Order the matter of acquisition of shares of Koffee Break Pictures Ltd.[SAT Appeal No.:101/2014][SAT Appeal No.:92/2016][SAT Appeal No.:93/2016][SAT Appeal No.:94/2016][SAT Appeal No.:95/2016][SAT Appeal No.:96/2016]

WTM/RKA/EFD-DRA-III/29/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 and regulations 44 and 45 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 read with regulations 32 and 35 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 in respect of: -

Sl. No. Entity Authorised Representative 1 Metex Marketing Pvt. Limited Mr. Sunil Karoth, Advocate 2 Mr. Apurva M. Shah Mr. J. J. Bhatt, Ms. Rinku Valenju, Mr. Rajesh Khandelwal and Ms. Isha Warhade, 3 Ms. Rashi Jain Advocates 4 Ms. Ashni Shah 5 Ms. Chanchal Jain 6 Ms. Bhavna M. Shah 7 Mr. Manish L. Shah 8 Manish L. Shah (HUF) 9 Mr. Lalitchandra Shah 10 Ms. Sumitra Lalitchandra Shah 11 Mr. Kamlesh Sheth Ms. Prachi Pandya, Advocate 12 Mr. Nitin S. Gada Mr. Joby Mathew and Mr. Shantibhushan Nirmal, Advocates 13 Nitin Shantilal Gada (HUF)

In the matter of acquisition of shares of Koffee Break Pictures Ltd.

1. Koffee Break Pictures Ltd. (hereinafter referred to as "target company” or “KBPL” or “the Company”) is a company having its registered office at 374, 3rd Floor, Powai Plaza, Hiranandani Garden, Powai, Mumbai – 400076 and its shares are listed on the BSE Ltd. (hereinafter referred to as “BSE”).

2. As per the disclosures made by the target company on December 2009 on the stock exchange, its promoter group comprises of Metex Marketing Pvt. Limited, Mr. Apurva M. Shah, Ms. Rashi Jain, Mr. Ashni Shah, Mr. Chanchal Jain, Ms. Bhavna M. Shah, Mr. Manish L. Shah, Manish L. Shah (HUF), Mr. Kamlesh Sheth, Mr. Lalitchandra Shah, Ms. Sumitra Lalitchandra Shah, Mr. Nitin S. Gada and Nitin Shantilal Gada (HUF) (hereinafter collectively referred to as “the promoter group” or individually by their respective names) and as on June 30, 2009, the entire promoter group held 28,90,810 shares of the target company (constituting 4.51% of its share capital).

Order in the matter of Koffee Break Pictures Ltd.

3. It was observed that pursuant to the conversion of warrants (earlier allotted to the promoter group amongst others) into equity shares of the target company, the collective shareholding of the promoter group had increased from 28,90,810 shares constituting 4.51% as on June 30, 2009 to 3,27,63,440 shares constituting 25.20% of the enhanced share capital of the target company as on December 31, 2009. The details of conversion of warrants into equity shares of the target company are as follows: Date of Total no. of Out of total equity Allottees amongst Promoters Percentage of conversion of equity shares shares allotted promoter group shareholding Promoter warrants allotted upon upon conversion, pursuant to Group conversion of shares allotted to conversion of shareholding warrants Promoter Group warrants. as a result of this allotment 31/03/2009 NA 28,90,810 5.05 17/06/2009 32,50,000 None NA 28,90,810 4.77 29/06/2009 36,25,000 None NA 28,90,810 4.51 10/07/2009 25,00,000 25,00,000 Rashi Jain 53,90,810 8.08 05/08/2009 67,50,000 15,00,000 Chanchal Jain 68,90,810 9.39 11/09/2009 50,00,000 None NA 68,90,810 8.79 31/10/2009 87,50,000 15,00,000 Ashni A. Shah 1,13,90,810 13.07 10,00,000 Chanchal Jain 10,00,000 Metex Marketing Pvt. Ltd. 17/11/2009 40,00,000 None NA 1,13,90,810 12.50 30/11/2009 39,50,000 375000 Lalitchnadra Shah 1,21,40,810 12.77 375000 Sumitra L. Shah 12/12/2009 3,49,25,000 25,00,000 Bhavna M. Shah 3,27,63,440 25.20 25,00,000 Manish L. Shah 25,00,000 Manish L. Shah HUF 21,25,000 Lalitchandra Shah 21,25,000 Sumitra L. Shah 25,00,000 Kamlesh Seth 65,00,000 Metex Marketing Pvt. Ltd. Total 7,27,50,000

4. In view of the above increase in the shareholding of the promoter group SEBI issued a show cause notice dated September 26, 2014 (hereinafter referred to as “the SCN”) to the promoter group of the target company (alternatively also referred to as “the noticees”) calling upon them to show cause as to why suitable directions under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) and regulations 44 and 45 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as “the Takeover Regulations, 1997”) read with regulations 32 and 35 of the Securities and Exchange Board of India (Substantial

Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as “the Takeover Regulations, 2011”) should not be issued against them. The following was, inter alia, alleged in the SCN:

(i) On December 12, 2009, as a result of the conversion of 2,07,50,000 warrants of the target company into equity shares, the collective shareholding of the promoter group had increased from 12.77% to 25.20%, i.e., an increase beyond the threshold of 15% specified under regulation 10 of the Takeover Regulations, 1997 and as a result the acquirers were required to make a public announcement in accordance with the provisions of regulation 10 read with regulation 14(1) of the Takeover Regulation, 1997 within 4 working days from December 12, 2009. However, despite such an increase in shareholding beyond stipulated limit, the noticees, failed to make the requisite public announcement in these terms. (ii) Therefore, the noticees, who are alleged to be promoter group entities, have violated provisions of regulation 10 read with regulation 14(1) of the Takeover Regulations, 1997 thereby making them liable for action under regulations 44 and 45 of the Takeover Regulations, 1997 (relevant as on the date of acquisition) read with the corresponding provisions in regulations 32 and 35 of Takeover Regulations, 2011 and sections 11 and 11B of the SEBI Act, 1992. 5. The noticees filed their replies to the SCN vide separate letters dated July 7, 2015, July 27, 2015, August 17, 2015 and August 19, 2015. Subsequently, these noticees were granted opportunities of personal hearing on July 7, 2015, August 19, 2015 and October 15, 2015 when their authorised representatives appeared and made submissions on their behalf.

The noticees also filed their written submissions in the matter vide letter dated November 17 2015 and November 19, 2015. The replies/submissions of the noticees are, inter alia, as under:- 6. Metex Marketing Pvt. Limited (Metex): (a) The SCN suffers from a great delay as the acquisition of shares of the target company through preferential allotment was made in June 2008 and the SCN is issued after about more than six years which has caused great prejudice to it. (b) Metex and its secretarial team were not guided professionally and under certain mis-conception, Metex was declared as a promoter group entity. The target company unilaterally made Metex a promoter group entity considering preferential allotment. No consent or clarification was sought from Metex by the target company before declaring it as a promoter group entity. Metex was not aware about the fact that it is to be treated as promoter group entity. (c) Metex can never fall under the promoter group as it has not promoted the target company in any manner whatsoever. The subscription to the shares of the target company was made through preferential allotment.

(d) Metex was branded as a promoter with effect from December 2009 through acquisition of shares by way of allotment of shares upon conversion of preferential warrants. Metex did not act in concert with anyone. (e) As alleged in the SCN, the concept of persons acting in concert (PAC) does not apply to Metex as there was no any agreement or understanding between and among the preferential allottees to acquire the shares of the target company. There was no intention to acquire control over the target company and also there was no commonality of objective and commonality of interest that are the basic requirement of PAC. (f) Metex never intended to acquire any substantial shares/voting rights/control over the target company. This is evident from the fact that Metex never attended any general meetings of the target company nor did it exercise any voting rights at the meeting of the shareholders. 7. Mr. Apurva M. Shah, Ms. Rashi Jain, Ms. Ashni Shah, Ms. Chanchal Jain, Ms. Bhavna M. Shah, Mr. Manish L. Shah, Manish L Shah (HUF), Lalitchandra Shah and Sumitra Lalitchandra Shah (hereinafter collectively referred to as “Shah and Jain family” or individually by their respective names).

(a) The target company is a very small company engaged in the business of making motion pictures. The target company was formed somewhere in the year 1994 in the name of My Fellow Fashions Ltd. which was engaged in textiles and had a lacklustre performance during 1994 to 2004. (b) In the year 2005, Mr. Apurva M. Shah met with the then promoters of My Fellow Fashions Ltd., namely, Hillcrest Informatics Ltd., Mr. M.V.V. Ramanna Verma, Mr. Suryadevra Shridhar and Mr. Manish Ruparel who invited him to join the board of the directors of My Fellow Fashions Ltd. which he did. (c) The target company took professional advice from Mr. Apurva M. Shah and recast their business model and got into the business of movie making. (d) On July 07, 2005, the name of the company was changed from My Fellow Fashions Ltd. to KBPL to align with its new business activity. (e) Since the blue print of this new business was prepared by Mr. Apurva M. Shah and Mr. Manish Ruparel, a special resolution was passed authorizing them to acquire control over the target company. (f) Both Mr. Apurva M. Shah and Mr. Manish Ruparel were designated as new promoters of target company without having any shareholdings and old promoters resigned from the directorship.

(g) In order to undertake new businesses, target company issued 1 crore warrants of `10/-face value each with `11/- premium to a large number of investors including the noticees. (h) The Shah and Jain family are inter-related to each other as under: (i) MMPL is a private limited company incorporated in the year 2004. Its shareholding is mainly divided amongst Mr. Siddharth Jain (50%), Ms. Chanchal Jain (25%) and Mr. Jayesh Patel (25%). (ii) Earlier in December 2006, prior to marriage, Ms. Priyanka Jain (now Ms. Ashni Shah) wife of Mr. Apurva M. Shah was holding 25% of MMPL share. However, when she got married to Mr. Apurva M. Shah in December 2006, she transferred her holdings to her brother Mr. Siddharth Jain. (iii) Mr. Kamlesh Sheth is the father of Mr. Kshitij Sheth who at the relevant time was an employee of KBPL and working as its whole time director. (iv) Mr. Nitin S. Gada was father of Mr. Varun Gada who was employee of KBPL and working as its CEO. (v) Ms. Bhavna Shah is the mother of Mr. Apurva M. Shah and Mr. Manish L. Shah is the father of Mr. Apurva M. Shah. (vi) Mr. Lalitchandra Shah is the grandfather of Mr. Apurva M. Shah and Ms. Sumitra Lalitchandra Shah is the grandmother of Mr. Apurva M. Shah.

(vii) Ms. Rashi Jain is the wife of Mr. Siddharth Jain and Ms. Chanchal Jain is the mother of Ms. Ashni Shah. However, because of this relationship she is not covered in the definition of “relative”. (viii) Further, a relative is not included in the definition of ‘promoter’ under regulation 2(1) (h) of the Takeover Regulations,1997. (ix) Mr. Apurva M. Shah was holding shares in the target company. Other noticees did not held any shares in the target company prior to conversion of their warrants. Barring Mr. Apurva M. Shah, all the above noticees were not active or exercising any control on the business of KBPL. They have never sought to become the directors of KBPL nor participated in the day to day management of it or sought any control over the affairs of KBPL nor even participated in the policy making of the company. Therefore, barring the common link of Mr. Apurva M. Shah, because of whom the two families of Shah and Jains have got related to each other, there is no other co-relation of any nature between them so far as business is concerned. (i) Prior to disclosing the names of these entities as the promoter group neither their consent was obtained by the target company nor even intimation was given to them about the fact that their names are being disclosed as promoters in the EOGM notice issued for the purposes of issue of convertible warrants.

(j) Just because target company and noticees committed errors and were under a mistaken belief that they fell under the category of promoter group, they cannot be now denied the benefit of the applicable law and the definition of promoter group and be penalized on account of some error initially committed by KBPL in categorizing and treating them as a promoter group. (k) Among them, Mr. Apurva M. Shah was the only promoter of KBPL and enclosed his letter dated February 5, 2014 addressed to the board of directors of KBPL and a copy of receipt issued by the Ministry of Corporate Affairs (MCA) acknowledging the filing made by target company informing them about disassociation of Mr. Apurva M. Shah with KBPL. Thus, at the relevant time only Mr. Apurva M. Shah was the promoter and other 8 noticees (other members of Shah and Jain family) have never acted as promoters of target company and were never in its control. (l) Present SCN is not maintainable on the ground that the present proceedings have been initiated after a lapse of more than 5 years. (m) The target company convened an EOGM for seeking the approval of its shareholders on May 27, 2008. Other than Mr. Apurva M. Shah, remaining 8 entities of Shah and Jain family were not even the shareholders of KBPL at the relevant point of time and therefore, had not received aforesaid EOGM notice.

(n) Relying upon replies of these noticees the learned advocate appearing for them further contended that they converted their warrants separately on different dates and sold their shares on different dates. Some of the noticees can fall in the definition of “promoter group”. Several of them like Ms. Rashi Jain, Mr. Lalitchandra Shah, Ms. Sumitra Lalitchandra Shah, Mr. Kamlesh Sheth, Nitin S. Gada (HUF), Mr. Nitin S. Gada and Metex Marketing Pvt. Ltd do not qualify to be included in the definition of “promoter group”. He further contended that the definition of 'acquirer' in regulation 2(1) (b) of the Takeover Regulations, 1997 does not include "promoter" or 'promoter group'. He submitted that there is no allegation in the SCN that all the noticees acted together in concert. Further, the concept of “person acting in concert” under Takeover Regulations, 1997 is acquisition specific. Therefore, the role and participation and concert of all should be proved in respect of specific acquisition. There should be active role of all in acquisition. Independent acquisition by persons forming a group cannot be a concerted action.

8. Mr. Kamlesh Sheth: (a) He was never a promoter or had ever agreed to be a promoter of the target company. It appears that the target company has wrongly termed him as its promoter and has erroneously made filings with the BSE. The target company was incorporated in the year 1994, whereas he has been allegedly named as its promoter for the first time only in December 2009. His name is reflected as a promoter of the target company in the records of BSE on the basis of erroneous filings made by it. It is pertinent to note that the target company had named him as promoter only for two quarters, i.e., December 2009 and March 2010. (b) He had first purchased a negligible amount of 10,000 shares from the market sometime in September 2008. By the end of September 2008 quarter, he was holding 33000 shares however the target company has declared the same under public shareholding. His shareholding continued to be declared under the public holding category for quarters ended December 2008 and March 2009. During quarter ended June 2009, and September 2009, he was holding 1,86,000 and 1,80,300 shares respectively, however the target company has continued to declare the said shareholding under public category.

(c) As on December 31, 2009, he was actually holding 25,27,300 shares whereas the target company had declared only 25,00,000 shares under promoter category and rest of the shares under public category. This fact further drives, endorses and validates the above argument that the target company had made erroneous fillings to the stock exchange in a brazen and absurd manner. (d) The argument that he was wrongly termed as a promoter is further corroborated by the fact that in the disclosure made by the target company for quarter ended June 2010, his name does not appear in the promoters' list on the records of BSE even though he was holding 3,24,426 shares as on June 30, 2010 of the very same 25,00,000 shares acquired by way of conversion of warrants into equity which was earlier erroneously declared under promoter category by the target company. (e) Furthermore, he started selling his shares in the target company from June 2009 onwards. In fact before, whilst and even after the 25,00,000 shares were allotted to him on December 12, 2009, he was continuously selling his shareholding in the target company.

He has sold his shares through the periods of June 2009 – December 2009 and even thereafter. This clearly implies that he did not intend to acquire additional and substantial shares or control of the target company, either individually or with person acting in concert/other noticees. The sole reason for him to invest further in December 2009 during conversion of warrants into equity was wholly and only to safeguard his initial investment which otherwise would have got forfeited. (f) Further, to the above, the SEBI Regulations on preferential issue state that the promoter holding must be under lock-in for a specific period of time. The fact that his shareholding was not under any lock-in further drives forward the point mentioned in the above arguments that he was not a promoter. (g) It seems that the only common denominator between him and the 12 other noticees mentioned in the SCN is that all of them were allegedly “promoters: of the target company and all of them acquired shares by virtue of conversion of warrants into shares. It is, therefore, presumed that the SCN has taken that as a basis for terming him as a “person acting in concert” with other noticees.

It is submitted that, on the said two factors he cannot be termed “person acting in concert”. Merely on the basis of the fact that all the noticees were termed as promoters of the target company and they acquired shares pursuant to conversion of warrants into equity shares, does not make them “person acting in concert” as defined by the Takeover Regulations, 1997.

9. Nitin S. Gada HUF and Mr. Nitin S. Gada: (a) As of March 2009, Nitin S. Gada HUF and Mr. Nitin S. Gada had a very small shareholding in the target company (Nitin S. Gada HUF- 0.22% and Mr. Nitin S. Gada – 0.03%). (b) They did not exercise control over the affairs of the target company. Yet, the target company in its own discretion described Nitin S. Gada HUF and Mr. Nitin S. Gada as promoters until March 2010. Thereafter, i.e., from the quarter ended June 2010, they were not described as promoters by the target company. It is, thus, evident that when the target company realized the error, it stopped reporting the shareholding of Nitin S. Gada HUF and Mr. Nitin S. Gada as part of the promoter group shareholding. (c) They do not consider themselves as promoters of the target company or that they ever represented to the world at large that they were promoters of the target company. (d) Their shareholding has declined during the relevant period. The shareholding of Mr. Nitin S. Gada decreased from 0.04% to 0.02% and the shareholding of Nitin S. Gada HUF decreased from 0.26% to 0.09%. (e) In the light of the above, even prima facie, it is apparent that they were not promoters of the target company and cannot be considered as PACs with the promoters/acquirers; it is also apparent that Nitin S. Gada HUF and Mr. Nitin S. Gada did not acquire any shares during the relevant period and that in fact, their shareholding decreased.

(f) They are not connected with the promoters of the target company by way of relationship or otherwise and therefore, they had been erroneously shown by the target company as a part of the promoter group. Therefore, their shareholding ought not to consider as part of the shareholding of the promoters. They may not be considered as PACs merely because the target company described them as its promoters. (g) They have submitted that as per the terms of allotment, the warrants would expire if they were not converted by a specified date i.e., within 18 months from the date of allotment. Nitin S. Gada HUF and Mr. Nitin S. Gada did not exercise the right of conversion of the warrants in their name and got expired. Therefore, they did not acquire any shares of the target company by conversion of the warrants. 10. I have considered the SCN, replies and submissions made by the noticees and other material available on record. Before dealing with the merits of the case I deem it necessary to refer to the relevant regulations of the Takeover Regulations, 1997 which are alleged to have been violated by the noticees.

Those regulations are as under- Regulation 10 “No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise fifteen per cent or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the regulations.”

Regulation 14(1) “The public announcement referred to in regulation 10 or regulation 11 shall be made by the merchant banker not later than four working days of entering into an agreement for acquisition of shares or voting rights or deciding to acquire shares or voting rights exceeding the respective percentage specified therein.” 11. In terms of regulation 10 of Takeover Regulations, 1997, no ‘acquirer’, himself or with ‘persons acting in concert’ with him, can acquire 15% or more shares or voting rights in a target company unless such acquirer makes a public announcement to acquire shares of such company in accordance with the regulation 14. 12. In this case, it undisputed fact that KBPL had made preferential allotment of 1 crore warrants of `10/- face value with `11/- premium on June 14, 2008 to 47 allottees including the noticees herein except Mr. Apurva M. Shah, one of the promoters of KBPL. It is admitted position that Nitin S. Gada, HUF and Mr. Nitin S. Gada did not exercise their option of conversion of their warrants into equity shares of the target company and their warrants got expired after 18 months from the date of allotment.

Therefore, they did not acquire any shares of the target company by conversion of warrants. Further, they have been charged merely on the basis that they were disclosed by the target company as its ‘promoters’. 13. The other noticees have not disputed the fact of conversion of warrants allotted to them as described in the SCN. I note that the charge against these noticees is based on the fact that they were disclosed by the target company as its ‘promoters’ and they were allotted warrants on preferential basis on June 14, 2008 and that they all converted their warrants into equity shares on several dates from July 10, 2009 to December 12, 2009 as described in the SCN. Consequent to conversions of 2,07,50,000 warrants into equity shares of the target company by some of these noticees on December 12, 2009, collective shareholding of all the noticees who are alleged to be ‘promoters’ of the target company increased from 12.77% to 25.20%. 14. Admittedly, Mr. Apurva M. Shah was the ‘promoter’ of the target company at relevant times. However, other noticees have contended that they were not promoters of the target company and the disclosures made by it were without their consent and knowledge and they were not acting in concert with Mr. Apurva M. Shah or with each other.

In order to deal with this contention, I deem it necessary to refer to the provisions of regulation 2(1)(h) of the Takeover Regulations, 1997 as it existed at the time of acquisitions in this case. The said provisions read as follows: - “promoter” means- (a) Any person who is in control of the target company; (b) Any person named as promoter in any offer document of the target company or any shareholding pattern filed by the target company with the stock exchanges pursuant to the Listing Agreement, whichever is later;”

15. In terms of regulation 2(1)(h), any person who is named as promoter in the shareholding pattern filed by the target company with the stock exchanges is a promoter of the company for the purposes of the Takeover Regulations,1997 in the context of acquisition of shares in or control over a target company by a promoter or any person acting in concert with him. In this case, it is noted that all the noticees were named and disclosed to BSE in the shareholding patterns of the target company as on December 31, 2009. Further, in the notice dated April 22, 2008 issued to its shareholders by the target company convening Extraordinary General Meeting to be held on May 27, 2008 for approval of the preferential allotment, all these noticees were named and disclosed to shareholders of the target company and BSE as in promoters. It is, thus, clear that the fact that all these noticees were disclosed by target company as its promoters was within public domain at all relevant time i.e. at the time of preferential allotment as well as at the time of conversion of warrants into equity shares. I, therefore, find that the noticees were, at the relevant times, aware of the fact that they were disclosed as promoters of the target company.

If at all they were disclosed by the target company without their consent, they could have taken appropriate steps for rectification or other legal actions in accordance with law. However, they have failed to take any such steps or actions even after issuance of SCN on September 14, 2014. In these facts and circumstances, I find that all the noticees were ‘promoters’ within the definition under regulation 2(1)(h) and they had also held themselves out to be so by their action and conduct. 16. Another contention of the noticees is that the ‘promoters’ cannot always be ‘acquirer’ or ‘persons acting in concert’ under the Takeover Regulations, 1997 and that they were not holding controlling stake in the target company. They have further contended that they never acted in concert with Mr. Apurva Shah and with each other. Hence, their acquisition did not trigger regulation 10. In this regard, I note that the position has been settled by the Hon’ble SAT in various judgments such as Modipon Ltd v. SEBI & others, (decided on July 31, 2001), Naagraj Ganeshmal Jain v P.Sairam (2001) 33 SCL 295; by the Hon'ble Bombay High Court in K. K. Modi Vs SAT (2002) 35 SCL 230 (BOM.) and the Hon’ble Supreme Court in the case of Technip SA (2005)5SCC 465. In the context of the applicability of the regulations 10, 11 or 12 of the Takeover Regulations, 1997 it has been settled that in each and every case a ‘promoter’ simpliciter need not be an ‘acquirer’ or ‘person acting in concert’ automatically.

For the purposes of these regulations, it is not necessary that the one promoter shall always be deemed to be a 'person acting in concert' with regard to acquisition of another. In the matter of Kishore Rajaram Chhabria V SEBI, the Hon'ble SAT, in its order dated August 1, 2003, held that if persons charged with acting in concert, do not fall within the inclusive definition under regulation 2(1)(e) (1), their mere positions, would not be the basis for establishing acting in concert. That is to say, a 'promoter' may not be deemed to be in concert unless an active co-operation between that person and another is shown or established. 17. In the above context, the following observations of the Hon'ble SAT in Nagraj Ganeshmal

Jain's (2001) 33 SCL295 (SAT) are relevant to mention:

“On a perusal of the definition of the expression ‘acquirer’ extracted above it is clear that any person who acquires or agrees to acquire shares or voting rights/control of the target company is an acquirer. The expression “ any person” is of wide amplitude. A person becomes an acquirer by virtue of his action-who acquires or agrees to acquire shares etc. etc., Therefore it is difficult to agree with the Appellants contention that a promoter can never be an acquirer. A promoter could be considered as an acquirer or not would depend on the question as to whether he is a person who acquires or agrees to acquire shares etc. Identification is thus action related. ............ " 18. With regard to the question as to whether a ‘promoter’ who is control can be acquirer or not the Hon'ble SAT in the above case held as under: " ...Now comes the question raised by the Appellants that since they are promoters and in control of the company how can they be treated as acquirers.? The Appellants contention that a person who is in control of the company cannot be an acquirer but only a promoter is not born out of any legal authority. The fact that in the regulation 2(1)(h) a promoter also includes “ the person or persons who are in control of the company” does not mean that he cannot be an acquirer who “acquires or agrees to acquire shares or voting rights in a company”. By virtue of a position to exercise control over a company, the person concerned is not debarred from acquiring shares in the company......”.

19. In this regard, the following observations of the Hon'ble SAT in the said Modipon's case (upheld by the Hon'ble Bombay High Court in appeal of K. K. Modi Vs SAT (2002) 35 SCL 230 (BOM.) are also relevant to mention:- “It may be noted that the promoter as such need not be an acquirer automatically. Any person, shareholder including the promoter will become an acquirer or a person acting in concert with the acquirer only if he falls within the definition of these expressions provided in regulation 2(b) and 2(e). It is the conduct of the party that decides the identity. A dormant promoter or a promoter simpliciter who neither acquires nor agrees to acquire shares or voting rights or control over the target company is not an acquirer and his share holding in the target company cannot be considered as the share holding of the acquirer warranting exclusion from the public shareholding. Similarly if the characteristics of a person acting in concert stated in the definition are found missing in the case of a person, it may not be proper to consider him as a person acting in concert with the acquirer.”………..

“The expression ‘acquirer’ and the ‘person acting in concert with the acquirer’ have been defined in the regulation. There is no hard and fast rule that a promoter can never be an acquirer or person acting in concert. If a promoter acquires or agrees to acquire shares or voting rights or gains control over the target company he can be safely considered as an acquirer who in turn would be subject to the provisions of regulation 11. Likewise a promoter can be a person acting in concert provided he is found to cover within the scope of the definition under regulation 2(1)(e). Whether a promoter is also an acquirer or person acting in concert would depend on the facts of each case. It is to be noted that there is no blanket prohibition on the promoters acquiring shares etc. in the company.” 20. I further note that Hon'ble Supreme Court in the matter of Daiichi Sankyo Company Ltd. vs. Jayaram Chigurupate and Others (2010) 7 SCC 449 has finally held that two or more persons may join hands together with the shared common objective or purpose of any kind but so long as the common object and purpose is not of substantial acquisition of shares of a target company they would not comprise “persons acting in concert”.

In that case, Hon'ble Supreme Court has held that : ".. There can be no “persons acting in concert” unless there is a shared common objective or purpose between two or more persons of substantial acquisition of shares etc. of the target company. ...... The idea of “persons acting in concert” is not about a fortuitous relationship coming into existence by accident or chance. The relationship can come into being only by design, by meeting of minds between two or more persons leading to the shared common objective or purpose of acquisition of substantial acquisition of shares etc. of the target company. It is another matter that the common objective or purpose may be in pursuance of an agreement or an understanding, formal or informal; the acquisition of shares etc. may be direct or indirect or the persons acting in concert may cooperate in actual acquisition of shares etc. or they may agree to cooperate in such acquisition. Nonetheless, the element of the shared common objective or purpose is the sin qua non for the relationship of “persons acting in con cert” to come into being."

21. In the light of the above judgments, I am of the view that if, on facts, it is held that the ‘promoters’ share the common objective or purpose or community of interest in substantial acquisition of equity shares or voting rights they can be safely considered as an ‘acquirer’/ ‘person acting in concert’. What is important is that it must be shown that the ‘promoters’ are acquiring equity shares or voting rights or acting in concert with other promoter (acquirer) with the common objective or purpose or interest of acquisition of equity shares or control in the target company. This is also clear from the expression ‘no acquirer shall acquire shares or voting rights............... held by him or by persons acting in concert with him’ used in regulation 10. It is note that the SCN has named all the noticees as ‘acquirer’ as it has alleged that as a result of acquisition in this case, the ‘acquirers’ were required to make a public announcement in accordance with the provisions of the Takeover Regulations, 1997. In this regard, it is noted that the definition of the term ‘acquirer’ in regulation 2(1)(b) includes in itself a ‘person acting in concert’. It is settled position that the applicability of the Takeover Regulations,1997 needs to be objectively considered and not only on mere technicalities. Thus, if it is established, on facts, that a ‘promoter’ covered within the definition under regulation 2(1)(h) is an ‘acquirer’ or a ‘person acting in concert’ and has breached the threshold under regulation 10, he cannot escape liability on the technical grounds that the SCN does not name him as ‘person acting in concert’ as sought to contended by some of the noticees.

22. In order to determine the identity of the noticees for the purpose of acquisitions as alleged in the SCN it is relevant to refer to the definition of the term ‘acquirer’ and ‘persons acting in concert’ as defined in regulation 2(1)(b) and 2(1)(e) of the Takeover Regulations, 1997 which are reproduced hereunder: "2(1)(b) "acquirer" means any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer;" "2(1)(e) "person acting in concert" comprises, - (1) persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal),directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company. (2) ....." 23. It is noted that the present case does not involve any relationship amongst the parties so as to bring the deeming provision of regulation 2(1)(e)(2) in operation.

For the purposes of this case, the first part of the definition in regulation 2(1)(e)(1) is relevant. For the purpose of interpretation of this regulation it is relevant to mention the observations of Justice Bhagwati Committee made in its report dated January 18, 1997, wherein it is stated that - "To be acting in concert with an acquirer, persons must fulfill certain "bright line" tests. They must have commonality of objectives and a community of interests which could be acquisition of shares or voting rights beyond the threshold limit, or gaining control over the company and their act of acquiring the shares or voting rights in a company must serve this common objective. Implicit in the concerted action of these persons must be an element of cooperation. And as has been observed, this cooperation could be extended in several ways, directly or indirectly, or through an agreement - formal or informal." 24. It is established position that the concept of PAC under the Takeover Regulations,1997 is acquisition specific and has to be determined on factual situations taking into account the commonality of objectives of the parties, community of interest, etc. Such commonality of objective or community of interest can be gathered from the facts and circumstances and act and conduct of the parties.

It is the conduct of the party rather than his status that decides the identity. As observed by Justice Bhagwati Committee and also held by the Hon'ble Supreme Court in the matter of Technip SA that the cooperation could be extended in several ways, directly or indirectly, or through an agreement/understanding - formal or informal. It is trite law that the preferential allotment is an issue of by an issuer to select person or group of persons on a private placement basis unlike a public issue where funds are raised by inviting subscriptions from public in general. It is also a matter of common knowledge that a preferential allotment is made to the persons/entities on a one-to-one basis who are acquainted/familiar with the company and/or its promoters/directors. A preferential allotment is always for the purposes of meeting fund requirements of the concerned company and involves a covert, manifested, planned and co-operated actions by the concerned parties, i.e.,- (a) the company to identify select persons/group of persons who are known to it or its promoters/directors for investing in its share capital, (b) select persons/group of persons (preferential allottees) exercise due diligence and then finance the fund requirements of the company and subscribe to its shares issued on preferential basis; (c) the company allots shares to the preferential allottees; and (d) The object of subscribing to shares by promoters in the preferential allotment may not be to acquire control but to infuse funds and to acquire shares.

Thus, the preferential allotment envisages common objective of acquiring shares. 25. With regard to preferential allotment to promoters the following observation of the Hon'ble SAT in Nagraj Ganeshmal Jain's are worth mentioning:- ".........In that context it is relevant to see as to whether they were acting in concert and thereby their collective acquisitions need be taken into account. In this context the Appellants contention that they are not persons acting in concert for the reason that they had no common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company need be examined......... In this context it is to be noted that the Appellants had admitted that the whole purpose of acquiring shares in the preferential allotment was to infuse funds to meet the financial requirements of the company. Even if their objective was to make available funds to the company, for that purpose they had acquired 18.82% shares in the company, which is substantial. The shares are acquired by the acquirers and the funds are received by the company.

It is not a case of direct supply of funds. It is a case of subscription against the shares acquired by them. Even the Appellants have not denied the fact of acquisition of shares by them. It is incorrect to say that such substantial acquisition should be for gaining control and in a company where the control is already vested in the acquirers, the acquisition of further shares was of no relevance. There is no doubt that as Justice Bhagwati Committee put it, to be acting in concert with an acquirer “ they must have commonality of objective and a community of interests which could be acquisition of shares or voting rights beyond the threshold limit or gaining control over the company and this act of acquiring shares or voting rights in a company must serve this common objective. Implicit in the concerted action of these persons must be an element of co-operation”. (para 2.22 of the report). In the instant case there is no dispute as to whether there was an element of co-operation among the Appellants to acquire shares of the company. It is also evident that they had a commonality of objectives and community of interest in as much as they had decided to subscribe to the preferential allotment made by the company.

The object of subscribing to the preferential allotment may not be to acquire control but to infuse funds. But the fact remains that the Appellants had acquired shares following the common objective of acquiring shares. Therefore in the light of the undisputed facts before me, I have no hesitation to hold that the Appellants are acquirers in terms of regulation 2(1)(b) read with regulation 2(1)((e)......"

26. Thus, the only issue that needs to be examined is whether the noticees were ‘acquirers’ and/or ‘persons acting in concert’ to acquire substantial shares. In this case, it is admitted fact that all the noticees, except Mr. Nitin S. Gada and Nitin S. Gada HUF, who were allotted warrants, converted their warrants into shares of the target company. It is relevant to mention that in order to fall under the definition of ‘acquirer’ and ‘person acting in concert’ a person must acquire or agree to acquire shares or voting rights or he shares common objective or purpose with the acquirer to acquire shares or voting rights. It is settled position that the Takeover Regulations, 1997 are triggered on acquisition of shares which entitle voting rights beyond the prescribed threshold or acquisition of control in a target company. With regard to allotment of warrants to Mr. Nitin S. Gada and Nitin S. Gada HUF this ingredient is not met as they did not acquire shares or voting rights on allotment of warrant to them and did not convert their warrants at all. Further, there is nothing on record to show any cooperation or concert by any act or conduct on their part in acquisition of other noticees.

I, therefore, give benefit of doubt to them. 27. I further note that Mr. Kamlesh Sheth has demonstrated that while in the quarter ending till September 2009 his entire shareholding was disclosed in public category, in the quarter ending December 2009 a part of his shareholding (i.e., 25,00,000 shares) was shown in the promoters' category and rest under public category by the target company. The fact that his shareholding was shown in public category and only the shares allotted on conversion of his warrants were shown in promoters' shareholding in the quarter ending December 2009 when seen along with fact that target company did not put those shares under applicable lock-in period, lead to conclude that he has been able to show on preponderance of probability that he was wrongly disclosed as ‘promoter’ by the target company. Further, his act of selling his shareholding in the target company from June 2009, i.e., at the time of allotment of warrants and at the time of conversion thereof in December 2009 and even thereafter show that he did not have common objective of acquiring shares in concert with other noticees.

In this regard, it is pertinent to mention that for the purposes of regulation 10 of the Takeover Regulations, 1997 a promoter is not a deemed PAC under regulation 2(1)(e)(2). Further, as held by the Hon’ble High Court of Bombay in K.K. Modi case a dormant promoter who neither acquires nor agrees to acquire shares or voting rights or control or a promoter who does not share commonality of objective with other promoters/acquirers to acquire shares or voting rights or control over the target company is not an ‘acquirer’ nor a ‘person acting in concert’. There cannot be a common objective or purpose between an promoter/acquirer who wishes to acquire further shares in the target company and a promoter who is interested in the disinvestment of his shares. In this case, Mr. Kamlesh Sheth has demonstrated that he had no objective to acquire further shares and had been divesting his shareholding in the target company even prior to acquisition in question and even thereafter. There is nothing on record to show any cooperation or concert by any act or conduct on his part in acquisition of shares by other noticees.

I, therefore, give benefit of doubt to him also. 28. However, in the facts and circumstances as discussed hereinabove, it is established that the noticees, i.e., Ms. Rashi Jain, Mr. Lalitchandra Shah, Ms. Sumitra Lalitchandra Shah, Ms. Ashni Shah, Ms. Chanchal Jain, Ms. Bhavna M. Shah, Mr. Manish L Shah, Manish L Shah (HUF) and Metex Marketing Pvt. Ltd. who were promoters of the target company subscribed to warrants in the preferential allotment with common objective of acquisition of substantial shares and converted the warrants into equity shares sequentially during July 2009 to December 2010 and then continued to hold them during applicable lock-in period and beyond. Such actions and conduct clearly demonstrate the common objective of these noticees to acquire shares and the element of co-operation amongst them is implicit from their such actions and conduct. In the facts and circumstances, such actions and conduct clearly show cooperated and concerted action of these noticees. All these promoters, as homogeneous unit, were acquirers for their respective acquisitions and PACs with regard to acquisitions of others.

Mr. Apruva M. Shah, the managing director and 'promoter' of the target company was responsible for the conduct of its business and management. In this regard, it is relevant to mention that the Hon’ble SAT, in the matter of Rajesh Toshniwal Vs. SEBI, vide its order dated June 1, 2012 has also held that the promoter group should be regarded as homogeneous unit and should be taken as such unless proven otherwise. In this case, Mr. Apurva M. Shah being a promoter/MD - the person in charge of affairs of the target company - was actively involved in the preferential allotment and allotment of shares on conversion of warrants by these 9 promoters/noticees, who were admittedly his close relatives/connected entities. He had signed the notice of EOGM of the target company contemplating preferential allotment of warrants and declared other noticees as part of the promoter group. Thus, he had actively co-operated in acquisition by the noticees and shared commonality of objective and community of interests with these noticees who acquired shares on conversion of their warrants and was, thus, a ‘person acting in concert’ with them with regard to their acquisitions.

In this case, these 9 promoters/noticees and Mr. Apurva M. Shah have failed to prove otherwise. 29. The details of acquisitions of shares by these noticees acting in concert with Mr. Apurva M. Shah are as following:- Date of equity Out of total Allottees Noticees' Total share Percentage of conversion shares equity amongst shareholdin capital of aforesaid allotted shares noticees g the noticees upon allotted Company shareholding conversio upon (at the end as a result of n conversion, of the this shares particular allotment* allotted to month.

aforesaid noticees. 17/06/2009 32,50,000 None NA 0 29/06/2009 36,25,000 None NA 0 64136000 0 10/07/2009 25,00,000 25,00,000 Rashi Jain 25,00,000 66636000 3.75 05/08/2009 67,50,000 15,00,000 Chanchal Jain 40,00,000 73386000 8.60 11/09/2009 50,00,000 None NA 40,00,000 78386000 31/10/2009 87,50,000 15,00,000 Ashni A. Shah 75,00,000 87136000 8.60 10,00,000 Chanchal Jain 10,00,000 Metex Marketing Pvt. Ltd. 17/11/2009 40,00,000 None NA 30/11/2009 39,50,000 375000 Lalitchandra Shah 82,50,000 95086000 8.67 375000 Sumitra L. Shah 12/12/2009 3,49,25,000 25,00,000 Bhavna M.Shah 2,65,00,000 130011000 20.38 25,00,000 Manish L Shah 25,00,000 Manish L. Shah HUF 21,25,000 Lalitchandra Shah 21,25,000 Sumitra L. Shah 65,00,000 Metex Marketing Pvt. Ltd. Total 7,02,50,000 30. It is noted that the aforesaid noticees started converting their warrants into equity shares of the target company from July 10, 2009 and it continued till December 12, 2009. Due to the conversion of these warrants into equity shares their shareholding in the target company started increasing from 3.75% (July 10, 2009) to 20.38% (December 12, 2009) of its shares capital. It is established that, on December 12, 2009, as a result of the conversion of warrants into equity shares of the target company by these 9 noticees as aforesaid their collective shareholding in the target company increased from 8.67% to 20.38%. Thus, on December 12, 2009 the total shareholding of these noticees acting in concert with Mr. Apurva M. Shah, increase beyond the threshold of 15% specified under regulation 10 of the Takeover Regulations, 1997, and as a result they were under mandatory obligation to make the public announcement in accordance with the provisions of regulation 10 read with 14(1) within 4 working days from December 12, 2009 which they failed to make.

31. I note that regulation 44 of the Takeover Regulations, 1997 which provides consequences of breach as found in this case gives flexibility to SEBI to enforce regulation 11 by way of several directions including - (a) disinvestment of shares acquired in breach of regulations; (b) transfer of any proceeds or securities to the investors protection fund; (c) making open offer for acquiring shares of the target company, etc. The guiding principles for the directions as provided in these regulations are the interest of the investors and securities market which are the statutory guiding principles as inbuilt in the SEBI Act, the Takeover Regulations, 1997. In this context, the following guiding principles propounded by the Hon'ble Securities Appellate Tribunal in its order dated September 08, 2011 in the matter of Nirvana Holdings Private Limited vs. SEBI (Appeal no. 31/2011) is relevant: "It must be remembered that whenever an acquirer violates Regulation 10, 11 or 12 of the takeover code by not making a public announcement, he should be directed to comply with the provision by making a public offer.

The words “unless such acquirer makes a public announcement” appearing in Regulations 10 and 11(1) make these provisions mandatory and a public announcement has to be made. Similar words appear in Regulation 12 as well. These provisions make the acquisition conditional upon a public announcement being made. The primary object of the takeover code is to provide an exit route to the public shareholders when there is substantial acquisition of shares or a takeover. This right to exit is an invaluable right and the shareholders cannot be deprived of this right lightly. It is only when larger interest of investor protection or that of the securities market demands that this right could be taken away. Therefore, as a normal rule, a direction to make a public announcement to acquire shares of the target company should issue to an acquirer who fails to do that. The Board need not give reasons as to why such a direction is being issued because that is the mandate of Regulations 10, 11 and 12. However, if the issuance of such a direction is not in the interest of the securities market or for the protection of interest of investors, the Board may deviate from the normal rule and issue any other direction as envisaged in Regulation 44 of the takeover code.

In that event, the Board should record reasons for deviation." 32. It is pertinent to mention that at the relevant time the shares of the target company were frequently traded on the stock exchange. If the public announcement were to be directed under regulation 44 read with regulation 10 of the Takeover Regulations, 1997, as on the date of this order, the open offer would be at price of approximately `33.5 per share (calculated in terms of regulation 20 of the Takeover Regulations, 1997 alongwith interest @ 10% per annum thereon) whereas the present average market price of the shares of the target company considering the trading on BSE in the last six months is `0.138 per share. In the facts and circumstances of the present case, I do not find any reason to deviate from the normal rule to make a public announcement to acquire shares of the target company in accordance with the provisions of the Takeover Regulations, 1997, and issue any other direction as envisaged in regulation 44. Had the noticees made the public announcement within a period of 4 days from December 12, 2009 in accordance with the provisions of the Takeover Regulations, 1997 and complied with all related activities within the timelines specified therein, all formalities with respect to their public announcement and the open offer would have been completed by March 23, 2010, i.e., 97 days from the date of making the public announcement.

I am of the view that since the public announcement now would provide a delayed exit opportunity to the shareholders of the target company, the noticees should pay interest on the consideration amount to the shareholders who tender their shares in the open offer and who are eligible for interest as per law. 33. Considering the above, I, in exercise of powers conferred upon me under section 19 read with section 11 and 11B of the SEBI Act, 1992 and regulations 44 and 45 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, regulation 32(1)(h) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, hereby issue following directions to the noticees, viz; Mr. Apurva M. Shah, Ms. Rashi Jain, Mr. Lalitchandra Shah, Mr. Sumitra Lalitchandra Shah, Ms. Ashni Shah, Ms. Chanchal Jain, Ms. Bhavna M. Shah, Mr. Manish L. Shah, Manish L. Shah (HUF) and Metex Marketing Pvt. Ltd.:- (a) The aforesaid noticees shall, jointly or severally, make a public announcement to acquire shares of the target company in accordance with the provisions of the Takeover Regulations, 1997, within a period of 45 days from the date of this order; and (b) They shall, alongwith the consideration amount, pay interest at the rate of 10% per annum from March 23, 2010 to the date of payment of consideration, to the shareholders who were holding shares in the target company on the date of violation and whose shares are accepted in the open offer, after adjustment of dividend paid, if any.

34. This order shall come into force with immediate effect.

Sd/- Date: MARCH 09TH, 2016 RAJEEV KUMAR AGARWAL Place: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA