WTM/PS/134/CFD/JAN/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
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 NONCOMPLIANCE

WITH

THE

REQUIREMENT

OF

MINIMUM

PUBLIC

SHAREHOLDING BY LISTED COMPANIES

IN RESPECT OF KESAR PETRO PRODUCTS LIMITED

Date of personal hearing; July 02, 2015

Appearance:
For Kesar Petro Products Limited: Mr. R. V. Srinivasan, Head-Accounts and Ms. Manali More,
Compliance Officer.
For SEBI: Dr. Anitha Anoop, Deputy General Manager, Mr. N. Murugan, Assistant General
Manager and Mr. Rohan Vijay, Assistant Manager

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 noncompliant companies, their promoters and/or directors or issuing such directions in accordance

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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.

Kesar Petro Products Limited (hereinafter referred to as "the Company" or KPPL) was

one such company covered under the interim order. The equity shares of the Company are listed on
the Bombay Stock Exchange Limited ("BSE").
3.

An opportunity of personal hearing was afforded an opportunity on July 02, 2015, when

Mr. R.V Srinivasan, Head-Accounts and Ms. Manali More, Compliance officer of the Company
appeared and made oral submissions. The representatives submitted that during November 2012,
around 48 % of shares were transferred inter se. However, without taking into account such transfer,
BSE website showed that the promoter shareholding as on March 31, 2013, was 96.35%. The
company claimed that by the said transfer made in November 2012, the Company became
compliant with the MPS requirement. As requested, liberty was granted to the Company to file
written submissions within a period of one week.
4.

The Company,vide letter dated August 6, 2015, filed its written submissions. Summary of

such submissions are as follows:

a. The company was incorporated in 1990. It set up manufacturing facility of Bisphenol A, a
specialty chemical. However, due to various reasons the manufacturing facility was
discontinued in November 18, 2004. At the same time, due to the erosion of net -worth, on
reference, BIFR vide order dated September 23, 2005 declared the company as sick
company. Thereafter, vide order dated April 28, 2006, BIFR was of the opinion that the
company cannot be rehabilitated and therefore, ordered the company to be wound up. The
notice for the same was published on May 10, 2006.
b. Pursuant to a proposal from Shreyas Intermediates Limited(SIL)to take over the
Company, BIFR vide order dated August 17, 2007 passed another scheme of rehabilitation
i.e., for takeover by SIL.

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c. Pursuant to the Sanctioned scheme, the capital structure of the company was restructured in
April 2008. SIL and Dinesh Sharma HUF acquired 65 lakh shares of the Company
through fresh issuance. In the quarter ended June 2008, SIL holding 35 lakh shares (51.72
%) and Dinesh Sharma HUF holding 30 lakh shares (44.33 %) were shown as promoters
of the Company.
d. This continued till November 9, 2012, when SIL sold 17.50 lakh shares each (24.08 %) to
Mr. Shreyas Sharma and Ms. Shruti Sharma respectively.According to the Company, the
purchasers are not promoters of the company. Disclosures were made under regulation 10(1)
(a) and 10(6) of the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations,
2011(Takeover Regulations) stating that the above purchase by Mr. Shreyas Sharma and Ms.
Shruti Sharma were from immediate relatives of the directors of SIL. Hence, the acquirers
were exempted from making any public offer. The copy of the disclosuresunder Takeover Regulations
though claimed to be filed were not annexed with the reply.
e. Subsequent to the acquisition, the shareholding of Mr. Shreyas Sharma and Ms. Shruti
Sharma, were wrongly included in the promoter category in the disclosures to BSE under
clause 35 of the listing agreement for the quarters ended December 2012 and March 2013.
The error was corrected in the shareholding pattern filed with BSE for the quarter ended
June 2013. However, in the meanwhile, SEBI had passed the interim order on June 4, 2013.
According to the Company, as on November 9, 2012, the public shareholding was more
than 25 % in view of the transfer of shares to Mr. Shreyas Sharma and Ms. Shruti Sharma
f. As on March 31, 2015 the promoter shareholding in the company as shown in BSE website
is as follows:
Table No. 1
Sr. No.
1
2
3

Name of Promoter
Dinesh Sharma HUF
Rajkumar
Shankarlal Sharma
Total

Number of shares
30,00,000
5,00,000
1
35,00,001

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% holding of
promoters
41.28
6.88
0
48.16

g. As on March 31, 2015 as shown in the above table, the company had complied with the
MPS requirement.
h. In the interim order, it is mentioned that the shares of the Company are suspended from
BSE. However, the shares of the company were suspended for trading only in between
September 2006 and June 16, 2014. The Company could not have increased its public
shareholding by any of its methods due to suspension of its shares for trading in BSE.
Therefore, one of the promoters, i.e., SIL on November 9, 2012 transferred the shares to
Mr. Shreyas Sharma and Ms. Shruti Sharma in off-market transaction.
5.

I have considered the submissions made by the Company and other material available on

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

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6.

From the shareholding pattern as on June 2013, filed by the Company with BSE, I find that

the following persons are disclosed as the shareholders belonging to the promoter and promoter
group of the Company.
Table No.2
Serial
No.
1
2
3

Name of the Directors

Dinesh Sharma HUF
Rajkumar
Shankarlal Sharma
Total

No. of shares

Percentage holding

30,00,000
5,00,000
1
35,00,001

41.28
6.88
0
48.16

In the previous quarter (i.e. quarter ended March 31, 2013), the following are shown as promoters of
the company.
Table No.3
Serial
Number
1
2
3
4
5

7.

Name of Promoters
Dinesh Sharma HUF
Rajkumar
Shankarlal Sharma
Shreyas Dinesh Sharma
Shruti Dinesh Sharma
Total

Number of
shares
30,00,000
5,00,000
1
17,50,000

Percentage
holding
41.29
6.88
0
24.09

17,50,000
70,00,001

24.09
96.35%

This discrepancy was explained by the Company. As per the company, pursuant to the

Sanctioned scheme, the capital structure of the Company was restructured in April 2008. SIL and
Dinesh Sharma HUF acquired 65 lakh shares of the Company through fresh issuance of shares. In
the quarter ended June 2008, SIL holding 35 lakh shares (51.72 %) and Dinesh Sharma HUF
holding 30 lakh shares (44.33 %), were shown as promoters of the Company. This continued till
November 9, 2012 when SIL had transferred 17.50 lakh shares (24.08 %) each to Mr. Shreyas
Sharma and Ms. Shruti Sharma respectively. According to the Company, the purchasers are not
promoters of KPPL and therefore there was a mistake in including their shareholding (i.e. of Mr.
Shreyas Sharma and Ms. Shruti Sharma) in the promoter category in the disclosures to BSE made
under clause 35 of listing agreement for the quarters ended December 2012 and March 2013.

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8.

The Companys contention is that it has complied with the MPS requirements as early as

November 2012 when SIL transferred its shares to Mr. Shreyas Sharma and Ms. Shruti Sharma. In
this regard, it is noted that from the shareholding pattern of SIL(this is also a listed company) for
the quarters ended on September 30, 2012 and December 31, 2012, it is observed that Mr. Dinesh
Sharma, his son,Mr. Shreyas Sharma and daughter,Ms. Shruti Sharma have been shown to be part of
the promoter and promoter group of SIL. SIL was earlier a promoter in the Company and has been
shown in the promoter category as on September 2009 till September 2012.By virtue of exercising
control as part of promoter and promoter group in SIL (as per the shareholding pattern of SIL for
quarters ended on September 2012 onwards till date), Mr. Shreyas Sharma and Ms. Shruti Sharma
along with the other promoters of SIL can be said to be exercising indirect control over KPPL.
Subsequent to acquisition of shares from SIL, Mr. Shreyas Sharma and Ms. Shruti Sharma could
directly exercise 45.65% of shares/voting rights in KPPL. Therefore, these two persons cannot be
said to hold shares in the public category as contended by the Company. Hence, these two
individuals shall belong to the promoter category in KPPL.
9.

I note from the shareholding pattern of the Company for the quarter ended September 2015

(as available in the BSE website) that the promoter and promoter group comprising of Dinesh
Sharma HUF, Rajkumar and Shankarlal Sharma hold 48.16%. Mr. Shreyas Sharma and Ms. Shruti
Sharma have been categorized as public shareholders together holding 45.65%. It may also be
noticed that as Mr. Shreyas Sharma and Ms. Shruti Sharma being the children of Mr. Dinesh Sharma
would be part of Dinesh Sharma HUF, a promoter of the Company. It may also be noted that
under the Takeover Regulations, under regulation 2(1)(q)(v), immediate relativesshall be deemed to be
persons acting in concert with other persons within the same category. Dinesh Sharma HUF
(holding 41.28%) is a declared promoter group entity even as per the Company. Accordingly,
Dinesh Sharma being the Karta of this HUF would also be a part of the promoter group of the
Company and his children (Mr. Shreyas Sharma and Ms. Shruti Sharma), being his immediate
relatives, are deemed to be PACs with the persons within the same category, i.e. promoter and
promoter group. At this juncture, it also becomes relevant to reiterate that Dinesh Sharma HUF
(41.28%), Ms. Shruti Sharma (holding 24.08%) and Mr. Shreyas Sharma (21.57%) are the major
shareholders in the Company. In view of the above and the observations made in the paragraph

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above, it can be concluded that the effective promoter and promoter groups shareholding in the
Company is at 93.81% and definitely not what the Company had represented in its submissions.
10.

The company in its reply stated that the transfer between SIL and Mr. Shreyas Sharma and

Ms. Shruti Sharma was exempted under the Takeover Regulations as it was an inter-setransfer to
relatives. This submission again supports the above view taken that the transferees should be
classified as part of promoter group only and not otherwise. Under regulation 10(1)(a)(i), inter se
transfer amongst immediate relatives are exempt from the obligation to make an open offer under
regulations 3 and 4 subject to fulfilment of stipulated conditions. Reference to immediate relatives
would for transferors and transferees who are natural person. In this case, SIL is not a natural
person and therefore the transaction would not be covered by the aforesaid provision. The above
submission made by the Company is therefore misplaced.
11.

In view of the foregoing, I conclude that the shareholding of Mr. Shreyas Sharma and Ms.

Shruti Sharmaought to be classified under the promoter and promoter group of the Company and
should have been continuously disclosed as part of the promoter group as done in the disclosures of
shareholding pattern for quarters ended December 2012 and March 2013. The subsequent
disclosures classifying them as public shareholders are therefore incorrect and misleading.
12.

As submitted by the Company, the shares of the company were suspended for trading only

in between September 2006 and June 16, 2014. It may be noted that it is the responsibility of the
Company to have the suspension revoked. Moreover, the status of the company as suspended from
the Stock Exchange cannot be an excuse for non-compliance of the MPS requirement.
13.

In view of the foregoing, I hold that as on June 03, 2013 (i.e. due date for compliance with

the MPS norms) the promoter holding in the company was 96.35% and public shareholding was a
meagre 3.65 % which is way less than the required MPS. Further, even as per the disclosure for the
quarter ended September 2015 and considering that Mr. Shreyas Sharma and Ms. Shruti Sharma
belong to the promoter and promoter group category and not public as wrongly disclosed by the
Company, the promoter and promoter group hold 93.81% and the public shareholding in the
Company is only at 6.19%. The Company is therefore in continuous violation of the MPS norms.

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14.

Considering the fact that the Company has not complied with the MPS requirements till date

in breach of rule 19A of the SCRR and Clause 40 A of the Listing Agreement read with section 21
of the SCRA, and such non-compliance being continuous in nature, it becomes necessary for me, to
confirm the directions issued vide the interim order against the Company, its directors and
promoters/promoter group. Further, for proper regulation of the securities market and in view of
the continuing nature of the violations committed by the Company, SEBI may also initiate other
action, as appropriate in law, against the Company, its directors and promoters.
15.

SEBI also may also initiate appropriate action as per law for the misleading disclosures made

in the shareholding pattern of KPPL, as discussed above in this Order. With respect to the
acquisition of 48.16% by Mr. Shreyas Sharma and Ms. Shruti Sharma and the resultant increase in
the shareholding/voting rights of the promoter group of the Company to the extent of 96.32%
(considering the shareholding pattern of the Company for the quarter ended December 2012),
allegedly in violation of the Takeover Regulations, SEBI would initiate appropriate action in
accordance with law.
16.

Accordingly, I, in exercise of the powers conferred upon me under section 19 of the

Securities and Exchange Board of India Act, 1992 read with sections 11(1), 11(2)(j), 11(4) and 11B
thereof and section 12A of the Securities Contracts (Regulation) Act, 1956, hereby confirm the
directions issued vide the interim order dated June 04, 2013 against the company, Kesar
Petroproducts Limited, its directors, promoters and promoter group.
17. This Order shall remain in force till further directions.
18. Copy of this Order shall be served on the stock exchanges and depositories for their
information and necessary action.

Date: January 11th, 2016

Place: Mumbai

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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