Order in the matter of Vaarad Ventures Limited

WTM/PS/62/CFD/NOV/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 Vaarad Ventures 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. Vaarad Ventures Limited (initially known as NHN Corporation Limited and thereafter the name was changed to Atco Corporation 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 13.69%. The shares of the Company are listed on the Bombay Stock Exchange Limited ('BSE').

3. The Company vide its letters dated June 22, 2013 and August 08, 2013 replied to the interim order. Thereafter, an opportunity of personal hearing was afforded to the Company on October 14, 2013, when Mr. Vikram Doshi, Managing Director of the Company and Mr. Nitin Datanwala, Director appeared and made submissions. The submissions of the Company are as under: a. The Company is a sick company under the Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA'). A scheme for revival was sanctioned on June 25, 2007 by Hon'ble Board for Industrial and Financial Reconstruction ('BIFR') and the same is under implementation. The implementation of the scheme included the equity funding by the promoters directly and also by convertible warrants. The scheme further envisaged merger of other promoter group company.

b. The holding of the promoters has increased due to the rehabilitation, restructuring and the merger of the Company pursuant to the sanctioning of the scheme under SICA. c. Despite exemption, it had examined the options available in order to dilute the promoter's holdings. However, the methods available were not found to be viable due to the market conditions and infrequently traded scrip.

4. I have considered the replies of the Company and the submissions made during the personal hearing. I note that the Company was a sick company for which the BIFR had sanctioned a rehabilitation scheme. I have also perused the order pertaining to the proceedings held on June 25, 2007, passed by BIFR and the sanctioned rehabilitation scheme. I note that as per the sanctioned scheme, the Company had agreed for amalgamation of one Atcomaart Limited with it. For the same, the Company had to issue three equity shares at par against each share held by the shareholders of Atcomart Limited. I note that the Company/ promoters and the new investors had requested for exemption from takeover/ creeping acquisition/ preferential allotment/ limits on promoters holding under SEBI Act/ Rules/ Guidelines etc. or any other concerned body from any deeds and acts which the Company and new investors may undertake to give effect to the rehabilitation scheme. The Company had also requested for exemption from maintaining the guideline of minimum public holding during the rehabilitation period which includes allotment/ transfer/ conversion/ dilution of shares/ warrant during the restructuring period. I note that the scheme which inter alia contains the aforesaid clauses and is still in force/ implementation has been approved.

5. I further note that in terms of Section 32 of the SICA, the provisions of the said Act, rules or schemes made there under shall have overriding effect on other laws. SEBI Act is not a statute exempted from the applicability of Section 32 of the SICA. Further, in terms of Section 32 of the SEBI Act, the provisions of the SEBI Act shall be in addition to, and not in derogation of the provisions of any other law for the time being in force. I have also noted that the Company is taking efforts for bringing down its promoters' holding for achieving compliance with the MPS requirements.

6. Having noted the fact that the Company is a sick company for which a rehabilitation scheme has been approved and is in force and the provisions of Section 32 of SICA, 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 vacate the directions issued vide the interim order dated June 04, 2013 against Vaarad Ventures Limited, its directors, promoters and promoter group, with immediate effect. However, the directions issued vide the SEBI Order dated June 04, 2013, shall immediately be revived (without the need for passing of a separate order) against the said Company, its directors, promoters and the promoter group, if - a. the promoter shareholding in Vaarad Ventures Limited, is not reduced to 75% or less, within a period of three (3) months from the date when the said Company comes out of the purview of BIFR; and b. Vaarad Ventures Limited, fails to increase its public shareholding to the minimum 25% as stipulated under rule 19A of the SCRR, within three (3) months from the date it comes out of the purview of BIFR.

7. The Company is directed to submit a status report w.r.t. of its rehabilitation scheme every six months along with the details of public shareholding including the steps taken towards MPS compliance, in order to ascertain whether the Company is still a sick company and under the purview of the Hon'ble BIFR and whether the Company is compliant with the MPS requirements.

8. Further, the above directions would be without prejudice to the right of SEBI to initiate other appropriate action in accordance with law, if the company, Vaarad Ventures Limited, fails to reduce its promoter shareholding to 75% and increase its public shareholding to 25% as stipulated under rule 19A of the SCRR, within three (3) months, from the date it comes out of the purview of BIFR.

9. This Order shall come into force with immediate effect.

10. 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: November 22, 2013 PRASHANT SARAN PLACE: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA