Order in the matter of Sanathnagar Enterprises Ltd

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 SANATHNAGAR ENTERPRISES 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. Sanathnagar Enterprises Limited (hereinafter referred to as "the Company") is one of such companies against whom the interim order was passed. The equity shares of the Company are listed on the Bombay Stock Exchange Limited ("BSE") and the Delhi Stock Exchange Limited (DSE). 3. The submissions of the company filed vide letter dated June 14, 2013 and written submission dated July 16, 2015 to SEBI stated as follows:- a. The shares of the Company was suspended from BSE and DSE from 2003 onwards.

b. The name of the company was changed from Bakelite Hylam Limited to Sanathnagar Enterprises Limited in 2009. The Company was registered as a sick company in September 2001 before BIFR which vide its order dated August 22, 2005, sanctioned a rehabilitation scheme providing for a) capital reduction to the extent of 90% of capital b) capital infusion by the promoters by preferential allotment and c) de-merger of the company into three companies. The said order was affirmed by Appellate Authority of Industrial and Financial Reconstruction (AAIFR). c. The Company gave effect to the scheme. However, these corporate actions are not reflected in the records of the BSE and DSE. The company has reduced its paid up capital by 90% on June 30, 2005 and thereafter issued further capital to the new promoters. As per the scheme, majority of the promoter holding was transferred to the incoming promoter, Lodha group. Sizeable increase of promoters’ holding was under the scheme of rehabilitation. The shareholding pattern prior to and post the reduction of capital and preferential issue and post de-merger is as follows:- Prior to Post- Post- Post - Reduction Reduction preferential demerger of capital of Capital Issue No of % of No of % of No of No of % % Shares holding Shares holding Shares Shares 77,76,104* 60,475@ Promoters 66,82,255 54.59 6,68,226 54.59 81 Total 2,908,037 92.32 =8504805 (60,475) transferred Public 55,56,709 45.41 5,55,670 45.41 15,00,000% Total 19,95,195 19 2,41,963 7.68 10,50,00,00 Total 1,22,38,964 100 12,23,896 100 100 31,50,000 100 0

*issued on Sep 2005; % issued on May 2006 @ by transfer d. The increase in promoter shareholding from 54.59 % to 92.32 % is pursuant to the subscription/allotment/transfer of shares from the company under the BIFR order read with AAFIR order. Therefore, no ex-parte order could have been passed against the company. e. The company was discharged from BIFR in September 2008. Thereafter, the Company vide letter dated May 21, 2009 and July 14, 2009 requested BSE for revocation of the suspension. f. Meantime, the Company passed resolution for delisting the shares much before June 4, 2010 when the MPS requirement was stipulated. The Company vide its letter dated May 20, 2010 had written to BSE stating its intention to delist its shares. Thereafter, the company in in its letter dated June 17, 2010 to BSE, stated that it had already made application for delisting from BSE. In view of the suspension of trading, the Company could not go ahead with delisting. g. Therefore, the Company followed up with BSE for revocation of suspension by providing additional information and clarifications vide letters dated January 12, 2015, March 3, 2015, March 10, 2015 and March 30, 2015. The Company has cleared all its dues to BSE including the listing fees. The Company is compiling the documents as per the last request from BSE and is confident of revocation of suspension. In view of the non-availability of information relating to shareholding pattern for the period prior to 2000, the Company is not able to provide to BSE the same. Therefore, the Company has vide letter dated August 26, 2015 sought for the access of BSE data for the period prior to 2000 which is yet to be replied by BSE. Immediately thereafter, the promoters will opt for offer for sale (OFS) through stock exchange for compliance of MPS requirement. h. The external market conditions is reflected in GDP slipping down from 9% to 4.8% which is further reflected in investors’ lack of confidence and their resultant staying away from primary and secondary market in 2012-13. i. In view of the external, internal circumstances, and suspension of trading, the Company was not able to comply with any of the methods prescribed in Clause 40A of Listing Agreement, for reduction of promoters holding.

j. Hence, the Company vide letter February 11, 2013 made a request to SEBI under clause 40A(ii)(g) of Listing Agreement, for permitting the reduction of promoters’ holding through negotiated deal with interested persons as envisaged in section 108 of the Companies Act, 1956. However, SEBI passed the interim order. k. Though promoters are willing to dilute their holding, in view of the facts and circumstance, they are handicapped from complying with the MPS norms. l. The Company seeks a period of ten months for compliance of MPS subject to the necessary clearances from BSE for revocation of suspension. 4. Pursuant to the interim order, SEBI vide e-mail dated May 27, 2015 intimated that the Company is given an opportunity of hearing on July 2, 2015. 5. Mr. Yogesh Vadhwana, the Advocate for Lodha Group, Mr. Sharatkumar Shetty, Company Secretary, Mr. Uday Nair, Chartered Accountant, Mr. Prakash Shah, Advocate attended the personal hearing on July 2, 2015, for the Company and made oral submissions. It was submitted that the company was under BIFR and the scrip is under suspension in BSE. The Company is taking efforts to revoke the suspension and the only available mode before the company for compliance of MPS can be through OFS.

The Company sought one week’s time for filing written submissions. The Company thereafter vide letter dated July 16, 2015 filed the written submissions. 6. I have considered the submissions made by the Company and other material available on record. The interim order was issued against the Company as it failed to maintain the minimum public shareholding of 25% as mandated under rule 19A of the SCRR and Clause 40A of the Listing Agreement read with section 21 of the Securities Contract (Regulation) Act, 1956 ("SCRA"). 7. SEBI had issued circulars dated December 16, 2010, February 08, 2012 and August 29, 2012, in order to suitably amend Clause 40A of the Listing Agreement by specifying the manner in which public shareholding may be raised to the prescribed minimum level. The amended Clause 40A of the Listing Agreement, inter alia, provided the following methods for complying with the MPS requirements: a. Issuance of shares to the public through prospectus, b. Offer for sale of shares held by promoters to public through prospectus, c. Sale of shares held by promoters through Stock Exchange Mechanism i.e. OFS through Stock Exchange, d. Institutional Placement Programme, e. Rights Issues to public shareholders, with promoters/ promoter group f. shareholders forgoing their rights entitlement, g. Bonus Issues to public shareholders, with promoters/ promoter group shareholders forgoing their bonus entitlement, h. Any other method as may be approved by SEBI, on a case to case basis.

8. From the shareholding pattern as on June 2013, filed by the Company in BSE, I find that the following persons are disclosed as the shareholders belonging to the promoter and promoter group of the Company.

Percentage of Promoter group shareholders No of shares shareholding 1 N P S Shinh 14,955 0.47 2 Manita Shinh 3,150 0.1 3 Continuous Forms (Calcutta) Ltd 53,985 1.71 4 Paraswanath Residential Paradise Pvt Ltd 27,10,837 86.06 5 Paraswanath Residential Paradise Pvt Ltd 1,23,691 3.93 6 Microtec Constructions Pvt Ltd 426 0.01 7 Arihant Premises Pvt Ltd 993 0.03 Total 29,08,037 92.32

9. As on June 3, 2010 the promoter holding in the company was 92.32 % and public shareholding was 7.68 % which is much less than the required MPS. The company did not deny the non-compliance of the MPS requirement within the stipulated time or as on this date. As on June 30, 2015, the position of shareholding of promoters and the public remain the same. 10. I note that the Company vide letter dated February 11, 2013, requested for SEBI’s permission for the reduction of promoters’ holding through negotiated deal under clause 40A(ii)(g) of Listing Agreement. No material was placed before me to show that the said permission has been granted by SEBI.

11. As submitted by the Company, the shares of the Company stood suspended from DSE and BSE w.e.f. January 09, 2002 and February 3, 2003 respectively. 12. I find from the copy of the Order dated August 22, 2005 passed by BIFR that the company was registered as a sick company in September 2001 and BIFR vide the above said order sanctioned a rehabilitation scheme in respect of the Company. It may be noted that as per the submission of the company it was discharged from BIFR in September 2008. 13. However, the company has not brought to the notice of SEBI any modified scheme or any order from the Hon’ble BIFR to the effect that they exempt the Company from the compliance of MPS requirement. In terms of section 32 of the SICA, the provisions of the said Act, rules or schemes made there under shall have effect notwithstanding anything inconsistent therewith contained in any other law. In view of non-production of material showing any such exemption as mentioned above, the Company was required to comply with the MPS norms within the due date i.e., June 03, 2013. This is admittedly not done by the Company.

14. Instead, the Company at the time of personal hearing, maintained that in view of the suspension of the trading, it could not go ahead with OFS. It stated that once the suspension of trading is revoked by BSE, it will opt for OFS and comply with MPS requirement. It further submitted in the written submissions that it had taken necessary efforts for revocation of suspension. It may be noted that it is the responsibility of the Company to have the suspension revoked. Moreover, the status of the company as suspended from the Stock Exchange cannot be an excuse for non-compliance of the MPS requirement. 15. Hence, the request sought in the written submissions for extension by ten months’ time for compliance of MPS requirement cannot be acceded to. Rule 19A of the SCRR and Clause 40A of the Listing Agreement, do not provide for extension of time limits prescribed therein. 16. Considering the fact that the Company has not complied with the MPS requirements till date in breach of rule 19A of the SCRR and Clause 40 A of the Listing Agreement read with section 21 of the SCRA, and such non-compliance being continuous in nature, it becomes necessary for me, to confirm the directions issued vide the interim order against the Company, its directors and promoters/promoter group.

Further, for proper regulation of the securities market and in view of the continuing nature of the violations committed by the Company, SEBI may also initiate other action, as appropriate in law, against the Company, its directors and promoters. 17. 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 confirm the directions issued vide the interim order dated June 04, 2013 against the company, Sanathnagar Enterprises Limited, its directors, promoters and promoter group. 18. This Order shall remain in force till further directions. 19. Copy of this Order shall be served on the stock exchanges and depositories for their information and necessary action.

Date :Sep 29th, 2015 PRASHANT SARAN Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA