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Sebi slaps Rs 25 lakh penalty on individual for delay in making open offer to shareholders
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Sebi slaps Rs 25 lakh penalty on individual for delay in making open offer to shareholders

Press Trust of India • July 27, 2017, 08:51:56 IST
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The individual had appointed his representatives as additional directors on the board of the firm in February and March, 2015.

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Sebi slaps Rs 25 lakh penalty on individual for delay in making open offer to shareholders

New Delhi: Markets regulator Sebi on Wednesday slapped a penalty of Rs 25 lakh on one Amar Gala for alleged delay in making an open offer to the shareholders of Enbee Trade & Finance Ltd. Gala had entered into a share purchase agreement (SPA) with the erstwhile promoters of Enbee Trade & Finance Ltd on 22 January, 2015 to acquire 58,200 shares, constituting 23.76 percent of the then paid-up capital of 2,45,000 shares of the firm and acquired control over the company. Consequently, the individual had to make an open offer under Sebi SAST (Substantial Acquisition of Shares and Takeovers) Regulations. In an order, the regulator said that Gala was obligated under SAST regulations to make a public announcement of an open offer for acquiring shares on the date of entering into the SPA. The Securities and Exchange Board of India (Sebi) noted that as Gala made the public announcement only on 17 April, 2015, there is a clear delay of 85 days in making the public announcement, resulting in violation of the SAST regulations. Besides, the individual had appointed his representatives as additional directors on the board of the firm in February and March, 2015. Gala had submitted to Sebi that the appointments were not made during the offer period, which commenced, as per the individual, only after the public announcement was made in April 2015. [caption id=“attachment_2649272” align=“alignleft” width=“380”] ![Reuters](https://images.firstpost.com/wp-content/uploads/2016/02/sebi380.jpg) Reuters[/caption] “The argument of the noticee (Gala) that appointments were not done during the offer period, which commenced only after the public announcement, has no merit as he cannot take advantage of his own laxity in making the public announcement,” the regulator said noting that the individual was obligated to give public announcement for open offer on 22 January, 2015 and not with a delay of 85 days on 17 April, 2015. The regulator also said that Gala could complete the acquisition of shares before the expiry of the offer period only if he had deposited in cash 100 percent of the consideration payable under the open offer in the escrow account. However, the individual had only deposited 1 percent in cash in the escrow account and had obtained bank guarantee for the remaining 99 percent, Sebi said. “Thus, it is clear that the noticee completed the acquisition of the shares and took control of the target company (Enbee Trade & Finance Ltd) while open offer was still in progress as per law without complying with the requirement of keeping the consideration payable under open offer in cash in an escrow account,” the regulator added.

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