Order in the matter of Vippy Industries Limited

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 Vippy Industries 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. Vippy Industries 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). The Company filed its reply to the interim order vide letter dated June 20, 2013, wherein it inter alia submitted as follows :

a) The Company is a sick industrial company and a Scheme for its Rehabilitation was sanctioned vide Order dated October 04, 2007 ("the Scheme") passed by the Hon'ble Board for Industrial and Financial Reconstruction ("BIFR") and the same is still under implementation as the relief and concession provided for under the said scheme have not been made available to the Company in their entirety.

b) Prior to the sanction of the rehabilitation scheme, the draft scheme was circulated vide Order dated July 17, 2007 of the BIFR to all concerned including SEBI. The draft scheme provided that the provisions of regulations 10, 11 and 12 of the SEBI (Substantial

Acquisition of Shares and Takeovers) Regulations, 1997 ("Takeover Regulations, 1997") will not apply to the Company and that the Company will be considered to have been exempted from the application of the aforesaid provisions. The aforesaid provisions are in line with the provisions of regulation 3(1)(j) of the Takeover Regulations, 1997.

c) SEBI had informed the BIFR that the provisions of regulation 3(1)(j) of the Takeover Regulations, 1997 exempt the application of regulations 10, 11 and 12 thereof with respect to the Schemes framed under section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 ("the SICA"). The Scheme was approved by BIFR on October 04, 2007.

d) In due compliance of the Scheme, the promoters of the Company had infused long term funds to the tune of 15 crore by way of subscription towards 15 crore warrants of a Face Value of 1/- each, which were convertible into equal number of equity shares. The money thus raised was utilised towards meeting the cost of the Scheme for revival of business and restructuring of the Company. The consequence of conversion of such warrants was that the promoters' shareholding increased from 37.12% to 97.7%. The issue of such equity shares was in terms of the Scheme.

e) At the time of sanction of the Scheme, the exemption from maintaining 25% public shareholding under Clause 40A(x)(a) [as applicable during the relevant time period] was available to the Company. Pursuant to the sanction of the Scheme, the covenants of the said Scheme became final and binding on all parties and that subsequent amendment introduced in the Securities Contracts (Regulation) Act, 1956 cannot override the covenants of the Scheme or the exemptions available under law at the time of the sanction of the Scheme. Section 32 of the SICA would override all law (except those specifically saved).

f) The Company had filed a Miscellaneous Application (No. 297/2013) on May 29, 2013 before the BIFR seeking the following directions :

(i) To clarify that the exemption from maintaining 25% of public shareholding in the equity share capital of the Company which was available to the Company at the time of sanction of the Scheme would continue to be so made available; Or in the alternative, (ii) To restrain SEBI from seeking compliance of the amended law requiring the Company to maintian 25% of public shareholding in its equity share capital till expiry of three years from the date of successful and complete implementation of the Scheme.

g) The BIFR had stayed the operation of the interim order passed by SEBI and that the directions contained in the interim order are not operative on the Company and all persons connected with the Company as mentioned in the aforesaid order of SEBI.

h) The Company had requested SEBI to grant further period of three years after completion of implementation of the rehabilitation scheme for implementing the minimum public shareholding norm.

3. The Company, vide letter dated June 19, 2013 (received by SEBI on June 24, 2013) forwarded a copy of the miscellaneous application filed by it before the BIFR. Thereafter, vide letter dated June 29, 2013, the Company forwarded a copy of the Order dated June 10, 2013 of BIFR. Vide this Order, the BIFR had stayed the interim order with respect to the Company till the date of next hearing (i.e. till September 04, 2013).

4. It is also noted that one Mr. Sajeve Deora, a non-executive director of the Company had filed an appeal challenging the interim order before the Hon'ble Securities Appellate Tribunal ("the Hon'ble SAT"). The Hon'ble SAT, vide its Order dated September 26, 2013, granted liberty to the appellant to withdraw his appeal as it was undertaken on behalf of SEBI that a final order, after considering the reply filed by the Company and grounds raised in the said appeal and after hearing the Company and the appellant, would be passed within a period of four weeks.

5. The Company had also filed another Miscellaneous Application (No. 537/2013) on October 17, 2013 before the BIFR, requesting the BIFR, as an alternate prayer to the reliefs claimed in M.A. No. 297/2013, to permit the Company to seek delisting in terms of regulation 3(2) of the SEBI (Delisting of Equity Shares) Regulations, 2009 ("the Delisting Regulations") and that the said delisting be made a part of the sanctioned scheme with the BIFR providing for a procedure to complete the delisting or to provide exit option to the public shareholders at a specified rate.

6. SEBI was also a party before BIFR in respect of both the miscellaneous application (nos. 297 & 537 of 2013) filed by the Company. The interim order was continued to be stayed by the BIFR. Thereafter, the BIFR vide its Order dated January 21, 2014 had disposed off both the aforesaid applications filed by the Company, wherein it was inter alia observed that SEBI does not have any objection to the delisting of the equity shares of the Company from the stock exchanges provided the promoters of the Company offer an exit option to existing public shareholders at a fair and specified rate to the investors. The BIFR had directed as follows :

"12.5 Having considered the submissions made in the hearing and the material on record, the Bench issued the following directions :- (i) The Promoters of the company are permitted to go ahead with the buy-back of 4.3% floating stock of public shareholding and delisting of shares from Stock Exchange(s) in terms of Regulation 3(2) of SEBI (Delisting of Equity Shares) Regulations, 2009, after following the Structural Procedure filed by the Company with SEBI and Stock Exchange, where the equity shares are presently listed. SEBI in its written submission has offered no objection for buy-back of equity shares by the promoters of the company. Accordingly, rehabilitation scheme of the company sanctioned by BIFR vide order dated 04.10.2007 stand modified to that extent, under section 18(9) of SICA. (ii) The Promoters of the company shall provide an exit option to the public shareholders of the company and offer to buy-back shares held by such public shareholders at the rate of Rs.7.21 per equity share and shall strictly comply with the Structural Procedure filed by the company. (iii) As a consequence of delisting of the equity shares of the company, SEBI to with draw its Order dated 04.06.2013, and SEBI is restrained from adjudicating or taking action on the show cause notice issued under the said order against the company / the promoters of the company or the Directors (including independent Directors) of the company, with immediate effect. (iv) Accordingly, MA No.297 & 537 of 2013 filed by the company stand disposed off. (v) The next date of review hearing in this case is fixed on 05.03.2014."

7. It is also noted that the Order dated September 26, 2013 passed by the Hon'ble SAT was modified by a subsequent Order of SAT dated December 13, 2013, whereby SEBI was directed to pass an appropriate order within four weeks after disposal of application pending before the BIFR inter alia in relation to delisting.

8. The Company has forwarded a copy of its letter dated February 14, 2014 issued to the BSE, wherein it has referred to the Order dated January 21, 2014 (with respect to the proceedings held on 19.12.2013 before BIFR) of the BIFR and submitted that the BIFR has also approved the structural procedure to be followed for delisting of shares. It was further stated that a Public Announcement of the Delisting Offer was published on February 11, 2014 in the newspapers in accordance with the approved structural procedure and that the offer letter along with the application form are being sent to shareholders independently by the acquirers.

9. I have considered the submissions made by the Company and have also perused the Order dated January 21, 2014 passed by the BIFR. The BIFR has directed the Promoters of the company to go ahead with the buy-back of 4.3% floating stock of public shareholding and delisting of shares from Stock Exchange(s) in terms of Regulation 3(2) of SEBI (Delisting of Equity Shares) Regulations, 2009, after following the Structural Procedure filed by the Company with SEBI and Stock Exchange, where the equity shares are presently listed. The Scheme, as sanctioned by BIFR for the Company, also stood modified to that extent in terms of section 18(9) of the SICA. The BIFR has also directed that the Promoters of the Company shall provide an exit option to the public shareholders of the Company and offer to buy-back shares held by such public shareholders at the rate of 7.21/- per equity share and shall strictly comply with the Structural Procedure filed by the Company.

10. I also note that the promoters have made a public announcement dated February 11, 2014 with respect to their delisting offer. The exit price mentioned therein is Rs.7.21/-, as directed by the BIFR. Copy of the public announcement was forwarded to SEBI vide the Company's letter dated February 11, 2014. I have also perused the Post-offer Public Announcement dated March 27, 2014 (as seen on the website of the Company) made by the acquirers, which inter alia states that – a) The Post Offer PA is being issued in terms of Structural Procedure approved by the Hon’ble BIFR vide its order dated December 19, 2013. b) All the Public Shareholders of the Company who have validly tendered their equity shares through valid acceptance cum acknowledgement forms (Application Forms) will be paid the consideration at the Exit Price of 7.21 (Rupees Seven and twenty one paise only) per equity share. The consideration will be dispatched to all successful public shareholders by April 03, 2014. c) As on the date of offer closure, Registrar to the Offer has received valid applications from Public Shareholders for 28,70,567 equity share. d) The Company/Acquirers will initiate the necessary steps to delist its equity shares from the BSE. The Company shall announce the delisting date in the same newspapers in which the Original PA and this Post Offer PA has appeared. e) All Public Shareholders of the Company who have not participated in the Delisting Offer may offer their equity shares for sale to Promoters at the price specified in the Letter of Offer (Exit Price) till one year following the date of delisting from BSE.

11. In this regard, I refer to the provisions of section 32 of the SICA, which provides that the provisions of the said Act, rules or schemes made there under shall have overriding effect on other laws. 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 also note that in terms of regulation 3(2) of the Delisting Regulations, the said regulation shall not apply to any delisting made pursuant to a scheme sanctioned by the BIFR if such scheme lays down any specific procedure to complete the delisting or provides an exit option to the existing public shareholders at a specified rate.

12. I also note that SEBI has, in the meanwhile, approached the Hon'ble SAT for seeking further time for passing an order with respect to Mr. Sajeve Deora (a director of the Company). It has been informed that the Hon'ble SAT vide its order dated April 17, 2014 has granted further time of two weeks to SEBI for passing the order.

13. In view of the foregoing, 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 issue the following directions : (i) Vippy Industries Limited/its promoters (i.e., the acquirers in the delisting offer) shall complete the delisting process and ensure that the company is delisted from the Bombay Stock Exchange Limited within a period of 4 months from the date of this Order. The Company shall file a report informing SEBI of the outcome of the delisting process, within a period of 15 days thereafter. (ii) The directions issued vide the interim order dated June 04, 2013 against Vippy Industries Limited, its directors, promoters and promoter group, are vacated with immediate effect. Further, the show cause notice issued to the Company, its directors and promoters, vide paragraph 18 of the interim order, shall also stand disposed off. (iii) The directions issued vide the interim order dated June 04, 2013 in respect of Vippy Industries Limited, its directors, promoters and promoter group shall be re-imposed immediately (without the need for passing of a separate order) in case the delisting process of the Company is not completed within the period directed above. Further, they would also be liable for the actions contemplated in paragraph 18 of the interim order. 14. Copy of this Order shall be served on the stock exchanges and depositories for their information and necessary action.

PRASHANT SARAN WHOLE TIME MEMBER DATE : 29/APRIL/2014 SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI