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BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA
[ADJUDICATION ORDER NO. CFD/AVT/AO/DRK-AKS/EAD3-591-594/135-138 -2014]
__________________________________________________
UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA
ACT, 1992 READ WITH RULE 5(1) OF SECURITIES AND EXCHANGE
BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING
PENALTIES BY ADJUDICATING OFFICER) RULES, 1995
In respect of:
Name of the entity Acquirer / PAC Address
Midland Rubber and Produce
Company Ltd.
Acquirer 27/1032, Panampilly Nagar, Ernakulum-
682036, Kerala
Shri Ajit Thomas PAC 60, Rukmani Lakshmipathy Salai,
Egmore, Chennai- 600008, Tamil Nadu
Ms. Shanthi Thomas PAC 60, Rukmani Lakshmipathy Salai,
Egmore, Chennai- 600008, Tamil Nadu
Neelamalai Agro Industries Ltd. PAC Katary Estate, Katary P.O. Coonoor,
Nilgiris District- 643213, Tamil Nadu

FACTS IN BRIEF
1. Securities and Exchange Board of India (hereinafter referred to as SEBI)
received a complaint against the company, AVT Natural Products Ltd.
(hereinafter referred to as 'AVT / company') for alleged violation of SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997
(hereinafter referred to as Takeover Regulations).
APPOINTMENT OF ADJUDICATING OFFICER
2. I was appointed as Adjudicating Officer under Section 15 I of the Securities and
Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act), read
with Rule 3 of Securities and Exchange Board of India (Procedure for Holding
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Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter
referred to as Adjudication Rules) to inquire into and adjudge under Section
15H (ii) of the SEBI Act for the violation of Regulations 11 (2) of Takeover
Regulations alleged to have been committed by Midland Rubber and Produce
Company Ltd., Shri Ajit Thomas, Ms. Shanthi Thomas and Neelamalai Agro
Industries Ltd. (hereinafter collectively referred to as 'noticees / Promoter
Group') and the same was communicated vide proceedings of the Whole Time
Member appointing Adjudicating Officer dated 23.06.2014.

SHOW CAUSE NOTICE, REPLY AND HEARING

3. A common Show Cause Notice No. A&E/EAD3/DRK-AKS/19140/2013 dated
03.07.2014 (herein after referred to as SCN) was served on the noticees in
terms of the provisions of Rule 4 of the SEBI (Procedure for Holding Inquiry and
Imposing Penalties by Adjudicating Officer) Rules, 1995 requiring the noticees
to show cause as to why an inquiry should not be held against the noticees and
why penalty, if any, should not be imposed on the noticees under Section 15H
(ii) of the SEBI Act.

4. In the said SCN, it was alleged that the Promoter Group shareholding of the
company had increased from 69.25% on 03.01.2005 to 69.38% due to the
purchase of 5,334 shares (0.14%) made between 04.01.2005 to 06.01.2005.

5. Noticees vide their letter dated 21.07.2014 submitted a common reply to the SCN
as follows:
Noticees would like to state that, the Promoters of AVT Natural Products
Limited held less than 55% in 1999, which was increased to 68.81% as at the
end of March 31, 2004 on account of open offer and systematic consolidation
of the Promoters holding by market acquisition within the prescribed limits.

As at the beginning of April 01, 2004, the Promoters holding in the Company
was 68.81% and in accordance with the provisions of Regulation 11 (1) of the
Takeover Regulations, which at that time permitted the persons, who held
more than 15% but less than 75% to acquire up to 5% in a financial year
ending March 31, proceeded to consolidate their shareholding by acquiring
further shares from the market. Accordingly, necessary orders were placed
with noticees share brokers who acquired the shares on behalf of the
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noticees and the total number of shares purchased from December 21, 2004
to January 06, 2005 was 22,094, shares, which included the 5,334 shares
(0.14% of the total paid up capital) purchased between January 04, 2005 and
January 06, 2005.

Regulation 11(1) of the Takeover Regulations was amended on January 03,
2005 by reducing the upper limit from 75% to 55%. This, unfortunately came
to noticees knowledge only later, by which time, the share brokers with whom
noticees had placed the orders earlier itself had executed the orders and
noticees had purchased 5,334 shares, from January 4 to January 06, 2005.
Noticees therefore requests the Adjudicating Officer to kindly take a lenient
view for this acquisition.

Noticees also requests to kindly consider the following submissions:

a. This is a border line case which happened during the issue of the
amendment in Regulation 11(1) on 3
rd
January 2005 of the Takeover
Regulations. There was no mala fide intention in noticees part in making
this acquisition.

b. The acquisition is of 5,334 shares which constitutes only 0.14% of the total
paid up share capital of the company.

c. Necessary disclosures of the acquisitions have been made by noticees at
all times and noticees as Promoters of the Company are very conscious
and particular about compliance of all Rules and Regulations.

6. As requested by the noticees, noticees were granted an opportunity of hearing
vide hearing notice dated 24.07.2014 to appear on 12.08.2014 at 03:00 pm at
SEBI Bhavan, Mumbai. Noticees vide their letters dated 05.08.2014 authorised
Ms. Shailashri Bhaskar, Practising Company Secretary and Shri V Suresh,
Practising Company Secretary (herein after referred to as 'ARs') to appear on
their behalf for the scheduled hearing.
7. At the time of hearing the AR, Ms. Shailashri Bhaskar reiterated the submissions
made in the reply dated July 21, 2014. At the time of the hearing the AR
submitted date wise capital build up of the Promoter group and the details of the
investment made by the Promoter group during 2004-05 along with the contract
notes. The AR was provided time till August 18, 2014 to submit any additional
documents / case laws in support of the matter.

8. The AR vide her emails dated 18.08.2014 and 07.09.2014 submitted case laws
in support of the matter.
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CONSIDERATION OF EVIDENCE AND FINDINGS

9. I have taken into consideration the facts and circumstances of the case and the
material made available on record.
10. The acquisition of 5,334 shares (0.14% of the total paid up capital) by the
noticees during the period January 04, 2005 to January 06, 2005 is not in
dispute.
11. Regulation 11 of the Takeover Regulations makes provision for public
announcement in case of consolidation of holdings. A bare reading of
Regulation 11 (2) of the Takeover Regulations makes it clear that any acquirer
who has 55% but less than 75% of the shares or voting rights in a company
acquires any additional share or voting right in the company has to make a
public announcement.

12. In the present matter the noticees already had acquired 69.25% by 03.01.2005
and subsequently had purchased 5,334 shares (0.14%) between 04.01.2005 to
06.01.2005 for a value of ` 4,78,907. Since the noticees acquired additional
shares when they already held amongst themselves 69.25% of the total paid up
share capital, the statutory embargo to the effect that the acquirer must make a
public announcement to acquire any additional shares in accordance with the
Regulation comes into operation which the noticees have failed to comply.
13. It is observed from the noticee's submission and documents submitted by the
noticees that the noticees were in the process of consolidating their holding in
the company and had already instructed their stock broker to buy shares. The
noticees have submitted documentary proof showing that they had bought
22,094 shares from 21/12/2004 to 06/01/2005 and the noticees had bought only
5,334 shares within 3 days of the amendment coming into effect / gazette
notification.
14. Over here, I would like to quote the order of the Honble Securities Appellate
Tribunal in Vashi Construction Pvt. Ltd.et.al Vs SEBI dated 08.04.2013 wherein
it was held as follows:
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..PCL Comp being a listed company, therefore, was obliged to make a
public announcement in this regard. By not doing so and due to its failure, the
general public / investors at large were put to prejudice.."

15. In view of the above discussions and Hon'ble Securities Appellate Tribunal's
Order, it can be concluded that the noticees have violated Regulations 11 (2)
read with 14 (1) of the Takeover Regulations for the aforesaid transaction. The
text of the said provisions are as follows:
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997

Consolidation of holdings
...
11. (2) An acquirer, who together with persons acting in concert with him has
acquired, in accordance with the provisions of law, fifty five per cent (55%) or more
but less than seventy five per cent (75%) of the shares or voting rights in a target
company, may acquire either by himself or through persons acting in concert with
him any additional share or voting right, only if he makes a public announcement to
acquire shares or voting rights in accordance with these regulations.

Provided that no acquirer shall acquire shares or voting rights, through market
purchase and preferential allotment pursuant to a resolution passed under section 81
of the Companies Act, 1956 or any other applicable law, 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 more than fifty five per cent of the voting rights in the
company;

Provided further that if the acquirer has acquired shares or voting rights through such
market purchases or preferential allotment beyond fifty five per cent of the voting
rights in the company, he shall forthwith disinvest the shares acquired in excess of
fifty five per cent and shall be liable for action under these Regulations and the Act.

Timing of the public announcement of offer.

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:

Provided that in case of disinvestment of a Public Sector Undertaking, the public
announcement shall be made by the merchant banker not later than 4 working days
of the acquirer executing the Share Purchase Agreement or Shareholders
Agreement with the Central Government or the State Government as the case may
be, for the acquisition of shares or voting rights exceeding the percentage of
shareholding referred to in regulation 10 or regulation 11 or the transfer of control
over a target Public Sector Undertaking.

16. The said violations attract penalty under Section 15H (ii) of the SEBI Act. The
text of the said provision is as follows:

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SEBI Act
Penalty for non-disclosure of acquisition of shares and takeovers.

15H. If any person, who is required under this Act or any rules or regulations made
thereunder, fails to,
...
(ii) make a public announcement to acquire shares at a minimum price;
...
he shall be liable to a penalty of twenty-five crore rupees or three times the amount
of profits made out of such failure, whichever is higher.

17. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the
Rules require that while adjudging the quantum of penalty, the adjudicating
officer shall have due regard to the following factors namely;
a. the amount of disproportionate gain or unfair advantage wherever
quantifiable, made as a result of the default
b. the amount of loss caused to an investor or group of investors as a
result of the default
c. the repetitive nature of the default

18. The material made available on record has quantified the notional profit made by
the noticees on the acquired shares (5,334) in the range from ` 32,13,735 to `
32,67,075 (as on 27.05.2014). However, there is no material made available on
record to assess the amount of loss caused to an investor or group of investors
as a result of noticees violation.

19. In view of the abovementioned conclusion, discussions and after considering the
factors under Section 15J of the SEBI Act, I hereby impose a penalty of
` 40,00,000/- (Rupees Forty Lakh only) jointly and severally on all the noticess
viz. Midland Rubber and Produce Company Ltd., Mr. Ajit Thomas, Ms. Shanthi
Thomas and Neelamalai Agro Industries Ltd. under Section 15H (ii) of the
Securities and Exchange Board of India Act, 1992 which is appropriate in the
facts and circumstances of the case.



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ORDER
20. In exercise of the powers conferred under Section 15 I of the Securities and
Exchange Board of India Act, 1992, and Rule 5 of Securities and Exchange
Board of India (Procedure for Holding Inquiry and Imposing Penalties by
Adjudicating Officer) Rules, 1995, I hereby impose a penalty of ` 40,00,000/-
(Rupees Forty Lakh only) jointly and severally on all the noticees viz Midland
Rubber and Produce Company Ltd. (PAN No. AAACT8098G), Shri Ajit Thomas
(PAN No. AAAPT8581H), Ms. Shanthi Thomas (PAN No. AAQPS9457H) and
Neelamalai Agro Industries Ltd. (PAN No. AAACN1143N) in terms of the
provisions of Section 15H (ii) of the Securities and Exchange Board of India Act
1992 for the violation of Regulations 11 (2) read with 14 (1) of SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997. In the facts and
circumstances of the case, I am of the view that the said penalty is
commensurate with the violations committed by the noticees.

21. The penalty shall be paid by way of Demand Draft drawn in favour of SEBI
Penalties Remittable to Government of India payable at Mumbai within 45 days
of receipt of this order. The said demand draft shall be forwarded to Chief
General Manager- CFD, Securities and Exchange Board of India, Plot No. C4-A,
G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051.

22. In terms of the provisions of Rule 6 of the Securities and Exchange Board of
India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating
Officer) Rules 1995, copies of this order are being sent to Midland Rubber and
Produce Company Ltd., Mr Ajit Thomas, Ms. Shanthi Thomas and Neelamalai
Agro Industries Ltd. and also to the Securities and Exchange Board of India,
Mumbai.



Place: Mumbai D. RAVI KUMAR
CHIEF GENERAL MANAGER &
Date: 16.09.2014 ADJUDICATING OFFICER
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