Acquirers to:

a. Make a fresh Public Announcement for 20% shares as required under Chapter III of the Takeover Regulations 1997 in accordance with Regulation 10 and offer to the shareholders of the Target Company the price of ₹23.75 per share along with interest at the rate of 15% per annum for the period from November 16, 1999 to the actual date of payment of consideration.

b. Pay the balance amount to all the shareholders who shares have been accepted in the public offer made on April 24, 1999, the balance amount being ₹15 [₹23.75 - ₹8.75] plus interest at the rate of 15% for the period from November 16, 1999 to actual date of payment of balance consideration.

8. Aggrieved by the SEBI Order, the Acquirers preferred an appeal before the Hon’ble Securities Appellate Tribunal (“SAT”) (Appeal no. 205 of 2006). Vide an Order dated April 19, 2006 (“First SAT Order”), the Hon’ble SAT inter alia observed that as the buy–back of shares which transpired between the Acquirers and HSIDC was neither disclosed in the Public Announcement nor in the Letter of Offer made to the other shareholders, SEBI was correct in directing the Acquirers to go in for a fresh Public Announcement and offer to the remaining shareholders of the Target Company, the rate of ₹23.75 per share.

9. Aggrieved by the First SAT Order, the Acquirers filed an Appeal before the Hon’ble Supreme Court (Civil Appeal No. 2727 of 2006), which vide an Order dated November 26, 2015 (“First Supreme Court Order”) found that the transaction of buy–back of shares which transpired between the Acquirers and HSIDC was required to be disclosed in the Public Announcement dated April 24, 1999, and accordingly, dismissed the Appeal. Subsequent to the First Supreme Court Order, the Acquirers filed a Review Petition before the Hon’ble Supreme Court (Review Petition (C) No. 2361 of 2016), which dismissed the same vide an Order dated July 13, 2016 (“Second Supreme Court Order”). Thereafter, the Acquirers filed a Curative Petition before the Hon’ble Supreme Court (Curative Petition (C) No. 66 of 2017), which dismissed the same vide an Order dated March 2, 2017 (“Third Supreme Court Order”).

10. SEBI vide letter dated April 5, 2017, advised the Acquirers to comply with the SEBI Order. The Acquirers vide letter dated April 10, 2017 informed SEBI that Navigant Corporate Advisors Limited (“Navigant”) had been appointed as Merchant Banker to the Open Offer and requested for thirty days to comply with the SEBI Order. SEBI vide letter dated April 21, 2017 acceded to the aforementioned request made by the Acquirers. However, vide a letter dated May 8, 2017, Navigant informed SEBI that it was withdrawing its consent to act as a Merchant Banker to the Open Offer since the Acquirers had not arranged the requisite amount to be deposited in the Escrow Account as required under the Takeover Regulations 1997. Subsequently, the Acquirers addressed a letter to SEBI on May 9, 2017, stating that on account of the aforementioned conduct of the Merchant Banker, the Acquirers were unable to comply with the SEBI Order. Vide letter dated May 22, 2017, the Acquirers sought extension of time to comply with the aforementioned Order. Vide letter dated June 7, 2017, SEBI granted 15 days’ time for the compliance of the aforementioned Order.

As the Acquirers failed to comply with the SEBI Order in spite of extension of time being granted, SEBI vide letter dated August 3, 2017, once again called upon the Acquirers to comply with the said Order within 7 days failing which, appropriate action would be initiated. Aggrieved by the aforementioned letter dated August 3, 2017, the Acquirers filed an Appeal before the Hon’ble SAT (Appeal no. 205 of 2017), which vide an Order dated August 29, 2017 (“Second SAT Order”), had observed: “In our opinion the present appeal is filed in gross abuse of the process of law merely with a view to delay implementation of the order of SEBI dated 1.8.2003 which was upheld by this Tribunal and finally by the Apex Court on November 26, 2015. Even after SEBI considered the plea of the appellant and granted extension of time, the appellant has failed and neglected to comply with the order of SEBI dated August 1, 2003 … We grant extension of time for a further period of four weeks for compliance of the Order of SEBI dated August 1, 2003 subject to payment of costs quantified at ₹50,000 to be paid by the appellant to SEBI within a period of 2 weeks from today.” 11. The Acquirers failed to ensure compliance with the SEBI Order within the time stipulated by the Second SAT Order.

The Acquirers (through the Merchant Banker) filed a Public Announcement only on November 6, 2017 and thereafter, a draft Letter of Offer with SEBI on November 16, 2017. SEBI offered its observations on the aforementioned draft Letter of Offer vide an Observation Letter dated May 11, 2018 (“Observation Letter”) inter alia advising the Acquirers to incorporate the following in the draft Letter of Offer: (a) Public Announcement shall be made for acquiring 44,74,851 equity shares constituting 20% of the latest capital of the Target Company, which is 2,23,74,253 as per the provisions of Regulation 21 of Chapter III of the Takeover Regulations 1997.

(b) As per the (SEBI) Order, the Acquirers were required to pay the shareholders who were holding shares as on April 30, 1999 (Trigger date) whose shares are accepted in the offer, the price at the rate of ₹23.75 per share along with interest @ 15% for the period from November 16, 1999 to the actual date of payment of consideration.

(c) Shareholders other than the above shall be eligible to tender their shares at the price of ₹23.75 per share. 12. A reminder e–mail dated May 18, 2018, was forwarded to the Acquirers to ensure compliance with the Observation Letter and to complete the Open Offer process in compliance with the the SEBI Order. 13. The Acquirers filed a Writ Petition (Civil Writ Petition No. 13983 of 2018) challenging the Observation Letter, before the Hon’ble Punjab and Haryana High Court, which vide an Order dated May 30, 2018 permitted the Acquirers to “withdraw the petition with liberty to file Appeal before (the) Tribunal.” (“High Court Order”). 14. Pursuant to the above, the Acquirers filed an Appeal challenging the Observation Letter, before the Hon’ble SAT (Appeal no. 192 of 2018 and Misc. Applications no. 195 of 2018 and 205 of 2018), which vide an Order dated February 15, 2019 (“Third SAT Order”) had observed: “Consequently, for the reasons stated aforesaid, we do not find any merit in the appeal and the same is dismissed with costs which we quantify at ₹50,000 since we find that the Order of SEBI dated August 1, 2003 has not been complied with for almost 15 years in spite of the said Order reaching finality. The said costs shall be deposited before the Registrar of this Tribunal within four weeks from today.” 15. Vide a letter dated February 27, 2019, SEBI inter alia advised the Acquirers to complete the Open Offer process in compliance with the the SEBI Order. 16. Thereafter, the Acquirers filed an appeal against the Third SAT Order before the Hon’ble Supreme Court (Civil Appeal no. 2377 of 2019), which dismissed the same vide an Order dated April 5, 2019 (“Fourth Supreme Court Order”). Subsequent to the aforementioned, the Acquirers vide a letter dated April 16, 2019, informed SEBI that they had filed a Review Application before the Hon’ble Supreme Court. 17. Vide a letter dated May 3, 2019, SEBI inter alia advised the Acquirers to comply with the SEBI Order within 5 working days from the date of receipt of the said letter and to complete the pending Open Offer after duly incorporating the observations issued vide the Observation Letter. However, vide a reply dated May 8, 2019, the Acquirers requested SEBI to grant time for compliance with the SEBI Order till the disposal of the Review Application preferred by them before the Hon’ble Supreme Court.

FINDINGS – 18. I have considered the reply dated May 8, 2019, as filed by the Acquirers and all the relevant material on record. As detailed at paragraphs 10–16, I note that the instant matter has a history of litigations such as three Appeals filed before the Hon’ble SAT, followed by two Civil Appeals, two Review Petitions (including the latest stated to have been filed by the Acquirers in their letter dated May 8, 2019) and one Curative Petition, all filed before the Hon’ble Supreme Court and a Writ Petition filed before the Punjab and Haryana High Court. Despite the final disposal/dismissal of all Court proceedings (that have spanned over a period of fifteen years) with respect to the issues arising out of an Open Offer made by the Acquirers as early as in 1999, the Acquirers are now seeking time for compliance with the SEBI Order on the ground that a Review Application is pending before the Hon’ble Supreme Court. In this context, I note that no official copy of the Review Application has been received by SEBI till date. I also note that no stay has been granted by the Hon’ble Supreme Court in the matter.

Moreover, I note that the Hon’ble SAT vide the Third SAT Order dated February 15, 2019 had observed that the SEBI Order had not been complied with for almost 15 years in spite of the said Order reaching finality. The Civil Appeal filed against the aforementioned SAT Order was dismissed by the Hon’ble Supreme Court vide the Fourth Supreme Court Order. I find that the Acquirers have been avoiding, delaying and protracting the obligation to make an Open Offer in compliance with the SEBI Order for a considerable period thereby adversely affecting the interests of small shareholders of the Target Company and depriving them of an exit opportunity at a fair price. I also note that SEBI is in receipt of several complaints in the matter inter alia stating that the original complainant i.e. Komlam Sardana, based on whose complaint the SEBI Order was issued, has passed away during the course of litigation in the matter. In my opinion, having regard to the aforementioned facts, any further delay by the Acquirers at this stage would result in irreparable damage to the interests of the small shareholders of the Target Company.

It is therefore appropriate for SEBI to step in and protect the interest of such shareholders by adopting effective measures through an Order to compel the Acquirers i.e. Abhey Ram Dahiya, Amardeep Singh Dahiya and Pankaj Dahiya, to comply with the legal mandate of making an Open Offer in compliance with the SEBI Order read with the Observation Letter, without any further delay

19. I am also of the considered opinion that since the SEBI Order has attained finality (see the Third SAT Order), the Acquirers must make good the amount payable as per the Open Offer (assuming full acceptance) directed to be made vide the SEBI Order read with the Observation Letter. In this context, it is reiterated that vide the SEBI Order, the following directions were issued against the Acquirers:

a. Make a fresh Public Announcement for 20% shares as required under Chapter III of the Takeover Regulations 1997 in accordance with Regulation 10 and offer to the shareholders of the Target

Company the price of ₹23.75 per share along with interest at the rate of 15% per annum for the period from November 16, 1999 to the actual date of payment of consideration.

b. To pay the balance amount to all the shareholders who shares have been accepted in the public offer made on April 24, 1999, the balance amount being ₹15 [₹23.75 - ₹8.75] plus interest at the rate of 15% for the period from November 16, 1999 to actual date of payment of balance consideration. 20. For ensuring compliance with the direction at paragraph 19(a), the Acquirers made a Public Announcement on November 3, 2017. As per the applicable provisions of the Takeover Regulations 1997 read with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations 2011”), the Acquirers had opened an Escrow Account “Polo – Open offer Escrow A/c” with ICICI Bank and had deposited an amount of ₹80,42,167.30 being more than 25% of the earlier consideration amount under the Open Offer. The Merchant Banker vide an e–mail dated May 30, 2019, had confirmed that the aforementioned amount continues to remain in the aforesaid Escrow Account; however, the Acquirers have not deposited the difference in the consideration amount under the Open Offer on account of the resultant increase in the Target Company’s equity share capital as informed to them vide the Observation Letter.

21. For ensuring compliance with the direction at paragraph 19(b), the erstwhile Merchant Banker to the Open Offer i.e. Master Capital Services Limited (“MCSL”), had opened an Escrow Account with ING Vysya Bank (now Kotak Mahindra Bank). Vide a letter dated November 21, 2017, MCSL had confirmed to SEBI that an amount of ₹28,03,452.45 being the amount remaining after completion of the aforesaid Open Offer, continues to remain in the aforesaid Escrow Account.

22. At this stage, for ensuring compliance with the SEBI Order, the Acquirers’ liability amounts to ₹13,02,85,968.75 i.e. ₹12,54,25,192.75 for the direction at paragraph 19(a) and ₹48,60,776 for the direction at paragraph 19(b). However, having regard to the amounts already deposited by the Acquirers in Escrow Accounts as indicated at paragraphs 20 and 21, the total outstanding consideration amount under the Open Offer is ₹11,94,40,349, which has been computed as under:

TABLE II – TOTAL OUTSTANDING OPEN OFFER OBLIGATION (AMOUNT IN ₹) TOTAL PRICE/SHARE IN ₹ INTEREST IN ₹ AMOUNT IN ₹ SHARES CONTINUING/OLD SHAREHOLDERS* 2,74,910 23.75 #69.65 2,56,76,594.00 CURRENT SHAREHOLDERS 41,99,941 23.75 0 9,97,48,598.75 AMOUNT [A] 44,74,851 12,54,25,192.75 SHARES EARLIER TENDERED IN OPEN OFFER* [B] 82,400 15 #43.99 48,60,776.00 TOTAL AMOUNT [A + B] 45,57,251 13,02,85,968.75 LESS TOTAL AMOUNT ALREADY DEPOSITED BY THE ACQUIRERS IN ESCROW ACCOUNTS [SEE PARAGRAPHS 21 AND 22] [C] 1,08,45,619.75 TOTAL OUTSTANDING OPEN OFFER OBLIGATION [(A + B) – C] 11,94,40,349.00 *SOURCE – DRAFT LETTER OF OFFER DATED NOVEMBER 16, 2017. #AS PER SEBI ORDER DATED AUGUST 1, 2003, INTEREST CALCULATED AS ON MAY 31, 2019 AND MAY CHANGE DEPENDING UPON ACTUAL DATE OF PAYMENT. ORDER –

23. In view of the foregoing, I in exercise of the powers conferred upon me by virtue of Section 19 read with Sections 11(1), 11(4) and 11B of the SEBI Act, 1992 and Regulation 10 of the Takeover Regulations 1997 read with Regulation 32(1) of the Takeover Regulations 2011, hereby direct as under:

(a) Abhey Ram Dahiya, Amardeep Singh Dahiya and Pankaj Dahiya shall ensure compliance with the SEBI Order dated August 1, 2003 and complete the pending Open Offer after duly incorporating the observations issued vide the Observation Letter dated May 11, 2018 within twelve working days from the date of receipt of this Order.

(b) Abhey Ram Dahiya, Amardeep Singh Dahiya and Pankaj Dahiya shall within seven working days from the date of receipt of this Order, deposit an amount of ₹11,94,40,349 (as determined at paragraphs 20–22) in an interest bearing Escrow Account [“Escrow Account in Compliance with SEBI Order dated June 3, 2019 – A/c (in the name of the respective persons/entities)”] created specifically for the purpose in a Nationalized Bank.

(c) The Banks are directed that no debits shall be made, without the permission of SEBI, in respect of the bank accounts held by all persons mentioned at paragraph 23(b) except for the purpose of compliance with this Order. Further, the Depositories are also directed that no debit shall be made, without permission of SEBI, in respect of the demat accounts held by the above said persons. However, credits, if any, into the accounts maybe allowed. The Banks and the Depositories are directed to ensure that all the above directions are strictly enforced. Further, debits may also be allowed for amounts available in the account in excess of the amount to be deposited by the persons mentioned in paragraph 23(b). The Escrow Account(s) shall create a lien in favour of SEBI and the monies kept therein shall not be released without permission from SEBI. On production of proof by any of the persons mentioned in paragraph 23(b) that the aforementioned money is deposited in the Escrow Account, SEBI shall communicate to the Banks and Depositories to defreeze the accounts.

24. It is clarified that the above directions are passed with the limited objective of implementing/executing the directions contained in the SEBI Order dated August 1, 2003 (reproduced at paragraph 19 herein), as upheld by the Hon’ble SAT vide its Order dated February 15, 2019 and the Hon’ble Supreme Court vide its Order dated April 5, 2019. Upon failure to comply with the above directions, SEBI shall initiate other suitable actions under the securities laws including prosecution against Abhey Ram Dahiya, Amardeep Singh Dahiya and Pankaj Dahiya.

25. This Order shall come into force with immediate effect. 26. A copy of this Order shall be forwarded to the Stock Exchanges, Depositories and Registrar and Share Transfer Agents of all Mutual Funds and Banks to ensure necessary compliance.

Place: Mumbai G. MAHALINGAM Date: June 3, 2019 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA